10-K/A

QuickLinks -- Click here to rapidly navigate through this document

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

FORM 10-K/A
AMENDMENT 1

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

For the year ended:    December 31, 2002

Commission file number: 0-20824

INFOCROSSING, INC.
(Exact name of registrant as specified in its Charter)

Delaware	13-3252333
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
2 Christie Heights Street Leonia, NJ	07605
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code:    (201) 840-4700

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

Securities registered pursuant to Section 12(g) of the Exchange Act:

Common Stock, $0.01 Par Value per Share
(Title of Class)

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934, as amended, during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days: ý Yes    o No.

        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 statement incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K o.

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

        On June 30, 2002, the aggregate market value of the outstanding shares of voting stock held by non-affiliates of the registrant was approximately $26,018,000.

        On March 24, 2003, 5,378,516 shares of the registrant's Common Stock, $0.01 par value, were outstanding.

        Part III, Items 10-13 of this document are incorporated by reference from a Definitive Proxy Statement to be filed by the Company on or before April 30, 2003.

        This amendment is filed to correct the presentation of deferred revenue on the balance sheet, to expand the presentation of Managements' Discussion and Analysis, to correct the presentation of EBITDA, to add data to Schedule II, to amend Note 14 of Notes to Financial Statements, and to make certain other technical changes.

FORWARD LOOKING STATEMENTS

        Statements made in this Annual Report, including the accompanying financial statements and notes, other than statements of historical fact, are forward-looking statements that involve risks and uncertainties. These statements relate to future events or our future financial performance, including statements relating to products, customers, suppliers, business prospects and effects of acquisitions. In some cases, forward-looking statements can be identified by terminology such as "may," "will," "should," "expect," "anticipate," "intend," "plan," "believe," "estimate," "potential," or "continue," the negative of these terms or other comparable terminology. These statements involve a number of risks and uncertainties, including incomplete or preliminary information; changes in government regulations and policies; continued acceptance of our products and services in the marketplace; competitive factors; technological changes; our dependence upon third-party suppliers; intellectual property rights; business and economic conditions generally; and other risks and uncertainties including those set forth below that could cause actual events or results to differ materially from any forward-looking statement.

        You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K/A and are based on information currently and reasonably known to us. We undertake no obligation to release any revisions to or update these forward-looking statements to reflect events or circumstances that occur after the date of this Annual Report on Form 10-K/A or to reflect the occurrence or effect of anticipated or unanticipated events.

PART I

Item 1. Description of Business

General

        Unless stated otherwise, references in this report to "Infocrossing," "Company," "we," "our" or "us" refer to Infocrossing, Inc., a Delaware corporation, and its subsidiaries. Each trademark, trade name or service mark of any other company appearing in this Annual Report on Form 10-K/A belongs to its holder.

        Management believes that we are a leading provider of information technology ("IT") and business process outsourcing services to enterprise clients. We were organized as a New York corporation in October 1984 and reincorporated in Delaware as of August 31, 1999. On June 5, 2000, we changed our name from Computer Outsourcing Services, Inc. to highlight our expanded business base. We deliver a full suite of managed and outsourced solutions that enable clients to leverage our infrastructure and process expertise to improve their efficiency and reduce their operating costs. During our nearly twenty year history, we have developed significant expertise in managing complex computing environments, beginning with traditional data center outsourcing services and evolving to a comprehensive set of managed solutions. We support a variety of clients and assure the optimal performance, security, reliability, and scalability of our clients' mainframes, distributed servers, and networks, irrespective of where the systems' components are located. Strategic acquisitions have contributed significantly to our historical growth and acquisitions remain an integral component of our long-term growth strategy.

        We offer IT outsourcing services across a range of IT functions, bundled into a customized, long-term contractual arrangement, whereby we assume responsibility for managing all or part of a client's information systems infrastructure and operations. Our IT outsourcing agreements center on data center operations (including mainframes, AS/400 or mid-range computing, and NT/UNIX platforms) and extend to the infrastructure that facilitates the transmission of information across a client's enterprise. Our services are organized into six "solution" areas—(1) Mainframe Outsourcing,

2

(2) Business Process Outsourcing, (3) Open Systems Management, (4) AS/400 Management, (5) Business Continuity, and (6) IT Consulting.

        On February 5, 2002, we completed the acquisition of AmQUEST, Inc., an Atlanta-based IT outsourcing company, for approximately $19.6 million in cash (the "AmQUEST Acquisition"). This acquisition combined two highly complementary businesses and enabled us to benefit from increased scale, enhanced services, and expanded geographic reach. We believe the combination strengthens our position as one of the leading providers of IT outsourcing solutions for large and mid-size companies.

The IT Outsourcing Industry

        We believe that the IT outsourcing market will grow for the following reasons:

•

The need for companies to reduce costs and improve operating margins;



•

A slowdown in capital spending on existing IT infrastructure;



•

The increasing complexity of information technology systems and the need to connect electronically with clients, suppliers and other internal systems;



•

The increasing requirements for rapid processing of information and the instantaneous communication of large amounts of data to multiple locations;



•

The desire of business and government organizations to focus on their core competencies;



•

The desire by business and government organizations to take advantage of the latest advances in technology without the cost and resource commitment required to maintain an in-house system;



•

The need to provide alternative or back-up locations for mission critical information; and



•

The proliferation of web-based and wireless technologies.

Benefits of IT Outsourcing

        Companies traditionally outsource to reduce operational and capital expenses, improve service delivery, implement new technologies, and/or free their internal resources to focus on strategic initiatives.

•

Reduce Costs
We believe our clients realize -significant savings by using our services over their current internal costs. We leverage our 24x7 redundant infrastructure, personnel, processes, and tools across multiple clients to gain economies of scale that we believe translate into reduced costs for our customers.



•

Improve Service Delivery 
We believe that our customers enjoy improvement in service delivery because of our focus on operations and economies of scale.



•

Re-Deploy Resources
By turning over non-core activities to us, our clients can concentrate on activities central to their value proposition and increase their competitive position.



•

Access to Technology 
We believe outsourcing with us enables our clients to take advantage of new technologies and best practices without the costs and risks associated with implementing these solutions in-house.



•

Increased Flexibility
We believe that outsourcing enables our clients to respond rapidly to changing markets, mergers

3

and acquisitions, and major organizational changes by providing a flexible, multi-platform infrastructure that can scale or transition to accommodate change.

Business Model

        Our business model is based on leveraging our IT data center infrastructure, skilled operations team, and management tools across multiple clients to gain economies of scale that improve clients' operations and dramatically reduce their IT costs. We endeavor to achieve this by establishing consistent processes throughout the organization, leveraging a fully secure and redundant data-center infrastructure, sharing operational resources across multiple computing platforms, and investing in administration tools that enable the efficient monitoring and management of clients' systems regardless of where they are located.

Data Center Infrastructure

        Delivering high-availability IT outsourcing solutions to the enterprise client requires a significant investment in a secure data center infrastructure. We have fully constructed two data centers designed to meet the stringent environmental and security requirements of enterprise clients. Our data centers are raised-floor facilities that feature state-of-the-art physical components and redundant network offerings, including high standards for security and reliability. Our data centers have fully redundant power supply systems, redundant ingress and egress Internet access across multiple providers, multiple power feeds, N+1 fire suppression systems, and 24-hour security services.

Technology Infrastructure

        The aggregated scale of the existing client base enables us to deploy shared equipment and technology to improve margins by reducing operating costs and streamlining service delivery. We have fully deployed mainframe, mid-range, and open system processing; data storage systems; printing equipment; and networking hardware across our two data center facilities. By managing the scheduling and production of clients' processing, we gain significant economies of scale by effectively "sharing" technology resources across multiple clients.

        We utilize technologies such as IBM's Virtual Tape Subsystem (VTS) to reduce operational overhead by automating processes. The VTS is a system of hardware and software licensed from IBM that eliminates the need for personnel to manually loan and unload tapes containing client data. While VTS and other technologies we use are commercially available to any willing purchaser, they are often cost-prohibitive for individual companies. Without such technologies, we would not be as cost-efficient. We make the technology accessible to our clients by distributing the costs over multiple entities.

Operations

        Supporting a 24 x 7 computing environment requires significant operational resources skilled across a number of technology areas including operating systems, computing, networking, and applications. Few companies have the financial and human resources to support a 24-hour, multi-platform computing environment. Our operations team is a highly skilled, process driven organization that is trained across multiple computing platforms and operating systems. As a result of our technical competency and broad customer base, we believe our labor costs per client typically are lower than the costs our clients would incur by having internal IT departments deliver the same service levels. We believe our highly scalable operation allows our clients to enjoy reduced IT costs. Most of our computer hardware is manufactured by IBM. We also rely heavily on system software licensed from IBM or Computer Associates.

4

Management Tools

        With the growth of IP networking as a low-cost method for transmitting information, we have invested in the development of a proprietary suite of management tools that enables us to monitor and manage clients' systems and components from a centralized network operations center. The management platform enables the monitoring and management of clients' systems located in our data centers, at the clients' site, or at a third-party facility. The strategic investment provides us with the ability to expand our services portfolio beyond solutions delivered within our own data centers, and enables us to grow our data-center infrastructure without having to replicate the network operations center at each site.

Services

        Our services are organized into six solution areas, including:

•

Mainframe Outsourcing.  We believe our mainframe outsourcing solution provides clients with a cost-effective, operationally superior alternative to running and managing a mainframe infrastructure in-house. We combine the scalability and reliability of mainframe systems with the world- class management of, and access to, hardware, systems software, and communications. We offer the latest technologies—including Virtual Tape Subsystems, IBM's zSeries technology, and Linux on the mainframe—to provide greater uptime and more efficiency for our customers. We have experience in operating multiple computer systems running on different operating and complex enterprise environments. We provide high capacity in processing speed, connectivity, and storage management.



•

Business Process Outsourcing.  Business process outsourcing involves clients contracting with us to perform functions that support their business, but are not their core competency. These functions, commonly called "back-office" processes, include services such as payroll, accounts receivable management, payment processing, logistics, data entry and customer care services. Back-office processes are often supported by an extensive IT infrastructure. By contracting with us, companies can improve their processes, reduce their costs, and concentrate on their core business.

We provide a variety of customized IT services designed to specific client requirements. These services include the development of proprietary software we utilize to meet the IT processing requirements of particular clients. We manage the software application and retain ownership of the software we develop.

•

Open Systems Management.  We provide on-site hosting and remote management of customers' hardware and software running on Unix and Windows servers for both Internet based and other applications. Clients can choose from a wide range of options for their open systems—starting with basic on-site hosting all the way up to fully customized, fully managed services. This highly flexible approach makes it easy to support a variety of systems—from a simple website or database application to a full-scale, multinational Enterprise Resource Plan system. With our IFOXcenter management tools, we can remotely manage systems located at our customers' own data centers or at a third-party location.



•

AS/400 and iSeries Management.  We provide specialized support and outsourcing resources for companies that rely on midrange computers. With an experienced staff and infrastructure resources, we operate, administer, and maintain a client's midrange systems. Additionally, we have the expertise and flexibility to manage a client's system the way the client chooses to have it managed. With our IFOXcenter management tools, we can take full responsibility for managing a customer's systems even if the hardware is located outside of one of our data centers.

5

•

Business Continuity.  Our business continuity solutions help assure clients that their operations can proceed in the face of disaster. We offer 24 x 7, high-availability services—including disaster-planning assistance. The disaster recovery solutions are integrated into a client's overall IT infrastructure, with the opportunity to balance IT processing between their own data center and dedicated systems at either of our production data centers. We provide a full alternate office site, including desktop workstations, phone systems, and conventional office infrastructure such as fax and copier machines, networked printers, and conferencing facilities.



•

Consulting Services.  We provide review and implementation services for the underlying infrastructure of an enterprise's IT operations, with a view to reducing costs and improving services to the enterprise and end-user. Our expertise developed over our nearly twenty year history coupled with our highly trained and experienced staff can assist with design through implementation and on-going support in the areas of network architecture, infrastructure integration, automation process control, operating systems, database administration, and system stress testing.

Client Service and Support

        We believe that close attention to client service and support has been, and will continue to be, critical to our business plan and vital to our success in the IT outsourcing industry. We utilize client service as a key competitive differentiator and as the foundation of our revenue retention strategy. We provide a high degree of client service and support, including customized training and rapid response to client needs, which we believe generally exceeds industry standards. As a provider of services, virtually our entire organization is dedicated to client support and service. We believe that because of our attention to client service, many of our client relationships have been long-term, extending well beyond the initial contract term. Of our 236 employees, 210 devote substantially all of their time to direct client service and support. In addition, because of our compact size we can provide direct access to our senior executives.

Marketing and Sales

        We currently target our marketing efforts to a broad range of large and medium-size enterprises. Although we have developed industry specific services in several industries including financial services, publishing, manufacturing, consumer products, and health care, we believe our reputation for technical expertise and quality service extends across all industries.

        For the years ended December 31, 2002 and 2001, clients accounting for in excess of 10% of our consolidated revenues were ADT Security Services, Inc. and Alicomp, a division of Alicare, Inc. ("Alicomp"). For the two-month period ended December 31, 2000 and the fiscal year ended October 31, 2000, clients accounting for in excess of 10% of consolidated revenues were Alicomp and International Masters Publishers, Inc. We also have had a joint marketing agreement with Alicomp throughout the foregoing periods.

        Initial contact with a prospective customer is made by a variety of methods, including seminars, mailings, telemarketing, referrals, and attendance at industry conventions and trade shows. Our sales representatives and marketing support staff analyze a prospective client's requirements and prepare service demonstrations. In some cases, we have entered into agreements with certain enterprises and individuals that would be entitled to receive compensation for their assistance in procuring sales.

Development of New Services

        Since the IT services industry is characterized by rapid changes in hardware and software technology, we continually refine our IT infrastructure and systems management services to encompass new computing platforms. To meet our clients' exacting requirements, we are committed to maintaining

6

service offerings at a very high level of technological proficiency and we believe that we have developed a reputation for providing innovative solutions to satisfy our clients' requirements.

        We maintain an extensive infrastructure that serves as the underlying foundation across our IT solutions. These capabilities are augmented by strategic partnerships and key investments to provide clients with a full suite of IT outsourcing solutions. Where possible, we endeavor to develop offerings that can be easily replicated across multiple clients and give rise to a high degree of recurring revenue. Development of new services is focused on applying the Company's expertise in infrastructure and systems management to evolving hardware and software environments. Recent examples of new services include AS/400 and iSeries Management and Business Continuity Services described above. The costs to develop these services were expensed as incurred. Development is performed by our Company's employees and in limited instances by outside consultants. Capitalized expenditures for enhancement to existing products are for the Business Process Outsourcing Services described above. Capitalized expenditures for enhancements to existing products approximated $135,000, $285,000, $119,000, and $1,011,000 for the years ended December 31, 2002 and 2001, the two months ended December 31, 2000, and the fiscal year ended October 31, 2000, respectively.

Competition

        We operate in highly competitive markets. Our current and potential competitors include other independent computer service companies and divisions of diversified enterprises, as well as the internal IT departments of existing and potential customers. Among the most significant of our competitors are IBM Corporation; Electronic Data Systems Corporation; Affiliated Computer Services, Inc.; Computer Sciences Corp.; and SunGard Data Systems, Inc.

        In general, the outsourcing services industry is fragmented, with numerous companies offering services in limited geographic areas, vertical markets, or product categories. Many of our larger competitors have substantially greater financial and other resources than we do. We compete on the basis of a number of factors, including price, quality of service, technological innovation, breadth of services offered and responsiveness. Some of these factors are beyond our control.

        We cannot be sure that we will be able to compete successfully against our competitors in the future. If we fail to compete successfully against our current or future competitors with respect to these or other factors, our business, financial condition, and results of operations will be materially and adversely affected.

        While our larger competitors seek to outsource entire IT departments, we often selectively target core IT functions such as computer processing and storage solutions. In doing so, we position ourselves as a partner of the client's IT organization, rather than as a competitive threat.

