SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                 ---------------

                                    FORM 10-K

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

                   For the fiscal year ended December 31, 2000
                         Commission file number 0-20943

                               INTELLIGROUP, INC.
           ---------------------------------------------------------
             (Exact Name of Registrant as Specified In Its Charter)


            New Jersey                                    11-2880025
------------------------------------        ------------------------------------
(State or Other Jurisdiction of             (I.R.S. Employer Identification No.)
 Incorporation or Organization)

                  499 Thornall Street, Edison, New Jersey 08837
--------------------------------------------------------------------------------
(Address of Principal Executive Offices)                              (Zip Code)


                                 (732) 590-1600
                       ---------------------------------
                        (Registrant's Telephone Number,
                              Including Area Code)

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


                                                     Name of each exchange
Title of each class                                   on which registered
---------------------                             ----------------------------

        None
---------------------------                       ----------------------------


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

                          Common Stock, $.01 par value
--------------------------------------------------------------------------------
                                (Title of Class)



<PAGE>


        Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

                 Yes: X                            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  Registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [ ]

        State  the   aggregate   market  value  of  the  voting  stock  held  by
non-affiliates  of the  Registrant:  $10,398,963  at March 16, 2001 based on the
last sales price on that date.

        Indicate the number of shares  outstanding  of each of the  Registrant's
classes of common stock, as of March 16, 2001:

Class                                                    Number of Shares
-----                                                    ----------------

Common Stock, $.01 par value                                 16,630,125

        The following  documents are  incorporated by reference into the  Annual
Report on Form 10-K: Portions of the Registrant's definitive Proxy Statement for
its 2001 Annual Meeting of Shareholders  are incorporated by reference into Part
III of this Report.




                                     - 2 -
<PAGE>

                                TABLE OF CONTENTS
                                -----------------


           Item                                                             Page
           ----                                                             ----

PART I     1.   Business.....................................................  4

           2.   Properties................................................... 16

           3.   Legal Proceedings............................................ 17

           4.   Submission of Matters to a Vote of Security Holders.......... 17

PART II    5.   Market for the Company's Common Equity and Related
                Shareholder Matters.......................................... 18

           6.   Selected Financial Data...................................... 18

           7.   Management's Discussion and Analysis of Financial
                Condition and Results of Operations.......................... 20

           7A.  Quantitative and Qualitative Disclosure About Market Risk.... 30

           8.   Financial Statements......................................... 30

           9.   Changes in and Disagreements with Accountants on
                Accounting and Financial Disclosure.......................... 30

PART III   10.  Directors and Executive Officers of the Registrant........... 31

           11.  Executive Compensation....................................... 31

           12.  Security Ownership of Certain Beneficial Owners and
                Management................................................... 31

           13.  Certain Relationships and Related Transactions............... 31

PART IV    14.  Exhibits, List and Reports on Form 8-K....................... 32

SIGNATURES................................................................... 33

EXHIBIT INDEX................................................................ 35

FINANCIAL STATEMENTS.........................................................F-1


                                     - 3 -
<PAGE>

                                     PART I

ITEM 1.    BUSINESS.

GENERAL

     Overview

     Intelligroup,  Inc. ("Intelligroup" or the "Company") provides a wide range
of  information  technology  solutions and services  including the  development,
integration,  implementation,  hosting and full lifecycle  support of e-commerce
and enterprise  applications  to companies of all sizes.  Our  industry-specific
knowledge  and  expertise  in a wide  range of  technologies,  coupled  with our
ability to provide timely and cost-effective  integrated  technology  solutions,
are  intended to provide our  customers  with  substantial  improvements  in the
efficiency  and  performance  of their  businesses.  Our  mission is to develop,
deploy,  and host  customized,  scalable  technology  solutions  that  integrate
seamlessly  into our  customers'  existing  environment,  maximize the return on
customers' technology investment,  and provide a faster time-to-market and lower
total cost of ownership.

     Company History

     The Company was  incorporated  in New Jersey in October 1987 under the name
Intellicorp,   Inc.  to  provide   systems   integration   and  custom  software
development. The Company's name was changed to Intelligroup,  Inc. in July 1992.
In March 1994, the Company acquired Oxford Systems Inc. ("Oxford").  On December
31,  1996,  Oxford  was  merged  into  the  Company  and  ceased  to exist as an
independent  entity. In October 1996, the Company consummated its initial public
offering of its Common Stock. The Company's executive offices are located at 499
Thornall  Street,  Edison,  New Jersey 08837 and its  telephone  number is (732)
590-1600.

     In late 1999,  the Company  made the  strategic  decision  to leverage  its
traditional  application  integration  and consulting  experience and reposition
Intelligroup for future growth by focusing on the emerging  Application  Service
Provider  ("ASP")  market.  At the same time,  the  Company  made the  strategic
decision  to  spin-off  its   Internet   services   business  to   shareholders.
Accordingly,   on  January  1,  2000,  the  Company   transferred  its  Internet
applications  services and management  consulting  businesses to SeraNova,  Inc.
("SeraNova"), a wholly-owned subsidiary of the Company on such date.

     On January 27,  2000,  SeraNova  filed a  Registration  Statement  with the
Securities and Exchange Commission (the "SEC") relating to the proposed spin-off
of SeraNova  from the  Company.  On June 29, 2000,  the SEC declared  SeraNova's
Registration  Statement effective.  On July 5, 2000, the Company distributed all
of the  outstanding  shares of the  common  stock of  SeraNova  then held by the
Company to holders of record of the  Company's  common  stock as of the close of
business on May 12, 2000 (or to their subsequent transferees) in accordance with
the terms of a  Distribution  Agreement  dated as of January 1, 2000 between the
Company  and  SeraNova.  Accordingly,  the  assets,  liabilities  and results of
operations  of SeraNova have been reported as  discontinued  operations  for all
periods presented.


                                     - 4 -
<PAGE>

     Business Description

     As a global application service provider,  or ASP, of customized,  scalable
enterprise  and  e-commerce  solutions,  we have  focused  our  development  and
marketing  efforts on the vertical  industries in which we have built  expertise
and which we believe  are ready for  adoption of the ASP model.  These  specific
industries include:  process and discrete manufacturing,  professional services,
and the public sector.  As a  full-service,  single-source  ASP,  Intelligroup's
ASPPlus(SM)   Hosting   service   bundles  the  key  ASP   components  and  core
competencies,  combining leading e-commerce and enterprise software and a global
technology infrastructure,  with our application implementation,  management and
support   resources   and   capabilities.   Utilizing   the   ASP   model,   our
"software-to-service"  solutions are  contracted  on a predictable  subscription
basis and  delivered to customers  over a secure global  network.  As the single
point of accountability  to the customer,  we support and manage every component
of the ASP - from servers to software,  data centers to data storage.  By taking
responsibility  for the Service Level Agreements  associated with the ASP model,
we can help assure the on-going  reliability of security,  performance,  service
and long-term support for the customer.

     Our  ASPPlus  Hosting  service  provides   customers  with  e-commerce  and
enterprise software selected by Intelligroup to closely match the business needs
of  specific  market  segments,   such  as  pharmaceutical   manufacturers,   IT
professional services organizations, high tech and educational institutions. Our
strategic  alliances  with  such  software  leaders  as SAP,  PeopleSoft,  Niku,
MicroStrategy,  Onyx, Vignette,  Crossworlds and Ariba give our customers access
to the latest  developments in technology-based  business  solutions,  including
enterprise  resources  planning,  customer  relationship  management,   business
intelligence,  content management,  and supply chain management.  To provide the
global  infrastructure  on which we deliver and support  solutions for customers
worldwide,  Intelligroup  became a founding  Platinum member of AT&T's Ecosystem
for ASPs. As our strategic partner and  infrastructure  provider,  AT&T provides
the data center,  hardware and operating  systems,  and requisite  bandwidth and
communications capabilities.  These strategic alliances and hosting partnerships
not only support our ASP model, they present strong cross-selling  opportunities
and multiple points of entry into a customer's enterprise.

     By customizing,  configuring and integrating  core business systems such as
human    resources    and    financials    with     business-to-business     and
business-to-customer applications, we can create for our customers an end-to-end
technology value chain that delivers e-commerce and enterprise  solutions across
the entire enterprise.

     Key  to  our  strategy  is  the  ASPPlus  Advanced  Development  Center  in
Hyderabad,  India,  which  provides 24 x 365  development  and support using the
technical  expertise of its  developers  and technical  staff.  In May 2000, the
center was awarded  Level 2 of the People  Capability  Maturity  Model(R) by the
Carnegie  Mellon Software  Engineering  Institute  ("CMM-SEI").  The achievement
recognizes Intelligroup for its ability to attract, develop, motivate,  organize
and retain the talent needed to  continuously  improve its software  development
capability.  Intelligroup  is among the first in the IT  industry  to  integrate
CMM-SEI workforce  improvement with software process  improvement,  for which we
have achieved Software CMM-SEI Level 5 certification for continuous  improvement
of our software engineering. In addition, we are ISO 9001-certified for software
development, support and optimization.


                                     - 5 -
<PAGE>

     Intelligroup's  ASPPlus Application  Management services are focused on the
delivery and support of outsourced Enterprise Resource Planning ("ERP") software
implementation and maintenance services. ASPPlus Application Management services
provide  full life  cycle  support  of ERP  applications  through  our  offshore
facilities and resources.

     Since  1987,  the  Company  has  built a solid  reputation  on the  design,
development,  implementation and support of complex  technology  solutions based
primarily on SAP,  Oracle and PeopleSoft  products,  utilizing our best business
practices,  methodologies and toolsets.  The Company continues to provide a wide
range of information  technology services,  including  enterprise-wide  business
process  solutions,  IT  training  solutions,  systems  integration  and  custom
software development based on leading technologies.

     SAP,  Oracle  and  PeopleSoft  products  are  representative  of a class of
application  products  known as ERP  software.  ERP  products  are  pre-packaged
solutions for a wide-range of business areas,  including financial  information,
manufacturing and human resources.  For prospective customers,  ERP products are
an alternative to the custom design and  development of their own  applications.
Although  ERP  products  are  pre-packaged,  there is a  significant  amount  of
technical  work  involved in  implementing  them and  tailoring  their use for a
particular  customer's  needs.  The Company  recognized the  implementation  and
customization services work as a significant potential business opportunity.

     ERP vendors such as SAP, Oracle and  PeopleSoft,  have a vested interest in
encouraging  third  party  service  companies  to  provide   implementation  and
customization  services to  customers.  These  vendors have  established  formal
programs,  which are  designed to recruit  and  authorize  third  party  service
companies as service partners.  Companies wishing to become authorized  partners
must meet  performance  criteria  established  by the ERP vendor.  They are then
allowed to use the vendor's  partner  designation and associated logo to promote
their own  services.  The ERP product  vendors  also  promote  these  authorized
partners to  customers  and  prospective  customers of their ERP  products.  The
Company  believes  that such  partner  status  with the ERP vendors has and will
continue to result in direct referrals and enhanced industry recognition.

     In 1995, the Company  achieved the status of a SAP National  Implementation
Partner.  In the same year,  the  Company  also began to  utilize  Oracle's  ERP
application  products to diversify its service  offerings.  In 1997, the Company
enhanced its partner status with SAP, by first  achieving  National Logo Partner
status and then  AcceleratedSAP  Partner  status.  Also,  in 1997,  the  Company
further  diversified its ERP-based  service  offerings,  by beginning to provide
PeopleSoft  and Baan  implementation  services.  In July 1997,  the  Company was
awarded PeopleSoft implementation partnership status, and, in September 1997, it
was awarded Baan international  consulting partnership status. In June 1998, the
Company also expanded its Oracle applications  implementation  services practice
and added upgrade  services to meet market demand of mid-size to large companies
that were implementing or upgrading Oracle applications.

     The Company provides its services directly to end-user organizations, or as
a  member  of  consulting  teams  assembled  by  other  information   technology
consulting  firms.  The  number of  customers  billed by the  Company  has grown
substantially  from three  customers in 1993 to


                                     - 6 -
<PAGE>

approximately  800  customers in 2000.  The  Company's  customers  are primarily
Fortune 1000 and other large and  mid-sized  companies in the United  States and
abroad. They have included Armstrong World Industries, AT&T, Block Drug Company,
Bristol-Myers  Squibb,  IMC  Global,  Simon  &  Schuster,  Lucent  Technologies,
Lockheed  Martin and Network  Associates.  The Company has also  participated in
project teams lead by information  technology  consulting  firms such as Ernst &
Young LLP, IBM Global Services, KPMG LLP and PricewaterhouseCoopers LLP.

     Trademarks and Service Marks

     "Intelligroup,"  "myADVISOR,"  "ASPPlus" and the Company's logo are service
marks of the Company.

     "Empower  Solutions" is a trademark of Empower  Solutions,  a subsidiary of
the Company.

     All other trade names,  trademarks or service marks  referenced  herein are
the property of their respective owners and are not the property of the Company.

     Safe Harbor Statements

     This Form 10-K contains  forward-looking  statements  within the meaning of
Section 21E of the  Securities  Exchange  Act of 1934,  as  amended,  including,
without  limitation,  statements  regarding the Company's intention to shift its
focus  to  comprehensive  ASPPlus  solutions.  Such  forward-looking  statements
include risks and uncertainties, including, but not limited to:

     o    the continued  uncertainty of the application service provider ("ASP")
          market and revenues derived from anticipated ASP business;

     o    the  substantial  variability  of the  Company's  quarterly  operating
          results  caused by a variety of factors,  many of which are not within
          the Company's control, including (a) patterns of software and hardware
          capital spending by customers,  (b) information technology hosting and
          outsourcing  trends, (c) the timing,  size and stage of projects,  (d)
          timing and impact of  acquisitions,  (e) new service  introductions by
          the  Company  or  its  competitors  and  the  timing  of  new  product
          introductions  by the  Company's  ERP  partners,  (f) levels of market
          acceptance   for  the  Company's   services,   (g)  general   economic
          conditions,  (h) the hiring of  additional  staff and (i) fixed  price
          contracts;

     o    changes in the Company's billing and employee utilization rates;

     o    the  Company's  ability to manage its growth  effectively,  which will
          require  the  Company (a) to continue  developing  and  improving  its
          operational,  financial  and other  internal  systems,  as well as its
          business  development  capabilities,  (b) to attract,  train,  retain,
          motivate and manage its  employees,  (c) to continue to maintain  high
          rates of employee  utilization  at profitable  billing  rates,  (d) to
          successfully  integrate the personnel and  businesses  acquired by the
          Company, and (e) to maintain project quality, particularly if the size
          and scope of the Company's projects increase;


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<PAGE>

     o    the  Company's  ability to  maintain  an  effective  internal  control
          structure;

     o    the  Company's  limited  operating  history  within  the  ASP  line of
          business;

     o    the Company's  reliance on a continued  relationship  with SAP America
          and the Company's present status as a SAP National Logo Partner;

     o    the  Company's   substantial  reliance  on  key  customers  and  large
          projects;

     o    the  highly  competitive  nature  of the  markets  for  the  Company's
          services;

     o    the Company's ability to successfully  address the continuing  changes
          in information  technology,  evolving industry  standards and changing
          customer objectives and preferences;

     o    the Company's  reliance on the continued services of its key executive
          officers and leading technical personnel;

     o    the  Company's  ability to attract and retain a  sufficient  number of
          highly skilled employees in the future;

     o    uncertainties  resulting  from  pending  litigation  matters  and from
          potential  administrative  and  regulatory  immigration  and  tax  law
          matters;

     o    the Company's ability to protect its intellectual property rights; and

     o    In addition,  in October 2000,  SeraNova and  Silverline  Technologies
          Limited ("Silverline")  announced the proposed acquisition of SeraNova
          by  Silverline.   SeraNova's  management  has  represented  that  such
          acquisition  was  not  contemplated  at the  time of the  spin-off  of
          SeraNova  by the  Company,  and  accordingly  should  not  impact  the
          tax-free  nature of the  spin-off.  Should the spin-off be  ultimately
          construed  to be  taxable,  there is a risk  that if  SeraNova  and/or
          Silverline  are unable or unwilling to pay the resultant tax liability
          pursuant  to  SeraNova's  indemnification  obligations  under  its Tax
          Sharing  Agreement  with  the  Company,  the  Company  would  bear the
          liability to pay such resultant tax liability.

     As a result of these factors and others,  the Company's  actual results may
differ materially from the results disclosed in such forward-looking statements.

INDUSTRY BACKGROUND

     Many businesses face a rapidly  changing  business  environment,  including
intense global competition,  accelerating  technological change, and the need to
embrace  emerging web  commerce  and  procurement  strategies.  Such  businesses
continually  seek to improve the quality of products and services,  lower costs,
reduce cycle times, optimize their supply chain and increase value to customers.
Businesses are implementing and utilizing advanced information


                                     - 8 -
<PAGE>

solutions,  which enable them to redesign their business processes in such areas
as  product  development,  service  delivery,  manufacturing,  sales  and  human
resources.

     Many  businesses  have  adopted   information   systems   strategies  using
client/server architectures based on personal computers, local area network/wide
area network ("LAN/WAN"),  shared databases and packaged software  applications.
Frequently  these  strategies are intended to replace legacy systems,  which are
often  mainframe-based,  running  proprietary  software and  applications.  Such
client/server systems, when developed and implemented appropriately,  enable the
creation  and  utilization  of more  functional,  flexible  and  cost  effective
applications, which are critical to the competitive needs of businesses.

     As part of their client/server strategies,  organizations often acquire, or
consider   acquisition   of,   packaged    enterprise-wide   business   software
applications,  including  those  offered by leading  ERP  vendors,  such as SAP,
Oracle and PeopleSoft.  These applications are then implemented or customized to
meet their  particular  business needs.  Alternatively,  the  organizations  may
develop, or commission the development of, customized  software  applications to
meet their needs.

     For many  customers,  the issue of Year 2000  compliance  had driven  their
decisions  to  migrate  to new  client/server-based  ERP  solutions.  Others had
decided to retain their legacy  mainframe  applications  and make them Year 2000
compliant, rather than replacing them. In both cases, these customers now have a
set of core  operations  applications,  which they use to support  their central
business  processes.  These  customers may now face competing  internal  demands
against their budgets and  resources.  The customers  must balance  demands from
their user departments for new,  innovative  business  applications  against the
absolute  requirement  to  maintain,  manage and  optimize  the core  operations
applications.  These  competing  demands  reflect  areas of  potential  business
opportunity  for the Company in the areas of hosting or  outsourcing  of the ERP
applications maintenance.

     Intense   competitive   and  market   pressures   continue  to  force  many
organizations  to  look  for   improvements  in  the  quality,   efficiency  and
responsiveness of their end-to-end  business models. This would normally require
an in-depth  analysis of their business  strategies,  operational  processes and
supporting delivery mechanisms,  including  information systems.  Customers will
sometimes retain external  business and management  consulting  organizations to
assist with this analysis and the preparation of relevant recommendations.

     The majority of customers who have implemented,  or are  implementing,  ERP
solutions  have  been  Fortune  2000  companies.   The  Company   believes  that
opportunities  for  new ERP  implementations  will  continue  to  exist  in this
segment,  as these companies  deploy ERP solutions to subsidiaries and operating
units.  In addition,  these customers are also faced with the need to manage and
maintain their ERP applications.  The Company believes that there is significant
potential business opportunity for implementing ERP version-to-version  upgrades
and also for application hosting and outsourcing.

