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, 1998
                         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:  $54,920,024 at March 22, 1999 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 22, 1999:


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

Common Stock, $.01 par value                                     15,558,751

     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 1999 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.................................................. 18

           3.   Legal Proceedings........................................... 18

           4.   Submission of Matters to a Vote of Security Holders......... 20

PART II    5.   Market for the Company's Common Equity and Related
                Shareholder Matters......................................... 21

           6.   Selected Financial Data..................................... 22

           7.   Management's Discussion and Analysis of Financial
                Condition and Results of Operations......................... 24

           7A.  Quantitative and Qualitative Disclosure About Market Risk... 34

           8.   Financial Statements........................................ 34

           9.   Changes in and Disagreements with Accountants on
                Accounting and Financial Disclosure......................... 34

PART III   10.  Directors, Executive Officers, Promoters and Control
                Persons; Compliance with Section 16 (a) of the
                Exchange Act................................................ 35

           11.  Executive Compensation...................................... 35

           12.  Security Ownership of Certain Beneficial Owners
                and Management.............................................. 35

           13.  Certain Relationships and Related Transactions.............. 35

PART IV    14.  Exhibits, List and Reports on Form 8-K...................... 36

SIGNATURES      ............................................................ 37

EXHIBIT INDEX   ............................................................ 39

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   services,   including   management   consulting,
enterprise-wide  business process  solutions,  Internet  applications  services,
applications outsourcing and maintenance, web site design and customization,  IT
training solutions, systems integration and custom software development based on
leading technologies.

     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")  in a
pooling-of-interests  transaction.  On December 31, 1996, Oxford was merged into
the  Company  and  ceased  to  exist as an  independent  entity.  The  Company's
executive offices are located at 499 Thornall Street,  Edison,  New Jersey 08837
and its telephone number is (732) 590-1600.

     The Company has grown rapidly since 1994 when it made a strategic  decision
to diversify  its customer base by expanding  the scope of its  integration  and
development  services  and to utilize  software  developed  by SAP AG,  based in
Germany,  and distributed through its other subsidiaries  including SAP America,
Inc.  (collectively  "SAP")  as a  primary  tool  to  implement  enterprise-wide
business process solutions.

     SAP's software is representative  of a class of application  products known
as Enterprise Resource Planning ("ERP") software.  ERP products are pre-packaged
solutions for 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  that  this   implementation   and
customization   services  work  represented  a  significant  potential  business
opportunity.

     ERP  vendors  such as SAP,  Oracle,  PeopleSoft  and  Baan,  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.


                                     - 4 -
<PAGE>

     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. In September 1997, the
Company 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 are implementing or upgrading Oracle applications.

     The Company's software  implementation,  custom development and maintenance
services are enhanced by  round-the-clock  access to qualified  and  experienced
programmers at its offices in the United States, United Kingdom, New Zealand and
at its  Advanced  Development  Center  ("ADC")  located  in  India.  The  ADC is
connected by dedicated, high speed satellite links to certain customer sites, as
well as to the Company's  operations  centers in the United  States,  the United
Kingdom and New Zealand.

     The Company  believes that the ADC is one of the world's  largest  offshore
SAP development centers. In 1998, the ADC was awarded ISO 9001 certification for
offshore  SAP  development.  ISO  9001  is an  international  certification  for
organizations,  which  achieve  and  demonstrate  required  levels of quality in
software  development  processes.  The Company  believes  that, at this time, no
other  services  company has  achieved ISO 9001  certification  for offshore SAP
development.

     The ADC is  operated  by  Intelligroup  Asia  Private  Ltd.  ("Intelligroup
Asia"). The Company owns 99.8% of the shares of Intelligroup Asia. The remaining
shares are  expected to be  transferred  to the Company by the founders in 1999.
Upon  consummation  of such transfer,  Intelligroup  Asia will be a wholly owned
subsidiary of the Company.