        We believe that our services are particularly attractive to mid-tier companies that need substantial infrastructure to support their business environment, but are considered "small" compared to the multi-billion dollar engagements signed by our largest competitors. Many mid-market companies perceive, we believe, larger outsourcers as "inflexible" and "unresponsive" to their smaller-scale requirements. We believe that selective outsourcing enables them to maintain overall control over their IT environment, while benefiting from the scale and efficiency of an outsourcing provider.

Technological Changes

        Although we are not aware of any pending or prospective technological changes that would adversely affect our business, new developments in technology could have a material adverse effect on the development or sales of some or all of our services or could render our services noncompetitive or obsolete. There can be no assurance that we will be able to develop or acquire new and improved services or systems that may be required in order for it to remain competitive. We believe, however,

7

that technological changes do not present a material risk to our business because we expect to be able to adapt to and acquire any new technology more easily than our existing and potential clients. In addition, technological change increases the risk of obsolescence to potential clients that might otherwise choose to maintain in-house systems rather than use our services, thus potentially creating selling opportunities for us.

Intellectual Property Matters

        Due to the rapid pace of technological change in the computer industry, we believe that copyright and other forms of intellectual property protection are of less significance than factors such as the knowledge and experience of management and other personnel, and our ability to develop, enhance, market, and acquire new systems and services. As a result, our systems and processes are not protected by patents or by registered copyrights, trademarks, trade names, or service marks. To protect our proprietary services and software from illegal reproduction, we rely on certain mechanical techniques in addition to trade secret laws, restrictions in certain of our customer agreements with respect to use of our services and disclosure to third parties, and internal non-disclosure safeguards, including confidentiality restrictions with certain employees. Despite these efforts, it may be possible for our competitors or clients to copy aspects of our trade secrets. We are experienced in handling confidential and sensitive information for our clients, and we maintain numerous security procedures to help ensure that the confidentiality of our client's data is maintained.

Compliance with Environmental Laws

        We have not incurred any significant expense in our compliance with Federal, state, and local environmental laws.

Employees

        As of December 31, 2002, we had 227 full-time and 9 part-time employees. None of our employees is represented by a labor organization and we are not aware of any activities seeking such organization. We consider our relationship with our employees to be satisfactory.

Insurance

        We maintain insurance coverage we believe is reasonable, including errors and omissions coverage, business interruption, and directors and officers insurance to fund our operations in the event of catastrophic damage to any of our operations centers, and insurance for the loss and reconstruction of our computer systems. We also maintain extensive data backup procedures to protect our data and our clients' data.

Financial Information about Geographic Areas

        Substantially all of our revenues are derived from U.S. sources.

Available Information

        We maintain a website with the address www.infocrossing.com. We are not including the information contained on our website as part of, or incorporating it by reference into, this Annual Report on Form 10-K/A. We make available, free of charge, through a link from our website to the EDGAR database at www.sec.gov our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, and amendments to such reports, as soon as reasonably practicable after we file such material with the Securities and Exchange Commission.

8

Item 2. Description of Property

        We lease a facility of approximately 67,000 square feet in Leonia, NJ for our headquarters and data center operations. The lease expires on December 31, 2014.

        We lease 30,600 square feet in a building located in the Atlanta metropolitan area for data center operations. The lease expires on July 31, 2015.

        We lease 5,700 square feet of office space in New York, NY. The lease expires on December 31, 2009.

        We lease space in buildings owned by the former parent of AmQUEST. At February 5, 2002, we occupied approximately 33,400 square feet. Our lease agreement permits us to reduce our use of this space for a pro-rata reduction in rent. We have moved most of the operations of AmQUEST to our facility in the Atlanta metropolitan area, and occupy approximately 11,400 square feet at December 31, 2002. We intend to further reduce our use of this space during 2003. This lease agreement expires on January 31, 2006, unless we reduce our use of the space to zero at an earlier date.

        We generally lease our equipment under standard commercial leases, in some cases with purchase options, which we exercise from time to time. Our equipment is generally covered by standard commercial maintenance agreements.

        We believe our facilities are in good condition and are adequate to accommodate our current volume of business as well as anticipated increases.

Item 3. Legal Proceedings

        None.

Item 4. Submission of Matters to a Vote of Security Holders

        None.

9

PART II

Item 5. Market for Registrant's Common Stock and Related Stockholder Matters

        Our common stock is traded on the NASDAQ Stock Market under the symbol IFOX. Prior to June 5, 2000, the date on which we changed our name from Computer Outsourcing Services, Inc., our symbol was COSI. For the periods reported below, the following table sets forth the high and low bid quotations for the common stock as reported by NASDAQ-NMS.

	Bid
	High	Low
For the year ended December 31, 2001:
1st Quarter ended March 31, 2001	8.938	5.000
2nd Quarter ended June 30, 2001	9.300	4.110
3rd Quarter ended September 30, 2001	7.150	4.000
4th Quarter ended December 31, 2001	6.200	3.750
For the year ended December 31, 2002:
1st Quarter ended March 31, 2002	7.000	5.050
2nd Quarter ended June 30, 2002	6.890	4.555
3rd Quarter ended September 30, 2002	10.050	5.607
4th Quarter ended December 31, 2002	8.100	5.990

        The closing price of the Company's common stock on NASDAQ-NMS on March 24, 2003 was $6.71 per share. We have approximately 75 stockholders of record. In addition, we believe that there are approximately 500 beneficial owners holding their shares in "street name."

Dividends

        We have not paid dividends to holders of its common stock since inception. Certain terms of our Series A Preferred Stock restrict our ability to pay dividends on our common stock, and no common dividends may be paid so long as the Camden Debentures are outstanding.

Securities Authorized for Issuance under Equity Compensation Plans

	Number of Securities to be Issued Upon Exercise of Outstanding Options	Weighted Average Exercise Price of Outstanding Options		Number of Securities Remaining Available for Future Issuance
Two qualified Stock Option Plans—previously approved by stockholders	1,406,935	$	8.93	954,250

        For a complete discussion of these plans, please see Note 11 of the Notes to Financial Statements accompanying this report.

Recent Issuances of Unregistered Securities

        During the year ended December 31, 2002, a holder of 262.3 shares of our Series A Preferred Stock converted them into 2,764 shares of our common stock. In addition, the same holder exercised its Series A Warrants, receiving an additional 4,441 common shares. The common shares were issued in transactions exempt from registration pursuant to Section 4(2) of the Securities Act of 1933.

10

Item 6. Selected Financial Data (In Thousands Except For Per Share Amounts)

	Years ended December 31,						Fiscal Years ended October 31,								Two Month Periods ended December 31,
	2002(a)			2001			2000			1999		1998			2000			1999
																		(Unaudited)
CONSOLIDATED STATEMENTS OF OPERATIONS
Revenues	$	50,774		$	26,986		$	24,471		$	34,265	$	30,403		$	3,521		$	4,874
Net income (loss) from continuing operations		1,137			(36,524	)		(14,983	)		1,661		1,079			(4,440	)		(343	)
Loss on discontinued operation, net of income tax benefit		—			—			—			—		(76	)		—			—
Gain on sale of discontinued operation, net of income tax provision		—			—			—			—		1,696			—			—
Net income (loss) to common stockholders	$	(8,156	)	$	(45,048	)	$	(18,819	)	$	1,661	$	2,699		$	(5,790	)	$	(343	)
Net income (loss) to common stockholders per diluted common share	$	(1.52	)	$	(7.77	)	$	(3.58	)	$	0.34	$	0.61		$	(0.98	)	$	(0.07	)
CONSOLIDATED BALANCE SHEETS
Total assets	$	65,495		$	58,774		$	78,844		$	27,554	$	26,949		$	78,449		$	30,597
Long-term obligations and (beginning in fiscal 2000), redeemable preferred stock	$	64,066		$	47,593		$	34,146		$	—	$	12		$	38,214		$	2,014

No cash dividends have been declared (See Item 5, above).

(a)

On February 5, 2002, we acquired AmQUEST, Inc., which contributed approximately $17,148,000 of revenue subsequent to the acquisition. We paid $19,896,000 for the acquisition and related costs during 2002, and recorded $25,692,000 in assets, including $20,714,000 in goodwill. In connection with this acquisition, we incurred $10,000,000 of new debt, recorded as discounted Debentures and Warrants. The book value of the Debentures at December 31, 2002 is $9,372,000.

11

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

        Infocrossing is a leading provider of information technology and business process outsourcing services to enterprise clients. We deliver a full suite of managed and outsourced solutions that enable clients to leverage our infrastructure and process expertise to improve their efficiency and reduce their operating costs. We have gained significant expertise in managing complex computing environments, beginning with traditional data center outsourcing services and evolving to a comprehensive set of managed solutions. We support a variety of clients, including Global 2000 companies, and help assure the optimal performance, security, reliability, and scalability of our clients' mainframes, distributed servers, and networks, irrespective of where the systems' components are located. Due to rapid changes and increasing complexities in information technology, we believe outsourcing is an efficient solution for many businesses and continues to be a growing trend. We have grown through strategic acquisitions as well as organic growth.

        On February 5, 2002, we completed the acquisition of AmQUEST, Inc., an Atlanta-based IT outsourcing company, for approximately $19.6 million in cash after certain post-closing adjustments (the "AmQUEST Acquisition"). This acquisition combined two highly complementary businesses and enabled us to benefit from increased scale, enhanced services, and expanded geographic reach. The combination strengthens our position as one of the leading providers of IT outsourcing solutions for large and mid-size companies enterprises across a broad range of industries including financial services, security, publishing, healthcare, telecommunications and manufacturing.

        The AmQUEST Acquisition was recorded as a purchase in accordance with the Financial Accounting Standards Board ("FASB"), Statements of Financial Accounting Standards No. 141, "Business Combinations" ("SFAS 141"), which requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. SFAS 141 also includes guidance on the initial recognition and measurement of goodwill and other intangible assets arising from business combinations completed after June 30, 2001.

        In June 2001, the Financial Accounting Standards Board ("FASB") issued Statements of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"). SFAS 142 prohibits the amortization of goodwill and intangible assets with indefinite useful lives. SFAS 142 requires that these assets be reviewed for impairment at least annually. Intangible assets with finite lives will continue to be amortized over their estimated useful lives. We applied SFAS 142 beginning in the first quarter of 2002 and accordingly have not recorded goodwill amortization in 2002. We tested goodwill for impairment using processes described in SFAS 142, and have no impairment to record in 2002.

        On September 15, 2000, we changed our year ending date from October 31st to December 31st. This change required the preparation of financial statements for the two-month period ended December 31, 2000. Financial statements for the fiscal year ended October 31, 2000 and prior are not restated to conform to the calendar year reporting period of 2002.

Year ended December 31, 2002 as
Compared to the Year ended December 31, 2001

        For the year ended December 31, 2002 (the "Current Year"), revenues increased $23,788,000 (88%) to $50,774,000 from $26,986,000 for the year ended December 31, 2001 (the "Prior Year"). Revenues from AmQUEST contributed $17,148,000 of this increase. Revenues grew by 25%, excluding growth contributed by AmQUEST. This organic revenue growth is primarily attributable to a significant new IT managed services contract with ADT Security Services, Inc., signed in 2001, with an initial term of four years. Unless the customer provides notice of non-renewal, the contract will renew annually for three annual years. Revenues from this significant customer were $4,672,000 in the Prior Year compared with $14,977,000 in the Current Year, representing 17% and 29% of total revenues in the

12

respective periods. The increase in revenue from this customer reflects a higher level of service provided in the Current Year.

        Costs of revenues increased $1,181,000 (4%) to $32,977,000 during the Current Year compared with $31,796,000 for the Prior Year. With the additional costs of revenues of AmQUEST excluded, costs of revenues declined by $9,670,000 (30%). The reduced level of costs of revenues reflects the actions we took in 2001 to minimize costs through staff reductions. During 2001, management planned and executed without significant modification four reductions in its workforce, whereby it reduced total operating staff by 45 persons amounting to approximately $4 million in annualized salaries and benefits. Severance of approximately $151,000 was paid to employees and expensed in the month each of the planned reductions in the workforce was planned and executed. All severance was paid by December 31, 2001. In addition, in 2001 we suspended operations at our metropolitan Atlanta data center and the further development of the Northern Virginia data center. Costs of revenues as a percentage of revenues decreased to 65% in the Current Year from 118% in the Prior Year. Costs of revenues in the Current Year reflect the benefit from the settlement with a software licensor described below.

        In April 2002, we renegotiated the lease of our metropolitan Atlanta data center. The renegotiated lease, which is payable through December 2015, reduces the leased space by more than 20,000 square feet and increases the base rent by $2.00 per square foot, to an annual base rent of $525,000. The base rent is subject to future escalations of approximately 2.5% per lease year. In addition, we are responsible for a pro rata share of the building's operating expenses and real estate taxes. The total estimated savings under the renegotiated lease approximate $5 million over the remaining term of the lease. Included in costs of revenues in the Current and Prior Years are expenses for this facility of $556,000 and $1,095,000, respectively. During 2002, we relocated most of the operations of AmQUEST to the metropolitan Atlanta data center.

        Also in May 2002, we reached an agreement with the landlord of the Northern Virginia data center. The agreement releases us from the future payments under the lease, which amounted to approximately $30 million through November 2015. The agreement also required a cash payment of approximately $1,515,000 and the forfeiture of a $1,460,000 deposit. As of December 31, 2001, we recorded a provision of $5,650,000 for this expected result, including the write-off of approximately $2,742,000 of construction-in-progress costs. During 2002, approximately $290,000 of the provision relating to estimated settlement costs was reversed. Included in costs of revenues in the Current Year and Prior Year are costs for this facility of $378,000 and $2,254,000, respectively.

        In January 2002, we settled a dispute of certain claims with a software licensor. Pursuant to the settlement, we received credits totaling $2,000,000 to be used toward certain future purchases (the "Credits"). The entire value of the Credits has been recorded in the Current Year, and as of December 31, 2002, all the Credits have been applied against certain software license fees. Additionally, we reversed accrued expenses of $796,000 for software support and maintenance fees in the Current Year in connection with the settlement of the dispute.

        Selling and promotion costs decreased $457,000 (13%) to $3,140,000 for the Current Year from $3,597,000 for the Prior Year, solely due to staff reductions in 2001 as part of the reductions in workforce noted above. Selling and promotion costs as a percentage of revenues decreased to 6% from 13% in the Prior Year, due to decreased costs and increased revenues.

        General and administrative expenses decreased $2,614,000 (30%) to $6,114,000 for the Current Year from $8,728,000 for the Prior Year. With the effect of AmQUEST excluded, general and administrative expenses declined $3,244,000 (37%). Several factors contributed to the improvement: a reduction of $700,000 in bad debt provision from that required in 2001; $395,000 less in professional fees; $318,000 less in recruiting expenses; and staff reductions amounting to approximately $300,000 in salaries and benefits as part of the reductions in force noted above.

13

        Amortization related to a restricted stock award to a former executive was $9,823,000 in the Prior Year. The former executive resigned in November 2001, and the remaining unamortized balance of the award was written off at that time.

        In accordance with Statement of Financial Accounting Standards No. 142, goodwill is no longer subject to amortization. In the Prior Year, goodwill amortization was $644,000.

        Other depreciation and amortization for fixed assets and other intangibles rose $2,477,000 (72%), to $5,938,000 for the Current Year from $3,461,000 for the Prior Year. Without the effect of AmQUEST, other depreciation and amortization increased $1,325,000 (38%) as a result of fixed asset purchases since December 31, 2001.

        We recorded net interest expense of $1,965,000 in the Current Year, compared with net interest income of $886,000 in the Prior Year. The net change of $2,851,000 reflects a decrease in interest income of $1,205,000 from a lower average balance of interest-earning assets during the Current Year. Also, to a lesser extent, the decrease in interest income results from lower interest rates. The net change also includes an increase of $1,646,000 in interest expense on a larger average outstanding debt balance than in the Prior Year. In February 2002, we issued $10,000,000 of Senior Subordinated Debentures in connection with the AmQUEST Acquisition, bearing interest at an effective rate of 12.3%. Amortization of debt issuance costs and amortization of the debt discount also contributed to the increased interest expense in the Current Year.