     Because of the ERP  penetration  of Fortune 2000  customers,  the marketing
focus of the ERP vendors has turned toward mid-market clients. In addition,  the
leading ERP vendors are also realigning their sales organizations along industry
segments (e.g. manufacturing, finance,


                                     - 9 -
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etc.). The mid-market  segment presents the most opportunity for new ERP product
sales and  implementations.  Many of these companies are growing rapidly and are
likely to have the need for core financial and other operations systems that can
be addressed by ERP products.  The Company believes that opportunity  exists for
ERP  implementation  services to mid-market  clients.  This segment is very cost
conscious and will require a highly efficient services delivery model.

     The task of developing and implementing enterprise-wide,  mission-critical,
information  solutions is complex. It presents  significant  challenges for most
customer organizations and can be a time consuming and costly undertaking, which
typically   requires   significant   allocation  of  organizational   resources.
Information  technology  managers must integrate and manage information  systems
environments  consisting of multiple  computing  platforms,  operating  systems,
databases  and  networking  protocols,  as well as multiple  packaged and custom
developed applications.

     Companies must also  continually keep pace with a broad and often confusing
array of new technological  developments,  which can render internal information
technology skills obsolete.  Professionals with the requisite  technology skills
often are in short supply and many  organizations  are reluctant to expand their
internal  information  systems department for particular  projects.  At the same
time,  external economic factors encourage  organizations to focus on their core
competencies and trim work forces in the information technology management area.
Accordingly,  organizations often lack sufficient, and/or appropriate, technical
resources  necessary to design,  develop,  implement and manage the  information
technology solutions needed to support their business needs.

     To support their information technology needs, many businesses increasingly
engage experienced outside specialists for assistance across the full life cycle
of their  solutions.  Because of the  heightened  business  pressures they face,
these customers are demanding innovative solutions, in shorter timeframes,  with
lower life cycle cost of ownership, at higher levels of quality and service, all
with lower risk to themselves and their businesses.

     As a result of these industry dynamics,  demand for information  technology
services has grown  significantly.  It has moved from an implementation focus to
one  addressing  an  integrated  view  of  corporate  business  and  information
processes;  it has  also  moved to a focus on  value-based  pricing  and cost of
ownership  over the  total  life  cycle of the  solution.  These  changes  favor
services companies which can provide high quality, low cost life cycle services,
and which address high value solution areas for clients' businesses.

THE INTELLIGROUP SOLUTION

     Intelligroup  improves  its  clients'  business  performance,  through  the
intelligent  application  of information  technology.  We deliver to our clients
timely,   cost-effective   and  innovative  ERP   implementation,   hosting  and
outsourcing solutions by combining our:

     Proven  Offshore  Development and  Maintenance  Model:  The Company has the
ability to  develop,  implement  and  maintain  business  solutions  through its
offshore Advanced  Development Center ("ADC"),  at high quality and low cost. In
May 2000, the ADC was awarded Level 2 of


                                     - 10 -
<PAGE>

the  People  Capability  Maturity  Model(R)  by  the  Carnegie  Mellon  Software
Engineering Institute ("CMM-SEI").  The achievement recognizes  Intelligroup for
its ability to attract, develop, motivate, organize and retain the talent needed
to continuously  improve its software  development  capability.  Intelligroup is
among the first in the IT industry to integrate  CMM-SEI  workforce  improvement
with  software  process  improvement,  for which we have  achieved  the Software
CMM-SEI  Level  5  certification  for  continuous  improvement  of our  software
engineering.  In addition,  we are ISO 9001-certified for software  development,
support and optimization.

     The ADC is process driven and connected to the Company's operations centers
in  Asia/Pacific,  the United States and Europe via high-speed  satellite links.
The center operates on a 24x7, round-the-clock basis, allowing next business day
turn-around of work units to clients.  Combining the center's quality processes,
skilled development team and low cost of operation allows the Company to compete
for implementation and maintenance contracts on a fixed price/fixed time basis.

     Expertise in a Wide Range of Technologies,  Industries and Disciplines: The
Company's  consultants  have expertise with SAP, Oracle and PeopleSoft  products
and with a wide variety of leading computing  technologies,  including Internet,
client/server  architectures,  object-oriented  technologies,  CASE, distributed
database   management    systems,    mainframe    connectivity,    LAN/WAN   and
telecommunications  technologies.  The Company  believes  that its personnel are
effective because of their technical  excellence,  their industry experience and
their  strong  grounding  in  the  disciplines  of  project  implementation  and
management.

     Customer-Driven  Approach:  The Company's  project managers and consultants
maintain  on-going  communication and close interaction with customers to ensure
that  they are  involved  in all  facets  of a  project  and that the  solutions
designed and implemented by the Company meet the customer's needs. The Company's
goal is to provide  training to its  customers  during a project to achieve high
levels  of  self-sufficiency   among  its  customers'  end  users  and  internal
information  technology  personnel.  The  Company  believes  that its ability to
deliver the requisite  knowledge  base to its customers is critical to fostering
long-term relationships with, and generating referrals from, existing customers.

     Proprietary   Methodologies:   The  Company  has  developed  a  proprietary
implementation methodology, as well as a software-based  implementation toolset,
which are designed to minimize the time required to develop and  implement  SAP,
Oracle and PeopleSoft solutions for its customers.

INTELLIGROUP SERVICES

     Intelligroup provides a wide range of information  technology solutions and
services  including the development,  integration,  implementation,  hosting and
full lifecycle support of e-commerce and enterprise applications to companies of
all sizes.

     Historically,  the Company's services have ranged from providing  customers
with a single consultant to  multi-personnel  full-scale  projects.  The Company
provides these services to its customers primarily on a time and materials basis
and pursuant to agreements, which are


                                     - 11 -
<PAGE>

terminable upon relatively short notice.  As the Company has re-oriented  itself
towards serving our clients' needs over their  solutions'  entire life cycle, it
is beginning to enter into hosting and  outsourcing  agreements  with customers.
The contractual arrangements in these situations are typically fixed term, fixed
price and multi-year,  as is common in the hosting and outsourcing  market.  The
Company's focus on life cycle services is also intended to encourage ongoing and
recurring   service   relationships,   rather   than   one-time   implementation
engagements.

ENTERPRISE RESOURCE PLANNING SOLUTIONS

     The Company  designs,  develops,  integrates and  implements  sophisticated
business  process  solutions  based  on SAP,  Oracle  and  PeopleSoft  products,
utilizing its best business practices,  methodologies and toolsets.  The Company
believes that its expertise in a wide variety of technologies,  coupled with its
ability to  provide  comprehensive  business  process  solutions  and timely and
cost-effective  implementation of new business systems, enables its customers to
achieve  substantial  improvements  in  efficiency  and  effectiveness  in their
businesses and fosters long-term customer relationships.

     Accelerated  Implementation  Methodology  and  Toolset:  As a result of our
experience in implementing ERP software, the Company has developed a proprietary
methodology and associated toolset for implementing enterprise business software
applications.  The toolset also contains a project management and tracking tool,
which the Company  utilizes to monitor  implementation  projects  undertaken for
clients.  The Company  believes that its methodology  and toolset  throughout an
implementation  project, may enable its customers to realize significant savings
in time  and  resources.  Furthermore,  the  Company  believes  that  use of the
methodology  and  toolset  also  shortens  the  turn-around   time  for  program
development,  as it  streamlines  the  information  flow  between the  Company's
offices and customer sites.

APPLICATION SERVICE PROVIDER SOLUTIONS

     The Company  services  the  Application  Service  Provider  market with its
ASPPlus  Solutions,  which  include  implementation,  management  and hosting of
e-commerce  solutions  and  enterprise  applications.  ASPPlus  utilizes  a mass
customization approach,  providing pre-configured vertical industry solutions of
mission  critical  e-commerce  and  enterprise  business  applications.  Through
ASPPlus,  the Company  offers  customized  solutions  to its  client's  specific
e-commerce and enterprise needs.

APPLICATION MANAGEMENT SERVICES

     The Application  Management  Services ("AM") practice provides clients with
application management,  support and maintenance services. These services may be
provided on-site,  off-site through the Company's operations centers and ADC, or
a combination of both on-site and off-site. The Company's low cost, high quality
ADC delivery model allows the Company to compete for long term fixed price/fixed
time contracts.

     The AM practice  teams with the  Company's  various ERP  practices on their
implementation  projects,  and will take the lead role in selling and delivering
longer term outsourcing relationships.


                                     - 12 -
<PAGE>

     The ADC is an important  component of the Company's  value  proposition  to
customers.  The Company utilizes the programmers at the ADC, in conjunction with
its consultants in the United States who are on site at customer  locations,  to
provide its customers with savings in development and  implementation  costs and
time  to  project   completion.   The  ADC   allows   the   Company  to  provide
cost-effective,  timely and high quality software  development,  maintenance and
support  services to customers  throughout  the world.  Intelligroup  is able to
deliver high value services at attractive  prices due to the following:  (i) the
high level of expertise and experience of our ADC consultant  programmers;  (ii)
the  rigorous   application  of  the  Company's   proprietary  software  project
methodologies,  tools and  project  management  disciplines;  and (iii) the cost
structures associated with the ADC's offshore location in Hyderabad, India.

     The ADC is connected by dedicated,  high-speed  satellite links, to certain
customer sites, as well as the Company's  headquarters in the United States, its
European  headquarters in the United Kingdom and its office in New Zealand. Over
200 qualified and experienced  programmers staff the ADC. As the Company expands
its ERP  businesses,  the ADC is being prepared to undertake  projects in any of
the three ERP practices (SAP,  PeopleSoft and Oracle),  as well as certain other
advanced technologies.

SALES AND MARKETING

     The Company  historically  has generated new sales leads from (i) referrals
from  existing  customers,  (ii)  introductions  to  potential  customers by the
Company's  alliance  partners,  which often need to recommend  qualified systems
integrators  to implement  their  software  products,  and (iii)  internal sales
efforts. In addition, the Company has been introduced to customers by certain of
its competitors, such as the "Big Five" accounting firms, which at times require
the Company's  expertise and ability to deliver qualified  personnel for complex
projects.

     The Company has  dedicated  an  increased  level of  resources to sales and
marketing  efforts.  The Company will continue to market to potential  customers
with  demonstrated  needs for the  Company's  expertise  in ERP  solutions.  The
Company intends to implement focused sales management programs,  to leverage its
relationships  with  existing  customers,  as well as those  with ERP and  other
product vendors.

     Among its sales and  marketing  efforts,  the  Company's  has exhibited and
presented the Company's  expertise at trade events  associated  with the primary
ERP offerings.  These include events such as SAPPHIRE, the annual SAP conference
for SAP service providers and end-users, the Americas SAP User Group, the Oracle
Americas  User Group and the  PeopleSoft  Users  Group.  The Company  intends to
continue participation in such industry-recognized programs and trade shows.

     Most importantly,  however,  the Company believes that satisfying  customer
expectations  within  budgets and time  schedules is critical to gaining  repeat
business and obtaining new business from referrals. The Company believes that it
has  consistently  met  customer  expectations  with respect to budgets and time
schedules.

     As of December 31, 2000, the Company's  sales and marketing group consisted
of 28 employees in the United States,  10 employees in Europe,  and 16 employees
in the Asia Pacific

                                     - 13 -
<PAGE>

region.  The Company  markets and  delivers  its  services  to  customers  on an
international basis through its network of offices.  The Company's  headquarters
in New Jersey and its branch offices in Atlanta, GA; Rosemont,  IL; Foster City,
CA and Trujillo Alto,  Puerto Rico serve the United States market.  In addition,
the Company also maintains  offices in Europe  (Denmark,  the United Kingdom and
Sweden) and Asia Pacific (Australia,  India,  Japan, New Zealand,  Singapore and
Hong Kong).

     The  Company's  services  require a  substantial  financial  commitment  by
customers and,  therefore,  typically involve a long sales cycle. Once a lead is
generated,  the Company endeavors to understand quickly the potential customer's
business needs and objectives in order to develop the  appropriate  solution and
bid  accordingly.  The Company's  project  managers are involved  throughout the
sales cycle to ensure mutual understanding of customer goals,  including time to
completion,  and technological  requirements.  Sales cycles for complex business
solutions  projects  typically  range from one to six  months  from the time the
Company  initially meets with a prospective  customer until the customer decides
whether to authorize commencement of an engagement.

CUSTOMERS

     The Company provides its services  directly to many Fortune 2000 companies,
as well as small to medium sized enterprises, or as a member of consulting teams
assembled by other information  technology  consultants,  such as the "Big Five"
accounting  firms.  The  number of  customers  billed by the  Company  has grown
substantially  from three  customers in 1993 to  approximately  800 customers in
2000.

     The  Company's  ten largest  customers  accounted  for,  in the  aggregate,
approximately  41%,  43%  and  34%  of its  revenue  in  1998,  1999  and  2000,
respectively.  During 1998,  no single  customer  accounted for more than 10% of
revenue.  During  1999 and 2000,  one  customer  accounted  for more than 10% of
revenue.  In 1998,  1999  and  2000,  21%,  48% and  36%,  respectively,  of the
Company's  revenue  was  generated  by serving as a member of  consulting  teams
assembled by other information technology consulting firms.

     Although the Company has  contracts  with many of its  customers to provide
its services,  in general such contracts are terminable  upon  relatively  short
notice,  typically not more than 30 days. When providing hosting and outsourcing
services for  customers,  the Company  expects to compete for  multi-year  fixed
term,  fixed  price  contracts.  There can be no  assurance  that the  Company's
customers  will  continue  to enter  into  contracts  with the  Company  or that
existing contracts will not be terminated.

     Many of the Company's engagements involve projects that are critical to the
operations  of its  customers'  businesses  and  provide  benefits  that  may be
difficult to quantify.  The Company's  failure or inability to meet a customer's
expectations  in the  performance  of its  services  could  result in a material
adverse  change to the customer's  operations  giving rise to claims for damages
against the Company or causing  damage to the  Company's  reputation,  adversely
affecting  its  business,  financial  condition  and results of  operations.  In
addition,  certain of the Company's  agreements  with its customers  require the
Company to indemnify the customer for damages arising from services provided to,
or on behalf of, such customer. Under certain of the



                                     - 14 -
<PAGE>

Company's customer contracts, the Company warrants that it will repair errors or
defects in its  deliverables  without  additional  charge to the  customer.  The
Company  has  not  experienced,  to  date,  any  material  claims  against  such
warranties.  The  Company  has  purchased  and  maintains  errors and  omissions
insurance to insure the Company for damages and expenses  incurred in connection
with alleged negligent acts, errors or omissions.

COMPETITION

     The markets for the Company's services are highly competitive.  The Company
believes that its principal competitors include the internal information systems
groups  of its  prospective  customers,  as well  as the  following  classes  of
companies (some of which are also customers of the Company):

     o    Consulting  and  software  integration  firms:  including,  IBM Global
          Services,  Cambridge  Technology Partners,  MCI Systemhouse,  Computer
          Sciences Corporation and others.

     o    "Big Five" accounting firms:  Deloitte & Touche,  Ernst & Young, KPMG,
          PricewaterhouseCoopers.

     o    Software applications vendors: SAP, Oracle and PeopleSoft.

     o    General  management  consulting  firms: such as McKinsey & Co., Bain &
          Company.

     o    Application   service   providers:    Breakaway    Solutions,    Inc.,
          USinternetworking, Inc., Corio, Inc., and Interliant, Inc.

     Many of the Company's competitors have longer operating histories,  possess
greater industry and name recognition and have significantly  greater financial,
technical  and  marketing  resources  than the Company.  In addition,  there are
relatively low barriers to entry into the Company's  markets and the Company has
faced, and expects to continue to face, additional competition from new entrants
into its markets.

     The Company believes that the principal  competitive factors in its markets
include  quality  of  service  and   deliverables,   speed  of  development  and
implementation,  price, project management capability and technical and business
expertise. The Company believes that its ability to compete also depends in part
on a number of competitive factors outside its control, including the ability of
its competitors to hire,  retain and motivate  project managers and other senior
technical staff, the development by others of services that are competitive with
the  Company's  services and the extent of its  competitors'  responsiveness  to
customer needs.

     The Company  believes that it competes  based on its  expertise  across the
full  life  cycle  of  its  clients'  ERP  solutions.  This  expertise  includes
management  consulting  skills,  plus  design and  implementation  skills in ERP
products  (primarily SAP,  PeopleSoft and Oracle),  application  integration and
application hosting and outsourcing related to those solutions.  There can be no
assurance that the Company will be able to continue to compete successfully with
existing and new competitors.


                                     - 15 -
<PAGE>

EMPLOYEES

     As of December 31, 2000, the Company employed 1,174 full-time employees, of
whom 968 were engaged as consultants or as software developers,  54 were engaged
in sales and marketing, and 152 were engaged in delivery management, finance and
administration.  Of the total number of employees,  433 were based in the United
States,  636 were based in the Asia Pacific region and 105 were based in Europe.
In  addition,  the  Company  engaged  106  independent  contractors  to  perform
information technology services.

     None of the  Company's  employees  are covered by a  collective  bargaining
agreement. Substantially all of the Company's employees have executed employment
agreements  containing  non-competition,   non-disclosure  and  non-solicitation
clauses.  In addition,  the Company requires that all new employees execute such
agreements  as a condition of employment  by the Company.  The Company  believes
that it has been successful in attracting and retaining  skilled and experienced
personnel.  There is increasing  competition for experienced sales and marketing
personnel and technical professionals.  The Company's future success will depend
in part on its ability to continue to attract, retain, train and motivate highly
qualified  personnel.  The Company considers  relations with its employees to be
good.

INTELLECTUAL PROPERTY RIGHTS

     The  Company's  success  is  dependent,   in  part,  upon  its  proprietary
implementation  methodology,  development tools and other intellectual  property
rights.  The Company relies upon a combination  of trade secret,  non-disclosure
and other contractual arrangements, and copyright and trademark laws, to protect
its  proprietary  rights.  The Company  generally  enters  into  confidentiality
agreements with its employees,  consultants and customers,  and limits access to
and distribution of its proprietary information.  The Company also requires that
substantially  all of its employees and consultants  assign to the Company their
rights in  intellectual  property  developed  while  employed  or engaged by the
Company.  There can be no assurance  that the steps taken by the Company in this
regard will be adequate to deter misappropriation of its proprietary information
or  that  the  Company  will  be able to  detect  unauthorized  use of and  take
appropriate steps to enforce its intellectual property rights.

ITEM 2.        PROPERTIES.

     As of December 31, 2000,  the Company owns no real  property and  currently
leases or subleases  all of its office space.  The Company  leases 48,475 square
feet of office  space in  Edison,  New  Jersey,  of which  approximately  50% is
subleased  to SeraNova,  Inc.  Such lease has an initial term of ten (10) years,
which  commenced in September  1998.  The Company uses such facility for certain
technical and support personnel,  sales and marketing,  administrative,  finance
and  management  personnel.  The  Company  maintains  offices  for its sales and
operations within the United States in Atlanta,  GA; Rosemont,  IL; Foster City,
CA and Trujillo Alto,  Puerto Rico. The Company also maintains offices in India,
Australia,  Sweden,  Denmark, Japan, New Zealand,  Singapore,  Hong Kong and the
United Kingdom.