     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  approximately  750 customers in
1998.  The  Company's  customers  are Fortune 1000 and other large and mid-sized
companies  in the  United  States  and  abroad.  They  include  Armstrong  World
Industries, AT&T, Block Drug Company, Bristol-Myers Squibb, IMC Global and Simon
&  Schuster.  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.

     During  1998,  the Company  made the  decision to expand the  portfolio  of
services  offered to existing and potential ERP customers,  as well as customers
wishing to implement Internet-based  solutions.  These service offerings include
management  consulting,  Internet  solutions  and ERP and  Internet  application
outsourcing.  This  decision was based on the Company's  business  assessment of
customer needs over the life cycle of their  solution.  This  assessment  showed
that:

                                     - 5 -
<PAGE>

  o  many ERP and non-ERP  customers  need  business and  technology  consulting
                                            ------------------------------------
     assistance  to  prepare  and  optimize   systems  plans  to  support  their
     organization's business strategies;

  o  many ERP and non-ERP  customers need assistance in designing,  implementing
     and managing Internet and advanced technology  applications,  in areas such
                  --------------------------------
     as web commerce  and  procurement,  customer  relationship  management  and
     supply chain management; and

  o  many  customers  who  install  ERP  or  related  Internet   solutions  need
     assistance to maintain,  manage and operate those solutions and are open to
     proposals to outsource those functions.
                  ---------

     By providing a set of services  throughout a customers' solution life cycle
and  adding  Internet  solutions  services,  the  Company  believes  that  it is
leveraging  its strengths in the ERP market,  and  broadening  and expanding the
potential sources of future business opportunity.

     The Company's stated direction is to expand its service  offerings  through
an appropriate mix of internal growth and acquisitions. During 1998, the Company
expanded its service operations, both domestically and internationally,  through
a number of  acquisitions.  In May 1998,  the Company  expanded  its  PeopleSoft
services business in Europe, by acquiring the outstanding  capital stock of each
of CPI  Consulting  Limited  and CPI  Resources  Limited  (the "CPI  Companies")
located  in the  United  Kingdom.  The  CPI  Companies  provide  consulting  and
implementation  services related to PeopleSoft  applications.  In November 1998,
the Company acquired the outstanding capital stock of each of Azimuth Consulting
Limited,  Azimuth  Holdings  Limited,  Braithwaite  Richmond Limited and Azimuth
Corporation Limited (the "Azimuth  Companies") located primarily in New Zealand.
The Azimuth  Companies  provide business and management  consulting  services in
Australia,  New Zealand and Southeast  Asia.  See  "Management's  Discussion and
Analysis of Financial Condition and Results of Operations."

     In  December  1998,  the  Application   Management  Services  practice  was
reorganized as the worldwide Enterprise Sourcing Services ("ESS") practice.  The
ESS practice will focus on selling, delivering and supporting outsourced ERP and
Internet implementation and maintenance services. The offshore ADC in Hyderabad,
India is part of the ESS  practice.  The ADC  enables  ESS to take on larger and
more  complex  implementation  projects  and  outsourcing  arrangements,   while
maintaining our aggressive implementation schedules and cost-effective services.

     In January  1999,  in order to  augment  the  Internet/Advanced  Technology
practice,  the  Company  acquired  the  outstanding  capital  stock  of  Network
Publishing,  Inc.  ("NPI") located in Provo,  Utah. NPI provides web site design
and front-end application solutions services. In February 1999, by way of merger
transactions,  the Company augmented the PeopleSoft practice in North America by
acquiring  Empower  Solutions,  L.L.C.  and its  affiliate  Empower,  Inc.  (the
"Empower Companies") located in Plymouth, Michigan.


                                     - 6 -
<PAGE>
     Trademarks and Service Marks

     "Intelligroup," "4Sight," "4Sight Plus", and the Company's logo are service
marks and "OIM" are trademarks of the Company.

     "Azimuth" is a trademark of Azimuth Consulting.

     "Empower Solutions" is a trademark of Empower Solutions.