        In the Current Year, we recorded an income tax benefit representing the carryback of $251,000 of Federal income tax credits net of income tax expense of $42,000, representing estimated state income taxes. Tax expense of $697,000 was recorded in the Prior Year, representing the reconciliation between the estimated benefits reported in the period ended December 31, 2000 and the amount recognized in our income tax return. The cumulative tax benefit we recorded prior to December 31, 2001 was limited to the refund of taxes paid in prior years that were received as a result of carrying back a portion of its pre-tax loss.

        Cumulative pre-tax losses that cannot be carried back can be carried forward for a period of 20 taxable years for Federal income tax purposes. We have net operating loss carry-forwards of approximately $36 million for Federal income tax purposes that begin to expire in 2019. The deferred tax asset associated with carrying forward cumulative pre-tax losses has been fully offset by a valuation allowance due to the uncertainty of realizing such tax benefits.

        We have net income of $1,137,000 for the Current Year versus a net loss of $36,524,000 for the Prior Year. Net loss to common stockholders after accretion and accrued dividends on preferred stock was $8,156,000 for the Current Year compared with a net loss of $45,048,000 in the Prior Year. The net loss to common stockholders included an increase in non-cash charges for accretion and accrued dividends on preferred stock of $769,000 to $9,293,000 in the Current Year from $8,524,000 in the Prior Year. The loss per common share was $1.52 for the Current Year compared with a loss per common share of $7.77 in the Prior Year, on both a basic and diluted basis. Common stock equivalents were ignored in determining the net loss per share for both periods, since the inclusion of such equivalents would be anti-dilutive.

14

Year ended December 31, 2001 as
Compared to the Year ended December 31, 2000

        The financial statements included in this Annual Report on Form 10-K/A do not include financial statements for the year ended December 31, 2000. For the purposes of this Management's Discussion and Analysis, the following table presents our results for the year ended December 31, 2001 in comparison with the comparable unaudited results for the year ended December 31, 2000.

			Year ended December 31,
			2001			2000
						(Unaudited)
Revenues			$	26,986,466		$	23,118,665
Costs and expenses:
	Costs of revenues, excluding depreciation shown below			31,796,324			28,236,987
	Selling and promotion costs			3,597,153			3,540,262
	General and administrative expenses			8,728,468			9,758,066
	Leased facilities and office closings			5,650,000			548,972
	Amortization of restricted stock award			9,822,917			1,677,083
	Amortization of goodwill			644,090			631,648
	Other depreciation and amortization			3,460,914			1,870,267
		Total costs and expenses		63,699,866			46,263,285
Loss from operations				(36,713,400	)		(23,144,620	)
	Net interest income			(886,403	)		(2,110,505	)
Pretax loss				(35,826,997	)		(21,034,115	)
Income tax provision (benefit)				697,000			(1,954,004	)
Net loss				(36,523,997	)		(19,080,111	)
Accretion and dividends on redeemable preferred stock				(8,524,026	)		(5,186,143	)
Net loss to common stockholders			$	(45,048,023	)	$	(24,266,254	)

        For the calendar year ended December 31, 2001 ("Calendar 2001"), revenues increased $3,868,000 (16.7%) to $26,986,000 from $23,119,000 for the calendar year ended December 31, 2000 (unaudited) ("Calendar 2000"). Revenues from a significant new customer contributed to the increase. During the year, we announced the signing of a significant new IT managed services contract with a new customer that by its terms, and as subsequently amended, is expected to generate $50 million in revenues over the four-year life of its initial term.

        Costs of revenues increased $3,560,000 (13.7%) to $31,796,000 during Calendar 2001 compared with $28,237,000 in Calendar 2000. The increases primarily consist of IDC and related managed services operating and development costs mostly occurring earlier in Calendar 2001. Due to excess supply of server-hosting space, we have taken steps to minimize costs by suspending the operations at the metropolitan Atlanta data center and IDC and the further development of the Northern Virginia IDC. Included in costs of revenues in Calendar 2001 is $4,477,000 of costs for these facilities.

        Selling and promotion costs increased only $57,000 (1.6%) to $3,597,000 during Calendar 2001 compared with $3,540,000 in Calendar 2000.

        General and administrative expenses decreased $1,030,000 (11.0%) to $8,728,000 for Calendar 2001 from $9,758,000 for Calendar 2000. The decrease primarily consists of IDC and related administrative expenses that have been reduced during Calendar 2001.

        During Calendar 2001 we recorded a provision of $5,650,000 related to the suspension of the development of our Northern Virginia data center, including the write-off of approximately $2,742,000

15

of construction-in-process costs. We recorded a loss provision of $549,000 in Calendar 2000 relating to the closing of office locations.

        In June 2000, we hired a Chief Executive Officer (the "Executive") who served until November 2001. The employment agreement with the Executive provided for an award of 800,000 restricted shares of common stock. The value of the 800,000 restricted shares, $11,500,000 on the date of grant, was being amortized ratably over a four year vesting schedule. Effective November 14, 2001, the Executive resigned and entered into a settlement agreement with us to terminate the employment contract. As part of the settlement, we accelerated the vesting of the stock award resulting in a nonrecurring, noncash charge of approximately $7,427,000. Total amortization related to the restricted shares in Calendar 2001 was $9,823,000. In Calendar 2000 we amortized $1,677,000 of the restricted stock award.

        Other depreciation and amortization for fixed assets and other intangibles rose $1,591,000 (85.1%), to $3,461,000 for the Calendar 2001 from $1,870,000 for the Calendar 2000. The increase is primarily the result of fixed asset purchases during 2000 and 2001.

        We recorded net interest income of $886,000 in Calendar 2001, compared with net interest income of $2,111,000 in Calendar 2000. The net reduction of $1,225,000 reflects a decrease in interest income of $1,408,000 from a lower average balance of interest-earning assets during Calendar 2001 and lower interest rates. The reduction in interest income was partially offset by a decrease of $183,000 in interest expense arising from a larger average outstanding debt and capital lease obligation balance in Calendar 2000.

        In Calendar 2001, we recorded income tax expense of $697,000, representing the difference between the estimated benefit as previously reported and the amount recognized in our income tax return. A tax benefit of $1,954,000 was recorded in Calendar 2000 based on an estimate of the availability of carrying back the pre-tax loss for such period to a prior taxable year. The cumulative tax benefit we recorded was limited to the refund of taxes paid in prior years that were received as a result of carrying back a portion of its pre-tax loss. At December 31, 2001, we had net operating loss carryforwards of approximately $29 million for federal income tax purposes that begin to expire in 2020. The deferred tax asset associated with carrying forward cumulative pre-tax losses has been fully offset by a valuation allowance due to the uncertainty of realizing such tax benefits.

        Our net loss in Calendar 2001 increased $17,444,000 (91%) to $36,524,000 from $19,080,000 in Calendar 2000 reflecting an increase of $17,437,000 in total costs and expenses, largely due to a $5,650,000 loss on leased facilities and an increase of $8,146,000 in amortization for the restricted stock award on which the amortization was accelerated. Net loss to common stockholders after accretion and accrued dividends on preferred stock was $45,048,000 for Calendar 2001 and $24,266,000 for Calendar 2000. In addition to the increased loss related to the nonrecurring, noncash charge for the restricted stock award, the net loss to common stockholders included an increase in the year in noncash charges for accretion and accrued dividends on preferred stock of $3,338,000, which increased to $8,524,000 in Calendar 2001 from $5,186,000 in Calendar 2000. The loss per common share was $7.77 for Calendar 2001 compared with a loss per common share of $4.46 in Calendar 2000, on both a basic and diluted basis. Common stock equivalents were ignored in determining the net loss per share for both periods, since the inclusion of such equivalents would be anti-dilutive.

Liquidity and Capital Resources

        Net cash provided by operating activities was approximately $1,256,000 for the year ended December 31, 2002. During the Current Year, we had $1,137,000 of net income, $5,938,000 of depreciation and amortization, $492,000 of debenture discount amortization and a reversal of $290,000 provision of estimated settlement costs. Uses of cash during 2002 included $1,515,000 in settlement of a building lease in the Northern Virginia high tech corridor and $409,000 of rent payments related to

16

other closed offices. In addition to the cash payment relating to the building lease settlement agreement, we forfeited a $1,460,000 security deposit and were released from all future payments under the lease, amounting to approximately $30 million through November 2015. We had accrued the settlement as of December 31, 2001. Other payments of amounts expensed and accrued in the prior year included approximately $800,000 of payroll taxes withheld at the end of 2001 related to the restricted stock award granted to a former executive, $473,000 related to software purchases made in 2001 and approximately $279,000 in settlement of certain telecommunication agreements for unused circuits. Uses of cash also included a net increase in accounts receivable of $322,000, the reversal of $796,000 of accrued software maintenance fees waived as part of a settlement with a software vendor, and $1,122,000 of payments of liabilities assumed as part of the AmQUEST Acquisition.

        On February 5, 2002, we purchased all the outstanding shares of AmQUEST, which, after certain post-closing adjustments of the selling price and including other transaction-related costs, used approximately $19,896,000 of cash in the current period. This transaction and the related issuance of debentures are more fully described below. Additional uses of cash in investing activities included $3,955,000 for the purchase of property and equipment, excluding $1,278,000 that was acquired pursuant to capital leases.

        The following table includes aggregate information about our contractual obligations as of December 31, 2002 and the periods in which payments are due. Certain of these amounts are not required to be included in our consolidated balance sheet:

	Payments Due by Period (in thousands)
Contractual Obligations	Total		Less than 1 year		1-3 years		4-5 years		After 5 years
Long-Term Debt(1)	$	9,411	$	21	$	9,390	$	—	$	—
Operating Leases		36,667		6,788		7,927		6,824		15,128
Capital Lease Obligations		3,454		1,982		1,451		21		—
Other Liabilities(2)		1,133		208		421		325		179
Total Contractual Cash Obligations(3)	$	50,665	$	8,999	$	19,189	$	7,170	$	15,307

(1)

Net of unamortized discount of $1,228,000.

(2)

Excluded from Other Liabilities are Deferred Revenue, as it is a non-cash item, and Deferred Rent, as payments are included under Operating Leases.

(3)

Excludes Redeemable Preferred Stock. On June 1, 2007, if the market price of our common stock is not 110% or more than the per-share value of the Redeemable Preferred Stock, the Preferred Stockholders shall have the right, but not the obligation, to require us to redeem their shares for $59,900,000 plus any then-outstanding dividends due.

        Principal financing activities included proceeds of $10,000,000 from the issuance of debentures (more fully described below). Cash used in financing activities included $4,726,000 in payments of principal with respect to debt and capital lease obligations.

        On February 1, 2002, in connection with the acquisition of AmQUEST, we entered into a Securities Purchase Agreement (the "SPA") with a group of private investors (the "Investors") whereby we issued Senior Subordinated Debentures (the "Debentures") and warrants to purchase, initially, 2,000,000 shares of our common stock (the "Initial Warrants") (subject to adjustments as discussed below) in exchange for $10,000,000. Pursuant to the SPA, the proceeds from the sale of the Debentures were used to fund a portion of the cost of the acquisition of AmQUEST.

17

        The Debentures were issued at an aggregate face value of $10,000,000 with a maturity of three years from February 1, 2002 (the "Issuance Date"), with the right to extend the term of the Debentures for one additional year at our sole option. Pursuant to the terms of the Debentures, we are required to make semi-annual interest payments of 12% per annum for the first two years, 13% per annum for the period commencing on February 1, 2004 and ending on February 1, 2005, and if we elect to extend the maturity date for one year, 14% per annum from February 1, 2005. We have the option to pay interest in the form of (a) cash; (b) additional Debentures; or (c) a combination of cash and additional Debentures. If we choose to make interest payments using additional Debentures, we may be required to issue additional warrants (the "Additional Warrants") pursuant to the terms of the Debentures. Additional Warrants will not be subject to cancellation. The fair market value of Additional Warrants issued, if any, will be recorded as deferred financing costs and amortized over the remaining term of the Debentures.

        The Initial Warrants have been issued pursuant to a warrant agreement and are subject to certain customary anti-dilution adjustments, including adjustments that increase the number of shares issuable upon exercise of the warrants in certain events where we issue shares of common stock or securities exercisable for or convertible into shares of our common stock at an effective purchase price of less than the exercise price of the warrants then in effect. The exercise price of the Initial Warrants is $5.86. The Warrants expire if unexercised by January 31, 2007 and may be cancelled upon the prepayment of the Debentures, as more fully described in the Warrant Agreement.

        On July 31, 2002 and January 31, 2003, we made the interest payments then due by issuing additional Debentures totaling $600,000 and $636,000, respectively. The additional Debentures are subject to the same interest rates and other terms as the original Debentures. If the Debentures remain unpaid at February 1, 2004, we will be required to issue Additional Warrants to purchase 123,600 shares of common stock.

        In April 2002 we renegotiated the lease of our data center in metropolitan Atlanta. The renegotiated lease, which is payable through December 2015, reduces the leased space by more than 20,000 square feet and increases the base rent by $2.00 per square foot, to an annual base rent of $525,000. The base rent is subject to future escalations of approximately 2.5% per lease year. In addition, we are responsible for a pro rata share of the building's operating expenses and real estate taxes. The total estimated savings under the renegotiated lease approximate $5 million over the remaining term of the lease. During 2002, we relocated most of the operations of AmQUEST to the metropolitan Atlanta data center.

        Also, in May 2002 we reached an agreement with the landlord to terminate the lease of our partially developed data center in Northern Virginia. In the Prior Year, costs associated with the Northern Virginia data center were $2,280,000.

        As of December 31, 2002, we had cash and equivalents of $7,026,000. We expect that our operating activities will continue to generate cash. We believe that our cash, current assets, and cash generated from future operating activities will provide adequate resources to fund our ongoing operating requirements for the next 12 months. We would need to obtain additional financing to fund any significant acquisitions or other substantial investments.

EBITDA

        EBITDA represents net income before interest, taxes, depreciation and amortization. The Company presents EBITDA because it considers such information an important supplemental measure of the Company's performance and believes it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies with comparable market capitalization to the Company, many of which present EBITDA when reporting their results. The Company also uses EBITDA for the following purposes. EBITDA is one of the factors used to determine the total amount

18

of bonuses available to be awarded to executive officers and other employees. The Company's credit agreement uses EBITDA (with additional adjustments) to measure compliance with covenants such as interest coverage and debt incurrence. EBITDA is also used by prospective and current lessors as well as potential lenders to evaluate potential transactions with the Company. EBITDA is also widely used by the Company and other buyers to evaluate and price potential acquisition candidates.

        For the year ended December 31, 2002, our EBITDA was $8,832,000 compared to an EBITDA loss of $32,608,000 in the Prior Year. Also, please note that EBITDA for the Current Year includes $2,796,000 related to the settlement of a dispute with a software licensor, as previously described, and EBITDA for 2001 was adversely impacted by a $9,823,000 charge for amortization of a restricted stock award to a former executive who resigned in November 2001, at which time the remaining unamortized balance of the award was written off. Management believes the significant improvement in EBITDA reflects organic revenue growth combined with the cost savings and the contribution of AmQUEST to our operations.

        EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are: (a) EBITDA does not reflect changes in, or cash requirements for, the Company's working capital needs; (b) EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on the Company's debts; and (c) Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and EBITDA does not reflect any cash requirements for such capital expenditures. Because of these limitations, EBITDA should not be considered as a principal indicator of the Company's performance. The Company compensates for these limitations by relying primarily on its GAAP results and using EBITDA only supplementally.

        The following table reconciles EBITDA to net income for the Current and Prior Year.

Reconciliation—in Thousands

			Year Ended December 31,
			2002			2001
NET INCOME (LOSS)			$	1,137		$	(36,524	)
	Add back (deduct):
		Tax expense (benefit)		(208	)		697
		Interest expense (income)		1,965			(886	)
		Depreciation and amortization		5,938			4,105
EBITDA			$	8,832		$	(32,608	)

        EBITDA is a measure of the Company's performance that is not required by, or presented in accordance with, GAAP. EBITDA is not a measurement of the Company's financial performance under GAAP and should not be considered as an alternative to net income, income (loss) from operating activities or any other performance measures derived in accordance with GAAP.