                                     - 16 -
<PAGE>

ITEM 3.    LEGAL PROCEEDINGS.

     On February 7, 2001, NSA Investments II LLC filed a complaint in the United
States District Court for the District of  Massachusetts  naming,  among others,
SeraNova,  the Company  and  Rajkumar  Koneru,  a director  of the  Company,  as
defendants.  The plaintiff alleges that it invested money in SeraNova as part of
a private  placement of SeraNova  stock in March 2000,  prior to the spin-off of
SeraNova by the Company.  The complaint,  which seeks damages,  alleges that the
Company, as a "controlling person" vis-a-vis SeraNova,  is jointly and severally
liable with and to the extent as SeraNova  for false and  misleading  statements
constituting  securities laws  violations.  The Company has been served with the
complaint and is in the process of responding. Furthermore, the Company has made
a  request  for   indemnification   from   SeraNova   pursuant  to  the  various
inter-company agreements in connection with the spin-off. The Company denies the
allegations  made and  intends  to  defend  vigorously  the  claims  made by the
plaintiff.  It is too early in the dispute  process to determine the impact,  if
any,  that  such  dispute  will  have  upon the  Company's  business,  financial
condition or results of operations.

     There is no other  material  litigation  pending to which the  Company is a
party or to which any of its property is subject.

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

     Not applicable.



                                     - 17 -
<PAGE>

                                     PART II

ITEM 5.  MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.

     The Common Stock is quoted on the Nasdaq  National Market (the "NNM") under
the symbol  "ITIG."  The  following  table sets  forth,  for each of the periods
indicated,  the high and low sale prices per share of Common  Stock as quoted on
the NNM. The prices shown represent  quotations among securities dealers, do not
include retail markups,  markdowns or commissions  and may not represent  actual
transactions.

             QUARTER ENDED                 HIGH                  LOW
        -----------------------        -------------         -------------
        March 31, 1999                 $    20 1/2           $     5 1/4
        June 30, 1999                  $     9 5/8           $     5
        September 30, 1999             $     7 11/16         $     5 1/8
        December 31, 1999              $    27 11/16         $     6 7/8
        March 31, 2000                 $    45 3/4           $    19 9/16
        June 30, 2000                  $    29 1/2           $     7 1/4
        September 30, 2000             $    14 1/4           $     1 7/16
        December 31, 2000              $     3 1/8           $    25/32

     As of March 16, 2001,  the  approximate  number of holders of record of the
Common  Stock was 78 and the  approximate  number of  beneficial  holders of the
Common Stock was 4,671.

     The Company has never  declared or paid any dividends on its capital stock.
The  Company  intends  to retain  any  earnings  to fund  future  growth and the
operation of its business,  and, therefore,  does not anticipate paying any cash
dividends in the foreseeable future.

     All information  relating to the Common Stock of the Company in this Annual
Report on Form 10-K reflects a 81,351.1111-for-1 stock split of the Common Stock
effected July 12, 1996,  prior to the Company's  initial public  offering of its
Common Stock in September 1996.

ITEM 6.  SELECTED FINANCIAL DATA.

     The selected  statement of operations data for the years ended December 31,
1998, 1999 and 2000 and the selected  balance sheet data as of December 31, 1999
and 2000 are derived from,  are qualified by reference to, and should be read in
conjunction with, the more detailed audited  consolidated  financial  statements
and the related notes thereto included  elsewhere herein. The selected statement
of  operations  data  for the  year  ended  December  31,  1996 and 1997 and the
selected  balance  sheet data as of December 31,  1996,  1997 and 1998 have been
derived from audited financial  statements of the Company which are not included
elsewhere herein.



                                     - 18 -
<PAGE>

     The following should be read in conjunction with the consolidated financial
statements  and notes  thereto  and  "Management's  Discussion  and  Analysis of
Financial Condition and Results of Operations" appearing elsewhere herein:
<TABLE>
<CAPTION>
                                                                      FOR THE YEARS ENDED DECEMBER 31,
                                                          ------------------------------------------------------
                                                             1996       1997        1998        1999       2000
                                                             ----       ----        ----        ----       ----
                                                                    (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                       <C>        <C>        <C>         <C>         <C>
STATEMENT OF OPERATIONS DATA:
Revenue........................................           $52,626    $90,607    $147,462    $146,272    $112,838
Cost of sales..................................            38,261     63,534      96,024      97,382      75,444
  Gross profit.................................            14,365     27,073      51,438      48,890      37,394
Selling, general and administrative expenses...            10,360     18,816      32,364      42,822      45,191
Acquisition Expenses...........................                --         --       1,397       2,115          --
Restructuring and other special charges........                --         --          --       7,328          --
  Total operating expenses.....................            10,360     18,816      33,761      52,265      45,191
  Operating income (loss)......................             4,005      8,257      17,677      (3,375)     (7,797)
Other income (expenses), net...................            (1,257)       252         206        (513)        570
Income (loss) from continuing operations
  before income taxes..........................             2,748      8,509      17,883      (3,888)     (7,227)
Provision (benefit) for income taxes...........               578      2,173       3,852       1,441        (573)
Income (loss) from continuing operations.......             2,170      6,336      14,031      (5,329)     (6,654)
Income (loss) from discontinued operations,
  net of income tax expense (benefit)
  of $170, $154, $599, $(235) and $(2,095).....              (240)         2        (631)     (1,261)     (4,891)
Extraordinary charge, net of income
  tax benefit of $296..........................            (1,148)        --          --          --          --
    Net income (loss)..........................           $   782    $ 6,338    $ 13,400    $ (6,590)   $(11,545)
Earnings per share(1)
  Basic earnings per share:
    Continuing operations......................           $  0.20    $  0.43    $   0.91    $  (0.34)   $  (0.40)
    Discontinued operations....................             (0.02)        --       (0.04)      (0.08)      (0.30)
    Extraordinary charge.......................             (0.11)        --          --          --          --
      Net income (loss)........................           $  0.07    $  0.43    $   0.87    $  (0.42)   $  (0.70)
Common shares - Basic..........................            11,003     14,637      15,387      15,766      16,485
Diluted earnings per share:
  Continuing operations........................           $  0.18    $  0.42    $   0.88    $  (0.34)   $  (0.40)
  Discontinued operations......................             (0.02)        --       (0.04)      (0.08)      (0.30)
  Extraordinary charge.........................             (0.10)        --          --          --          --
    Net income (loss)..........................           $  0.06    $  0.42        0.84    $  (0.42)   $  (0.70)
Common shares - Diluted........................            12,263     15,117      15,969      15,766      16,485

                                                                            AS OF DECEMBER 31,
                                                          ------------------------------------------------------
                                                             1996       1997        1998        1999       2000
                                                             ----       ----        ----        ----       ----
                                                                              (IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents......................           $ 7,657    $ 8,506    $  3,568    $  5,510    $  1,327
Working capital surplus........................            15,672     30,500      32,641      29,133      23,575
Total assets...................................            22,506     44,302      66,924      80,200      67,368
Short-term debt and current portion
  of obligations under capital leases..........               226        386          11      10,585       5,623
Long-term debt and obligations under
  capital leases, less current portion.........               108        433          60          --       1,037
Shareholders' equity...........................            18,280     34,036      47,949      48,654      41,201
</TABLE>

---------------
(1)  Basic and  diluted  earnings  per share  have  replaced  primary  and fully
diluted earnings per share in accordance with SFAS No. 128.



                                     - 19 -
<PAGE>


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

OVERVIEW

     The Company provides a wide range of information  technology  solutions and
services  including the development,  integration,  implementation,  hosting and
full lifecycle support of e-commerce and enterprise applications to companies of
all sizes.  Our  industry-specific  knowledge  and  expertise in a wide range of
technologies,  coupled  with our  ability to provide  timely and  cost-effective
integrated  technology  solutions,  are intended to provide our  customers  with
substantial  improvements in the efficiency and performance of their businesses.
Our mission is to develop,  deploy,  and host  customized,  scalable  technology
solutions that integrate  seamlessly into our customers'  existing  environment,
maximize the return on customers'  technology  investment,  and provide a faster
time-to-market and lower total cost of ownership.

     In late 1999,  the Company  made the  strategic  decision  to leverage  its
traditional  application  integration  and consulting  experience and reposition
Intelligroup for future growth by focusing on the emerging  Application  Service
Provider  ("ASP")  market.  At the same time,  the  Company  made the  strategic
decision to spin-off its Internet  services  business to the shareholders of the
Company.  Accordingly,  on January 1, 2000, the Company transferred its Internet
applications  services and management  consulting  businesses to SeraNova,  Inc.
("SeraNova"), a wholly-owned subsidiary of the Company on such date.

     On January 27,  2000,  SeraNova  filed a  Registration  Statement  with the
Securities and Exchange Commission (the "SEC") relating to the proposed spin-off
of SeraNova  from the  Company.  On June 29, 2000,  the SEC declared  SeraNova's
Registration  Statement effective.  On July 5, 2000, the Company distributed all
of the  outstanding  shares of the  common  stock of  SeraNova  then held by the
Company to holders of record of the  Company's  common  stock as of the close of
business on May 12, 2000 (or to their subsequent transferees) in accordance with
the terms of a  Distribution  Agreement  dated as of January 1, 2000 between the
Company  and  SeraNova.  Accordingly,  the  assets,  liabilities  and results of
operations  of SeraNova have been reported as  discontinued  operations  for all
periods presented. (See Discontinued Operations.)

     During  1998 and 1999,  the Company  expanded  its  operations  through its
acquisitions of CPI Consulting  Limited,  CPI Resources  Limited and the Empower
Companies.  The CPI Companies  provide  consulting and  implementation  services
related to  PeopleSoft  applications.  The Empower  Companies  provide  business
process  reengineering,  system design and development,  project  management and
training services.

     The  majority  of the  Company's  revenues  are derived  from  professional
services rendered to customers.  Revenue is typically recognized as services are
performed.  The Company's services range from providing  customers with a single
consultant  to  multi-personnel  full-scale  projects.  Although the Company has
contracts with many of its customers to provide its services,  in general,  such
contracts are terminable upon relatively  short notice,  typically not more than
30 days. There can be no assurance that the Company's customers will continue to
enter into  contracts  with the Company or that existing  contracts  will not be
terminated.  The  Company  provides  its  services  either  directly to end-user
organizations, or as a member of a consulting


                                     - 20 -
<PAGE>

team  assembled  by  another  information   technology  consulting  firm.  Where
contractual  provisions  permit,  customers also are billed for reimbursement of
expenses incurred by the Company on the customers' behalf.

     The Company has provided  services on certain  projects in which it, at the
request of the clients,  offered a fixed price for its  services.  For the years
ended  December 31, 1999 and 2000,  revenues  derived from projects  under fixed
price  contracts  represented  approximately  9% and 10%,  respectively,  of the
Company's  total  revenue.  No single  fixed price  project was  material to the
Company's business during 1999 or 2000. The Company believes that, as it pursues
its strategy of providing hosting and outsourcing services to customers, it will
continue to offer  fixed price  projects.  The Company  believes  that there are
certain  risks  related  to  fixed  price  arrangements  and  thus  prices  such
arrangements to reflect the associated  risk. There can be no assurance that the
Company  will  be  able  to  complete  such  projects  within  the  fixed  price
timeframes. The failure to perform within such fixed price contracts, if entered
into, could have a material adverse effect on the Company's business,  financial
condition and results of operations.

     The  Company has derived  and  believes  that it will  continue to derive a
significant  portion  of its  revenue  from a limited  number of  customers  and
projects.  For the years ended  December 31, 1998,  1999 and 2000, the Company's
ten largest customers accounted for in the aggregate, approximately 41%, 43% and
34% of its revenue, respectively.  During 1998, no single customer accounted for
more than 10% of revenue.  During 1999 and 2000, one customer accounted for more
than 10% of revenue.  For the years ended December 31, 1998, 1999 and 2000, 21%,
48% and 36%, respectively,  of the Company's revenue was generated by serving as
a  member  of  consulting  teams  assembled  by  other  information   technology
consulting  firms.  There can be no assurance that such  information  technology
consulting  firms will  continue  to engage the Company in the future at current
levels of retention, if at all.

     During the years ended December 31, 1998, 1999 and 2000, approximately 55%,
54% and 63%,  respectively,  of the  Company's  total  revenue was derived  from
projects in which the Company implemented software developed by SAP. For each of
the years ended  December 31, 1998,  1999 and 2000,  approximately  21%, 33% and
24%,  respectively,  of the Company's total revenue was derived from projects in
which the Company implemented software developed by PeopleSoft.  For each of the
years ended  December 31,  1998,  1999 and 2000,  approximately  12%, 9% and 9%,
respectively,  of the Company's total revenue was derived from projects in which
the Company implemented software developed by Oracle.

     The Company's most significant cost is project  personnel  expenses,  which
consist of consultant salaries, benefits and payroll-related expenses. Thus, the
Company's financial performance is based primarily upon billing margin (billable
hourly rate less the cost to the Company of a consultant on an hourly basis) and
personnel utilization rates (billable hours divided by paid hours).

     The Company  currently  maintains its  headquarters in Edison (New Jersey),
and branch  offices in  Atlanta  (Georgia),  Rosemont  (Illinois),  Foster  City
(California) and Trujillo Alto,  Puerto Rico. The Company also maintains offices
in  Europe  (Denmark,   the  United  Kingdom,  and  Sweden),  and  Asia  Pacific
(Australia, India, Japan, New Zealand, Singapore and Hong



                                     - 21 -
<PAGE>

Kong). The Company leases its headquarters in Edison, New Jersey. Such lease has
an initial term of ten (10) years, which commenced in September 1998.

DISCONTINUED OPERATIONS

     On July 5, 2000, the Company completed the tax-free spin-off of SeraNova by
distributing all of the outstanding  shares of the common stock of SeraNova then
held by the Company to holders of record of the Company's common stock as of the
close of business on May 12, 2000 (or to their subsequent transferees).

     SeraNova  represented  a  significant  segment of the  Company's  business.
Pursuant to Accounting  Principles Board ("APB") Opinion No. 30,  "Reporting the
Results of  Operations  -  Reporting  the  Effects of Disposal of a Segment of a
Business,  and  Extraordinary,  Unusual and  Infrequently  Occurring  Events and
Transactions,"  the Consolidated  Financial  Statements of the Company have been
reclassified  to reflect the  spin-off  of  SeraNova.  Accordingly,  the assets,
liabilities,  results  of  operations,  and cash  flows of  SeraNova  have  been
segregated  in the  Consolidated  Balance  Sheets,  Consolidated  Statements  of
Operations and Consolidated Statements of Cash Flows. The net operating results,
net assets and net cash flows of SeraNova  have been  reported as  "Discontinued
Operations." The historical carrying amount of the net assets of SeraNova on the
spin-off date has been recorded as a dividend.

     The Company has reported a $4.9 million loss from  discontinued  operations
for the period  from  January 1, 2000 to July 5, 2000 and a $1.3  million  and a
$0.6 million loss from discontinued  operations for the years ended December 31,
1999 and 1998, respectively.

RESULTS OF OPERATIONS

     The following table sets forth for the periods  indicated certain financial
data expressed as a percentage of total revenue, for continuing operations:

<TABLE>
<CAPTION>
                                                         PERCENTAGE OF REVENUE
                                                              YEAR ENDED
                                                              DECEMBER 31
                                                   2000          1999           1998
                                                   ----          ----           ----
<S>                                                <C>           <C>            <C>
Revenue.......................................     100.0%        100.0%         100.0%
Cost of sales.................................      66.9          66.6           65.1
                                                   -----         -----          -----
    Gross profit..............................      33.1          33.4           34.9
Selling, general and administrative expenses..      37.2          27.3           21.0
Depreciation and amortization expense.........       2.8           2.0            0.9
Acquisition expenses..........................        --           1.4            0.9
Restructuring and other special charges.......        --           5.0             --
                                                   -----         -----          -----
    Total operating expenses..................      40.0          35.7           22.8
                                                   -----         -----          -----
    Operating income (loss)...................      (6.9)         (2.3)          12.1
Other income (expense), net...................       0.5          (0.4)           0.0
                                                   -----         -----          -----
Income (loss) from continuing operations
    before income taxes.......................      (6.4)         (2.7)          12.1
Provision (benefit) for income taxes..........      (0.5)          0.9            2.6
                                                   -----         -----          -----
Net income (loss) from continuing operations..      (5.9)%        (3.6)%          9.5%
                                                   =====         =====          =====
</TABLE>


                                     - 22 -
<PAGE>

     Year Ended December 31, 2000 Compared to Year Ended December 31, 1999

     The following  discussion compares the year ended December 31, 2000 and the
year ended December 31, 1999, for continuing operations.

     Revenue.  Total revenue  decreased by 22.9% or $33.5  million,  from $146.3
million  in  1999 to  $112.8  million  in  2000.  This  decrease  was  primarily
attributable to the anticipated  decline in sales of traditional  implementation
services  offerings and slower than expected  growth in outsourcing  and hosting
revenues  as the  Company  refocused  resources  into  the  application  service
provider market. The decline in traditional  implementation  services and slower
than  expected  growth in the  application  service  provider  market  primarily
resulted from the general  economic  slowdown in which  customers have decreased
technology  budgets  and have  displayed a lack of urgency to  immediately  fund
information technology projects.

     Gross profit.  The Company's cost of sales  primarily  includes the cost of
salaries to consultants  and related  employee  benefits and payroll taxes.  The
Company's cost of sales decreased by 22.6%, or $22.0 million, from $97.4 million
in 1999 to $75.4 million in 2000. The Company's gross profit decreased by 23.5%,
or $11.5  million,  from $48.9 million in 1999 to $37.4  million in 2000.  These
decreases were primarily attributable to lower revenues.  Gross margin decreased
slightly  to 33.1% in 2000 from 33.4% in 1999.  The Company was able to maintain
gross margins relatively  comparable to the prior year by managing  non-billable
consultant time.

     Selling,  general  and  administrative   expenses.   Selling,  general  and
administrative  expenses  primarily  consist  of  administrative  salaries,  and
related benefits costs,  occupancy costs, sales person compensation,  travel and
entertainment, costs associated with the Advanced Development Center and related
development costs and professional  fees.  Selling,  general and  administrative
expenses increased by 5.3%, or $2.1 million, from $39.9 million in 1999 to $42.0
million in 2000,  and  increased as a percentage of revenue from 27.3% to 37.2%,
respectively.  The increase in selling,  general and administrative expenses, in
absolute  dollars and as a  percentage  of  revenue,  was  primarily  related to
additional sales staff and expanded  marketing  efforts as the Company refocused
resources around the emerging application service provider market.

     Depreciation  and  amortization.  Depreciation  and  amortization  expenses
increased  10.3% to $3.2 million in 2000,  compared to $2.9 million in 1999. The
increase is primarily due to additional computers, equipment and software placed
in service since 1999, in support of the ASPPlus business model.