     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 to
higher margin turnkey  management  assignments and more complex  projects and to
utilize its proprietary  implementation  methodology in an increasing  number of
projects.  In addition,  statements regarding the Company's intent to expand its
service   offerings   through   internal  growth  and   acquisitions   are  also
forward-looking  statements.  Such forward-looking  statements include risks and
uncertainties, including, but not limited to:

  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  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;

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

  o  the  Company's  limited  operating  history  within  its  current  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;


                                     - 7 -
<PAGE>
  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  the  Company's  ability to continue to diversify its  offerings,  including
     growth in its Oracle, Baan and PeopleSoft services;

  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  Year 2000  compliance of vendors'  products and related  issues,  including
     impact of the Year 2000 problem on customer buying patterns.

     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  large  and  mid-sized  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  and  Internet  technology  solutions,  that 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.

                                     - 8 -
<PAGE>

     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,   PeopleSoft  or  Baan.  These  applications  are  then  implemented  or
customized  to  meet  their  particular  business  needs.   Alternatively,   the
organizations may develop,  or commission  development of,  customized  software
applications to meet their needs.

     For many  customers,  the issue of Year 2000  compliance  has driven  their
decisions  to migrate to new  client/server-based  ERP  solutions.  Others  have
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  management  consulting,  Internet
solutions and the outsourcing of 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.

     Two consistent  conclusions result from customers'  analyses.  The first is
the importance of timely access to relevant information, tools and applications,
at reasonable cost, for customers,  suppliers,  business partners and employees.
The  second  conclusion  is  that,   because  of  its  low  cost  and  universal
availability, the Internet and associated browser and web technology is becoming
the de-facto  information  access and delivery  standard for many  organizations
around  the  world.  Together,  these  are  leading  to a new class of web site,
commonly  called  "enterprise  information  portals".  These  sites  need  to be
designed and implemented to provide access to all information,  applications and
communications  tools  required for internal and external users to perform their
designated business functions.

     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 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 etc.). The mid-market segment presents the
most  opportunity for new ERP product sales and


                                     - 9 -
<PAGE>

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.

     In both the Fortune 2000 and mid-market segments, the Company believes that
enterprise   information   portals  will  become  a  focus  of  many  customers'
information  systems plans.  Enterprise  information portals provide customized,
integrated access to information, tools and applications. Much of the demand for
new  applications,  to be  accessed  via  the  portals,  will be  driven  by the
customers' need to compete on such fronts as web commerce, customer relationship
management,  sales force automation and supply chain integration.  A new wave of
product vendors has emerged,  which address these new application  requirements.
These  include  providers  of packaged  applications,  as well as  providers  of
middleware  frameworks  designed to simplify the task of building or integrating
custom  applications.  Often,  integration  of these new  applications  with the
customers' core ERP or legacy-based business systems will be critical.

     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,  and 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   and   changed.   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.

                                     - 10 -
<PAGE>
THE INTELLIGROUP SOLUTION

     Intelligroup  improves  its  clients'  business  performance,  through  the
intelligent  application  of  information  technology.  Intelligroup  provides a
continuum  of services  throughout  our  clients'  solution  life  cycle.  These
services   comprise   management   consulting,    ERP   solutions   design   and
implementation,  Internet  consulting  and solution  development  and enterprise
outsourcing.

     The Company delivers to our clients timely,  cost-effective  and innovative
ERP, Internet and maintenance 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 ADC, at high quality and low cost. The ADC, which the Company  believes
is one of the world's largest SAP offshore  development and maintenance centers,
is ISO 9001 certified for SAP offshore development. The center 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,  PeopleSoft and Baan
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.

     Accelerated   Implementation  Methodology  and  Toolset:  The  Company  has
developed  a  proprietary  implementation  methodology,  4Sight,  as  well  as a
software-based  implementation  toolset,  4Sight  Plus,  which are  designed  to
minimize the time required to develop and implement SAP, Oracle,  PeopleSoft and
Baan  solutions  for its  customers.  4Sight and 4Sight Plus are  designed to be
technology  independent and modular,  and have also been extended to support the
Company's Internet solutions engagements.