Critical Accounting Policies and Estimates

General

        The Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the U. S., which require the selection and application of significant accounting policies, and which require management to make significant estimates and assumptions. We believe that the following are some of the more critical judgment areas in the application of its accounting polices.

19

Revenue Recognition

        The Company's services are provided under a combination of fixed monthly fees and time and materials billings. Contracts with clients typically range from one to five years. Revenue is recognized (1) after we have obtained an executed service contract from the customer (2) as the services are rendered (3) when the price is fixed as per the service contract and (4) when the Company believes that collectibility is reasonably assured based on the credit risk policies and procedures that the Company employs.

Allowance for Doubtful Accounts

        We maintain allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Tangible and Intangible Assets

        We have significant tangible and intangible assets on its balance sheet, primarily property and equipment, deferred software costs, and intangible assets, primarily goodwill, related to acquisitions. The assignment of useful lives to these assets and the valuation and classification of intangible assets involves significant judgments and the use of estimates. The testing of these tangible and intangibles under established accounting guidelines for impairment also requires significant use of judgment and assumptions. Our assets are tested and reviewed for impairment on an ongoing basis under the established accounting guidelines. Changes in business conditions or changes in the decisions of management as to how assets will be deployed in our operations could potentially require future adjustments to asset valuations.

New Financial Accounting Standards

        In August 2001, the FASB issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supercedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of", and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations for a Disposal of a Segment of a Business." SFAS 144 is effective for fiscal years beginning after December 15, 2001, with earlier application encouraged. We adopted SFAS 144 as of January 1, 2002, with no effect on our financial position, results of operations, or cash flows.

        In July 2002, the FASB issued Statement of Financial Accounting Standards No. 146, "Accounting for Costs Associated with Exit or Disposal Activities" ("SFAS 146"). SFAS 146 provides guidance on the timing of the recognition of costs associated with exit or disposal activities, requiring such costs to be recognized when incurred. Previous guidance required the recognition of costs at the date of commitment to an exit or disposal plan. The provisions of SFAS 146 are to be adopted prospectively after December 31, 2002. Although SFAS 146 may impact the accounting for costs related to exit or disposal activities we may enter into in the future, particularly the timing of the recognition of these costs, the adoption of the statement did not have an impact on our current financial condition or results of operations.

        In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure, an amendment of FASB Statement No. 123," which amends SFAS No. 123, "Accounting for Stock-Based Compensation," to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock- based employee compensation. The transition and annual disclosure provisions of SFAS No. 148 are effective for fiscal years ending

20

after December 15, 2002. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. We will continue to account for stock-based compensation to employees under APB Opinion No. 25 and related interpretations.

Item 7a. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

        We are not significantly exposed to the impact of interest rate changes, foreign currency fluctuations, or changes in the market values of our investments. We primarily invest in money market mutual funds or certificates of deposit and commercial paper issued only by major corporations and financial institutions of recognized strength and security, and hold all such investments to term. We generally invest in instruments of no more than 30 days maturity.

Market Risk

        Our accounts receivable are subject, in the normal course of business, to collection risks. We regularly assess these risks and have established policies and business practices to protect against the adverse effects of collection risks. As a result, we do not anticipate any material losses in this area.

Foreign Currency Risks

        We have no significant foreign-source income, and bill foreign customers in U.S. dollars only.

Item 8. Financial Statements

        The Consolidated Financial Statements and Notes thereto are set forth beginning at page F-1 of this Report. Also included is Schedule II, Valuation and Qualifying Accounts, which schedule is set forth at page S-1 of this report. All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are inapplicable and therefore have been omitted.

Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

        None

21

PART III

Item 10. Directors and Executive Officers Compliance with Section 16(a) of the Securities Exchange Act

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management

        The information required by Item 201(d) of Regulation S-K is included above in Part II, Item 5 of this Annual Report on Form 10-K/A.

Item 13. Certain Relationships and Related Transactions

        The contents of Items 10 through 13 are incorporated by reference to a Definitive Proxy Statement to be filed on or before April 30, 2003.

Item 14. Controls and Procedures

        During the quarter ended December 31, 2002, an evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer and Senior Vice President of Finance, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our management, including the Chief Executive Officer and the Senior Vice President of Finance, concluded that our disclosure controls and procedures were effective as of December 31, 2002. There have been no significant changes in our internal controls, or in other factors that could significantly affect our internal controls, after the date of our most recent evaluation.

Item 15. Principal Accountant Fees and Services

	For the Years ended December 31,
	2002		2001
Audit Fees	$	248,000	$	198,250
Audit-related fees—primarily for due diligence related to the AmQUEST Acquisition and benefit plan audits		44,795		64,280
Tax fees for preparation and tax audit support		86,135		145,815
	$	378,930	$	408,345

22

PART IV

Item 16. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)

1.    The financial statements and schedule required to be filed in satisfaction of Item 8 are listed in the Index to Consolidated Financial Statements and Schedule that appears as page F-1 of this report. Schedules not required have been omitted

2.

The exhibits required to be filed as a part of this Annual Report are listed below.

Exhibit No.		Description
2.1		Stock Purchase Agreement dated as of February 5, 2002 by and between Infocrossing Inc. and American Software, Inc., incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed February 5, 2002.
3.1	A	Restated Certificate of Incorporation, incorporated by reference to Exhibit 3.1 to Infocrossing's Form 10-KSB for the period ended October 31, 1999.
3.1	B	Certificate of Amendment to Infocrossing's Restated Certificate of Incorporation, filed May 8, 2000 to increase the number of authorized shares and to remove Article 11, incorporated by reference to Exhibit 3.1B to Infocrossing's Form 10-Q for the period ended April 30, 2000.
3.2		Amended and Restated By-Laws, incorporated by reference to Exhibit 3.2 to Infocrossing's Form 10-KSB for the period ended October 31, 1999.
4.1		Certificate of Designation of the Powers, Preferences and other Special Rights of Series A Cumulative Convertible Participating Preferred Stock, incorporated by reference to Infocrossing's Proxy Statement for the Annual Meeting held on May 8, 2000.
4.2		Registration Rights Agreement by and among Computer Outsourcing Services, Inc.; DB Capital Investors, LP; the 'Initial Sandler Holders' as defined in the agreement ("Sandler Holders"); and Zach Lonstein, incorporated by reference to Infocrossing's Proxy Statement for the Annual Meeting held on May 8, 2000.
4.3		Warrant Agreement between Computer Outsourcing Services, Inc. and the Warrantholders Party thereto, incorporated by reference to Infocrossing's Proxy Statement for the Annual Meeting held on May 8, 2000.
4.4	A	Stockholders Agreement by and among Computer Outsourcing Services, Inc.; DB Capital Investors, LP; the Sandler Holders; and the Management and Non-Management Stockholders listed therein, incorporated by reference to Infocrossing's Proxy Statement for the Annual Meeting held on May 8, 2000.
4.4	B	Second Amended and Restated Stockholders Agreement dated as of February 1, 2002 by and among Infocrossing, Inc. and the Stockholders named therein, incorporated by reference to Exhibit 99.5 to the Current Report on Form 8-K filed February 5, 2002.
4.5	A	Amended and Restated 1992 Stock Option and Stock Appreciation Rights Plan, incorporated by reference to Appendix A to the Definitive Proxy for Infocrossing's Annual Meeting held on May 8, 2000, as subsequently amended as referenced in the Definitive Proxy for Infocrossing's Annual Meeting held June 22, 2001.
4.5	B	2002 Stock Option and Stock Appreciation Rights Plan, incorporated by reference to Appendix B to the Definitive Proxy for Infocrossing's Annual Meeting held on June 25, 2002.
4.6		Securities Purchase Agreement dated as of February 1, 2002 by and between Infocrossing, Inc. and the Purchasers named therein, incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed February 5, 2002.

23

4.7		Warrant Agreement dated as of February 1, 2002 by and between Infocrossing, Inc. as Issuer and the Purchasers named therein, incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K filed February 5, 2002.
10.1		Employment Agreement, dated as of June 15, 2000, between the Company and Charles F. Auster ("Auster), incorporated by reference to Exhibit 10.3 to Infocrossing's Form 10-Q for the period ended July 31, 2000.
10.2		Settlement and Release Agreement between Infocrossing and Auster, incorporated by reference to a Report on Form 8-K filed November 16, 2001.
10.3		Employment Agreement, dated as of November 1, 1999, between Infocrossing and Zach Lonstein, incorporated by reference to Exhibit 10.4 to Infocrossing's Form 10-Q for the period ended July 31, 2000.
10.4		Employment Agreement, dated as of November 1, 1999, between Infocrossing and Robert Wallach, incorporated by reference to Exhibit 10.5 to Infocrossing's Form 10-Q for the period ended July 31, 2000.
10.5		Office Lease Agreement dated May 22, 2000 between Infocrossing and Crocker Realty Trust, incorporated by reference to Exhibit 10.6 to Infocrossing's Form 10-Q for the period ended July 31, 2000.
10.6		First Amendment to Lease dated as of April 1, 2002 by and between Crocker Realty Trust, L.P. and Infocrossing, incorporated by reference to Exhibit 10.1 to Infocrossing's Quarterly Report on Form 10-Q for March 31, 2002.
10.7		Deed of Lease dated July 21, 2000 between Infocrossing and Beco-Terminal, LLC, ("BECO") incorporated by reference to Exhibit 10.7 to Infocrossing's Form 10-Q for the period ended July 31, 2000.
10.8		Lease Termination Agreement dated as of April 19, 2002 by and between Beco-Terminal LLC and Infocrossing, incorporated by reference to Exhibit 10.1 to Infocrossing's Quarterly Report on Form 10-Q for March 31, 2002.
10.9		Amendment to the Asset Purchase Agreement dated as of February 1, 2001, by and among Infocrossing, ETG, Inc., Enterprise Technology Group, Inc. ("Enterprise"), and certain stockholders of Enterprise, incorporated by reference to Exhibit 10.11B to Infocrossing's Annual Report on Form 10-K for December 31, 2000.
10.10		Warrant to purchase 65,000 shares of Infocrossing's common stock, dated February 1, 2001, issued to Enterprise, incorporated by reference to Exhibit 10.11C to Infocrossing's Annual Report on Form 10-K for December 31, 2000.
10.11		Master Loan and Security Agreement No. 85043 by and among Infocrossing, Inc. and ETG, Inc. as co-Debtors and Wells Fargo Equipment Finance, Inc., dated as of July 19, 2001, with accompanying Riders and Schedules, incorporated by reference to Infocrossing's Quarterly Report on Form 10-Q for September 30, 2001.
21	*	List of Subsidiaries of Infocrossing
23		Consent of Ernst & Young LLP
32		Certification required by Rule 13a-14(b) to be filed.

*

Previously filed as an exhibit to the Company's Annual Report on Form 10-K filed March 31, 2003.

(b)

Reports on Form 8-K

        On November 11, 2002, Infocrossing made public certain forward-looking financial information pursuant to Item 9 of Form 8-K

24

SIGNATURES

        In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	INFOCROSSING, INC.
February 6, 2004	/s/ ZACH LONSTEIN Zach Lonstein—Chief Executive Officer
February 6, 2004	/s/ WILLIAM J. MCHALE William J. McHale—Senior Vice President of Finance

        In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

February 6, 2004	/s/ ZACH LONSTEIN Zach Lonstein—Chairman of the Board of Directors and Chief Executive Officer (Principal Executive Officer)
February 6, 2004	/s/ WILLIAM J. MCHALE William J. McHale—Senior Vice President of Finance (Principal Financial Officer and Principal Accounting Officer)
February 6, 2004	Peter DaPuzzo—Director
February 6, 2004	Kathleen A. Perone—Director
February 6, 2004	/s/ MICHAEL B. TARGOFF Michael B. Targoff—Director
February 6, 2004	/s/ ROBERT B. WALLACH Robert B. Wallach—Director

25

CERTIFICATIONS

I, Zach Lonstein, certify that:

1.

I have reviewed this annual report on Form 10-K/A of Infocrossing, Inc.;



2.

Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;



3.

Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this annual report;



4.

The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:



a)

Designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;



b)

Evaluated the effectiveness of the Registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and



c)

Presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;



5.

The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the Registrant's auditors and the audit committee of the Registrant's Board of Directors (or persons performing the equivalent function):



a)

All significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant's ability to record, process, summarize and report financial data and have identified for the Registrant's auditors any material weaknesses in internal controls; and



b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls; and



6.

The Registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

February 6, 2004 /s/ ZACH LONSTEIN Zach Lonstein
Chairman and Chief Executive Officer

26

I, William J. McHale, certify that:

1.

I have reviewed this annual report on Form 10-K/A of Infocrossing, Inc.;



2.

Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;



3.

Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this annual report;



4.

The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:



a)

Designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;



b)

Evaluated the effectiveness of the Registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and



c)

Presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;



5.

The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the Registrant's auditors and the audit committee of the Registrant's Board of Directors (or persons performing the equivalent function):



a)

All significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant's ability to record, process, summarize and report financial data and have identified for the Registrant's auditors any material weaknesses in internal controls; and



b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls; and



6.

The Registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

February 6, 2004 /s/ WILLIAM J. McHALE William J. McHale
Senior Vice President of Finance

27

INFOCROSSING, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND SCHEDULE

		Page No.
Report of Independent Auditors		F-2
	Consolidated Balance Sheets— December 31, 2002 and 2001	F-3
	Consolidated Statements of Operations— Years ended December 31, 2002 and 2001, the Two-Month Period ended December 31, 2000, and the Fiscal Year ended October 31, 2000	F-4
	Consolidated Statements of Stockholders' Equity (Deficit)— Years ended December 31, 2002 and 2001, Two-Month Period ended December 31, 2000 and Fiscal Year ended October 31, 2000	F-5
	Consolidated Statements of Cash Flows— Years ended December 31, 2002 and 2001, the Two-Month Period ended December 31, 2000, and the Fiscal Year ended October 31, 2000	F-6
	Notes to Consolidated Financial Statements	F-8
	Schedule II: Valuation and Qualifying Accounts	S-1

F-1

Report of Independent Auditors

The Board of Directors and Stockholders of
Infocrossing, Inc. and Subsidiaries

        We have audited the accompanying consolidated balance sheets of Infocrossing, Inc. and subsidiaries as of December 31, 2002 and 2001, and the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for the years ended December 31, 2002 and 2001, the two month period ended December 31, 2000 and the year ended October 31, 2000. Our audits also included the financial statement schedule listed in the Index at Item 16(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Infocrossing, Inc. and subsidiaries at December 31, 2002 and 2001, and the consolidated results of their operations and their cash flows for the years ended December 31, 2002 and 2001, the two month period ended December 31, 2000 and the year ended October 31, 2000, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

        As discussed in Notes 1 and 6 to the consolidated financial statements, on January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Intangible Assets".