     Acquisition expense. In 1999, the Company incurred costs of $2.1 million in
connection with the acquisition of the Empower  Companies.  This acquisition was
accounted for as a pooling of interests.  Acquisition costs primarily  consisted
of professional fees associated with the acquisition.

     Restructuring  and other special charges.  In connection with  management's
plan to reduce costs and improve operating efficiencies,  the Company incurred a
non-recurring charge of $5.6 million related to restructuring initiatives during
1999. The restructuring charge included



                                     - 23 -
<PAGE>

settlement  of the former chief  executive  officer's  employment  agreement and
additional  severance  payment,  expenses  associated  with the  termination  of
certain  employees in the United States and the United  Kingdom,  the closing of
certain  satellite  offices in the United  States  and an  additional  office in
Belgium,  and costs to exit  certain  contractual  obligations.  Over 83% of the
total  restructuring  charges were paid out in 1999 and an  additional  11% were
paid out in 2000.  Additionally,  the Company recorded a reserve of $1.7 million
against  an  outstanding  receivable  from a large  ERP  account,  whose  parent
corporation filed for protection under Chapter 11 of the U.S. bankruptcy laws.

     Other income  (expense),  net. The Company  earned $1.2 million in interest
income in 2000,  compared with $0.2 million in 1999. The increase was related to
the  additional  interest  earned on the  balance  of the note  receivable  with
SeraNova,  which  increased in 2000. The Company  incurred $0.6 million and $0.7
million in interest expense in 2000 and 1999, respectively, primarily related to
borrowings  under its line of credit.  Borrowings  under the line of credit were
used to fund operating activities.

     (Benefit)  provision for income taxes.  During 1999, the Company  generated
losses for tax purposes in the United  States and income  related to its foreign
entities  (foreign source income).  As of December 31, 1999, the Company planned
to file a consolidated tax return. As a result, the Company would have generated
unused foreign tax credits  related to this foreign source income.  Accordingly,
as of December 31, 1999, included in deferred taxes was an asset for foreign tax
credits and a related valuation  allowance as the ability to apply these credits
may be limited in the future.

     During 2000,  the Company  changed their tax strategy,  and filed  separate
company  returns for 1999 which  resulted in the  realization of the foreign tax
credits and a portion of the valuation  allowance  being  reversed.  By choosing
this  strategy the Company was able to generate net  operating  losses which are
less restrictive than the foreign tax credits.

     During 2000, the Company  continued to generate overall pre-tax losses even
though there were profits  generated in foreign  jurisdictions.  The Company has
provided a valuation  allowance against certain of these net operating losses as
the  ability to utilize  these  losses  may be limited in the  future.  This has
negatively  impacted  the  amount  of  income  tax  benefit  recorded  in  2000.
Accordingly,  the Company's effective tax rate was (8%) in 2000 and 37% in 1999.
Based on anticipated profitability in the near future, management believes it is
more likely than not,  that the 2000 net deferred tax asset of $0.8 million will
be realized.

     In  1996,  the  Company  elected  a five  year tax  holiday  in  India,  in
accordance with a local tax incentive  program whereby no income tax will be due
in such period.  Such tax holiday was extended an additional five years in 1999.
Effective  April 1, 2000 pursuant to changes  introduced  by the Indian  Finance
Act, 2000,  the tax holiday  previously  granted is no longer  available and has
been  replaced  in the form of a tax  deduction  incentive.  The  impact of this
change is not expected to be material to the consolidated  financial  statements
of the Company.  For the years ended December 31, 2000 and 1999, the tax holiday
and new tax deduction  favorably  impacted the  Company's  effective tax rate by
approximately 2.0% and 5.0%, respectively.



                                     - 24 -
<PAGE>

     Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

     The following  discussion compares the year ended December 31, 1999 and the
year ended December 31, 1998, for continuing operations.

     Revenue.  Total  revenue  decreased  by 0.8% or $1.2  million,  from $147.5
million  in  1998 to  $146.3  million  in  1999.  This  decrease  was  primarily
attributable to a decrease in expenditures  on ERP  implementations,  related to
Y2K  concerns  as  companies  shifted  resources  away  from  mission  critical,
enterprise-wide applications.

     Gross profit.  The Company's cost of sales increased 1.4%, or $1.4 million,
from $96.0 million in 1998 to $97.4 million in 1999. The Company's  gross profit
margin decreased from 34.9% in 1998 to 33.4% in 1999. The decrease was primarily
attributable to lower staff utilization, experienced as a result of a decline in
the ERP implementation market.

     Selling,  general  and  administrative   expenses.   Selling,  general  and
administrative  expenses increased by 28.7%, or $8.9 million, from $31.0 million
in 1998 to $39.9  million in 1999 and  increased as a percentage of revenue from
21.0% to 27.3%, respectively. The increases in such expenses in absolute dollars
and as a percentage  of revenue were  primarily  due to the increase in salaries
and related  benefits,  reflecting  headcount  increases in the Company's  sales
force and its marketing,  finance,  accounting and administrative  staff through
acquisitions  and in order to manage its growth.  The Company's  occupancy costs
increased  as a result  of the  relocation  of its  corporate  headquarters.  In
addition,  the Company experienced  increases in sales and management recruiting
costs, occupancy costs (as additional offices were opened in the United States),
support services and the provision for doubtful accounts.

     Acquisition  expense.  During the year ended December 31, 1999, the Company
incurred costs of $2.1 million in connection with the acquisition of the Empower
Companies.  During the year ended December 31, 1998, the Company  incurred costs
of $1.4 million in connection  with the  acquisition  of CPI Resources  Limited.
Both  acquisitions  were  accounted for as a pooling of  interests.  Acquisition
costs primarily consisted of professional fees associated with each acquisition.

     Restructuring  and other special charges.  In connection with  management's
plan to reduce costs and improve operating efficiencies,  the Company incurred a
non-recurring charge of $5.6 million related to restructuring initiatives during
the year ended December 31, 1999. The restructuring  charge included  settlement
of the former chief  executive  officer's  employment  agreement and  additional
severance payment, expenses associated with the termination of certain employees
in the United States and the United  Kingdom,  the closing of certain  satellite
offices in the United States and an additional  office in Belgium,  and costs to
exit certain contractual obligations. Over 83% of the restructuring charges were
paid out in 1999.  Additionally,  the Company recorded a reserve of $1.7 million
against  an  outstanding  receivable  from a large  ERP  account,  whose  parent
corporation filed for protection under Chapter 11 of the U.S. bankruptcy laws.

     Interest  expense  (income).  The Company incurred $0.7 million in interest
expense  during the year  ended  December  31,  1999,  primarily  related to its
borrowings under its line of credit.



                                     - 25 -
<PAGE>

Borrowings  under the line of credit  were  used to fund  operating  activities,
purchases of computer  equipment and office  furniture and fixtures,  as well as
for  acquisitions.  The interest expense was partially offset by interest income
of $0.2 million in 1999.

     Provision  for  income  taxes.  While the  Company  experienced  an overall
pre-tax loss, profits generated in certain foreign jurisdictions resulted in tax
expense for the year ended December 31, 1999. Although the Company expects these
foreign taxes to produce  foreign tax credits in the United States,  the ability
to apply these credits may be limited and, therefore, the Company has provided a
valuation  allowance  against such tax credits,  which has  negatively  impacted
income tax expense.  The Company's effective income tax rate was 37% and 22% for
the years ended December 31, 1999 and 1998,  respectively.  Based on current and
anticipated  profitability,  management  believes  all recorded net deferred tax
assets are more likely than not to be realized.

     In 1996, the Company elected a five year tax holiday in India in accordance
with a local tax incentive program whereby no income tax will be due during such
period.  Such tax holiday was extended an additional five years in 1999. For the
year ended  December 31, 1999 and 1998, the tax holiday  favorably  impacted the
effective tax rate by approximately 5% and 12%, respectively.

     As  discussed in the  consolidated  financial  statements,  on February 16,
1999,  the Company  acquired  Empower  Solutions,  L.L.C.  and Empower,  Inc. (a
corporation  organized  under  subchapter S of the Internal  Revenue Code).  The
acquisitions  were  accounted  for as pooling of  interests  and thus prior year
financial  statements  have been  restated  in  accordance  with the  pooling of
interests  accounting.  The Empower Companies were pass-through entities for tax
reporting  purposes,  thus their  income was not taxed at the  corporate  level.
Accordingly,  the Company's federal statutory tax rate was reduced by 8% and 14%
for 1999 and 1998, respectively.

LIQUIDITY AND CAPITAL RESOURCES

     The Company funds its  operations  primarily  from cash flow generated from
operations  and  financing  activities,  and prior to 1998  from  cash  balances
generated from the Company's initial and follow-on public offerings  consummated
in October 1996 and July 1997, respectively.

     The Company had cash and cash  equivalents  of $1.3 million at December 31,
2000 and $5.5 million at December 31, 1999.  The Company had working  capital of
$23.6 million at December 31, 2000 and $29.1 million at December 31, 1999.

     Cash provided by continuing  operating  activities  was $7.6 million during
the year ended December 31, 2000, resulting primarily from decreases in accounts
receivable,  unbilled  services and income taxes  receivable,  and  increases in
accounts  payable,  accrued  payroll and related taxes and accrued  expenses and
other  liabilities.  These amounts were partially offset by an increase in other
current assets and a decrease in income taxes  payable.  Cash used in continuing
operating  activities  was $0.5 million during the year ended December 31, 1999.
Cash provided by continuing  operating activities during the year ended December
31, 1998 was $6.9 million.



                                     - 26 -
<PAGE>

     The  Company  invested  $2.9  million,  $2.4  million  and $6.4  million in
computer  equipment and office  furniture  and fixtures in 2000,  1999 and 1998,
respectively. The increase reflects purchases of computer and telecommunications
equipment for  consultants  and  administrative  staff and office  furniture and
fixtures for consultants  and  administrative  staff.  In addition,  the Company
invested $4.0 million in purchased  software in 2000. The purchased  software is
an integral component of the overall ASPPlus solution provided to customers.

     From  January 29,  1999 until May 31,  2000,  the Company had an  unsecured
three-year  $30.0 million  revolving  credit  facility with PNC Bank,  N.A. (the
"Bank").  The credit facility contained certain financial covenants in which the
Company was not in  compliance  with as of June 30, 1999 and September 30, 1999.
In January 2000,  the Company  finalized with the Bank the terms of a waiver and
amendment to the credit  agreement to remedy  defaults,  which existed under the
credit agreement.  The terms of the waiver and amendment  included,  among other
things,  (i)  a  $15.0  million  reduction  in  availability  under  the  credit
agreement,  (ii) a first priority  perfected  security interest on all assets of
the Company and its  domestic  subsidiaries  and (iii)  modification  of certain
financial  covenants  and a waiver  of prior  covenant  defaults.  However,  the
Company was not in compliance with the modified financial  covenants as of March
31, 2000.  Accordingly,  on May 9, 2000, the Bank issued to the Company a waiver
of the defaults,  which existed under the credit agreement for the quarter ended
March 31, 2000.

     On May 31,  2000,  the Company and the Bank  entered  into an  agreement to
replace the previous  facility with a new three-year  revolving  credit facility
agreement.  The new credit  facility is comprised of a revolving  line of credit
pursuant  to which the  Company  can  borrow up to $20.0  million  either at the
Bank's  prime  rate per annum or the Euro Rate plus 1.75% to 2.5% based upon the
Company's  ratio of debt to EBITDA.  The credit  facility is  collateralized  by
substantially  all of the  assets of the United  States  based  operations.  The
maximum  borrowing  availability  under  the  line of  credit  is  based  upon a
percentage of eligible billed and unbilled accounts  receivable,  as defined. As
of December 31, 2000, the Company had  outstanding  borrowings  under the credit
facility of $5.0 million.  The Company estimates undrawn  availability under the
credit  facility to be $6.2 million as of December 31, 2000.  As of December 31,
1999, the Company had outstanding  borrowings under the prior credit facility of
$10.6 million.

     The new credit  facility  provides for the following  financial  covenants,
among other things,  (1) the Company must maintain  consolidated  net worth,  as
defined  ("consolidated  net  worth")  of (a) $42.0  million at each of June 30,
2000,  September  30, 2000,  and  December  31,  2000;  (b) not less than 95% of
consolidated  net worth of the immediately  preceding fiscal year-end as at each
such  fiscal  quarter  after  December  31,  2000;  and  (c) at  least  105%  of
consolidated  net worth as of the  immediately  preceding  fiscal year-end as at
each such fiscal year-end  subsequent to December 31, 2000;  provided,  however,
the  foregoing  covenant  shall not be  tested  for any  quarter  so long as the
Company maintains, at all times during such fiscal quarter, undrawn availability
of more than $5.0 million and (2) the Company must maintain  unconsolidated  net
worth, as defined  ("unconsolidated  net worth") of (a) $39.0 million at each of
June 30, 2000,  September 30, 2000, and December 31, 2000; (b) not less than 95%
of unconsolidated  net worth of the immediately  preceding fiscal year-end as at
each such fiscal  quarter  after  December  31,  2000;  and (c) at least 105% of
unconsolidated  net worth as of the immediately  preceding fiscal year-end as at
each such fiscal year-end subsequent to



                                     - 27 -
<PAGE>

December 31, 2000; provided, however, the foregoing covenant shall not be tested
for any  quarter so long as the  Company  maintains,  at all times  during  such
fiscal quarter,  undrawn  availability of more than $5.0 million.  Additionally,
the credit facility  contains material adverse change clauses with regard to the
financial condition of the assets, liabilities and operations of the Company. As
of  December  31,  2000,  the  Company  was in  compliance  with  all  financial
covenants.

     On May 31,  2000,  SeraNova  and the  Company  formalized  a $15.1  million
unsecured  promissory  note (the "Note")  relating to net borrowings by SeraNova
from the Company  through such date.  The Note bears  interest at the prime rate
plus 1/2%. The Company has recorded total accrued interest of $0.8 million as of
December 31, 2000. A payment of $3.0 million was made on September 29, 2000 with
the  balance  being  due on July  31,  2001.  The  Note  has  certain  mandatory
prepayment provisions based on future debt or equity financings by SeraNova.

     In September  2000,  SeraNova  consummated an $8.0 million  preferred stock
financing  with  two  institutional   investors.   According  to  the  mandatory
prepayment provisions of the Note, SeraNova was required to make a prepayment of
$3.0 million on the Note as a result of the stock financing.  Subsequently,  the
Company finalized, with SeraNova, the terms of an agreement to waive, subject to
certain conditions, certain of the mandatory prepayment obligations arising as a
result of the financing.  The terms of the new agreement  included,  among other
things,  that  SeraNova pay the Company (i) $0.5  million upon  execution of the
agreement; (ii) $0.5 million on or before each of January 31, 2001, February 28,
2001, March 31, 2001, April 30, 2001 and May 31, 2001; and (iii) $0.4 million on
or before  December  15,  2000 to be applied  either as (a) an  advance  payment
towards a contemplated  services arrangement for hosting services to be provided
to SeraNova by the Company (the "Hosting  Agreement");  or (b) in the event that
no such  Hosting  Agreement  is  executed on or before  December  15,  2000,  an
additional  advance  prepayment  toward the  principal of the Note.  The Company
received from SeraNova the $0.5 million  payment that was due upon  execution of
the agreement and a $0.4 million  payment in December 2000 as an advance payment
towards the principal of the Note since no Hosting Agreement was executed before
December 15, 2000.

     The Company's 2001 operating plan contains  assumptions  regarding  revenue
and  expenses.  The  achievement  of the operating  plan depends  heavily on the
timing of work performed by the Company on existing  projects and the ability of
the Company to gain and perform  work on new  projects.  Project  cancellations,
delays in the timing of work  performed  by the Company on existing  projects or
the inability of the Company to gain and perform work on new projects could have
an adverse  impact on the Company's  ability to execute its  operating  plan and
maintain  adequate  cash  flow.  In the  event  actual  results  do not meet the
operating  plan,  management  believes  it could  execute  contingency  plans to
mitigate such effects.  Such plans include additional cost reductions or seeking
additional financing.  Considering the cash on hand, the anticipated  collection
of the note  receivable  from  SeraNova,  the credit  facility  and based on the
achievement  of the  operating  plan  and  management's  actions  taken to date,
management  believes it has the ability to continue to generate  sufficient cash
to satisfy its operating requirements in the normal course of business. However,
no  assurance  can  be  given  that  sufficient  cash  will  be  generated  from
operations.



                                     - 28 -
<PAGE>

     The Company believes that its available funds, together with current credit
arrangements,  the  anticipated  collection of the note receivable from SeraNova
and the cash flow expected to be generated from operations,  will be adequate to
satisfy its current and planned operations for at least the next 12 months.

RECENTLY ISSUED ACCOUNTING STANDARDS

     In June 1998,  the FASB  issued SFAS No. 133,  "Accounting  for  Derivative
Instruments and Hedging  Activities."  SFAS No. 133  establishes  accounting and
reporting standards for derivative financial  instruments and hedging activities
related to those instruments, as well as other hedging activities. In July 1999,
the FASB approved SFAS 137,  "Accounting for Derivative  Instruments and Hedging
Activities-Deferral  of the  Effective  Date of FASB  Statement No. 133," and in
June 2000 approved SFAS 138, "Accounting for Certain Derivative  Instruments and
Certain Hedging  Activities--an  Amendment of SFAS No. 133," both of which amend
SFAS No. 133.  The Company will be required to adopt SFAS No. 133 in fiscal 2001
in  accordance  with SFAS No. 137. The Company has  evaluated  the impact of the
adoption of SFAS No. 133 and 138 and does not believe that their  adoption  will
have a material impact on its financial position and results of operations.

     In December  1999,  the staff of the  Securities  and  Exchange  Commission
issued Staff  Accounting  Bulletin No. 101,  "Revenue  Recognition  in Financial
Statements,"  or SAB 101. SAB 101 summarizes  certain areas of the staff's views
in applying generally accepted  accounting  principles to revenue recognition in
financial  statements.  In June 2000,  the SEC issued SAB No.  101B to defer the
effective  date of the  implementation  of SAB 101 until the  fourth  quarter of
fiscal  2000.  Management  has  concluded  that the  adoption of SAB 101 did not
result in a material  impact on the Company's  financial  position or results of
operations.


     In March  2000,  the FASB issued  Interpretation  No. 44,  "Accounting  for
Certain  Transactions  Involving Stock  Compensation -- an Interpretation of APB
No. 25," or FIN 44. FIN 44 clarifies the  application  of APB No. 25 and,  among
other  issues,  clarifies  the  following:  the  definition  of an employee  for
purposes of applying  APB No. 25; the criteria  for  determining  whether a plan
qualifies as a  non-compensatory  plan;  the  accounting  consequence of various
modifications to the terms of the previously fixed stock options or awards;  and
the  accounting  for an  exchange  of stock  compensation  awards in a  business
combination. FIN 44 is effective July 1, 2000, but certain conclusions in FIN 44
cover specific  events that occurred  after either  December 15, 1998 or January
12, 2000.  The  application  of FIN 44 had no impact on the Company's  financial
position or results of operations.