                                     - 11 -
<PAGE>
INTELLIGROUP SERVICES

     Intelligroup  provides a wide  range of  information  technology  services,
including (i) management consulting services;  (ii) ERP solutions utilizing SAP,
as well as  Oracle,  PeopleSoft  and Baan  products,  all of which  are  leading
software  applications;  (iii) internet solution  services;  and (iv) enterprise
sourcing  services   (outsourcing)  for  the  maintenance,   administration  and
operations of customers' ERP and Internet solutions.

     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 terminable upon relatively  short notice.
As the Company has  re-oriented  itself towards  serving our clients' needs over
their  solutions'  entire life cycle, we are beginning to enter into outsourcing
agreements with customers. The contractual arrangements in these situations will
typically  be fixed  term,  fixed  price  and  multi-year,  as is  common in the
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.

MANAGEMENT CONSULTING

     During 1998, the Company's  management  consulting  practice has focused on
two areas: (i) Business  Consulting  (covering Business Process  Re-engineering,
Change Management, IT Strategy and Software selection); and (ii) Leasing & Asset
Management.

     The Company  believes that significant  value is provided to customers,  by
providing business consulting services. Such services also have the potential to
stimulate additional revenue  opportunities for the Company, in the execution of
recommendations   made  to  clients.   The  acquisition  of  Azimuth  Consulting
significantly  strengthens  Intelligroup's  management consulting  capabilities.
Founded  in  1984,   Azimuth  has  built  a  strong  IT  management   consulting
organization  with  operations in New Zealand,  Australia,  the  Philippines and
other Southeast Asian  countries.  Azimuth operates as a wholly-owned subsidiary
of  Intelligroup  with  headquarters  in  Wellington,  New Zealand.  The Company
intends to integrate its existing  management  consulting services groups in the
United  States and Europe,  under  Azimuth  worldwide.  The Company is currently
re-evaluating its Leasing and Asset Management solution offerings.

ENTERPRISE RESOURCE PLANNING SOLUTIONS

     The Company  designs,  develops,  integrates and  implements  sophisticated
business process  solutions based on SAP, Oracle,  PeopleSoft and Baan products,
utilizing our 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.

                                     - 12 -
<PAGE>

     Accelerated  Implementation  Methodology  and  Toolset:  As a result of our
experience in implementing ERP software, the Company has developed a proprietary
methodology  (4Sight) and  associated  toolset  (4Sight  Plus) for  implementing
enterprise business software  applications.  4Sight Plus also contains a project
management   and  tracking   tool,   which  the  Company   utilizes  to  monitor
implementation  projects  undertaken for clients.  The Company believes that the
use of 4Sight and 4Sight Plus, throughout an implementation  project, may enable
its customers to realize significant savings in time and resources. Furthermore,
the Company  believes that use of 4Sight Plus also shortens the turn-around time
for program  development,  as it streamlines  the  information  flow between the
Company's offices and customer sites.

     4Sight  and  4Sight  Plus,  initially  used  by  the  Company  in  projects
implementing  SAP,  were  designed  to be portable  to other  packaged  software
applications  and to be adaptable to the scope of a particular  project.  4Sight
and  4Sight   Plus  have  been   adapted   for  Baan,   Oracle  and   PeopleSoft
implementations.

INTERNET SOLUTIONS SERVICES

     In 1998,  the Company  created a practice  focusing on  providing  Internet
consulting  and  application  development  services,  designed to help companies
develop  innovative ways to reach their customers,  suppliers and target markets
by leveraging the power of the Internet and corporate  intranets.  This practice
developed expertise in Internet technologies as well as the integration of those
technologies with ERP and legacy systems.

     The Company's  core  expertise has been in the  technical  development  and
integration  of the  solutions.  However,  a key  element  of the new  breed  of
Internet solution relates to the projection of the customers'  offering to their
intended Internet audience. The Company,  however, did not possess this required
expertise  in  brand  marketing,   graphic  and  multimedia  design.   With  the
acquisition  of NPI,  the  Company is now able to  provide  those  services  and
provide a complete  Internet solution which combines NPI's web design capability
with   Intelligroup's   expertise  in  Internet   application   development  and
integration with ERP systems.