/s/ ERNST & YOUNG, LLP ERNST & YOUNG, LLP

New York, New York
February 19, 2003

F-2

INFOCROSSING, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	December 31,
	2002			2001
ASSETS
CURRENT ASSETS:
Cash and equivalents	$	7,026,407		$	24,343,819
Trade accounts receivable, net of allowances for doubtful accounts of $1,050,892 and $1,008,942		4,369,346			2,410,556
Due from related parties		216,340			205,106
Prepaid license fees		826,848			682,342
Other current assets		1,307,664			1,125,549
		13,746,605			28,767,372
PROPERTY and EQUIPMENT, net		19,436,768			17,173,134
OTHER ASSETS:
Deferred software, net		1,742,061			2,197,070
Goodwill, net		28,451,209			7,736,773
Other intangible assets, net		1,141,640			374,114
Security deposits and other non-current assets		976,890			2,525,531
		32,311,800			12,833,488
TOTAL ASSETS	$	65,495,173		$	58,773,994
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable	$	4,093,285		$	1,914,682
Current portion of long-term debt and capitalized lease obligations		1,740,863			1,893,683
Current portion of accrued loss on leased facilities		207,727			3,313,806
Accrued expenses		4,093,345			6,245,665
Income taxes payable		96,248			—
Current deferred revenue		1,380,630			450,641
		11,612,098			13,818,477
LONG-TERM LIABILITIES:
Debentures due in 2005, net of unaccreted discount		9,371,556			—
Long-term debt and capitalized lease obligations, net of current portion		1,505,833			3,632,446
Accrued loss on leased facilities, net of current portion		925,046			1,127,770
Deferred revenue, net of current portion		224,354			961,074
Other long-term liabilities		872,236			1,309,648
		12,899,025			7,030,938
COMMITMENTS AND CONTINGENCIES
REDEEMABLE 8% SERIES A CUMULATIVE CONVERTIBLE PARTICIPATING PREFERRED STOCK; $0.01 par value; 300,000 shares authorized; 157,115 shares issued and outstanding (liquidation preference of $73,863,906 at December 31, 2002)		53,188,577			43,960,634
STOCKHOLDERS' DEFICIT:
Preferred stock; $0.01 par value; 2,700,000 shares authorized; none issued		—			—
Common stock; $0.01 par value; 50,000,000 shares authorized; shares issued of 5,973,506 and 5,912,416 at December 31, 2002 and 2001, respectively		59,735			59,124
Additional paid-in capital		61,135,317			59,053,570
Accumulated deficit		(70,548,859	)		(62,392,549	)
		(9,353,807	)		(3,279,855	)
Less 594,990 and 578,623 shares at December 31, 2002 and 2001, respectively, of common stock held in treasury, at cost		(2,850,720	)		(2,756,200	)
TOTAL STOCKHOLDERS' DEFICIT		(12,204,527	)		(6,036,055	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	65,495,173		$	58,773,994

See Notes to Consolidated Financial Statements.

F-3

INFOCROSSING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

		Years ended December 31,						Two Month Period ended December 31, 2000			Fiscal Year ended October 31, 2000
		2002			2001
REVENUES		$	50,773,742		$	26,986,466		$	3,520,937		$	24,471,450
COSTS and EXPENSES:
	Costs of revenues, excluding depreciation shown below		32,977,274			31,796,324			5,262,253			26,869,973
	Selling and promotion costs		3,140,217			3,597,153			829,806			3,103,485
	General and administrative expenses		6,114,148			8,728,468			1,342,382			9,274,536
	Leased facilities and office closings		(289,860	)		5,650,000			34,601			514,371
	Amortization of restricted stock award		—			9,822,917			479,166			1,197,917
	Amortization of goodwill		—			644,090			105,466			619,085
	Other depreciation and amortization		5,938,340			3,460,914			398,717			1,688,692
			47,880,119			63,699,866			8,452,391			43,268,059
INCOME (LOSS) FROM OPERATIONS			2,893,623			(36,713,400	)		(4,931,454	)		(18,796,609	)
Interest income			(171,555	)		(1,377,093	)		(520,288	)		(1,753,863	)
Interest expense			2,136,494			490,690			28,862			114,004
			1,964,939			(886,403	)		(491,426	)		(1,639,859	)
INCOME (LOSS) BEFORE INCOME TAXES			928,684			(35,826,997	)		(4,440,028	)		(17,156,750	)
Income tax (benefit) expense			(208,395	)		697,000			—			(2,173,443	)
NET INCOME (LOSS)			1,137,079			(36,523,997	)		(4,440,028	)		(14,983,307	)
Accretion and dividends on redeemable preferred stock			(9,293,389	)		(8,524,026	)		(1,350,413	)		(3,835,730	)
NET LOSS TO COMMON STOCKHOLDERS		$	(8,156,310	)	$	(45,048,023	)	$	(5,790,441	)	$	(18,819,037	)
BASIC AND DILUTED EARNINGS PER SHARE:
Net loss to common stockholders		$	(1.52	)	$	(7.77	)	$	(0.98	)	$	(3.58	)
Weighted average number of common shares outstanding			5,352,757			5,801,312			5,888,311			5,251,457

See Notes to Consolidated Financial Statements.

F-4

INFOCROSSING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

	Common Shares		Par Value			Additional Paid in Capital		Retained Earnings (Deficit)			Unamortized Restricted Stock Award			Treasury Stock at Cost			Total
Balances, October 31, 1999	4,737,915		$	47,379		$	15,519,826	$	7,264,952		$	—		$	(7,313	)	$	22,824,844
Exercises of stock options	170,478			1,705			969,596		—			—			—			971,301
4,608 shares surrendered for stock option exercise	—			—			—		—			—			(111,744	)		(111,744	)
Contingent payment related to an acquisition	36,472			365			1,134,795		—			—			—			1,135,160
Exercise of warrants	75,000			750			374,250		—			—			—			375,000
Sale of restricted shares by the Company	68,446			684			999,312		—			—			—			999,996
Restricted stock award	800,000			8,000			11,492,000		—			(11,500,000	)		—			—
Amortization of restricted stock award	—			—			—		—			1,197,917			—			1,197,917
Issuance of warrants in connection with termination of a financing arrangement	—			—			120,000		—			—			—			120,000
Accretion and dividends on redeemable preferred stock	—			—			—		(3,835,730	)		—			—			(3,835,730	)
Issuance of warrants in connection with a private placement	—			—			28,180,132		—			—			—			28,180,132
Net loss	—			—			—		(14,983,307	)		—			—			(14,983,307	)
Balances, October 31, 2000	5,888,311		$	58,883		$	58,789,911	$	(11,554,085	)	$	(10,302,083	)	$	(119,057	)	$	36,873,569
Balances, October 31, 2000	5,888,311		$	58,883		$	58,789,911	$	(11,554,085	)	$	(10,302,083	)	$	(119,057	)	$	36,873,569
Amortization of restricted stock award	—			—			—		—			479,166			—			479,166
Purchased 6,900 shares for treasury, at cost	—			—			—		—			—			(68,356	)		(68,356	)
Issuance of a warrant in settlement of contingent purchase price	—			—			146,900		—			—			—			146,900
Accretion and dividends on redeemable preferred stock	—			—			—		(1,350,413	)		—			—			(1,350,413	)
Net loss	—			—			—		(4,440,028	)		—			—			(4,440,028	)
Balances, December 31, 2000	5,888,311		$	58,883		$	58,936,811	$	(17,344,526	)	$	(9,822,917	)	$	(187,413	)	$	31,640,838
Exercise of stock options by the surrender of 20,021 shares	25,000			250			116,750		—			—			(117,000	)		—
Cancellation of shares previously issued in error	(895	)		(9	)		9		—			—			—			—
Purchase 546,094 shares for treasury, at cost	—			—			—		—			—			(2,451,787	)		(2,451,787	)
Accretion and dividends on redeemable preferred stock	—			—			—		(8,524,026	)		—			—			(8,524,026	)
Amortization of restricted stock award	—			—			—		—			9,822,917			—			9,822,917
Net loss	—			—			—		(36,523,997	)		—			—			(36,523,997	)
Balances, December 31, 2001	5,912,416		$	59,124		$	59,053,570	$	(62,392,549	)	$	—		$	(2,756,200	)	$	(6,036,055	)
Balances, December 31, 2001	5,912,416		$	59,124		$	59,053,570	$	(62,392,549	)	$	—		$	(2,756,200	)	$	(6,036,055	)
Exercises of stock options	53,885			539			289,413		—			—			—			289,952
Accretion and dividends on redeemable preferred stock	—			—			—		(9,293,389	)		—			—			(9,293,389	)
Conversion of preferred stock and exercise of warrants	7,205			72			65,374		—			—			—			65,446
Purchase 16,367 shares for treasury, at cost	—			—			—		—			—			(94,520	)		(94,520	)
Warrants issued	—			—			1,720,000		—			—			—			1,720,000
Other	—			—			6,960		—			—			—			6,960
Net income	—			—			—		1,137,079			—			—			1,137,079
Balances, December 31, 2002	5,973,506		$	59,735		$	61,135,317	$	(70,548,859	)	$	—		$	(2,850,720	)	$	(12,204,527	)

See Notes to Consolidated Financial Statements.

F-5

INFOCROSSING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

			Years ended December 31,						Two Month Period ended December 31, 2000			Fiscal Year ended October 31, 2000
			2002			2001
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)			$	1,137,079		$	(36,523,997	)	$	(4,440,028	)	$	(14,983,307	)
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
	Depreciation and amortization			5,938,340			4,105,004			504,183			2,307,777
	Accretion of discounted Debentures			491,556			—			—			—
	Amortization of restricted stock award			—			9,822,917			479,166			1,197,917
	Stock-based compensation			—			—			—			71,266
	Warrants issued in connection with termination of a credit agreement			—			—			—			120,000
	Accrued loss (reduction of accrued loss) on leased facilities			(289,860	)		5,650,000			34,601			514,371
	Decrease (increase) in:
		Trade accounts receivable		(321,896	)		945,358			(155,836	)		2,810,288
		Prepaid license fees and other current assets		(122,356	)		3,910,196			63,697			(2,485,798	)
	Increase (decrease) in:
		Accounts payable		2,178,603			545,280			(893,434	)		1,025,357
		Income taxes payable		96,248			—			—			—
		Accrued expenses		(5,955,849	)		2,633,445			811,765			1,585,089
		Security deposits and other non-current assets		1,538,885			31,441			—			(2,073,185	)
		Payments on accrued loss on leased facilities		(3,257,237	)		(463,943	)		(72,477	)		(190,014	)
		Deferred revenue and other liabilities		(177,907	)		2,002,575			112,274			170,158
Net cash provided by (used in) operating activities				1,255,606			(7,341,724	)		(3,556,089	)		(9,930,081	)
CASH FLOWS FROM INVESTING ACTIVITIES:
	Purchase of property and equipment			(3,955,491	)		(9,009,097	)		(839,177	)		(6,564,057	)
	Disposal of equipment			—			—			—			2,750
	Redemptions (purchases) of investments in marketable debt securities			—			3,413,069			2,368,739			(4,108,367	)
	Purchase of the outstanding stock of AmQUEST, Inc.			(19,895,971	)		—			—			—
	Purchases of treasury stock			—			(516,567	)		(68,356	)		—
	Increase in deferred software costs			(134,799	)		(285,235	)		(118,828	)		(1,011,231	)
Net cash (used in) provided by investing activities				(23,986,261	)		(6,397,830	)		1,342,378			(11,680,905	)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from a private equity placement		$	—		$	—		$	—		$	58,430,596
	Proceeds from issuance of Debentures			10,000,000			—			—			—
	Proceeds from debt financing and a line of credit			—			3,062,252			—			5,140,336
	Repayments of debt and capitalized leases			(4,726,349	)		(1,217,115	)		(101,112	)		(5,041,993	)
	Advances to related parties, net			(11,234	)		(474,638	)		(1,495,079	)		(38,295	)
	Proceeds from a sale of common stock			—			—			—			999,996
	Exercises of stock options and warrants			202,392			—			—			1,163,291
Net cash provided by (used in) financing activities				5,464,809			1,370,499			(1,596,191	)		60,653,931
Net cash (used in) provided by continuing operations				(17,265,846	)		(12,369,055	)		(3,809,902	)		39,042,945
CASH FLOWS FROM DISCONTINUED OPERATION:
	Payments on portion of accrued loss on leased facilities relating to discontinued operation			(51,566	)		(50,957	)		(11,324	)		(48,111	)
Net (decrease) increase in cash and equivalents				(17,317,412	)		(12,420,012	)		(3,821,226	)		38,994,834
Cash and equivalents, beginning of year				24,343,819			36,763,831			40,585,057			1,590,223
Cash and equivalents, end of year			$	7,026,407		$	24,343,819		$	36,763,831		$	40,585,057

F-6

SUPPLEMENTAL CASH FLOW INFORMATION:
	Cash paid during the year for:
		Interest	$	422,329	$	491,385	$	1,369	$	114,004
		Income taxes	$	21,900	$	42,082	$	—	$	67,139
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES:
	Fees and other costs accrued in connection with the purchase of AmQUEST, Inc.		$	350,000	$	—	$	—	$	—
	Common stock issued for the Enterprise Purchase		$	—	$	—	$	—	$	1,135,160
	Equipment acquired subject to a capital lease		$	1,278,474	$	57,500	$	3,602,817	$	—
	Warrants issued for the settlement of contingent purchase price		$	—	$	—	$	146,900	$	—
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
	Treasury shares received in payment of an amount due from a related party		$	—	$	1,935,220	$	—	$	—
	Treasury shares received in payment of a stock option exercise		$	94,525	$	117,000	$	—	$	111,744
	Preferred shares converted to common		$	65,446	$	—	$	—	$	—
	Additional Debentures issued in lieu of a cash payment of interest		$	600,000	$	—	$	—	$	—

See Notes to Consolidated Financial Statements.

F-7

INFOCROSSING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2002

1.     Summary of Business and Significant Accounting Policies

        Business—Infocrossing, Inc. and its wholly-owned subsidiaries (collectively, the "Company") provides comprehensive information technology outsourcing services to companies, institutions, and government agencies.

        Principles of Consolidation—The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and significant intercompany transactions have been eliminated.

        On February 5, 2002, the Company purchased all of the outstanding capital stock of AmQUEST, Inc. ("AmQUEST"), from a corporate seller (the "AmQUEST Acquisition"). As consideration for the purchase of AmQUEST's shares, the Company paid the seller $19,634,000 in cash, after certain post closing adjustments. In addition, the Company has incurred an estimated $612,000 in other acquisition related costs of which $350,000 remains unpaid at December 31, 2002. The accounts and results of operations of AmQUEST are consolidated with the Company as of and after February 5, 2002.

        On September 15, 2000, the Company's Board of Directors voted to change the Company's year ending date from October 31st to December 31st. Accordingly, the audited financial information presented is on the basis of fiscal years ended on October 31st through October 31, 2000, the two-month period ended December 31, 2000, and the calendar years ended December 31, 2001 and December 31, 2002.

        In June 2001, the Financial Accounting Standards Board ("FASB") issued Statements of Financial Accounting Standards No. 141, "Business Combinations", ("SFAS 141"), and No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142").

        SFAS 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. SFAS 141 also includes guidance on the initial recognition and measurement of goodwill and other intangible assets arising from business combinations completed after June 30, 2001. SFAS 142 prohibits the amortization of goodwill and intangible assets with indefinite useful lives. SFAS 142 requires that these assets be reviewed for impairment at least annually. Intangible assets with finite lives will continue to be amortized over their estimated useful lives.

        In accordance with SFAS 141, the AmQUEST Acquisition was recorded as a purchase.

        The Company applied SFAS 142 beginning in the first quarter of 2002 and accordingly has not recorded any goodwill amortization in 2002 (See Note 6). The Company has tested goodwill for impairment using processes described in SFAS 142, and has no impairment to record in 2002.

        In August 2001, the FASB issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supercedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of", and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations for a Disposal of a Segment of a Business." SFAS 144 is effective for fiscal years beginning after December 15, 2001, with earlier application encouraged. The Company adopted SFAS 144 as of January 1, 2002, with no effect on the Company's financial position, results of operations, or cash flows.

F-8

        Cash and Equivalents—Cash and equivalents include all cash, demand deposits, money market accounts, and debt instruments purchased with an original maturity of three months or less.

        Concentration of Credit Risk—Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of temporary cash investments and trade receivables. The Company restricts investment of temporary cash investments to financial institutions with high credit standing. Credit risk on trade receivables is minimized as a result of the large and diverse nature of the Company's customer base. Ongoing credit evaluations of customers' financial condition are performed. The Company maintains reserves for potential credit losses and such losses, in the aggregate, have not exceeded management's expectations.

        Property and Equipment—Property and equipment is stated at cost except for assets acquired under capital leases, which are recorded at the lesser of their fair market value at the date of the lease or the net present value of the minimum lease commitments. Depreciation is provided using the straight-line method over the estimated useful lives. Leasehold improvements and assets acquired under capital leases are amortized over the shorter of the lease term or the estimated useful lives.