EUROPEAN MONETARY UNION (EMU)

     The euro was  introduced  on  January  1,  1999,  at which  time the eleven
participating  EMU member countries  established  fixed conversion rates between
their  existing   currencies  (legacy  currencies)  and  the  euro.  The  legacy
currencies  will  continue to be used as legal tender  through  January 1, 2002;
thereafter, the legacy currencies will be canceled and euro bills and coins will
be used for cash  transactions  in the  participating  countries.  The Company's
European  sales and  operations  offices  affected by the euro  conversion  have
established  plans to address the  systems  issues  raised by the euro  currency
conversion and are cognizant of the potential business


                                     - 29 -
<PAGE>

implications  of  converting  to a common  currency.  The  Company  is unable to
determine the ultimate financial impact of the conversion on its operations,  if
any,  given that the impact will be dependent  upon the  competitive  situations
which exist in the various  regional  markets in which the Company  participates
and the  potential  actions  which  may or may  not be  taken  by the  Company's
competitors and suppliers.

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

     Although the Company cannot accurately determine the precise effect thereof
on its  operations,  it does not believe  inflation,  currency  fluctuations  or
interest rate changes have historically had a material effect on its revenues or
results  of  operations.   Any  significant   effects  of  inflation,   currency
fluctuations  and  changes  in  interest  rates on the  economies  of the United
States, Europe or Asia Pacific could adversely impact the Company's revenues and
results of operations in the future.  If there is a material  adverse  change in
the  relationship  between European  currencies  and/or Asian currencies and the
United  States  Dollar,  such change  would  adversely  affect the result of the
Company's  European and/or Asia Pacific operations as reflected in the Company's
financial  statements.  The Company has not hedged its exposure  with respect to
this currency  risk,  and does not expect to do so in the future,  since it does
not believe that it is practicable for it to do so at a reasonable cost.

ITEM 8.   FINANCIAL STATEMENTS.

     The financial  statements  required to be filed pursuant to this Item 8 are
included in this Annual Report on Form 10-K. A list of the financial  statements
filed herewith is found at "Item 14. Exhibits, List, and Reports on Form 8-K."

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

     Not applicable.





                                     - 30 -
<PAGE>

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     The information relating to the Company's directors,  nominees for election
as directors and executive  officers under the headings  "Election of Directors"
and "Executive  Officers" in the Company's  definitive  proxy  statement for the
2001 Annual Meeting of Shareholders is incorporated  herein by reference to such
proxy statement.

ITEM 11.  EXECUTIVE COMPENSATION.

     The discussion under the heading "Executive  Compensation" in the Company's
definitive  proxy  statement  for the 2001  Annual  Meeting of  Shareholders  is
incorporated herein by reference to such proxy statement.

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

     The discussion under the heading "Security  Ownership of Certain Beneficial
Owners and Management" in the Company's  definitive proxy statement for the 2001
Annual Meeting of Shareholders is incorporated herein by reference to such proxy
statement.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The  discussion  under  the  heading  "Certain  Relationships  and  Related
Transactions"  in the Company's  definitive  proxy statement for the 2001 Annual
Meeting  of  Shareholders  is  incorporated  herein by  reference  to such proxy
statement.




                                     - 31 -
<PAGE>

                                     PART IV

ITEM 14.     EXHIBITS, LIST, AND REPORTS ON FORM 8-K.

    (a) (1)  Financial Statements.

             Reference is made to the Index to Financial Statements on Page F-1.

        (2)  Financial Statement Schedules.

             None.

        (3)  Exhibits.

             Reference is made to the Exhibit Index on Page 35.

    (b)      Reports on Form 8-K.

             No reports on Form 8-K were filed during the quarter ended December
             31, 2000.





                                     - 32 -
<PAGE>

                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned,  thereunto duly authorized this 30th day of March
2001.

                                         INTELLIGROUP, INC.



                                         By: /s/ Nagarjun Valluripalli
                                            -----------------------------------
                                            Nagarjun Valluripalli, Chairman and
                                            Chief Executive Officer




                                     - 33 -
<PAGE>

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.

       SIGNATURE                         TITLE                         DATE
       ---------                         -----                         ----

/s/ Nagarjun Valluripalli    Chairman, Chief Executive Officer    March 30, 2001
-------------------------
Nagarjun Valluripalli        and Director (principal executive
                             officer)

/s/ Nicholas Visco           Senior Vice President- Finance and   March 30, 2001
-------------------------
Nicholas Visco               Administration (principal
                             financial and accounting officer)

/s/ Rajkumar Koneru          Director                             March 30, 2001
-------------------------
Rajkumar Koneru

/s/ Klaus Besier             Director                             March 30, 2001
-------------------------
Klaus Besier

/s/ Dennis McIntosh          Director                             March 30, 2001
-------------------------
Dennis McIntosh



                                     - 34 -
<PAGE>

                                  EXHIBIT INDEX

Exhibit No.                           Description of Exhibit
-----------                           ----------------------

    2          Agreement  and Plan of Merger of the Company and its wholly owned
               subsidiary Oxford Systems Inc.  (Incorporated by reference to the
               Company's  Annual  Report  on  Form  10-KSB  for the  year  ended
               December 31, 1996.)

   3.1         Amended and Restated Certificate of Incorporation.  (Incorporated
               by reference to the Company's Registration Statement on Form SB-2
               (Registration  Statement  No.  333-5981)  declared  effective  on
               September 26, 1996.)

   3.2         Amended and Restated  Bylaws.  (Incorporated  by reference to the
               Company's  Registration  Statement  on  Form  SB-2  (Registration
               Statement  No.  333-5981)  declared  effective on  September  26,
               1996.)

   4.1         Shareholder  Protection  Rights Agreement dated as of November 6,
               1998,  between the Company and  American  Stock  Transfer & Trust
               Company  which  includes (I) the Form of Rights  Certificate  and
               (ii) the  Certificate  of  Amendment  to the Amended and Restated
               Certificate of Incorporation of Intelligroup,  Inc. (Incorporated
               by reference to Exhibit No. 4.1 of the  Company's  Report on Form
               8-K  dated  November  9,  1998,  filed  with the  Securities  and
               Exchange Commission on November 9, 1998.)

  10.1*        1996 Stock Plan,  as amended,  of the Company.  (Incorporated  by
               reference to the Company's  Quarterly Report on Form 10-Q for the
               quarter ended June 30, 1999.)

  10.2*        1996  Non-Employee  Director Stock Option Plan.  (Incorporated by
               reference to the  Company's  Registration  Statement on Form SB-2
               (Registration  Statement  No.  333-5981)  declared  effective  on
               September 26, 1996.)

  10.3         Form of Indemnification Agreement entered into by the Company and
               each of its Directors and officers. (Incorporated by reference to
               the Company's  Registration  Statement on Form SB-2 (Registration
               Statement  No.  333-5981)  declared  effective on  September  26,
               1996.)

  10.4         Employment  Agreement  dated  October 1, 1999 between the Company
               and Nicholas Visco. See Exhibit 10.30.

  10.5         Employee's  Invention  Assignment and Confidentiality  Agreement.
               (Incorporated   by  reference  to  the   Company's   Registration
               Statement  on Form SB-2  (Registration  Statement  No.  333-5981)
               declared effective on September 26, 1996.)



                                     - 35 -
<PAGE>

Exhibit No.                           Description of Exhibit
-----------                           ----------------------

  10.6         Services Provider Agreement by and between Oracle Corporation and
               the Company  dated July 26, 1994.  (Incorporated  by reference to
               the Company's  Registration  Statement on Form SB-2 (Registration
               Statement  No.  333-5981)  declared  effective on  September  26,
               1996.) See Exhibit 10.8.

  10.7         Agreement  by and  between  the  Company  and  Intelligroup  Asia
               Private  Limited  ("Intelligroup  Asia")  relating to operational
               control  of   Intelligroup   Asia,   with   related   agreements.
               (Incorporated   by  reference  to  the   Company's   Registration
               Statement  on Form SB-2  (Registration  Statement  No.  333-5981)
               declared effective on September 26, 1996.)

  10.8         Amendment  No. 1 to Services  Provider  Agreement  by and between
               Oracle  Corporation  and the Company  dated  December  30,  1996.
               (Incorporated by reference to the Company's Annual Report on Form
               10-KSB for the year ended December 31, 1996.) See Exhibit 10.6.

  10.9         R/3 National  Logo Partner  Agreement by and between SAP America,
               Inc. and the Company dated as of April 29, 1997. (Incorporated by
               reference to the  Company's  Registration  Statement on Form SB-2
               (Registration Statement No. 333-29119) declared effective on June
               26, 1997.) See Exhibits 10.10, 10.21 and 10.31.

  10.10        ASAP  Partner  Addendum to R/3 National  Logo  Partner  Agreement
               between SAP America,  Inc. and the Company effective July 1, 1997
               (amends   existing   R/3  National   Logo   Partner   Agreement).
               (Incorporated  by reference to the Company's  Quarterly Report on
               Form  10-QSB for the  quarter  ended  September  30,  1997.)  See
               Exhibits 10.9, 10.21 and 10.31.

  10.11        Implementation Partner Agreement between PeopleSoft, Inc. and the
               Company  effective July 15, 1997.  (Incorporated  by reference to
               the  Company's  Quarterly  Report on Form  10-QSB for the quarter
               ended September 30, 1997.) See Exhibit 10.20.

  10.12        Consulting  Alliance  Agreement with Baan  International B.V. and
               the  Company  effective  September  29,  1997.  (Incorporated  by
               reference to the  Company's  Quarterly  Report on Form 10-QSB for
               the quarter ended September 30, 1997.)

  10.13        Lease Agreement between Alfieri-Parkway  Associates, as Landlord,
               and  Intelligroup,   Inc.,  as  Tenant,  dated  March  17,  1998.
               (Incorporated  by reference to the Company's  Quarterly Report on
               Form 10-Q for the quarter ended March 31, 1998.)

  10.14        Agreement  of Purchase and Sale dated as of May 7, 1998 among the
               Company,  Intelligroup Europe Limited and the Shareholders of CPI
               Consulting  Limited.  (Incorporated by reference to the Company's
               Report on Form 8-K filed May 27, 1998.)


                                     - 36 -
<PAGE>

Exhibit No.                           Description of Exhibit
-----------                           ----------------------

  10.15        Agreement of Purchase and Sale dated as of May 21, 1998 among the
               Company,  Intelligroup Europe Limited and the Shareholders of CPI
               Resources  Limited.  (Incorporated  by reference to the Company's
               Report on Form 8-K filed May 27, 1998.)

  10.16        Agreement  of  Purchase  and Sale dated as of  November  25, 1998
               among  the  Company  and the  Shareholders  of  each  of  Azimuth
               Consulting   Limited,   Azimuth  Holdings  Limited,   Braithwaite
               Richmond Limited and Azimuth Corporation  Limited.  (Incorporated
               by reference to the Company's  Report on Form 8-K filed  December
               8, 1998.)

  10.17        Stock Purchase  Agreement dated as of December 21, 1998 among the
               Company  and  the  Shareholders  of  Network   Publishing,   Inc.
               (Incorporated  by reference to the  Company's  Report on Form 8-K
               filed January 8, 1999.)

  10.18        Agreement and Plan of Merger dated as of February 16, 1999 by and
               among the Company,  ES Merger Corp.,  Empower Solutions,  LLC and
               the members of Empower Solutions, LLC. (Incorporated by reference
               to the Company's Report on Form 8-K filed February 24, 1999.)

  10.19        Agreement and Plan of Merger dated as of February 16, 1999 by and
               among the Company, ES Merger Corp.,  Empower Solutions,  Inc. and
               the stockholders of Empower,  Inc.  (Incorporated by reference to
               the Company's Report on Form 8-K filed February 24, 1999.)

  10.20*       Fifth  Amendment to the  Implementation  Partner  Agreement dated
               July 15,  1998,  between  the Company and  PeopleSoft,  Inc.  See
               Exhibit 10.11.

  10.21*       Amendment to the National  Implementation Partner Agreement dated
               as of January 1, 1999,  between SAP America and the Company.  See
               Exhibits 10.9, 10.10 and 10.31.

  10.22        Contribution  Agreement  by and between  Intelligroup,  Inc.  and
               SeraNova,  Inc.  dated as of January 1,  2000.  (Incorporated  by
               reference  to the  Company's  Annual  Report on Form 10-K for the
               year ended December 31, 1999.)

  10.23        Distribution  Agreement  by and between  Intelligroup,  Inc.  and
               SeraNova,  Inc.  dated as of January 1,  2000.  (Incorporated  by
               reference  to the  Company's  Annual  Report on Form 10-K for the
               year ended December 31, 1999.)

  10.24        Services  Agreement  by  and  between   Intelligroup,   Inc.  and
               SeraNova,  Inc.  dated as of January 1,  2000.  (Incorporated  by
               reference  to the  Company's  Annual  Report on Form 10-K for the
               year ended December 31, 1999.)


                                     - 37 -
<PAGE>

Exhibit No.                           Description of Exhibit
-----------                           ----------------------

  10.25        Space  Sharing  Agreement  by and among  Intelligroup,  Inc.  and
               SeraNova,  Inc.  dated as of January 1,  2000.  (Incorporated  by
               reference  to the  Company's  Annual  Report on Form 10-K for the
               year ended December 31, 1999.)

  10.26        Tax Sharing  Agreement  by and  between  Intelligroup,  Inc.  and
               SeraNova,  Inc.  dated as of January 1,  2000.  (Incorporated  by
               reference  to the  Company's  Annual  Report on Form 10-K for the
               year ended December 31, 1999.)

  10.27*       Amended and Restated Revolving Credit Loan and Security Agreement
               among  the  Company,   Empower,   Inc.  and  PNC  Bank,  National
               Association.   (Incorporated   by  reference  to  the   Company's
               Quarterly  Report on Form  10-Q for the  quarter  ended  June 30,
               2000.)

  10.28        Amended and Restated  Promissory  Note by and between the Company
               and SeraNova,  Inc.  dated as of May 31, 2000.  (Incorporated  by
               reference to the Company's  Report on Form 8-K/A filed  September
               14, 2000.) See Exhibit 10.29.

  10.29        Agreement  and  Waiver  with  respect  to  Amended  and  Restated
               Promissory  Note by and between the  Company and  SeraNova,  Inc.
               dated as of September 29, 2000. (Incorporated by reference to the
               Company's  Quarterly  Report on Form 10-Q for the  quarter  ended
               September 30, 2000.) See Exhibit 10.28.

  10.30*+      First Amendment to Employment  Agreement  between the Company and
               Nicholas Visco dated November 1, 2000.

  10.31+       mySap.com Partner-Services Addendum effective June 7, 2000 to R/3
               National Logo Partner Agreement between SAP America, Inc. and the
               Company. See Exhibits 10.9, 10.10 and 10.21.

  10.32+       Service Alliance Master Agreement and Addendums dated May 5, 2000
               between PeopleSoft, Inc. and the Company.

   21+         Subsidiaries of the Registrant.

   23+         Consent of Arthur Andersen LLP.

------------------------

*       A management contract or compensatory plan or arrangement required to be
        filed as an exhibit pursuant to Item 14(c) of Form 10-K.

+       Filed herewith. All other exhibits previously filed.




                                     - 38 -
<PAGE>


                       INTELLIGROUP, INC. AND SUBSIDIARIES
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                           Page
                                                                           ----

Report of Independent Public Accountants.................................   F-2

Consolidated Financial Statements:

Consolidated Balance Sheets as of December 31, 2000 and 1999.............   F-3

Consolidated Statements of Operations for the years ended
        December 31, 2000, 1999 and 1998.................................   F-4

Consolidated Statements of Shareholders' Equity for the years ended
        December 31, 2000, 1999 and 1998.................................   F-5

Consolidated Statements of Cash Flows for the years ended
        December 31, 2000, 1999 and 1998.................................   F-6

Notes to Consolidated Financial Statements...............................   F-7

Financial Statement Schedules
        Financial  Statement  Schedules  required by the  Securities  and
        Exchange   Commission   have  been   omitted,   as  the  required
        information  is included in the Notes to  Consolidated  Financial
        Statements or is not applicable.



                                     F - 1
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of Intelligroup, Inc.:

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

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

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


                                            ARTHUR ANDERSEN LLP

Roseland, New Jersey
February 7, 2001




                                     F - 2
<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2000 AND 1999
<TABLE>
<CAPTION>
                                                                    2000               1999
                                                              -------------      -------------
<S>                                                             <C>                <C>
                          ASSETS
Current Assets:
  Cash and cash equivalents.............................        $   1,327,000      $   5,510,000
  Accounts receivable, less allowance for doubtful
      accounts of $2,061,000 and $2,939,000 at
      December 31, 2000 and 1999, respectively..........           22,438,000         27,607,000
  Unbilled services.....................................            5,933,000          7,692,000
  Income taxes receivable...............................              384,000          3,612,000
  Deferred tax asset....................................            1,348,000          2,481,000
  Other current assets..................................            4,820,000          2,699,000
  Note receivable - SeraNova............................           11,910,000                 --
  Net current assets of discontinued operations.........                   --          7,621,000
                                                                -------------      -------------
        Total current assets............................           48,160,000         57,222,000
  Note receivable - SeraNova............................                   --          8,397,000
  Property and equipment, net...........................            9,650,000          8,557,000
  Intangible assets, net................................            4,732,000          5,188,000
  Other assets..........................................            4,826,000            836,000
                                                                -------------      -------------
                                                                $  67,368,000      $  80,200,000
                                                                =============      =============
           LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
  Accounts payable......................................        $   6,849,000      $   3,800,000
  Accrued payroll and related taxes.....................            6,480,000          5,527,000
  Accrued expenses and other liabilities................            5,345,000          4,273,000
  Income taxes payable..................................              288,000          3,904,000
  Current portion of long term debt and obligations
      under capital leases..............................            5,623,000         10,585,000
                                                                -------------      -------------
        Total current liabilities.......................           24,585,000         28,089,000
Deferred tax liability..................................              545,000            806,000
                                                                -------------      -------------
Obligations under capital leases, less current portion..            1,037,000                 --
                                                                -------------      -------------
Net non-current liabilities of discontinued operations..                   --          2,651,000
                                                                -------------      -------------
Commitments and contingencies
Shareholders' Equity
  Preferred stock, $.01 par value, 5,000,000 shares
      authorized, none issued or outstanding............                   --                 --
  Common stock, $.01 par value, 25,000,000 shares
      authorized, 16,630,000 and 15,949,000 shares
      issued and outstanding at December 31, 2000
      and 1999, respectively............................              166,000            160,000
  Additional paid-in capital............................           41,366,000         43,356,000
  Retained earnings.....................................            1,908,000          6,317,000
  Currency translation adjustments......................           (2,239,000)        (1,179,000)
                                                                -------------      -------------
        Total shareholders' equity .....................           41,201,000         48,654,000
                                                                -------------      -------------
                                                                $  67,368,000      $  80,200,000
                                                                =============      =============
</TABLE>