     NPI has built a strong  track  record in  designing  web-sites  that enable
clients to achieve the desired sales and marketing impact. Its customers include
a number of Fortune 500 companies in such  industries as automotive,  technology
and   entertainment.   The  Company   intends  to  leverage  its  proven  4Sight
methodologies  and  offshore  development  model  to  pursue  Internet  business
opportunities.  The Company believes that the existing set of ERP customers will
be a receptive  audience for the Company's Internet  solutions.  These customers
represent a large and well-defined target, which can be reached by the Company's
direct sales and marketing activities.

     A wide variety of Internet solutions may be offered to prospective clients,
including electronic commerce, customer interaction,  sales force automation and
web training.  The Company intends to promote the use of enterprise  information
portals in marketing its Internet solutions services.


                                     - 13 -
<PAGE>
ENTERPRISE SOURCING SERVICES

     The ESS practice focuses on selling,  delivering and supporting  outsourced
ERP and Internet  implementation and maintenance  services.  The offshore ADC in
Hyderabad,  India is part of the ESS  practice.  ESS  provides  full life  cycle
support  of  ERP  and  Internet   applications  through  the  following  service
offerings:

     o     Offshore Support: These services are provided in conjunction with the
           Company's  ERP and  Internet  practices,  allowing  them  to  provide
           clients  with  high  quality,  low  cost and  time-dependent  project
           implementation services.

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

     Advanced  Development  Center:  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 center allows the
Company to provide cost-effective, timely and high quality software development,
maintenance and support services to customers  throughout the world. We are 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  4Sight  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.  The
ADC is staffed by over 200 qualified and  experienced  programmers.  The ADC has
performed  work on projects  with SAP,  as well as with Baan and certain  custom
Internet solutions. As the Company expands both its ERP and Internet businesses,
the ADC is being prepared to undertake projects in any of the four ERP practices
(SAP,  Baan,  Oracle  and  PeopleSoft),  as well as certain  Internet  and 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) internally generated
sales.  In addition,  the Company has been introduced to customers by

                                     - 14 -
<PAGE>

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  and  Internet
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.  In particular,  the Company has reorganized its SAP
practice  along  industry lines and will endeavor to partner with SAP's industry
sales organization to seek and close business opportunities.

     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,  BaanWorld  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, 1998, the Company's  sales and marketing group consisted
of 35 employees in the United States,  2 for Europe,  and 9 for the Asia Pacific
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  Phoenix,  AZ;  Foster  City,  CA;
Washington, DC; Miami, FL; Atlanta, GA; Chicago, IL; Detroit, MI; Dallas, TX and
Reston,  VA serve the United  States  market.  In addition,  the  Company,  also
maintains  offices in Europe  (Denmark,  the United  Kingdom and Belgium);  Asia
Pacific  (Australia,  India,  Japan,  New Zealand,  Philippines  and Singapore).
Azimuth  Consulting  will operate  worldwide,  as a wholly owned  subsidiary  of
Intelligroup  with  headquarters  in  Wellington,  New  Zealand.  The  Company's
existing management  consulting services groups in the United States and Europe,
will be merged with Azimuth worldwide.

     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.


                                     - 15 -
<PAGE>
CUSTOMERS

     The Company provides its services  directly to Fortune 2000 and other large
and mid-sized companies, many of which have information-intensive, multinational
operations,  or as a member of a consulting team assembled by other  information
technology  consultants,  such as "Big  Five"  accounting  firms.  The number of
customers billed by the Company has grown  substantially from three customers in
1993 to approximately 750 customers in the year ended December 31, 1998.