        Software—Software that has been purchased is included in Property and Equipment and is amortized using the straight-line method over five years. The cost of internally developed software and product enhancements, not reimbursed by customers, is capitalized as Deferred Software Costs. Such assets are internal-use software, accounted for in accordance with Statement of Position 98-1, "Accounting of the Costs of Computer Software Developed or Obtained for Internal Use." The estimated useful lives of such assets vary between three and five years, based upon the estimated useful life of each particular software product. If the software has been developed for a particular client, the useful life equals the term of the related customer contract.

        Intangible Assets—The excess of cost over net assets of acquired businesses ("goodwill") was amortized during the periods ending December 31, 2001 using the straight-line method over the estimated lives, typically no more than fifteen years. In accordance with SFAS 142, goodwill was not amortized in 2002. Other intangible assets, primarily acquired customer lists, are amortized using the straight-line method over the estimated lives, typically no more than ten years. The carrying value of intangibles is evaluated periodically for impairment in accordance with Statement of Financial Accounting Standards No. 142.

        Revenue Recognition—The Company's services are provided under a combination of fixed monthly fees and time and materials billings. Contracts with clients typically range from one to five years. Revenue is recognized (1) after we have obtained an executed service contract from the customer (2) as the services are rendered (3) when the price is fixed as per the service contract and (4) when the Company believes that collectibility is reasonably assured based on the credit risk policies and procedures that the Company employs.

        Deferred Revenue—The Company records deferred revenue for amounts billed for which the services have not yet been provided. Deferred revenue amounts are recorded to income as the services are rendered.

        Income Taxes—Income tax expense or benefit is based on pre-tax accounting income. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Deferred tax benefits are recognized to the extent that realization of such benefits is more likely than not. In 2002, a net tax benefit was recognized for the carry-back of certain 2000 alternative minimum tax losses to prior years. The cumulative tax benefit recorded by the Company in October 2000 was limited to the refund the Company received as a result of carrying back a portion of the pretax loss to prior years.

        Earnings per Share—Basic earnings per share is computed by dividing income to common stockholders by the weighted average number of common shares outstanding during each period.

F-9

Diluted earnings per share are computed using the weighted average number of common shares plus the potentially dilutive effect of common stock equivalents. Stock options, warrants, and convertible preferred stock that are anti-dilutive are excluded from the computation of weighted average shares outstanding. Certain options, warrants, and convertible preferred stock that are currently anti-dilutive may be dilutive in the future.

        Segments—The Company and its subsidiaries operate in one reportable segment of providing information technology outsourcing services.

        Derivatives—The Company does not invest in derivatives for trading purposes nor does it use derivative financial instruments to manage risks associated with fluctuating interest rates.

        Fair Value of Financial Instruments—At December 31, 2002 and 2001, the carrying amounts of cash and equivalents, trade accounts receivable, accounts payable, accrued expenses, accrued loss on leased facilities, customer deposits, deferred revenue and other current liabilities approximate fair value due to the short-term nature of these instruments. The carrying amounts of long-term debt approximate fair value based on interest rates that are currently available to the Company with similar terms and remaining maturities.

        Use of Estimates—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 dates of the financial statements and the reported amounts of revenues and expenses during the periods. Actual results could differ from those estimates.

        Reclassifications—Certain reclassifications were made to the prior years' financial statements to conform to the current year presentation.

        Major Customers—For the years ended December 31, 2002 and 2001, the two month period ended December 31, 2000, and the fiscal year ended October 31, 2000, one client accounted for 11%, 17%, 16% and 14%, respectively, of the Company's revenues. In addition, during the years ended December 2002 and 2001, a new client accounted for 29% and 17%, respectively, of the Company's revenues, and in the two month period ended December 31, 2000 and the fiscal year ended October 31, 2000, a former client accounted for 17% and 13% of the Company's revenues.

        Stock-based Compensation—The Company accounts for stock options granted to employees and directors under the Plan in accordance with Accounting Principles Board Opinion No. 25 and related Interpretations. Accordingly, no compensation cost has been recognized for stock option awards.

        Had compensation cost been determined in accordance with Statement of Financial Accounting Standard No. 123 "Accounting for Stock-Based Compensation", the Company's income (loss) in thousands of dollars and income (loss) per common share for the years ended December 31, 2002, and

F-10

2001, the two month period ended December 31, 2000, and the fiscal year ended October 31, 2000, respectively, would have been as follows:

		Year ended December 31,						Fiscal Year ended October 31, 2000			Two Month Period ended December 31, 2000
		2002			2001
Net loss to common stockholders:
	As reported	$	(8,156	)	$	(45,048	)	$	(18,819	)	$	(5,790	)
	Pro forma	$	(11,071	)	$	(47,885	)	$	(20,336	)	$	(6,247	)
Net loss to common stockholders per share:
	As reported	$	(1.52	)	$	(7.77	)	$	(3.58	)	$	(0.98	)
	Pro forma	$	(2.07	)	$	(8.25	)	$	(3.87	)	$	(1.06	)

        All incentive stock options under the Plan, other than those granted to any person holding more than 10% of the total combined voting power of all classes of outstanding stock, are granted at the fair market value of the common stock at the grant date. The weighted average fair value of the stock options granted during the years ended December 31, 2002 and 2001 and the fiscal year ended October 31, 2000 was $689,431, $888,724, and $12,122,000, respectively. No grants were made during the two months ended December 31, 2000. The fair value of each stock option grant is estimated on the date of the grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2002: a risk-free interest rate of 3.69%; expected lives of three and a half years; and expected volatility of 54.7%. The assumptions used in 2001 and fiscal 2000 included risk-free interest rates of 4.72% and 6.28%, respectively, expected lives ranging from six months to five years, and expected volatilities of 65.5% and 85.9%, respectively.

        Recently Issued Accounting Pronouncements—In July 2002, the FASB issued Statement of Financial Accounting Standards No. 146, "Accounting for Costs Associated with Exit or Disposal Activities" ("SFAS 146"). SFAS 146 provides guidance on the timing of the recognition of costs associated with exit or disposal activities, requiring such costs to be recognized when incurred. Previous guidance required the recognition of costs at the date of commitment to an exit or disposal plan. The provisions of SFAS 146 are to be adopted prospectively after December 31, 2002. Although SFAS 146 may impact the accounting for costs related to exit or disposal activities we may enter into in the future, particularly the timing of the recognition of these costs, the adoption of the statement did not have an impact on our current financial condition or results of operations.

        In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure, an amendment of FASB Statement No. 123," which amends SFAS No. 123, "Accounting for Stock-Based Compensation," to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock- based employee compensation. The transition and annual disclosure provisions of SFAS No. 148 are effective for fiscal years ending after December 15, 2002. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. We will continue to account for stock-based compensation to employees under APB Opinion No. 25 and related interpretations.

2.     Acquisition

        On February 5, 2002, the Company purchased all of the outstanding capital stock of AmQUEST, a Georgia corporation, from its former parent company American Software, Inc. ("ASI"). As

F-11

consideration for the purchase of AmQUEST's shares, the Company paid ASI approximately $19,634,000 in cash, after finalizing certain post closing adjustments. In addition, the Company incurred approximately $612,000 in professional fees and other costs related to the acquisition of which $350,000 remains unpaid at December 31, 2002.

        The Company financed the AmQUEST Acquisition through the application of the proceeds of the financing described in Note 9 and cash held by the Company.

        The Company acquired client contracts valued at $1,200,000. This intangible asset is being amortized over five years using an accelerated method to approximate the anticipated decline in the revenues of the acquired contracts as they expire over that time. The acquisition also generated $20,714,436 in goodwill. This goodwill is not currently deductible for tax purposes.

        The balance sheet of AmQUEST as of the date of the acquisition has been valued as follows:

Consolidated Balance Sheet of AmQUEST, Inc.
as of February 5, 2002
(In Thousands)

ASSETS:
	Accounts receivable		$	1,637
	Other current assets			204
		Total current assets		1,841
	Equipment and other fixed assets			1,936
	Customer list			1,200
	Goodwill			20,714
			$	25,691
LIABILITIES AND EQUITY:
	Accrued expenses		$	4,053
	Current capital leases			802
	Other current liabilities			56
		Total current liabilities		4,911
	Capital leases due			366
	Other liabilities			168
		Total liabilities		5,445
	Parent's equity			20,246
			$	25,691

        The following unaudited condensed consolidated pro forma financial statements of operations is presented to illustrate the effects of the acquisition of AmQUEST as if such transaction had occurred on the first day of each of the periods presented (January 1, 2002 and 2001). The pro forma statements of operations may not be indicative of the results that actually would have occurred had the

F-12

combination been in effect on the date indicated, nor does it purport to indicate the results that may be obtained in the future.

Condensed Consolidated Pro Forma Statements of Operations
(In Thousands except Per Share Data)

	Years ended December 31,
	2002			2001
Revenues	$	52,249		$	45,228
Net income (loss)		1,012			(38,387	)
Net loss to common stockholders	$	(8,280	)	$	(46,911	)
Net loss to common stockholders per basic and diluted share	$	(1.55	)	$	(8.09	)

3.     Settlement

        On January 10, 2002, the Company and a software licensor (the "Licensor") entered into a Release Agreement (the "Agreement") in settlement of a dispute of certain claims the Company had sought against the Licensor under a software license and support agreement. Pursuant to the Agreement, the Company received credits totaling $2,000,000 to be used towards certain future purchases (the "Credits"). The Credits were subject to restrictions and were to expire on December 31, 2002 if unused. Additionally, support fees of $1,136,000 under the software and support agreement, including $522,000 of past due amounts, were waived by the Licensor. Pursuant to the Agreement, the Company agreed to release and hold harmless the Licensor and its subsidiaries from any and all claims, damages, actions or causes of action of any kind arising prior to the date of the Agreement.

        The Company recognized all of the Credits in its statement of operations in 2002. Additionally, accrued expenses related to the unpaid support fees totaling $796,000 were reversed in connection with the Agreement. As of December 31, 2002, all of the Credits had been used.

4.     Property and Equipment

        Property and equipment consists of the following:

	December 31,
							Depreciable Lives (Years)
	2002			2001
Computer equipment	$	10,916,395		$	8,836,460		5
Computer equipment held under capital leases (Note 9)		7,485,394			4,938,987		*
Furniture and office equipment		1,261,716			1,343,842		7
Leasehold improvements		8,022,889			7,941,703		*
Purchased software		5,838,603			3,294,070		5
Vehicles		131,711			155,058		3
		33,656,708			26,510,120
Less accumulated depreciation and amortization, including $2,893,080 and $2,062,025 attributable to capital leases at December 31, 2002 and 2001, respectively		(14,219,940	)		(9,336,986	)
	$	19,436,768		$	17,173,134

*

Shorter of the useful life or the length of the lease.

F-13

        In connection with the AmQUEST Acquisition, the Company added $1,935,970 of fixed assets, including $1,168,442 of capitalized leases

        Depreciation and amortization charged to operations was $4,906,301 and $2,562,985 for the years ended December 31, 2002 and 2001; $948,164 for the fiscal year ended October 31, 2000, and $283,017 for the two-month period ended December 31, 2000.

        In connection with the recording of a loss of on leased facilities at December 31, 2001, approximately $2,742,000 of capitalized costs were written off (See Note 10).

5.     Deferred Software Costs

        Deferred software costs consist of the following:

	December 31,
	2002			2001
Cost of internally-developed software and enhancements, including software under development	$	5,956,159		$	5,821,360
Accumulated amortization		(4,214,098	)		(3,624,290	)
	$	1,742,061		$	2,197,070

        Amortization of deferred software costs charged to operations was $589,808 and $753,879 for the years ended December 31, 2002 and 2001; $596,476 for the fiscal year ended October 31, 2000, and $91,691 for the two months ended December 31, 2000.

6.     Goodwill and Other Intangible Assets

        Goodwill consists of the following:

	December 31,
	2002			2001
Excess cost of investments over net assets acquired	$	30,692,926		$	9,978,490
Accumulated amortization		(2,241,717	)		(2,241,717	)
	$	28,451,209		$	7,736,773

        In connection with the AmQUEST Acquisition, the Company incurred $20,714,436 of new goodwill.

        Amortization charged to operations was $644,090 for the year ended December 31, 2001; $619,085 for the fiscal year ended October 31, 2000, and $105,464 for the two months ended December 31, 2000.

        As noted above, SFAS 142 prohibits the amortization of goodwill, and also requires that the Company report, on a pro forma basis the amount of net income or loss, for periods presented prior to January 1, 2002, as if SFAS 142 were implemented at the beginning of the earliest period presented and goodwill had not been amortized.

F-14

Consolidated Pro Forma Statement of Net Loss
(In Thousands Except Per Share Data)

	For the Year ended December 31, 2001						For the Two Month Period ended December 31, 2000						For the Fiscal Year ended October 31, 2000
	As Reported			Pro Forma			As Reported			Pro Forma			As Reported			Pro Forma
Net loss	$	(36,524	)	$	(35,880	)	$	(4,440	)	$	(4,335	)	$	(14,983	)	$	(14,364	)
Net loss to common stockholders	$	(45,048	)	$	(44,404	)	$	(5,790	)	$	(5,685	)	$	(18,819	)	$	(18,200	)
Net loss to common stockholders per diluted share	$	(7.77	)	$	(7.65	)	$	(0.98	)	$	(0.97	)	$	(3.58	)	$	(3.47	)

        Other intangible assets consist of the following:

	December 31,
	2002			2001
Acquired customer lists	$	2,380,488		$	1,180,488
Accumulated amortization		(1,238,848	)		(806,374	)
	$	1,141,640		$	374,114

        In connection with the acquisition of AmQUEST, Inc., the Company added customer contracts worth $1,200,000.

        Amortization charged to operations was $432,474 and $134,294 for the years ended December 31, 2002 and 2001; $134,296 for the fiscal year ended October 31, 2000, and $22,384 for the two-month period ended December 31, 2000. Amortization expense related to customer lists is estimated to be $353,000, $277,000, $217,000, $170,000, and $17,000 for the years ended December 31, 2003, 2004, 2005, 2006 and 2007, respectively.

7.     Accrued Expenses

        Accrued Expenses consists of the following:

	December 31,
	2002		2001
Salaries and Bonuses	$	769,889	$	1,214,107
Interest		588,302		26,794
Other		2,735,154		5,004,764
	$	4,093,345	$	6,245,665

8.     Related Party Transactions

        The Company is the beneficiary of a $1,000,000 life insurance policy that it maintains on its Chairman of the Board.

        In June 2000, the Company hired a Chief Executive Officer (the "Executive"). The employment agreement with the Executive provided, among other things, for an award of 800,000 restricted shares of common stock and an agreement that the Company would loan the Executive an amount equal to 50 percent of the related Federal income tax liability on such grant. The Executive also purchased 68,446 shares of common stock from the Company at $14.61 per share. The value of the 800,000 restricted shares ($11,500,000 on the grant date of June 15, 2000) was being amortized ratably over the four-year vesting schedule. The Executive's obligation to the Company was repayable from, among

F-15

other things, the proceeds arising from the disposition of any of the 800,000 shares. As of November 14, 2001, the Executive had borrowed, including accrued interest, a total of $1,935,000.

        Effective as of November 14, 2001, the Executive resigned his positions as CEO and Director, and entered into a settlement agreement with the Company to terminate the employment contract. The Company accelerated the vesting of the stock award and purchased 535,594 of the 868,446 common shares held by the Executive for consideration of $2,385,000, consisting of $450,000 in cash plus the repayment of the balance due on his loan from the Company of $1,935,000. These shares are held in the Company's treasury. Accelerating the vesting of the stock award resulted in a nonrecurring, noncash charge of approximately $7,427,000 for the remaining unamortized balance of the original grant. Total amortization of the restricted stock award was $9,822,917 for the year ended December 31, 2001; $1,197,917 for the fiscal year ended October 31, 2000, and $479,166 for the two-month period ended December 31, 2000.

        Due from related parties consists of the following:

	December 31,
	2002		2001
Due from the Chairman, bearing interest at the Prime Rate (4.25% at December 31, 2002) plus 1% per annum, repayable on demand	$	84,645	$	78,177
Due from other officers, bearing interest at the Prime Rate, repayable on demand		131,695		126,929
Total due from related parties	$	216,340	$	205,106

        In accordance with the Sarbanes-Oxley Act of 2002, no further advances are being made to the Company's officers.