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

                                     F - 3
<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


<TABLE>
<CAPTION>
                                                        2000               1999              1998
                                                   -------------     --------------     -------------
<S>                                                <C>               <C>                <C>
Revenue.......................................     $ 112,838,000     $  146,272,000     $ 147,462,000
Cost of sales.................................        75,444,000         97,382,000        96,024,000
                                                   -------------     --------------     -------------
    Gross profit.............................         37,394,000         48,890,000        51,438,000
                                                   -------------     --------------     -------------
Selling, general and administrative expenses..        42,004,000         39,892,000        30,977,000
Depreciation and amortization.................         3,187,000          2,930,000         1,387,000
Acquisition expenses..........................                --          2,115,000         1,397,000
Restructuring and other special charges.......                --          7,328,000                --
                                                   -------------     --------------     -------------
    Total operating expenses..................        45,191,000         52,265,000        33,761,000
                                                   -------------     --------------     -------------
    Operating income (loss)...................        (7,797,000)        (3,375,000)       17,677,000
Interest income (expense), net................           570,000           (513,000)          206,000
                                                   -------------     --------------     -------------
Income (loss) from continuing operations
    before income tax provision (benefit).....        (7,227,000)        (3,888,000)       17,883,000
Income tax provision (benefit)................          (573,000)         1,441,000         3,852,000
                                                   -------------     --------------     -------------
Income (loss) from continuing operations......        (6,654,000)        (5,329,000)       14,031,000
Loss from discontinued operations, net of
    tax expense (benefit) of  $(2,095,000),
    $(235,000) and $599,000, respectively.....        (4,891,000)        (1,261,000)         (631,000)
                                                   -------------     --------------     -------------
Net income (loss).............................     $ (11,545,000)    $   (6,590,000)    $  13,400,000
                                                   =============     ==============     =============
Earnings per share:
    Basic earnings per share:
        Income (loss) from continuing
           operations ........................     $       (0.40)    $        (0.34)    $        0.91
        Discontinued operations ..............             (0.30)             (0.08)            (0.04)
                                                   -------------     --------------     -------------
           Net income (loss) per share........     $       (0.70)    $        (0.42)    $        0.87
                                                   =============     ==============     =============
        Weighted average number of Common
           shares - Basic.....................        16,485,000         15,766,000        15,387,000
                                                   =============     ==============     =============
    Diluted earnings per share:
        Income (loss) from continuing
           operations ........................     $       (0.40)    $        (0.34)    $        0.88
        Discontinued operations ..............             (0.30)             (0.08)            (0.04)
                                                   -------------     --------------     -------------
        Net income (loss) per share...........     $       (0.70)    $        (0.42)    $        0.84
                                                   =============     ==============     =============
        Weighted average number ofCommon
           shares - Diluted...................        16,485,000         15,766,000        15,969,000
                                                   =============     ==============     =============
</TABLE>

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

                                     F - 4
<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

<TABLE>
<CAPTION>
                                                                                       CUMULATIVE
                                                                          RETAINED      FOREIGN
                                         COMMON STOCK       ADDITIONAL    EARNINGS      CURRENCY         TOTAL        COMPREHENSIVE
                                         ------------        PAID-IN    (ACCUMULATED   TRANSLATION    SHAREHOLDERS'   INCOME (LOSS)
                                     SHARES      AMOUNT      CAPITAL      DEFICIT)     ADJUSTMENTS      EQUITY        FOR THE PERIOD
                                  ----------   ---------   -----------  ------------   -----------    ------------    --------------

<S>                               <C>          <C>         <C>           <C>           <C>            <C>             <C>
Balance at December 31, 1997..... 15,263,000   $ 153,000   $30,812,000   $ 3,170,000   $   (99,000)   $ 34,036,000    $  6,154,000
                                                                                                                      ============
Issuance of common stock in
connection with acquisitions.....    166,000       2,000     3,126,000            --            --       3,128,000              --

Exercise of stock options........    144,000       1,000     1,021,000            --            --       1,022,000              --

Tax benefit from exercise of
stock options....................         --          --       302,000            --            --         302,000              --

Adjustment for difference in
Azimuth fiscal periods...........         --          --            --        32,000            --          32,000              --

Shareholder dividends............         --          --            --    (3,525,000)           --      (3,525,000)             --

Currency translation adjustments.         --          --            --            --      (446,000)       (446,000)   $   (446,000)

Net income.......................         --          --            --    13,400,000            --      13,400,000      13,400,000
                                  ----------   ---------   -----------   -----------   -----------    ------------    ------------

Balance at December 31, 1998..... 15,573,000     156,000    35,261,000    13,077,000      (545,000)     47,949,000    $ 12,954,000
                                                                                                                      ============
Issuance of common stock in
connection with acquisitions.....    155,000       2,000     4,589,000            --            --       4,591,000              --

Exercise of stock options........    221,000       2,000     2,996,000            --            --       2,998,000              --

Tax benefit from exercise of
stock options....................         --          --       510,000            --            --         510,000              --

Shareholder dividends............         --          --            --      (170,000)           --        (170,000)             --

Currency translation adjustments.         --          --            --            --      (634,000)       (634,000)   $   (634,000)

Net loss.........................         --          --            --    (6,590,000)           --      (6,590,000)     (6,590,000)
                                  ----------   ---------   -----------   -----------   -----------    ------------    ------------

Balance at December 31, 1999..... 15,949,000     160,000    43,356,000     6,317,000    (1,179,000)     48,654,000    $ (7,224,000)
                                                                                                                      ============
Issuance of common stock in
connection with acquisitions.....    100,000       1,000            --            --            --           1,000              --

Spin-off distribution of
SeraNova common stock............         --          --    (7,733,000)    7,136,000      (107,000)       (704,000)             --

Exercise of stock options........    581,000       5,000     5,743,000            --            --       5,748,000              --

Currency translation adjustments.         --          --            --            --      (953,000)       (953,000)   $   (953,000)

Net loss.........................         --          --            --   (11,545,000)           --     (11,545,000)    (11,545,000)
                                  ----------   ---------   -----------   -----------   -----------    ------------    ------------

Balance at December 31, 2000..... 16,630,000   $ 166,000   $41,366,000   $ 1,908,000   $(2,239,000)   $ 41,201,000    $(12,498,000)
                                  ==========   =========   ===========   ===========   ===========    ============    ============
</TABLE>

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


                                     F - 5
<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

<TABLE>
<CAPTION>
                                                                        2000             1999          1998
                                                                   -------------    ------------   ------------
<S>                                                                <C>              <C>             <C>
Cash flows from operating activities:
  Net income (loss)...........................................     $(11,545,000)    $ (6,590,000)   $13,400,000
  Less: Loss from discontinued operations, net of tax.........       (4,891,000)      (1,261,000)      (631,000)
                                                                   ------------     ------------    -----------
  Income (loss) from continuing operations....................       (6,654,000)      (5,329,000)    14,031,000
  Adjustments to reconcile income (loss) from continuing
    operations to net cash provided by (used in)
    operating activities of continuing operations:
      Depreciation and amortization...........................        3,187,000        2,930,000      1,387,000
      Provision for doubtful accounts.........................        3,293,000        4,742,000      1,128,000
      Deferred income taxes...................................          872,000       (1,430,000)       (12,000)
      Tax benefit from exercise of stock options..............               --          510,000        302,000
  Changes in operating assets and liabilities:
    Accounts receivable.......................................        1,876,000       (1,823,000)   (12,004,000)
    Unbilled services.........................................        1,759,000        2,250,000     (2,212,000)
    Income taxes receivable...................................        3,228,000       (3,612,000)            --
    Other current assets......................................       (2,121,000)       1,292,000     (3,274,000)
    Other assets..............................................          735,000         (120,000)      (379,000)
    Accounts payable..........................................        3,049,000       (1,021,000)     3,121,000
    Accrued payroll and related taxes.........................          953,000          312,000      2,461,000
    Accrued restructuring charges.............................         (608,000)      (4,679,000)            --
    Accrued expenses and other liabilities....................        1,680,000        4,494,000        598,000
    Income taxes payable......................................       (3,616,000)         940,000      1,738,000
                                                                   ------------     ------------    -----------
  Net cash provided by (used in) operating activities
    of continuing operations..................................        7,633,000         (544,000)     6,885,000
                                                                   ------------     ------------    -----------

Cash flows from investing activities:
    Purchase of equipment ....................................       (2,919,000)      (2,356,000)    (6,446,000)
    Purchase of software licenses.............................       (3,957,000)              --             --
                                                                   ------------     ------------    -----------
  Net cash used in investing activities of continuing
    operations................................................       (6,876,000)      (2,356,000)    (6,446,000)
                                                                   ------------     ------------    -----------

Cash flows from financing activities:
  Principal payments under capital leases.....................         (117,000)         (12,000)        (6,000)
  Proceeds from exercise of stock options.....................        5,749,000        2,998,000      1,022,000
  Shareholder dividends ......................................               --         (170,000)    (3,525,000)
  Repayment of shareholders' loans ...........................               --               --       (618,000)
  Other borrowings............................................           91,000               --             --
  Net change in line of credit borrowings.....................       (5,572,000)      10,526,000             --
  Net change in note receivable-SeraNova prior to
     spin-off date............................................       (6,662,000)      (6,618,000)    (1,475,000)
  Net change in note receivable-SeraNova subsequent to
    spin-off date ............................................        3,149,000               --             --
                                                                   ------------     ------------    -----------
    Net cash provided by (used in) financing activities
      of continuing operations................................       (3,362,000)       6,724,000     (4,602,000)
                                                                   ------------     ------------    -----------
    Effect of foreign currency exchange rate changes on cash..         (953,000)        (634,000)      (446,000)
                                                                   ------------     ------------    -----------
Net cash provided by (used in) continuing operations .........       (3,558,000)       3,190,000     (4,609,000)
Net cash used in discontinued operations .....................         (625,000)      (1,248,000)      (329,000)
                                                                   ------------     ------------    -----------
Net increase (decrease) in cash and cash equivalents .........       (4,183,000)       1,942,000     (4,938,000)
Cash and cash equivalents at beginning of period..............        5,510,000        3,568,000      8,506,000
                                                                   ------------     ------------    -----------
Cash and cash equivalents at end of period....................     $  1,327,000     $  5,510,000    $ 3,568,000
                                                                   ============     ============    ===========

Supplemental disclosures of cash flow information:
  Cash paid for income taxes..................................     $  4,053,000     $  3,850,000    $ 2,067,000
                                                                   ============     ============    ===========
  Cash paid for interest......................................     $    603,000     $    779,000    $     7,000
                                                                   ============     ============    ===========
Supplemental disclosures of non-cash transactions:
  Issuance of common stock in connection with acquisitions....     $      1,000     $  4,591,000    $ 3,128,000
                                                                   ============     ============    ===========
</TABLE>


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


                                     F - 6
<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

     Intelligroup,  Inc., and its  subsidiaries  (the "Company")  provide a wide
range  of   information   technology   solutions  and  services   including  the
development, integration,  implementation, hosting and full lifecycle support of
e-commerce and enterprise  applications  to companies of all sizes.  The Company
markets its services to a wide variety of industries,  the majority of which are
in the United  States.  The  majority  of the  Company's  business is with large
established companies, including consulting firms serving numerous industries.

     On July 5, 2000, the Company  spun-off its Internet  applications  services
and management consulting businesses ("SeraNova").  This transaction resulted in
the distribution of SeraNova common stock to each holder of the Company's common
stock of  record  as of May 12,  2000.  As a  result  of this  transaction,  the
Consolidated  Financial  Statements  and  related  notes have been  restated  to
present the results of this business as discontinued operations (See Note 4).

     The Company's 2001 operating plan contains  assumptions  regarding  revenue
and  expenses.  The  achievement  of the operating  plan depends  heavily on the
timing of work performed by the Company on existing  projects and the ability of
the Company to gain and perform  work on new  projects.  Project  cancellations,
delays in the timing of work  performed  by the Company on existing  projects or
the inability of the Company to gain and perform work on new projects could have
an adverse  impact on the Company's  ability to execute its  operating  plan and
maintain  adequate  cash  flow.  In the  event  actual  results  do not meet the
operating  plan,  management  believes  it could  execute  contingency  plans to
mitigate such effects.  Such plans include additional cost reductions or seeking
additional financing.  Considering the cash on hand, the anticipated  collection
of the note  receivable  from  SeraNova,  the credit  facility  and based on the
achievement  of the  operating  plan  and  management's  actions  taken to date,
management  believes it has the ability to continue to generate  sufficient cash
to satisfy its operating requirements in the normal course of business. However,
no  assurance  can  be  given  that  sufficient  cash  will  be  generated  from
operations.

Principles of Consolidation and Use of Estimates

     The accompanying financial statements include the accounts of Intelligroup,
Inc. and its majority owned subsidiaries.  All significant intercompany balances
and transactions have been eliminated.

     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  recorded  amounts  of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting period. Actual results could differ from those estimates.


                                     F - 7
<PAGE>

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


Reclassification

     Certain  prior year amounts have been  reclassified  to conform to the 2000
presentation.

Cash and Cash Equivalents

     Cash  and  cash  equivalents   consist  of  investments  in  highly  liquid
short-term  instruments,  with original  maturities of three months or less from
the date of purchase.

Allowance for Doubtful Accounts

     The Company  provides an  allowance  for  doubtful  accounts  arising  from
services,  which is based upon a review of  outstanding  receivables  as well as
historical  collection  information.  Credit is  granted  to  substantially  all
customers on an unsecured  basis.  In  determining  the amount of the allowance,
management is required to make certain estimates and assumptions.  The provision
for doubtful  accounts  totaled  $3,293,000,  $4,742,000 and $1,128,000 in 2000,
1999 and 1998, respectively. Accounts written off totaled $4,171,000, $2,649,000
and $1,083,000 in 2000, 1999 and 1998, respectively.

Property and Equipment

     Property and equipment is stated at cost,  less  accumulated  depreciation.
Depreciation  is provided  using the  straight-line  method  over the  estimated
useful lives of the related assets  (primarily  three to five years).  Leasehold
improvements  are amortized  over the shorter of the lease term or the estimated
useful life (ten years). Costs of maintenance and repairs are charged to expense
as incurred.

     In 1999,  the Company  adopted  Statement  of Position  98-1 ("SOP  98-1"),
"Accounting  for the  Costs of  Computer  Software  Developed  or  Obtained  for
Internal Use." SOP 98-1 requires the  capitalization of direct costs incurred in
connection  with  developing or obtaining  software for internal use,  including
external  direct costs of materials and services and payroll and payroll related
costs for  employees  who are  directly  associated  with and devote  time to an
internal-use software development project. The cost of the internal-use software
and the  capitalized  implementation-related  costs are included within computer
software in property  and  equipment  as of December 31, 2000 and 1999 (See Note
2). Such  capitalized  costs are  amortized  on a  straight-line  basis over the
software's economic useful life of three years.

Intangible Assets

     Intangible assets,  net, at December 31, 2000 and 1999 include goodwill and
other intangibles totaling $4,732,000 and $5,188,000,  respectively,  which were
attributable  to  the  acquisition  of  CPI  Consulting  (See  Note  11).  These
intangible  assets are being  amortized over the estimated  useful lives ranging
from 5 to 15 years using the straight-line method.  Accumulated amortization was
$1,044,000 and $588,000 as of December 31, 2000 and 1999,



                                     F - 8
<PAGE>

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


respectively.  Amortization expense was $456,000, $441,000 and $147,000 in 2000,
1999 and 1998, respectively.

Other Assets

     Other assets primarily include the cost of purchased computer software that
is marketed to customers as a part of the Company's ASPPlus solution. During the
year ended December 31, 2000, the Company purchased  $3,957,000 of such computer
software.  The cost of the software will be amortized on a  straight-line  basis
over the software's economic life (typically, three to five years). For the year
ended December 31, 2000, no amortization expense was recorded since the software
was not yet placed in service.

Recoverability of Long-Lived Assets

     The  Company  reviews  the  recoverability  of its  long-lived  assets on a
periodic basis whenever events and changes in circumstances  have occurred which
may indicate a possible  impairment.  The assessment for potential impairment is
based  primarily on the Company's  ability to recover the carrying  value of its
long-lived  assets from  expected  future cash flows from its  operations  on an
undiscounted   basis.   The   Company   recently   completed  a  review  of  the
recoverability  of its  long-lived  assets  and  determined  that no  impairment
exists.  The amount of  impairment  of  goodwill  is  determined  as part of the
long-lived asset groupings being evaluated.

Revenue Recognition

     The  Company  primarily   generates  revenue  from  professional   services
rendered. Revenue is recognized as services are performed with the corresponding
cost of providing  those  services  reflected as cost of sales.  The majority of
customers  are  billed on an hourly or per diem  basis  whereby  actual  time is
charged  directly to the  customer.  Billings  to  customers  for  out-of-pocket
expenses are recorded as a reduction of expenses incurred.  Unbilled services at
December 31, 2000 and 1999 represent services provided through December 31, 2000
and 1999,  respectively,  which are  billed  subsequent  to  year-end.  All such
amounts are anticipated to be realized in the following year.

     The Company also generates revenue from hosting services rendered.  Hosting
services  revenue  primarily  consists  of monthly  recurring  fees for  hosting
services provided to customers.  Revenue and the associated  implementation  and
support costs are recognized on a monthly basis as services are performed  after
the hosted application has been implemented for the customer.

     The  adoption  of  Staff  Accounting  Bulletin  101,  relating  to  revenue
recognition,  issued in December 1999 and effective during the fourth quarter of
2000, did not have a material impact to the Company's accompanying  consolidated
financial statements.



                                     F - 9
<PAGE>

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


Stock-Based Compensation

     Stock-based  compensation  is recognized  using the intrinsic  value method
under Accounting  Principles Board ("APB") No. 25. For disclosure purposes,  pro
forma net income (loss) and earnings (loss) per share impacts are provided as if
the fair market value method had been applied.

Currency Translation

     Assets and liabilities  relating to foreign  operations are translated into
U.S.  dollars using exchange  rates in effect at the balance sheet date.  Income
and expenses are translated  into U.S.  dollars using monthly  average  exchange
rates  during  the year.  Translation  adjustments  associated  with  assets and
liabilities  are  excluded  from  income and  credited  or charged  directly  to
shareholders' equity.

Concentrations

     For the years ended December 31, 2000,  1999 and 1998,  approximately  63%,
54% and 55% of revenue,  respectively,  was derived  from  projects in which the
Company's personnel  implemented software developed by SAP. The Company's future
success in its SAP-related  consulting services depends largely on its continued
relationship   with  SAP  and  on  its  continued   status  as  a  SAP  National
Implementation  Partner,  which  was  first  obtained  in  1995.  The  Company's
agreement  with SAP  (the  "Agreement")  is  awarded  on an  annual  basis.  The
Company's  current  contract  expires on December 31, 2001 and is  automatically
renewed for successive one-year periods, unless terminated by either party. This
Agreement contains no minimum revenue  requirements or cost sharing arrangements
and does not provide for commissions or royalties to either party. In July 1997,
the Company achieved  Accelerated SAP Partner Status with SAP by meeting certain
criteria established by SAP. Additionally,  for each of the years ended December
31,  2000,  1999 and 1998,  approximately  24%,  33% and 21%,  respectively,  of
revenue was derived from projects in which the Company's  personnel  implemented
software developed by PeopleSoft. For each of the years ended December 31, 2000,
1999 and 1998,  approximately  9%, 9% and 12%,  respectively,  of the  Company's
total  revenue  was  derived  from  projects  in which the  Company  implemented
software developed by Oracle.