     The  Company's  ten largest  customers  accounted  for,  in the  aggregate,
approximately  50%,  46%  and  34%  of its  revenue  in  1996,  1997  and  1998,
respectively. During 1996 and 1997, PricewaterhouseCoopers LLP and Bristol-Myers
Squibb each  accounted  for more than 10% of  revenue.  During  1998,  no single
customer  accounted for more than 10% of revenue.  In 1996,  1997 and 1998, 34%,
32% and 25% respectively, of the Company's revenue was generated by serving as a
member  of  consulting  teams  assembled  by  leading   information   technology
consulting  firms  retained  by  organizations  to manage  projects  to  provide
enterprise-wide business process solutions.

     Although  the Company has  contracts  with many of its large  customers  to
provide its services,  in general such contracts are terminable  upon relatively
short  notice,  typically  not more than 30 days.  Under the ESS  practice,  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  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):

                                     - 16 -
<PAGE>

     o    Consulting  and  software   integration   firms:   including  Andersen
          Consulting,  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, Baan and PeopleSoft.

     In addition,  the Company  competes with smaller  companies  such as Plaut,
Clarkson-Potomac, Whittman-Hart and Origin.

     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 our  clients'  ERP and  Internet  solutions.  This  expertise
includes management  consulting skills, plus design and implementation skills in
ERP  products  (primarily  SAP,  Oracle,  PeopleSoft  and  Baan),  Internet  and
application  integration and application 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.

EMPLOYEES

     As of December 31, 1998, the Company employed 1,260 full-time employees, of
whom 957 were engaged as consultants or as software developers,  46 were engaged
in sales and marketing,  and 257 were engaged in sales and delivery  management,
finance and administration.  Of the total number of employees, 631 were based in
the United States,  522 were based in the Asia Pacific region and 107 were based
in Europe.  In addition,  the Company  engaged 102  independent  contractors  to
perform information technology services.

     None of the  Company's  employees  is  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


                                     - 17 -
<PAGE>

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
accelerated 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, 1998, the Company owns no real  property  and  currently
leases or subleases all of its office space. The Company leases its headquarters
in Edison, New Jersey, totaling approximately 48,475 square feet. 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
also leases or subleases  offices for its sales and  operations in Phoenix,  AZ;
Foster City, CA; Washington,  DC; Miami, FL; Atlanta,  GA; Chicago, IL; Detroit,
MI; Dallas, TX; and Reston, VA; and operations in Hyderabad,  India;  Australia;
Denmark; Japan; New Zealand; Singapore and the United Kingdom. The Company is in
the process of opening a sales office in Brussels, Belgium. In October 1998, the
Company  finalized  an  agreement  to  sublet  the  space  used  for  its  prior
headquarters  for the  remainder  of the  term of its  sublease,  which  expires
November 15, 1999.


ITEM 3. LEGAL PROCEEDINGS.

     On February 16, 1996, the Company,  as plaintiff,  filed a complaint in the
Superior Court of New Jersey,  Chancery  Division,  Middlesex County,  against a
former  consultant  to the Company,  seven  former  employees of the Company and
Pegasus Systems, Inc. ("Pegasus"), a corporation which currently employs certain
of such individuals (collectively, the "Defendants"). The complaint, which seeks
damages and  injunctive  relief  against the  Defendants,  alleges,  among other
things,   misappropriation  of  proprietary  information,   unfair  competition,
tortious interference,  breach of employment agreements,  breach of a consulting
agreement between the Company and Pegasus,  and breach of duty of loyalty,  good
faith and fair dealing. Upon the filing of its complaint, the Company obtained a
temporary  restraining  order and in May 1996 obtained a preliminary  injunction
prohibiting the Defendants from using or disclosing the Company's