9.     Long-term Debt and Capitalized Lease Obligations

Long-term Debt

	December 31,
	2002			2001
Debentures	$	10,600,000		$	—
Unamortized discount		(1,228,444	)		—
Loan payable—financial institution		—			2,646,679
Vehicle loans		39,517			60,159
Notes payable—other		—			54,890
		9,411,073			2,761,728
Less current portion		(20,895	)		(1,000,000	)
	$	9,390,178		$	1,761,728

        On February 1, 2002, in anticipation of the AmQUEST Acquisition, the Company entered into a Securities Purchase Agreement (the "SPA") with a group of private investors (the "Investors") whereby the Company issued Senior Subordinated Debentures (the "Debentures") and warrants to purchase, initially, 2,000,000 shares of the common stock of the Company (the "Initial Camden Warrants") (subject to adjustments as discussed below) in exchange for $10,000,000. Pursuant to the SPA, the proceeds of the sale of the Debentures were used to fund a portion of the cost of the AmQUEST Acquisition.

F-16

        The Debentures were issued at an aggregate face value of $10,000,000 with a maturity of three years from February 1, 2002 (the "Issuance Date"), with the right to extend the term of the Debentures for one additional year at the Company's sole option. Pursuant to the terms of the Debentures, the Company is required to make semi-annual interest payments of 12% per annum for the first two years, 13% per annum for the period commencing on February 1, 2004 and ending on February 1, 2005, and (if the Company elects to extend the maturity date as described above), 14% per annum from February 1, 2005. The Company has the option to pay interest in the form of (a) cash, (b) additional Debentures, or (c) a combination of cash and additional Debentures. If the Company chooses to make interest payments using additional Debentures, the Company may be required to issue additional warrants (the "Additional Camden Warrants") pursuant to the terms of the Debentures. Additional Camden Warrants will not be subject to cancellation. The fair market value of Additional Camden Warrants issued, if any, will be recorded as deferred financing costs and amortized over the remaining term of the Debentures.

        The initial carrying values of the Debentures ($8,280,000) and Initial Camden Warrants ($1,720,000) were determined by apportioning an amount equal to the proceeds from the private sale multiplied by the relative value of each item as of the Issuance Date. The difference between the carrying value and the face value of the Debentures is being recorded as additional interest expense through February 1, 2005 (the initial maturity date of the Debentures) using the interest method.

        The Initial Camden Warrants have been issued pursuant to a Warrant Agreement dated as of February 1, 2002 by and between the Company and the Investors (the "Warrant Agreement") and are subject to certain customary anti-dilution adjustments. The exercise price of the Initial Camden Warrants is $5.86. The Camden Warrants expire on January 31, 2007 and may be cancelled, in part, upon the prepayment of the Debentures as more fully described in the Warrant Agreement.

        On July 31, 2002 and January 31, 2003, the Company made the interest payments then due by issuing additional Debentures totaling $600,000 and $636,000, respectively. The additional Debentures are subject to the same interest rates and other terms as the original Debentures. If any Debentures are outstanding at February 1, 2004, the Company will be required to issue Additional Camden Warrants to purchase 123,600 shares of common stock.

        In August 2001, the Company borrowed $3 million from a financial institution to purchase computer equipment; bearing interest at 12.55% and repayable in 36 monthly payments of approximately $100,400. On February 1, 2002, in connection with the issuance of the debentures described above, the Company repaid this loan including a 3% penalty.

        During 2001, the Company borrowed an aggregate of $62,252 from two lending institutions to finance the purchase of three vehicles. Two of these loans were entered into during the zero interest promotion. The aggregate monthly payment for these loans is $1,762.

        On October 23, 2000, the Company entered into two agreements to purchase certain equipment. The agreements called for twenty-four payments of $5,847 per month. These obligations were paid as of December 31, 2002.

Capital Lease Obligations

        Assets subject to capital lease agreements are reflected in property and equipment as capital leases. During the year ended December 31, 2002, the Company entered into four capital leases aggregating approximately $1,278,000. During 2001, the Company entered into a capital lease for equipment having a net present value of $57,500. For the two-month period ended December 31, 2000, the Company entered into two capital leases aggregating approximately $3,603,000.

F-17

        The following is a schedule of future minimum lease payments under capital leases, together with the present value of the net minimum lease payments:

Years ending December 31:
	2003	$	1,982,327
	2004		1,415,197
	2005		35,914
	2006		21,366
Total minimum lease payments			3,454,804
Less amount representing interest			(247,625	)
Present value of net minimum lease payments			3,207,179
Less current portion of obligations under capital leases			(1,719,968	)
Long-term portion		$	1,487,211

10.   Income Taxes

        The provision (benefit) for income taxes on continuing operations consists of:

		Year ended December 31,					Two Month Period ended December 31, 2000		Fiscal Year ended October 31, 2000
		2002			2001
Current tax (benefit):
	Federal	$	(250,628	)	$	697,000	$	—	$	(2,857,672	)
	State and local		42,233			—		—		—
Deferred provision (benefit)			—			—		—		684,229
		$	(208,395	)	$	697,000	$	—	$	(2,173,443	)

        Income tax expense represents the difference between the estimated tax expense or benefit as provided and as realized in the Company's income tax returns. A reconciliation of income taxes computed at the Federal statutory rate to amounts provided is as follows:

	Years ended December 31,						Two Month Period ended December 31, 2000			Fiscal Year ended October 31, 2000
	2002			2001
Tax provision computed at the statutory rate	$	315,753		$	(12,539,449	)	$	(1,509,610	)	$	(5,833,295	)
Increase (decrease) in taxes resulting from:
State and local income taxes, net of federal income taxes		27,874			—			—			—
Non-deductible expenses		13,715			3,438,021			170,221			159,405
Benefit of tax credits		(315,109	)		—			—			—
Losses for which no benefit has been provided		—			9,101,428			1,366,890			3,500,447
Other, net		(250,628	)		697,000			(27,501	)		—
	$	(208,395	)	$	697,000		$	—		$	(2,173,443	)

F-18

        Temporary differences that give rise to net deferred tax assets (liabilities) are as follows:

		December 31,
		2002			2001
Deferred tax assets:
	Accrued loss on leased facilities and office closings	$	470,101		$	2,980,931
	Accrued liabilities		758,896			612,342
	Allowance for doubtful accounts		375,183			418,711
	Deferred rent		358,980			542,713
	Net operating loss		18,311,420			11,939,586
	Other		107,950			—
			20,382,530			16,494,283
Deferred tax liabilities:
	Depreciation and amortization		(506,245	)		22,234
	Deferred software costs		(722,955	)		(835,105	)
	Other		—			—
			(1,229,200	)		(812,871	)
Net tax assets			19,153,330			15,681,412
Valuation allowance			(19,153,330	)		(15,681,412	)
Net deferred taxes		$	—		$	—

        The deferred tax assets have been fully offset by a valuation allowance due to the uncertainty of realizing such tax benefits.

        At December 31, 2002, the Company had net operating loss carryforwards of approximately $44.1 million for federal income tax purposes, including approximately $8.1 million acquired in the AmQUEST Acquisition, that begin to expire in 2019. The use of the acquired net operating loss may be restricted under Section 382 of the Internal Revenue Code.

11.   Stockholders' Equity

        Common Stock—The Company is authorized to issue up to 50,000,000 shares of common stock, $0.01 par value. The holders of common stock are entitled to one vote per share. There is no cumulative voting for the election of directors. Subject to the prior rights of any series of preferred stock which may from time to time be outstanding, holders of common stock are entitled to receive ratably any dividends as may be declared by the Board of Directors of the Company out of legally available funds, and upon the liquidation, dissolution, or winding up of the Company, are entitled to share ratably in all assets remaining after the payment of liabilities, and payment of accrued dividends and liquidation preferences on the preferred stock outstanding, if any.

        Holders of common stock have no preemptive rights, and have no rights to convert their common stock into any other security.

        Preferred Stock—The Company is authorized to issue up to 3,000,000 shares of preferred stock, $0.01 par value. The preferred stock may be issued in one or more series, the terms of which may be determined by the Board of Directors without further action by the stockholders, and may include voting rights (including the right to vote as a series on certain matters), preferences as to dividends and liquidation conversion, redemption rights, and sinking fund provisions. In connection with the private placement of securities discussed below, the Board of Directors reserved 300,000 shares of preferred stock for initial and future issuances as Series A.

F-19

        Private Placement of Securities—On May 10, 2000, in a private placement with a group of investors (the "Purchasers"), the Company issued 157,377 shares of redeemable 8% Series A Cumulative Convertible Participating Preferred Stock with an aggregate face value of $60 million (the "Series A Preferred Stock") and warrants to purchase 2,531,926 shares of the Company's common stock at an exercise price of $0.01 per share (the "Investor Warrants"). The Company received $58,430,596 after payment of issuance costs and related legal fees.

        The initial carrying values of the Investor Warrants ($28,180,132) and Series A Preferred Stock ($30,250,464) were determined by apportioning an amount equal to the proceeds from the private placement multiplied by the relative value of each class of security as of the commitment date. The difference between the carrying value and the face value of the Series A Preferred Stock is being accreted as a charge against retained earnings through May 31, 2007 (the Purchasers' earliest redemption date) using the interest method. Accumulated dividends (dividends not paid on a dividend date) and dividends accruing prior to a dividend payment date also increase the carrying value of the Series A Preferred Stock through a charge to retained earnings.

        On December 18, 2002, 262.3 shares of Series A Preferred, with a face value of $100,000, were converted into 2,764 shares of the Company's common stock. In addition, the same holder exercised his Series A Warrants, receiving an additional 4,441 common shares.

        The significant provisions of the Series A Preferred Stock are as follows:

        Each share of Series A Preferred Stock maintains a liquidation preference of $381.25 per share, or an aggregate of $59.9 million for all 157,115 shares, plus accumulated and accrued dividends. Each share of Series A Preferred Stock bears a quarterly dividend of $7.625 payable on March 1, June 1, September 1, and December 1 of each year. Such dividends will accumulate and compound quarterly at a rate of 8% per annum for approximately the first three years. Thereafter, dividends may be accumulated and compounded quarterly at 8% per annum or paid in cash, at the option of the Company. Each share of Series A Preferred Stock was convertible initially into ten shares of common stock of the Company at the option of the Purchasers, subject to adjustment provided in the Certificate of Designation.

        The conversion price of the Series A Preferred Stock shall be adjusted from time to time if the Company: (i) pays a stock dividend; (ii) except in certain instances, issues or sells any shares of common stock or convertible securities at a price per share less than $14.61, as adjusted; (iii) subdivides or reclassifies its common stock; (iv) distributes assets to holders of common stock; or (v) makes a tender offer for all or any portion of its common stock. On February 1, 2002, in connection with the issuance of the Camden Warrants described below, each share of Series A Preferred became convertible into approximately 10.54 shares of common stock.

        The Company has the option to redeem the Series A Preferred Stock at any time following five years from the closing date at the greater of (x) $381.25 per share plus all accrued and unpaid dividends or (y) the market value per share at the date of redemption of the common stock into which shares of the Series A Preferred Stock are convertible. The Purchasers have a one-year right to require the Company to redeem shares of Series A Preferred Stock after seven years from the closing date for $381.25 per share, plus all accrued and unpaid dividends thereon, in certain circumstances.

        Each share of Series A Preferred Stock is entitled to vote on all matters on which holders of common stock are entitled to vote, with each share of Series A Preferred Stock having a number of votes equal to the number of shares of common stock into which the Series A Preferred Stock is convertible.

        The approval of the holders of two-thirds of the shares of Series A Preferred Stock is required for the Company to: (i) amend its charter or by-laws so as to adversely effect the rights or

F-20

preferences of the Series A Preferred Stock; (ii) merge or transfer all or substantially of its assets, reorganize, or take any action that is expected to result in a change of control of the Company or a planned liquidation; (iii) impose material restrictions on the Company's ability to honor the rights of the holders of the Series A Preferred Stock; (iv) authorize or sell any class or series of equity securities (other than stock options pursuant to existing plans or upon the conversion of the Series A Preferred Stock or the exercise of the Investor Warrants) which ranks senior to, or pari passu with, the Series A Preferred Stock; (v) subdivide or modify any outstanding shares of the Company if the rights of the holders of the Series A Preferred Stock are impaired; or (vi) pay any dividends on any class of stock (other than the Series A Preferred Stock) or redeem or repurchase any equity securities of the Company or its subsidiaries.

        The sale of shares of Series A Preferred Stock, the Investor Warrants, and the shares of common stock issuable upon conversion of the Series A Preferred Stock or exercise of the Investor Warrants are not registered under the Securities Act. The Company has entered into a Registration Rights Agreement providing for certain demand registration and unlimited piggyback registrations, subject to certain limitations.

        The Purchasers, the Company and certain specified officers of the Company (the "Management Stockholders") entered into a Stockholders Agreement. Among other things, the Stockholders Agreement provides: (i) limitations on transfers of the Company's securities; (ii) the agreement of the parties to vote all securities to elect certain designees to the Company's Board of Directors; and (iii) that certain acts may not be taken without the prior written approval of the directors nominated by the investors. Those acts include (i) hiring or terminating any senior manager of the Company or any subsidiary; (ii) approval of the Company's annual business plan, operating budget and capital budget; (iii) any capital expenditure not reflected in the Company's annual capital budget which would cause the capital budget to be exceeded by $250,000; (iv) consolidation or merger of the Company, sale of all or substantially all of its assets, recapitalization or liquidation of the Company or other acts that could result in a change of control of the Company; (v) authorizing or issuing additional equity securities of the Company, (vi) an acquisition or divestiture in excess of $5,000,000; (vii) incurring indebtedness in excess of $2,500,000; (viii) entering into a transaction with an affiliate; or (ix) increasing the securities available under an employee benefit plan.

        The Investor Warrants issued to the Purchasers are subject to adjustment provisions that are similar to those of the Series A Preferred Stock. The Investor Warrants must be exercised before May 11, 2007.

        On February 5, 2002, in connection with the issuance of the Initial Camden Warrants discussed below, the number of common shares issuable for the Investor Warrants was increased from 2,531,926 to 2,668,710 and the exercise price was adjusted to $0.00949.

        Private Sale of Debentures with Warrants—In connection with the SPA discussed in Note 9 above, the Company issued the Debentures and the Initial Camden Warrants to purchase 2,000,000 shares of the common stock of the Company (subject to adjustments as discussed below) in exchange for $10,000,000.

        Other Warrants—In February 2001, the Company issued a warrant to purchase 65,000 shares of the Company's common stock at $18.00 per share in settlement of any future contingent consideration payable under an agreement to purchase the assets of a business. This warrant has a ten year life and vests as to 21,667 shares on September 16, 2001, with the remaining 43,333 shares vesting in approximately equal amounts over the following 24 months. The fair value of the warrant of $146,900, calculated using the Black-Scholes pricing model, was recorded as additional goodwill relating to the related acquisition.

F-21

        On June 5, 2000, the Company issued warrants to former debt holders to purchase 30,000 shares of the Company's common stock at $19.25 per share as consideration for the settlement of all other potential equity interests in the Company held by them. The warrants were immediately exercisable and expire on June 5, 2004. The fair value of the warrants of $120,000, calculated using the Black-Scholes pricing model, was included in the statement of operations for the fiscal year ended October 31, 2000.

        Stock Option Plans—On June 25, 2002, the stockholders approved a Board of Directors resolution establishing the Company's 2002 Stock Option and Stock Appreciation Rights Plan (the "2002 Plan"). The principal reason for adopting the 2002 Plan is the Federal income tax requirement that Incentive Stock Options must be granted within ten years from the earlier of the date of adoption of a qualified plan or approval of the plan by the stockholders. Prior to its initial public offering in September 1992, the Company had adopted the 1992 Stock Option and Stock Appreciation Rights Plan (as subsequently amended and restated, "the 1992 Plan") that provided for the granting of options to employees, officers, directors, and consultants for the purchase of common stock. The material features of the 1992 Plan and the 2002 Plan are substantially the same. Incentive stock options may be granted only to employees and officers of the Company, while non-qualified options may be issued to directors and consultants, as well as to officers and employees of the Company.