     A substantial  portion of the Company's revenue is derived from projects in
which an information  technology consulting firm other than the Company has been
retained by the end-user  organization to manage the overall project.  For years
ended December 31, 2000, 1999 and 1998, 36%, 48% and 21%,  respectively,  of the
Company's  revenue  was  generated  by serving as a member of  consulting  teams
assembled by other information technology consulting firms.



                                     F - 10
<PAGE>

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


     One customer accounted for approximately 10% and 15% of revenue in 2000 and
1999, respectively. Accounts receivable due from this customer was approximately
$2,979,000  and  $5,900,000  as of December  31, 2000,  and 1999,  respectively.
During  1998,  no single  customer  accounted  for more than 10% of  revenue  or
accounts receivable.

     During 2000 and 1999, the Company derived  revenues  totaling  $307,000 and
$58,000,  respectively,  from  contracts  with an entity  whose chief  executive
officer is a director of the Company.

Income Taxes

     Deferred income taxes are recognized for the tax  consequences of temporary
differences  between  the  financial  statement  and tax  bases  of  assets  and
liabilities,  using enacted tax rates currently in effect.  The Company does not
provide for additional U.S. income taxes on undistributed earnings considered to
be permanently invested in foreign subsidiaries.

Earnings Per Share

     Basic  earnings per share is computed by dividing  income  attributable  to
common  shareholders by the weighted average number of common shares outstanding
for the period.  Diluted  earnings  per share is  computed  by  dividing  income
available to common shareholders by the weighted average number of common shares
outstanding, adjusted for the incremental dilution of outstanding stock options.
The computation of basic earnings per share and diluted  earnings per share were
as follows:

<TABLE>
<CAPTION>
                                                        2000            1999             1998
                                                   ------------     -----------      ------------
<S>                                                <C>              <C>              <C>
Income (loss) from continuing operations.....      $ (6,654,000)    $(5,329,000)     $ 14,031,000
Loss from discontinued operations............        (4,891,000)     (1,261,000)         (631,000)
                                                   ------------     -----------      ------------
Net income (loss)............................      $(11,545,000)    $(6,590,000)     $ 13,400,000
                                                   ============     ===========      ============
Basic earnings per share:
  Weighted average number of common shares...        16,485,000      15,766,000       15,387,000
                                                   ------------     -----------      ------------
  Basic income (loss) per share from
    continuing operations....................      $      (0.40)    $     (0.34)     $       0.91
  Basic loss per share from discontinued
    operations...............................             (0.30)          (0.08)            (0.04)
                                                   ------------     -----------      ------------
  Basic net earnings (loss) per share........      $      (0.70)    $     (0.42)     $       0.87
                                                   ============     ===========      ============
Diluted earnings per share:
  Weighted average number of common shares...        16,485,000      15,766,000        15,387,000
  Common share equivalents of outstanding
    stock options............................                --              --           582,000
                                                   ------------     -----------      ------------
  Total shares...............................        16,485,000      15,766,000        15,969,000
  Diluted income (loss) per share from
    continuing operations....................      $      (0.40)    $     (0.34)     $       0.88
  Diluted loss per share from discontinued
    operations...............................             (0.30)          (0.08)            (0.04)
                                                   ------------     -----------      ------------
  Diluted net earnings (loss) per share......      $      (0.70)    $     (0.42)     $       0.84
                                                   ============     ===========      ============
</TABLE>



                                     F - 11
<PAGE>

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


     Stock options,  which would be antidilutive  (3,369,746 and 3,927,280 as of
December  31,  2000  and  1999,   respectively)  have  been  excluded  from  the
calculations of diluted shares outstanding and diluted earnings per share.

Financial Instruments

     Financial  instruments that potentially  subject the Company to credit risk
consist  principally of trade receivables and unbilled  services.  Management of
the Company believes the fair value of accounts receivable and unbilled services
approximates  the  carrying  value.  The  Company  does not  utilize  derivative
instruments.


NOTE 2 - PROPERTY AND EQUIPMENT

     Property and equipment consist of the following as of December 31:

                                                 2000                  1999
                                           --------------        -------------
        Vehicles.........................  $      156,000        $     172,000
        Furniture........................       3,392,000            3,158,000
        Equipment........................      10,152,000            7,552,000
        Computer software................       2,801,000            1,708,000
        Leasehold improvements...........         801,000              625,000
                                           --------------        -------------
                                               17,302,000           13,215,000
        Less-Accumulated depreciation....      (7,652,000)          (4,658,000)
                                           --------------        -------------
                                           $    9,650,000        $   8,557,000
                                           ==============        =============

     Depreciation  expense was  $2,731,000,  $2,489,000  and $1,240,000 in 2000,
1999 and 1998, respectively.


NOTE 3 - LINES OF CREDIT

     From  January 29,  1999 until May 31,  2000,  the Company had an  unsecured
three-year  $30,000,000  revolving  credit  facility  with PNC Bank,  N.A.  (the
"Bank").  The credit facility contained certain financial covenants in which the
Company was not in  compliance  with as of June 30, 1999 and September 30, 1999.
In January 2000,  the Company  finalized with the Bank the terms of a waiver and
amendment to the credit  agreement to remedy  defaults,  which existed under the
credit agreement.  The terms of the waiver and amendment  included,  among other
things, (i) a $15,000,000  reduction in availability under the credit agreement,
(ii) a first priority  perfected  security interest on all assets of the Company
and its  domestic  subsidiaries  and (iii)  modification  of  certain  financial
covenants and a waiver of prior covenant defaults.  However, the Company was not
in  compliance  with the  modified  financial  covenants  as of March 31,  2000.
Accordingly,  on May 9,  2000,  the Bank  issued to the  Company a waiver of the
defaults,  which existed under the credit  agreement for the quarter ended March
31, 2000.


                                     F - 12
<PAGE>

NOTE 3 - LINES OF CREDIT (CONTINUED)


     On May 31,  2000,  the Company and the Bank  entered  into an  agreement to
replace the previous  facility with a new three-year  revolving  credit facility
agreement.  The new credit  facility is comprised of a revolving  line of credit
pursuant to which the Company can borrow up to $20,000,000  either at the Bank's
prime  rate per  annum or the  Euro  Rate  plus  1.75%  to 2.5%  based  upon the
Company's  ratio of debt to EBITDA.  The credit  facility is  collateralized  by
substantially  all of the  assets of the United  States  based  operations.  The
maximum  borrowing  availability  under  the  line of  credit  is  based  upon a
percentage of eligible billed and unbilled accounts  receivable,  as defined. As
of December 31, 2000, the Company had  outstanding  borrowings  under the credit
facility of $5,013,000.  The Company  estimates undrawn  availability  under the
credit  facility to be  $6,213,000  as of December 31, 2000.  As of December 31,
1999, the Company had outstanding  borrowings under the prior credit facility of
$10,585,000.

     The new credit  facility  provides for the following  financial  covenants,
among other things,  (1) the Company must maintain  consolidated  net worth,  as
defined  ("consolidated net worth") of (a) $42,000,000 at each of June 30, 2000,
September 30, 2000, and December 31, 2000; (b) not less than 95% of consolidated
net worth of the  immediately  preceding  fiscal year-end as at each such fiscal
quarter after December 31, 2000; and (c) at least 105% of consolidated net worth
as of the immediately  preceding fiscal year-end as at each such fiscal year-end
subsequent to December 31, 2000; provided, however, the foregoing covenant shall
not be tested for any  quarter so long as the  Company  maintains,  at all times
during such fiscal quarter, undrawn availability of more than $5,000,000 and (2)
the Company must maintain unconsolidated net worth, as defined  ("unconsolidated
net worth") of (a) $39,000,000 at each of June 30, 2000, September 30, 2000, and
December  31,  2000;  (b) not less than 95% of  unconsolidated  net worth of the
immediately  preceding  fiscal  year-end  as at each such fiscal  quarter  after
December 31, 2000; and (c) at least 105% of  unconsolidated  net worth as of the
immediately preceding fiscal year-end as at each such fiscal year-end subsequent
to December 31, 2000;  provided,  however,  the foregoing  covenant shall not be
tested for any quarter so long as the  Company  maintains,  at all times  during
such fiscal quarter, undrawn availability of more than $5,000,000. Additionally,
the credit facility contains material adverse change clauses with regards to the
financial condition of the assets, liabilities and operations of the Company. As
of  December  31,  2000,  the  Company  was in  compliance  with  all  financial
covenants.

     Interest expense on debt and obligations under capital leases  approximated
$608,000,  $720,000 and $26,000 for the years ended December 31, 2000,  1999 and
1998, respectively.


NOTE 4 - DISCONTINUED OPERATIONS

     In November  1999,  the Company  announced  its  intentions to spin off its
Internet  applications  services and management  consulting  business subject to
certain  approvals and conditions.  On January 1, 2000, the Company  transferred
its Internet  applications  services and  management  consulting  businesses  to
SeraNova, a wholly-owned subsidiary of the Company on such date.



                                     F - 13
<PAGE>

NOTE 4 - DISCONTINUED OPERATIONS (CONTINUED)


     On March 14, 2000, SeraNova sold 831,470 shares of its common stock to four
institutional  investors for  $10,000,000.  SeraNova  granted certain demand and
piggyback registration rights to such investors.

     On July 5, 2000, the Company completed the tax-free spin-off of SeraNova by
distributing all of the outstanding  shares of the common stock of SeraNova then
held by the Company to holders of record of the Company's common stock as of the
close  of  business  on May 12,  2000 (or to their  subsequent  transferees)  in
accordance  with the terms of a  Distribution  Agreement  dated as of January 1,
2000  between the Company  and  SeraNova.  SeraNova  represented  a  significant
segment of the Company's business.

     Pursuant to APB Opinion  No.30,  "Reporting  the  Results of  Operations  -
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently  Occurring Events and  Transactions,"  the Consolidated
Financial  Statements  of the  Company  have been  reclassified  to reflect  the
spin-off  of  SeraNova.   Accordingly,  the  assets,  liabilities,   results  of
operations,  and cash flows of SeraNova have been segregated in the Consolidated
Balance  Sheets,   Consolidated   Statements  of  Operations  and   Consolidated
Statements  of Cash Flows.  The net operating  results,  net assets and net cash
flows  of  SeraNova  have  been  reported  as  "Discontinued   Operations."  The
historical  carrying  amount of the net assets of SeraNova on the spin-off  date
has been recorded as a stock dividend.

     The  following is summarized  financial  information  for the  discontinued
operations of SeraNova:
<TABLE>
<CAPTION>

                                           JANUARY 1, 2000 TO       YEAR ENDED           YEAR ENDED
                                               JULY 5, 2000      DECEMBER 31, 1999    DECEMBER 31, 1998
                                           ------------------    -----------------    -----------------
<S>                                           <C>                 <C>                 <C>
Revenue................................       $  36,019,000       $   39,795,000      $  15,378,000
Pre-tax loss...........................          (6,986,000)          (1,496,000)           (32,000)
Income tax expense (benefit)...........          (2,095,000)            (235,000)           599,000
Loss from discontinued operations......          (4,891,000)          (1,261,000)          (631,000)

                                               JULY 5, 2000      DECEMBER 31, 1999
                                           ------------------    -----------------
Current assets.........................       $  25,319,000       $   12,516,000
Total assets...........................          36,874,000           18,880,000
Note payable to Intelligroup...........          15,059,000            8,397,000
Current liabilities....................           9,173,000            4,895,000
Total liabilities......................          26,170,000           13,910,000
Net assets of discontinued operations..          10,704,000            4,970,000
</TABLE>


NOTE 5 - NOTE RECEIVABLE - SERANOVA

     On May  31,  2000,  SeraNova  and  the  Company  formalized  a  $15,100,000
unsecured  promissory  note (the "Note")  relating to net borrowings by SeraNova
from the Company  through such date.  The Note bears  interest at the prime rate
plus 1/2%.  The Company has recorded  total  accrued  interest of $803,000 as of
December 31, 2000. A payment of  $3,000,000  was made on September 29, 2000 with
the  balance  being  due on July  31,  2001.  The  Note  has  certain  mandatory
prepayment provisions based on future debt or equity financings by SeraNova.



                                     F - 14
<PAGE>

NOTE 5 - NOTE RECEIVABLE - SERANOVA (CONTINUED)


     In September  2000,  SeraNova  consummated  an $8,000,000  preferred  stock
financing  with  two  institutional   investors.   According  to  the  mandatory
prepayment provisions of the Note, SeraNova was required to make a prepayment of
$3,000,000  on the Note as a result of the stock  financing.  Subsequently,  the
Company finalized, with SeraNova, the terms of an agreement to waive, subject to
certain conditions, certain of the mandatory prepayment obligations arising as a
result of the financing.  The terms of the new agreement  included,  among other
things,  that  SeraNova  pay the  Company (i)  $500,000  upon  execution  of the
agreement;  (ii)  $500,000 on or before each of January 31,  2001,  February 28,
2001,  March 31, 2001, April 30, 2001 and May 31, 2001; and (iii) $400,000 on or
before  December 15, 2000 to be applied either as (a) an advance payment towards
a  contemplated  services  arrangement  for  hosting  services to be provided to
SeraNova by Company (the "Hosting Agreement");  or (b) in the event that no such
Hosting  Agreement is executed on or before  December 15,  2000,  an  additional
advance  prepayment  toward the principal of the Note. The Company received from
SeraNova the $500,000 payment that was due upon execution of the agreement and a
$400,000 payment in December 2000 as an advance payment towards the principal of
the Note since no Hosting Agreement was executed before December 15, 2000.


NOTE 6 - RESTRUCTURING AND OTHER SPECIAL CHARGES

     In connection with the Company's plan to reduce costs and improve operating
efficiencies,  the Company incurred a non-recurring charge of $5,628,000 related
to  restructuring  initiatives  during the year ended  December  31,  1999.  The
restructuring charge included settlement of the former chief executive officer's
employment agreement and additional severance payment,  expenses associated with
the  termination of certain  employees in the United States and United  Kingdom,
the closing of certain  satellite offices in the United States and an additional
office in Belgium, and costs to exit certain contractual obligations.

     Activity  in accrued  costs for  restructuring  and other  special  charges
during 1999 and 2000 is as follows:

<TABLE>
<CAPTION>
                                  CHARGES TO                     ACCRUED COSTS                   ACCRUED COSTS
                                  OPERATIONS      COSTS PAID      DECEMBER 31,     COST PAID      DECEMBER 31,
                                  DURING 1999     DURING 1999         1999        DURING 2000         2000
                                  -----------     -----------    -------------    -----------    -------------

<S>                                <C>            <C>              <C>             <C>            <C>
Severance and related costs.....   $5,027,000     $4,162,000       $ 865,000       $ 608,000      $ 257,000
Other costs primarily to exit
facilities, contracts, and
certain activities..............      601,000        517,000          84,000              --         84,000
                                  -----------     ----------      ----------       ---------      ---------
                                   $5,628,000     $4,679,000       $ 949,000       $ 608,000      $ 341,000
                                  ===========     ==========      ==========       =========      =========
</TABLE>

     Additionally,  in 1999 the Company recorded a reserve of $1,700,000 against
an outstanding  receivable  from a large ERP account,  whose parent  corporation
filed for protection under Chapter 11 of the U.S. bankruptcy laws.



                                     F - 15
<PAGE>

NOTE 7 - INCOME TAXES

     Income taxes provision (benefit) consists of the following:

<TABLE>
<CAPTION>
                                                2000                1999               1998
                                           ------------        ------------       -------------
<S>                                        <C>                 <C>                <C>
Current:
    Federal.........................       $ (1,951,000)       $  2,310,000       $   2,639,000
    State...........................                 --             345,000             729,000
    Foreign.........................            506,000             216,000             496,000
                                           ------------        ------------       -------------
                                             (1,445,000)          2,871,000           3,864,000
                                           ------------        ------------       -------------
Deferred:
    Federal.........................            872,000          (1,267,000)            (12,000)
    State...........................                 --            (163,000)                 --
                                           ------------        ------------       -------------
                                                872,000          (1,430,000)            (12,000)
                                           ------------        ------------       -------------
Total...............................       $   (573,000)       $  1,441,000       $   3,852,000
                                           ============        ============       =============
</TABLE>

     The provision for income taxes differs from the amount computed by applying
the statutory rate of 34% to income before income taxes.  The principal  reasons
for this difference are:

<TABLE>
<CAPTION>
                                                             2000            1999             1998
                                                            ------          ------           ------
<S>                                                          <C>             <C>               <C>
Tax at federal statutory rate......................          (34)%           (34)%             34%
Nondeductible expenses.............................            1               2                5
State income tax, net of federal benefit...........           --               2                4
Foreign losses for which no benefit is available...            7               3                6
Changes in valuation allowance.....................           20              77               --
Foreign operations taxed at less than U.S.
    statutory rate, primarily India................           (2)             (5)             (12)
S Corp and L.L.C. income passed through to
    shareholders...................................           --              (8)             (14)
Other..............................................           --              --               (1)
                                                            -----           -----            -----
Effective tax rate.................................           (8)%            37%              22%
                                                            =====           =====            =====
</TABLE>

     In 1996, the Company elected a five year tax holiday in India in accordance
with a local tax incentive  program whereby no income taxes will be due for such
period.  Such tax holiday was  extended  for an  additional  five years in 1999.
Effective  April 1, 2000 pursuant to changes  introduced  by the Indian  Finance
Act, 2000,  the tax holiday  previously  granted is no longer  available and has
been  replaced  in the form of a tax  deduction  incentive.  The  impact of this
change is not expected to be material to the consolidated  financial  statements
of the Company. Prior to their acquisition,  the Empower Companies (see Note 11)
were pass-through entities for tax reporting purposes, thus their income was not
taxed at the corporate level.  Accordingly,  the Company's federal statutory tax
rate   was   reduced   by  8%  and  13%  for  1999   and   1998,   respectively.

     Deferred  income  taxes  reflect  the tax effect of  temporary  differences
between the carrying amount of assets and  liabilities  for financial  reporting
purposes  and  the  amounts  used  for  income  tax  purposes.  The  significant
components of the Company's  deferred tax assets and  liabilities as of December
31, 2000 and 1999 are as follows:



                                     F - 16
<PAGE>

NOTE 7 - INCOME TAXES (CONTINUED)

                                                          2000           1999
                                                     -----------    ------------
  Deferred tax assets:
    Allowance for doubtful accounts................. $   742,000     $1,247,000
    Vacation accrual................................     122,000        334,000
    Net operating losses............................   4,033,000        570,000
    Foreign tax credits.............................          --      2,200,000
    Other accrued liabilities.......................     484,000        739,000
                                                     -----------     ----------
  Total deferred tax assets.........................   5,381,000      5,090,000

  Deferred tax liability-accelerated depreciation...  (1,040,000)      (806,000)

  Valuation allowance...............................  (3,538,000)    (2,609,000)
                                                     -----------     ----------
  Net deferred tax asset                             $   803,000     $1,675,000
                                                     ===========     ==========

     During 1999,  the Company  generated  losses for tax purposes in the United
States and income related to its foreign entities (foreign source income). As of
December 31, 1999, the Company planned to file a consolidated  tax return.  As a
result,  the Company would have generated  unused foreign tax credits related to
this foreign source income.  Accordingly,  as of December 31, 1999,  included in
deferred  taxes was an asset for foreign  tax  credits  and a related  valuation
allowance as the ability to apply these credits may be limited in the future.