                                     - 18 -
<PAGE>

proprietary   information,   prohibiting   the  Defendants  from  contacting  or
soliciting  certain of the Company's  customers and  prohibiting  the Defendants
from  recruiting or attempting  to recruit the  Company's  employees,  agents or
contractors.  The preliminary  injunction remains in effect. The Defendants have
filed an answer and  counterclaim.  Pegasus  has  asserted a breach of  contract
counterclaim  against the Company alleging that the Company owes it $129,000 for
consulting services.  Pegasus and two of the individual Defendants also asserted
claims against the Company and two of its officers for tortious interference and
defamation.  In addition, one of the individual Defendants has asserted that the
Company  owes him $70,000 in  commissions.  In addition to monetary  damages the
Defendants  seek  injunctive  relief.  The  Defendants  unsuccessfully  sought a
temporary  restraining  order  against the  Company.  On October 13,  1998,  the
parties  negotiated  a  settlement  to dispose of all  claims  asserted  in this
lawsuit  as well as  those  asserted  in the  claim  against  Sophien  Bennaceur
(discussed  below).  The Company  drafted and circulated a settlement  agreement
which,  if executed,  would  dispose of both  lawsuits.  On March 11, 1999,  the
Company filed a Motion to Enforce the  settlement  agreement in light of Sophien
Bennaceur's failure to execute such settlement  agreement.  The Company does not
believe that the outcome of these claims and counterclaims  will have a material
effect  upon  the  Company's   business,   financial  condition  or  results  of
operations.

     On February 13, 1998,  Russell  Schultz,  a former employee of the Company,
filed a complaint in the Superior  Court of New Jersey,  Law Division,  Monmouth
County, naming the Company as a defendant.  The complaint,  which seeks damages,
alleges,  among other things,  that the Company  misrepresented  plaintiff's job
description in order to induce plaintiff to leave his prior employer,  failed to
provide  stock  options  to  the  plaintiff  and  violated  plaintiff's  written
employment  contract.  The Company was served  with the  complaint  on March 16,
1998.  Subsequently,  on July 10,  1998,  upon the  Company's  Motion  to Compel
Arbitration,  the court dismissed the plaintiff's  complaint without  prejudice.
Subsequently, the plaintiff's motion to reconsider the dismissal was denied. The
plaintiff  filed  his  demand  for  Arbitration  with the  American  Arbitration
Association  on February  17, 1999 and the Company  filed its answer on February
26, 1999.  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.

     On May 28, 1998, the Company and Rajkumar  Koneru,  as plaintiffs,  filed a
complaint in the United  States  District  Court for the District of New Jersey,
against Sophien  Bennaceur,  a former  employee and officer of the Company.  The
complaint,  which seeks damages and  injunctive  relief  against the  defendant,
alleges among other things,  misappropriation of proprietary information, breach
of employment  agreement,  breach of fiduciary duty and duty of loyalty,  unfair
competition  and  tortious  interference.  The  defendant  was  served  with the
complaint and filed an answer on July 9, 1998. On October 13, 1998,  the parties
negotiated  a  settlement  to dispose of all claims  asserted in this lawsuit as
well as those asserted in the Pegasus litigation  (discussed above). The Company
drafted and circulated a settlement agreement which, if executed,  would dispose
of both  lawsuits.  On March 11, 1999, the Company filed a Motion to Enforce the
settlement  agreement  in light of Sophien  Bennaceur's  failure to execute such
settlement agreement.


                                     - 19 -
<PAGE>

     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.




                                     - 20 -
<PAGE>

                                     PART II


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

     The Common Stock has been quoted on the Nasdaq  National Market (the "NNM")
under the symbol "ITIG" since  September  27, 1996 when the Company  consummated
its initial public  offering.  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, 1997              $12 3/4         $9  7/8
               June 30, 1997               $11 7/8         $8  1/4
               September 30, 1997          $23 1/2         $9  1/2
               December 31, 1997           $25 7/8         $13 3/4
               March 31, 1998              $21 1/2         $14 1/2
               June 30, 1998               $23 5/8         $15
               September 30, 1998          $24 1/4         $16
               December 31, 1998           $19 3/4         $10 5/8

     As of March 22, 1999, the approximate number of holders of record of the
Common  Stock was 47 and the  approximate  number of  beneficial  holders of the
Common Stock was 1,750.

     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.