        Upon adoption of the 2002 Plan, the resolution of the Board of Directors stipulates that no further grants will be made pursuant to the 1992 Plan. The grants previously made under the 1992 Plan will not be affected. The Board's resolution provides that 1,000,000 shares will be authorized as available for grant under the 2002 Plan. Both plans provide a maximum exercise period of ten years. Qualified options granted to a 10% or greater stockholder shall have a maximum term of five years under Federal tax rules. As a matter of practice, except with respect to a 10% or greater stockholder, the typical exercise period for options granted under the existing plan has been ten years from the date of grant.

        The Company's Board of Directors or a committee of the Board consisting of at least two non-employee directors determine those individuals to whom options will be granted, the number of shares of common stock which may be purchased under each option, and (when necessary) the option exercise price. The Board or the committee also determines the expiration date of the options (typically 10 years, except for 10% shareholders, which expire in 5 years), and the vesting schedule of the options.

        The per share exercise price of an incentive stock option may not be less than the fair market value of the common stock on the date the option is granted. The per share exercise price of a non-qualified option shall be determined by the committee, except that the Company will not grant non-qualified options with an exercise price lower than 50% of the fair market value of common stock on the day the option is granted.

        In addition, any person who, on the date of the grant, already owns, directly or indirectly, 10% or more of the total combined voting power of all classes of stock outstanding, may only be granted an option if the exercise price of such option is at least 110% of the fair market value of the common stock on the date of the grant.

        The Board or the committee may also grant "stock appreciation rights" ("SARs") in connection with specific options granted under the plan. Each SAR entitles the holder to either: (a) cash (in an amount equal to the excess of the fair value of a share of common stock over the exercise price of the related options); or (b) common stock (the number of shares of which is to be determined by dividing the SARs cash value by the fair market value of a share of common stock on the SAR exercise date); or (c) a combination of cash and stock. SARs may be granted along with options granted under the 2002 Plan, and to holders of previously granted options. No SARs have been granted under the either plan.

F-22

        Activity in the Plan during the periods from October 31, 1999 through December 31, 2002 is as follows:

		Number of Options		Exercise Price Range		Weighted Average Exercise Price
Options outstanding, October 31, 1999		788,400		$	3.55 - $11.48	$	6.56
	Options granted	1,407,350		$	8.81 - $45.00	$	16.18
	Options exercised	(170,478	)	$	3.25 - $27.25	$	5.53
	Options cancelled	(54,422	)	$	4.38 - $27.25	$	13.38
Options outstanding, October 31, 2000		1,970,850		$	3.25 - $45.00	$	12.89
	Options cancelled	(183,916	)	$	8.81 - $27.25	$	13.74
Options outstanding, December 31, 2000		1,786,934		$	3.25 - $45.00	$	12.65
	Options granted	235,400		$	4.58 - $14.61	$	8.09
	Options exercised	(25,000	)	$	4.68 - $4.68	$	4.68
	Options cancelled	(593,563	)	$	4.64 - $45.00	$	17.99
Options outstanding, December 31, 2001		1,403,771		$	3.25 - $37.78	$	9.77
	Options granted	252,100		$	4.95 - $8.63	$	6.37
	Options exercised	(53,885	)	$	3.78 - $7.14	$	5.38
	Options cancelled	(195,051	)	$	4.38 - $27.25	$	12.64
Options outstanding, December 31, 2002		1,406,935		$	3.25 - $37.78	$	8.93

Additional information regarding exercise price ranges of options outstanding:

Exercise Price Range		Number of Options Outstanding	Weighted Average Exercise Prices		Weighted Average Contractual Life (Years)	Number of Options Exercisable	Weighted Average Exercise Price of Exercisable Options
$	3.25 - $4.86	186,250	$	3.61	3.6	184,163	$	3.59
$	5.15 - $7.14	354,463	$	5.88	7.3	163,538	$	5.52
$	7.30 - $10.47	659,250	$	9.41	6.5	597,949	$	9.47
$	10.86 - $15.42	67,062	$	11.81	1.5	59,078	$	11.67
$	17.00 - $23.13	122,860	$	18.72	6.4	109,128	$	18.80
$	27.25 - $31.81	13,300	$	28.58	6.9	13,300	$	28.58
$	37.78 - $37.78	3,750	$	37.78	7.4	3,750	$	37.78
		1,406,935				1,130,906

        There were 1,130,906, 1,094,647, 950,997, and 884,612 options exercisable at December 31, 2002, 2001 and 2000 and October 31, 2000, respectively. At December 31, 2002, there are 954,250 options available for future grant.

12.   Commitments and Contingencies

Employment Agreements

        The Company is obligated under two employment agreements that were to expire on October 31, 2002. A provision of these agreements provides that, in the absence of any written notice to the contrary, each agreement is extended such that there shall always be an unexpired term of one year. This provision is currently in force. In connection with the AmQUEST Acquisition discussed in Note 2,

F-23

an additional employment agreement was entered into as of February 5, 2002 with a one year minimum term. Pursuant to such agreements, the total annual minimum salary payable in 2003 is $844,375.

Consulting and Non-competition

        In connection with an acquisition, the Company entered into an agreement with the former owner of the acquired company. This agreement, as amended, expires on February 1, 2003, and provides for remaining payments totaling $46,000 through that date.

Lease Obligations

        Operating leases for facilities extend through December 31, 2015. Several of these leases contain escalation clauses, which cause the amounts paid each year to increase by a stated amount or percentage. The Company records as expense, however, a fixed amount representing the average of these varying payments. The difference between the cash payments and the expense recorded is accrued. This liability is long-term since the accrued amounts will not be paid until the mid-point of the leases.

        In April 2002, the Company renegotiated its lease with respect to a data center in the Atlanta, Georgia, metropolitan area. The renegotiated lease, which is payable through December 2015, reduces the leased space by more than 20,000 square feet and increases the base rent by $2.00 per square foot, to an annual base rent of $525,000. The base rent is subject to future escalations of approximately 2.5% per lease year. In addition, the Company is responsible for a pro rata share of the building's operating expenses and real estate taxes. The total estimated savings under the renegotiated lease approximate $5 million over the remaining term of the lease. The Company is relocating the operations of AmQUEST to the facility.

        The Company leases space in a building owned by the former parent of AmQUEST. At February 5, 2002, the Company occupied approximately 33,400 square feet. The lease agreement permits the Company to reduce its use of this space for a pro-rata reduction in rent. The Company has moved most of the operations of AmQUEST to the facility in the Atlanta metropolitan area, and occupies approximately 11,400 square feet at December 31, 2002. It is the Company's intention to further reduce its use of this space during 2003. This lease agreement expires on January 31, 2006, unless the Company reduces its use of this space to zero at an earlier date. During 2002, the lease expense for this facility totaled $362,000.

        The Company's obligations under certain of these leases are secured by cash deposits or standby letters of credit, aggregating $735,000 and $2,086,000 at December 31, 2002 and 2001, respectively. The standby letters of credit are collateralized by certain cash investments that have been classified as long-term assets. Total expense for occupancy costs, was approximately $2,264,000; $5,364,000; $607,000; and $2,104,000 for the years ended December 31, 2002 and 2001, the two months ended December 31, 2000, and for the fiscal year ended October 31, 2000, respectively.

Loss on Leased Facilities

        In May 2002, the Company reached an agreement with the landlord of a facility the Company had been developing in the Northern Virginia high tech corridor. The agreement releases the Company from the future payments under its lease, which amounted to approximately $30 million through November 2015. The agreement also required a cash payment of approximately $1,515,000 and the forfeiture of a $1,460,000 deposit. As of December 31, 2001, the Company had recorded a provision of $5,650,000 for this expected result, including the write-off of approximately $2,742,000 of construction-in-progress costs. In 2002, approximately $290,000 of the provision relating to estimated settlement costs was reversed.

F-24

        Effective as of August 1, 1998, the Company sublet approximately 31,500 square feet in its New York City location. The sublease and the related primary lease expire in 2008. A charge was taken of approximately $3,022,000 representing the total amount of the shortfall between the amounts to be received and paid out over the life of the lease, and also including the value of leasehold improvements abandoned. Since a sale of certain operations also permitted the Company to reduce substantially its New York City space requirements, a portion of the original accrual and the subsequent net cash flows are charged to the discontinued operation.

        During fiscal 2000, the landlord, the subtenant, and the Company executed agreements terminating both the primary lease and the sublease. Under the terms of these agreements, the Company must pay the landlord monthly amounts equal to the excess of the sum due under the primary lease over the amount due under the sublease.

        Effective July 31, 2000, the Company closed its Charlotte, NC sales office, and recorded a charge of approximately $514,000 representing the total amount of future payments. The lease for this facility expired on December 31, 2002.

        The Company leases certain of its data center equipment, various items of office equipment, and vehicles under standard commercial operating leases. The Company also has fixed-term obligations for software licenses.

        Approximate minimum future lease payments for real estate and other operating leases are as follows:

Years ending December 31,
	2003	$	6,788,000
	2004		4,371,000
	2005		3,556,000
	2006		3,466,000
	2007		3,358,000
	Thereafter		15,128,000
		$	36,667,000

Settlement of Acquisition Contingency

        On December 18, 1998, a subsidiary of the Company purchased certain assets and the business of Enterprise Technology Group, Incorporated ("Enterprise") for $4,000,000 in cash and 300,000 shares of the Company's common stock valued at $2,677,500. The Company also recorded $6,852,928 in excess of cost over net assets acquired (goodwill).

        Certain additional consideration in the form of cash and common stock (up to $4,872,000 and 242,857 shares) would have been payable, at various times, based upon the future performance of the acquired business over the period ending December 31, 2001. Effective as of December 31, 1999, $1,135,160 in additional consideration became payable in the form of shares of the Company's common stock. This amount was recorded as an increase in the value of goodwill. The Company paid this consideration in the form of 36,472 shares of its common stock on February 22, 2000.

        In February 2001, the Asset Purchase Agreement was amended to provide for the issuance of a warrant to purchase 65,000 shares of the Company's common stock to settle any future contingent payments (see Note 12).

F-25

13.   Retirement Plans

        The Company maintains a 401(k) Savings Plan covering all eligible employees who have attained the age of 21 years and worked at least 1,000 hours in a one-year period. Plan participants may elect to contribute up to 100% of covered compensation each year, to the IRS maximum of $11,000. Per the Economic Growth and Tax Reconciliation Act of 2001, employees who reached 50 years of age were allowed to contribute an additional $1,000. The Company may make matching contributions at the discretion of the Board of Directors. The Company has not made any matching contributions. The administrative costs of the Plans are borne by the Company. Asset management costs are deducted pro rata from the participants' accounts.

14.   Quarterly Financial Information (Unaudited)

        The following is a summary of the quarterly results of operations for the years ended December 31, 2002 and 2001 (in thousands except per share data):

	Three Months ended:
	March 31, 2002			June 30, 2002			September 30, 2002			December 31, 2002
Revenues	$	11,233		$	13,241		$	12,906		$	13,394
Gross Profit	$	5,436		$	3,715		$	3,913		$	4,733
Net income (loss)	$	1,330		$	(726	)	$	(30	)	$	563
Net loss to common Stockholders	$	(919	)	$	(3,024	)	$	(2,378	)	$	(1,835	)
Net loss to common stockholders per basic or diluted common shares	$	(0.17	)	$	(0.57	)	$	(0.44	)	$	(0.34	)
	Three Months ended:
	March 31, 2001			June 30, 2001			September 30, 2001			December 31, 2001
Revenues	$	5,514		$	6,610		$	7,354		$	7,508
Gross Profit	$	(3,181	)	$	1,963		$	(349	)	$	683
Net loss	$	(7,782	)	$	(6,243	)	$	(4,800	)	$	(17,699	)
Net loss to common stockholders	$	(9,844	)	$	(8,350	)	$	(6,953	)	$	(19,901	)
Net loss to common stockholders per basic or diluted common shares	$	(1.68	)	$	(1.42	)	$	(1.18	)	$	(3.49	)

F-26

INFOCROSSING, INC. AND SUBSIDIARIES
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

	Balance at Beginning of Period		Charged to Costs and Expenses		Charged to Other Accounts		Deductions (a)		Balance at End of Period
Allowance for Doubtful Accounts:
Year ended December 31, 2002	$	1,008,942	$	227,784	$	—	$	185,834	$	1,050,892
Year ended December 31,2001	$	525,957	$	776,228	$	—	$	293,243	$	1,008,942
Two-month period Ended December 31, 2000	$	502,957	$	23,000	$	—	$	—	$	525,957
Fiscal year ended October 31, 2000	$	350,939	$	175,838	$	—	$	23,820	$	502,957
Valuation allowance offsetting Net Deferred Tax Assets
Year ended December 31, 2002	$	15,681,412	$	3,471,918	$	—	$	—	$	19,153,330
Year ended December 31,2001	$	6,620,748	$	9,060,664	$	—	$	—	$	15,681,412
Two-month period Ended December 31, 2000	$	4,737,389	$	1,883,359	$	—	$	—	$	6,620,748
Fiscal year ended October 31, 2000	$	—	$	4,737,389	$	—	$	—	$	4,737,389

(a)

Uncollectible accounts written off, net of recoveries.

S-1

QuickLinks

FORWARD LOOKING STATEMENTS
PART I

Item 1. Description of Business
Item 2. Description of Property
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders

PART II

Item 5. Market for Registrant's Common Stock and Related Stockholder Matters
Item 6. Selected Financial Data (In Thousands Except For Per Share Amounts)
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 7a. Quantitative and Qualitative Disclosures about Market Risk
Item 8. Financial Statements
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

PART III

Item 10. Directors and Executive Officers Compliance with Section 16(a) of the Securities Exchange Act
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
Item 14. Controls and Procedures
Item 15. Principal Accountant Fees and Services

PART IV

Item 16. Exhibits, Financial Statement Schedules and Reports on Form 8-K

SIGNATURES
INFOCROSSING, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
Report of Independent Auditors
INFOCROSSING, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
INFOCROSSING, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
INFOCROSSING, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
INFOCROSSING, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
INFOCROSSING, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2002
INFOCROSSING, INC. AND SUBSIDIARIES SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

EX-23

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 23

CONSENT OF INDEPENDENT AUDITORS

        We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-110191) pertaining to the 2002 Stock Option and Stock Appreciation Rights Plan of Infocrossing, Inc., Registration Statement (Form S-8 No. 333-46720) pertaining to the Amended and Restated 1992 Stock Option and Stock Appreciation Rights Plan of Infocrossing, Inc. and Registration Statements (Form S-3 No. 333-45663 and Form S-3 No. 33-94040) of our report dated February 19, 2003, with respect to the consolidated financial statements and schedule of Infocrossing, Inc. included in the Annual Report (Form 10K/A) for the year ended December 31, 2002.

/s/  ERNST & YOUNG, LLP ERNST & YOUNG, LLP

New York, New York
February 6, 2004

QuickLinks

Exhibit 23

CONSENT OF INDEPENDENT AUDITORS

EX-32

QuickLinks -- Click here to rapidly navigate through this document

EXHIBIT 32

CERTIFICATIONS REQUIRED BY RULE 13a-14(b) TO BE FURNISHED BUT NOT FILED

Certifications Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

        In connection with the Annual Report of Infocrossing, Inc. (the "Company") on Form 10-K/A for the fiscal year ended December 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we, Zach Lonstein and William J. McHale, Chairman and Chief Executive Officer and Senior Vice President of Finance, respectively, of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

        1)    The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

        2)    The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

/s/  ZACH LONSTEIN Zach Lonstein
Chairman and Chief Executive Officer
February 6, 2004 /s/  WILLIAM J. MCHALE William J. McHale
Senior Vice President of Finance
February 6, 2004

QuickLinks

EXHIBIT 32

CERTIFICATIONS REQUIRED BY RULE 13a-14(b) TO BE FURNISHED BUT NOT FILED
Certifications Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002