     During 2000,  the Company  changed their tax strategy,  and filed  separate
company  returns for 1999 which  resulted in the  realization of the foreign tax
credits and a portion of the valuation  allowance  being  reversed.  By choosing
this  strategy the Company was able to generate net  operating  losses which are
less restrictive than the foreign tax credits.

     During  2000,  the Company  continued to generate  losses.  The Company has
provided a valuation  allowance against certain of these net operating losses as
the ability to utilize  these losses may be limited in the future.  Although the
realization of the net deferred tax assets is not assured,  management  believes
it is more likely  than not,  that the 2000 net  deferred  tax asset of $803,000
will be realized.

NOTE 8 - COMMITMENTS AND CONTINGENCIES

Tax-Free Spin-off of SeraNova

     On  July  5,  2000,  the  Company  distributed  SeraNova  common  stock  to
shareholders  in a  transaction  that was  intended  to be a  tax-free  spin-off
pursuant to Section 355 of the Internal  Revenue Code ("Section  355") (See Note
4). If the distribution  qualifies as a tax-free  spin-off,  neither the Company
nor the Company's  shareholders  recognize any gain or income in connection with
the transaction.  However, Section 355 provides that the Company may be required
to recognize a gain on the  transaction  if the  distribution  is part of a plan
pursuant to which one or more  persons  acquire  50% or more of SeraNova  common
stock  within two years of the  distribution  date.  The  Company  and  SeraNova
executed  a  Tax  Sharing  Agreement,   dated  January  1,  2000  ("Tax  Sharing
Agreement"),   whereby   SeraNova  would  indemnify  the  Company  for  any  tax
liabilities  in the  event a  future  transaction  of  SeraNova  results  in the
spin-off being deemed a taxable event.



                                     F - 17
<PAGE>

NOTE 8 - COMMITMENTS AND CONTINGENCIES (CONTINUED)


     On  October  27,  2000,  SeraNova  and  Silverline   Technologies   Limited
("Silverline")  announced  that they had entered into an  agreement  and plan of
merger,  under which  Silverline would acquire SeraNova in exchange for American
depositary  shares of  Silverline  and the  assumption by Silverline of SeraNova
indebtedness.  However, SeraNova management has represented that the merger with
Silverline was not contemplated at the time of the spin-off and accordingly, the
spin-off  should be  tax-free.  Should the spin-off  ultimately  be construed as
taxable,  the resultant tax liability could be up to $65,000,000,  plus interest
and, depending on the facts that ultimately are established, penalties. SeraNova
and/or  Silverline would be obligated to indemnify the Company for these amounts
under the Tax Sharing Agreement.

Employment Agreements

     As of December 31, 2000, the Company had employment agreements with certain
of  its  executives,  which  provide  for  minimum  payments  in  the  event  of
termination  for  reasons  other  than  just  cause.  The  aggregate  amount  of
compensation  commitment in the event of  termination  under such  agreements is
approximately $550,000.

Leases

     The Company  leases  office  space,  office  equipment  and vehicles  under
capital and operating leases that have initial or remaining non-cancelable lease
terms in excess of one year as of December 31, 2000.  Future  minimum  aggregate
annual lease payments are as follows:

                   FOR THE YEARS
                ENDING DECEMBER 31,              CAPITAL       OPERATING
          ------------------------------       ----------      ---------
          2001..........................       $  762,000      $3,413,000
          2002..........................          810,000       3,030,000
          2003..........................          327,000       2,651,000
          2004..........................               --       2,209,000
          2005..........................               --       1,491,000
          Thereafter....................               --       3,741,000
                                               ----------
          Subtotal......................        1,899,000
          Less-Interest.................          252,000
                                               ----------
                                                1,647,000
          Less-Current Portion..........          610,000
                                               ----------
                                               $1,037,000
                                               ==========

     Rent  expense  for the years ended  December  31,  2000,  1999 and 1998 was
$3,940,000, $4,340,000 and $3,309,000, respectively.

Legal

     The  Company is engaged in certain  legal and  administrative  proceedings.
Management  believes the outcome of these  proceedings  will not have a material
adverse effect on the Company's  consolidated  financial  position or results of
operations.



                                     F - 18
<PAGE>

NOTE 9 - STOCK OPTION PLANS

     The  Company's  stock  option  plans  permit  the  granting  of  options to
employees,  non-employee directors and consultants.  The Option Committee of the
Board of Directors  generally has the authority to select individuals who are to
receive  options  and to  specify  the terms and  conditions  of each  option so
granted,  including  the  number of shares  covered by the  option,  the type of
option  (incentive  stock option or  non-qualified  stock option),  the exercise
price,  vesting  provisions,  and the overall  option term. A total of 4,840,000
shares  of Common  Stock  have  been  reserved  for  issuance  under the  plans.
Subsequent  to December 31,  2000,  the Company  granted  options to purchase an
aggregate of 75,000 shares of its Common Stock to certain employees.  All of the
options issued pursuant to these plans expire ten years from the date of grant.

<TABLE>
<CAPTION>
                                                                             WEIGHTED AVERAGE
                                                        NUMBER OF SHARES      EXERCISE PRICE
   ------------------------------------------------------------------------------------------
<S>                                                        <C>                  <C>
   Options Outstanding, December 31, 1997
   (93,674 exercisable)....................                1,042,946            $   10.25
   Granted.................................                1,257,630            $   16.81
   Exercised...............................                 (143,297)           $    9.32
   Canceled................................                 (258,138)           $   14.91
   ------------------------------------------------------------------------------------------
   Options Outstanding, December 31, 1998
   (262,156 exercisable)...................                1,899,141            $   14.14
   Granted.................................                3,465,759            $    8.82
   Exercised...............................                 (220,645)           $   13.47
   Canceled................................               (1,216,975)           $   14.00
   ------------------------------------------------------------------------------------------
   Options Outstanding, December 31, 1999
   (336,090 exercisable)...................                3,927,280            $    9.55
   Granted.................................                4,842,931            $    4.94
   Exercised...............................                 (581,450)           $   10.06
   Canceled................................               (4,819,015)           $    9.31
   ------------------------------------------------------------------------------------------
   Options Outstanding, December 31, 2000
   (1,038,275 exercisable).................                3,369,746            $    3.18
                                                          ===========          ===========
</TABLE>

     Effective  with the  spin-off  of SeraNova  on July 5, 2000,  all  unvested
Intelligroup   stock  options  held  by  SeraNova   employees   were   canceled.
Additionally,  as of July 6,  2000,  the  exercise  price  of all  employee  and
director  stock  options was  adjusted to offset the  reduction  in option value
caused by the  spin-off of  SeraNova.  The  exercise  price of each stock option
grant  outstanding  as of July 5, 2000,  was  adjusted  based on the  percentage
change in closing price of the Company's stock on the distribution  date of July
5, 2000,  and the  ex-dividend  date of July 6, 2000.  In  accordance  with FASB
Interpretation  No. 44,  "Accounting  for Certain  Transactions  Involving Stock
Compensation,"   the  Company  has  concluded   that  there  are  no  accounting
consequences  for changing the exercise price of outstanding  stock options as a
result of the spin-off.




                                     F - 19
<PAGE>


NOTE 9 - STOCK OPTION PLANS (CONTINUED)

        The  following  table   summarizes   information   about  stock  options
outstanding and exercisable at December 31, 2000:

<TABLE>
<CAPTION>
                                     Outstanding                              Exercisable
                                     -----------                              -----------
                                      Weighted
                                       Average          Weighted                         Weighted
 Exercise Price      Number of      Remaining Life      Average         Number of         Average
     Range            shares          in years)       Exercise Price      shares       Exercise Price
-----------------------------------------------------------------------------------------------------
<S>                  <C>                 <C>            <C>            <C>                <C>
 $1.00 to 2.00         288,746           9.1            $  1.45           21,691          $  1.80
 $2.00 to 2.50         271,425           9.0            $  2.11           38,324          $  2.14
 $2.50 to 2.75       1,046,679           8.2            $  2.54          397,354          $  2.54
 $2.75 to 3.00         904,500           6.5            $  2.80          450,000          $  2.80
 $3.00 to 4.50         461,179           8.8            $  4.29           18,243          $  3.47
 $4.50 to 6.50         316,854           6.4            $  5.34           97,472          $  5.48
 $6.50 to 8.00          12,563           8.1            $  7.44            3,188          $  7.18
 $8.00 to 12.50         39,300           9.1            $  9.33            2,502          $  9.55
$12.50 to 14.50         28,500           9.2            $ 13.80            9,501          $ 13.80
                    -----------         -----          ---------      -----------        ---------
 $1.00 to 14.50      3,369,746           7.8            $  3.18        1,038,275          $  3.05
                    ===========                                       ===========
</TABLE>

     As permitted by SFAS 123, the Company has chosen to continue accounting for
stock options at their intrinsic value.  Accordingly,  no compensation  cost has
been  recognized  for the stock  option  plans.  Had  compensation  cost for the
Company's  stock  option  plans been  determined  based on the fair value option
pricing method, the tax-effective impact would be as follows:

<TABLE>
<CAPTION>
                                              2000                1999                 1998
-----------------------------------------------------------------------------------------------
<S>                                       <C>                <C>                  <C>
Net (Loss) Income:
    as reported................           $(11,545,000)      $ (6,590,000)        $13,400,000
    pro forma..................           $(31,990,000)      $(14,975,000)        $ 8,894,000
-----------------------------------------------------------------------------------------------
Basic Earnings per Share:
    as reported................           $      (0.70)      $      (0.42)        $      0.87
    pro forma..................           $      (1.94)      $      (0.95)        $      0.58
-----------------------------------------------------------------------------------------------
Diluted Earnings per Share:
    as reported................           $      (0.70)      $      (0.42)        $      0.84
    pro forma..................           $      (1.94)      $      (0.95)        $      0.56
</TABLE>

     The fair value of option grants for disclosure purposes is estimated on the
date of grant using the Black-Scholes  option-pricing  model using the following
weighted-average  assumptions:   expected  volatility  of  121%,  82%  and  78%,
risk-free  interest rate of 5.2%,  5.6% and 5.4% and expected  lives of 3.4, 2.9
and 8.5 years, in 2000, 1999 and 1998,  respectively.  The weighted average fair
value of options granted during 2000, 1999 and 1998 was $4.68, $9.75 and $13.49,
respectively.



                                     F - 20
<PAGE>

NOTE 10 - STOCK RIGHTS

     In  October  1998 the  Company's  Board of  Directors  declared  a dividend
distribution of one Preferred Share Purchase Right for each outstanding share of
the Company's Common Stock.  These Rights will expire in November 2008 and trade
with the Company's Common Stock.  Such Rights are not presently  exercisable and
have no voting  power.  In the event a person or  affiliated  group of  persons,
acquires 20% or more, or makes a tender or exchange offer for 20% or more of the
Company's  Common  Stock,  the Rights  detach  from the Common  Stock and become
exercisable and entitle a holder to buy one one-hundredth  (1/100) of a share of
Preferred Stock at $100.00.

     If, after the Rights become exercisable, the Company is acquired or merged,
each Right will  entitle  its holder to  purchase  $200.00  market  value of the
surviving company's stock for $100.00,  based upon the current exercise price of
the Rights.  The Company may redeem the Rights, at its option, at $.01 per Right
prior to a public announcement that any person has acquired beneficial ownership
of at least  20% of the  Company's  Common  Stock.  These  Rights  are  designed
primarily to encourage  anyone  interested in acquiring the Company to negotiate
with the Board of Directors.

NOTE 11 - ACQUISITIONS

     On February 16, 1999, the Company  acquired Empower  Solutions,  L.L.C. and
its affiliate Empower,  Inc. (a corporation organized under sub-chapter S of the
Internal  Revenue  Code).  The  acquisitions  were  accounted for as poolings of
interests.  Prior results for all periods have been restated in accordance  with
pooling of interests  accounting.  In connection  with these  acquisitions,  the
Company issued approximately 2,000,000 shares of the Company's Common Stock. The
pre-merger results of the Empower Companies were revenues of $18,000,000 and net
income of  $6,200,000  for 1998.  In  connection  with the mergers,  acquisition
expenses of $2,115,000 were expensed during 1999.  These costs primarily  relate
to professional fees incurred.

     On May 21, 1998, the Company acquired all of the outstanding  share capital
of CPI Resources Limited. The acquisition of CPI Resources Limited was accounted
for as a pooling of interests.  Prior results for all periods have been restated
in accordance with pooling of interests  accounting.  As consideration  for this
acquisition, the Company issued 371,000 shares of the Company's Common Stock. At
the time of the acquisition,  CPI Resources Limited owned seventy percent of the
outstanding  share capital of CPI Consulting  Limited.  In connection  with this
merger,  $1,397,000 of non-recurring  acquisition  related charges were incurred
and have been charged to expense during the year ended December 31, 1998.  These
costs  primarily  relate to  professional  fees incurred in connection  with the
merger.

     On May 7, 1998,  the Company  acquired  thirty  percent of the  outstanding
share capital of CPI  Consulting  Limited.  This  acquisition  was accounted for
utilizing  the purchase  method of  accounting.  The  consideration  paid by the
Company  included the issuance of 165,696  shares of the Company's  Common Stock
with a fair market value of  $3,100,000  at the time of purchase.  An additional
155,208  shares  of the  Company's  Common  Stock  with a fair  market  value of
$2,500,000  was  paid  during  1999  pursuant  to an  earn-out  relating  to the
operating results for the balance of 1998. The excess of purchase price over the
fair value of the net assets  acquired  was  attributed  to  intangible  assets,
amounting in the aggregate to $5,800,000.


                                     F - 21
<PAGE>

NOTE 12 - SEGMENT DATA AND GEOGRAPHIC INFORMATION

     The Company operates in one industry,  information technology solutions and
services. The Company had been reporting two business segments as follows:

     o    Enterprise  Applications Services group - the largest business segment
          of  the  Company's   operations  which  includes  the  implementation,
          integration,  development,  and customization of solutions for clients
          utilizing a class of application products known as Enterprise Resource
          Planning software.  This class of products includes software developed
          by such  companies  as SAP,  PeopleSoft  and Oracle.  The segment also
          includes   application   service  provider  offerings   including  the
          development,   customization,   and   integration  of  enterprise  and
          e-commerce  applications,  hosted  externally,  and made accessible to
          customers over a secure network, on a monthly, per seat,  subscription
          basis.

     o    Internet  Applications Services group - provides Internet professional
          services to  businesses.  Such services  enable clients to communicate
          and conduct commerce  between a company and its customers,  suppliers,
          and partners over the Internet.

     The  Internet   Applications   Services  group   represented   the  assets,
liabilities  and results of operations  of SeraNova,  which has been reported as
discontinued  operations for all periods presented.  Accordingly,  the Company's
Enterprise  Applications  Services group is presented as one business segment in
the following  geographic  areas for the years ended  December 31, 2000 1999 and
1998.

<TABLE>
<CAPTION>
                                  UNITED STATES    ASIA-PACIFIC       EUROPE         INDIA           TOTAL
                                  -------------    ------------       ------         -----           -----
<S>                               <C>              <C>             <C>             <C>            <C>
2000
----
Revenue.......................    $ 77,814,000     $10,806,000     $17,844,000     $6,374,000     $112,838,000
Depreciation & amortization...       2,023,000         145,000         697,000        322,000        3,187,000
Operating income (loss).......      (6,228,000)         81,000      (1,741,000)        91,000       (7,797,000)
Total assets..................      44,749,000       5,918,000       9,309,000      7,392,000       67,368,000

1999
----
Revenue.......................    $105,898,000     $ 8,911,000     $24,585,000     $6,878,000     $146,272,000
Depreciation & amortization...       1,675,000         156,000         807,000        292,000        2,930,000
Operating income (loss).......      (6,133,000)       (483,000)        473,000      2,768,000       (3,375,000)
Total assets..................      53,821,000       3,362,000      12,135,000      3,261,000       72,579,000 (1)

1998
----
Revenue.......................    $112,250,000     $ 5,557,000     $23,839,000     $5,816,000     $147,462,000
Depreciation & amortization...       1,135,000          78,000         115,000         59,000        1,387,000
Operating income (loss).......      13,244,000        (764,000)      1,952,000      3,245,000       17,677,000
Total assets..................      51,631,000       3,575,000       8,270,000      2,093,000       65,569,000 (1)
</TABLE>
-----------
(1)  Excludes $7,621,000 and $1,355,000 of net assets of discontinued operations
     as of December 31, 1999 and 1998, respectively.


                                     F - 22
<PAGE>

NOTE 12 - SEGMENT DATA AND GEOGRAPHIC INFORMATION (CONTINUED)

     Included  above  are  application   maintenance  and  support  revenues  of
$20,200,000  and  $1,700,000  for the years  ended  December  31, 2000 and 1999,
respectively.  Other  information  related to the  application  maintenance  and
support  business is not available and the Company  determined  that it would be
impractical to calculate such data.

NOTE 13 -QUARTERLY INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
                                                                      FISCAL YEAR QUARTERS
                                             ------------------------------------------------------------------------
                                                 FIRST         SECOND         THIRD         FOURTH          TOTAL
                                             ------------------------------------------------------------------------
<S>                                          <C>            <C>            <C>            <C>            <C>
YEAR ENDED DECEMBER 31, 2000
----------------------------
Revenue.................................     $29,051,000    $27,689,000    $27,599,000    $28,499,000    $112,838,000
Gross Margin............................       9,867,000      9,199,000      9,440,000      8,888,000      37,394,000
Loss from continuing operations.........      (2,108,000)    (2,891,000)    (1,182,000)      (473,000)     (6,654,000)
Loss from discontinued operations.......      (3,079,000)    (1,812,000)            --             --      (4,891,000)
Net loss................................      (5,187,000)    (4,703,000)    (1,182,000)      (473,000)    (11,545,000)
Earnings per share - basic and diluted:
Loss per share from continuing
    operations..........................           (0.13)         (0.17)         (0.07)         (0.03)          (0.40)
Loss per share from discontinued
    operations..........................           (0.19)         (0.11)            --             --           (0.30)
Net loss per share......................           (0.32)         (0.28)         (0.07)         (0.03)          (0.70)

YEAR ENDED DECEMBER 31, 1999
----------------------------
Revenue.................................     $38,807,000    $37,820,000    $37,879,000    $31,766,000    $146,272,000
Gross Margin............................      12,281,000     12,867,000     13,340,000     10,402,000      48,890,000
Income (loss) from continuing
    operations..........................        (371,000)    (4,185,000)     1,583,000     (2,356,000)     (5,329,000)
Income (loss) from discontinued
    operations..........................         280,000        152,000        122,000     (1,815,000)     (1,261,000)
Net income (loss).......................         (91,000)    (4,033,000)     1,705,000     (4,171,000)     (6,590,000)
Earnings per share - basic and diluted:
  Income (loss) per share from
      continuing operations.............           (0.02)         (0.27)          0.10          (0.15)          (0.34)
  Income (loss) per share from
      discontinued operations...........            0.01           0.01           0.01          (0.11)          (0.08)
  Net income (loss) per share...........           (0.01)         (0.26)          0.11          (0.26)          (0.42)
</TABLE>



                                     F - 23