     The following  information relates to all securities of the Company sold by
the Company  which were not  registered  under the  Securities  Act of 1933,  as
amended (the "Securities Act"), at the time of grant,  issuance and/or sale, and
have not previously been disclosed in a Quarterly Report on Form 10-Q:

          On  November  25,  1998,  Intelligroup,   Inc.  (the  "Company"),
     consummated the acquisition (the  "Acquisition")  of all of the shares
     of outstanding  capital stock of each of Azimuth  Consulting  Limited,
     Azimuth  Holdings  Limited,  Braithwaite  Richmond Limited and Azimuth
     Corporation Limited, each a company formed pursuant to the laws of New
     Zealand (the  "Azimuth  Companies").  As a result of the  Acquisition,
     each of the Azimuth Companies became a wholly-owned  subsidiary of the
     Company.  The parties have accounted for such transaction as a pooling
     of interests.  The principal activity of each of the Azimuth Companies
     is providing business and management consultancy services.

                                     - 21 -
<PAGE>

          The purchase price consisted of the issuance by the Company of an
     aggregate of 902,928  restricted shares of its Common Stock, $0.01 par
     value per share,  to David Anthony Stott and Alexander  Graham Wilson,
     the sole  shareholders of each of the Azimuth  Companies.  The Company
     agreed  to use  its  best  efforts  to file a  registration  statement
     registering the shares of the Company's Common Stock issued to Messrs.
     Stott and Wilson on Form S-3 no later than  February  28, 1999 and use
     its best efforts to have such registration become effective as soon as
     practicable thereafter.  The Company filed such Registration Statement
     on  February  26,  1999  and  anticipates  that  the  Form S-3 will be
     declared  effective by the Securities  and Exchange  Commission in the
     near term after the filing of this Form 10-K.

          No underwriter was employed by the Company in connection with the
     issuance by the Company of the securities described above. The Company
     claims that the issuance of all of the foregoing securities was exempt
     from  registration  under  Section  4(2)  of  the  Securities  Act  as
     transactions  not involving any public offering.  Appropriate  legends
     were  affixed to the stock  certificates  issued in such  transaction.
     Both recipients had adequate access to information about the Company.


ITEM 6. SELECTED FINANCIAL DATA.

     The selected  statement of operations data for the years ended December 31,
1996, 1997 and 1998 and the selected  balance sheet data as of December 31, 1997
and 1998 are derived from and 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,  1994 and 1995 and the
selected  balance  sheet data as of December 31,  1994,  1995 and 1996 have been
derived from audited financial  statements of the Company which are not included
elsewhere herein. Prior period financial information has been revised to reflect
the Company's  acquisitions  of CPI Resources and the Azimuth  Companies  during
1998, which were accounted for in accordance with the pooling of interests rules
under generally accepted accounting principles.



                                     - 22 -
<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  in this
Prospectus:

<TABLE>
<CAPTION>
                                                    1994      1995     1996      1997      1998
                                                 --------- --------- -------- --------- ----------
                                                       (IN THOUSANDS, EXCEPT PER SHARE DATA)

<S>                                               <C>       <C>      <C>       <C>        <C>     
STATEMENT OF OPERATIONS DATA:
  Revenue....................................     $19,438   $39,283  $61,699   $94,326    $144,861
  Cost of sales..............................      13,528    29,263   43,142    65,535      94,203
                                                  -------   -------  -------   -------    --------
    Gross profit.............................       5,910    10,020   18,557    28,791      50,658
                                                  -------   -------  -------   -------    --------
  Selling, general and administrative
    expenses.................................       4,670     8,401   14,544    22,060      36,570
  Acquisition expenses.......................          --        --       --        --       2,118
                                                  -------   -------  -------   -------   ---------
    Total selling, general and administrative
     expenses................................       4,670     8,401   14,544    22,060      38,688
                                                  -------   -------  -------   -------    --------
    Operating income.........................       1,240     1,619    4,013     6,731      11,970
  Factor charges/Interest expense (income),
    net......................................         463     1,327    1,335      (257)       (120)
                                                  -------   -------  -------   -------    --------
  Income before provision for
    income taxes and extraordinary
      charge.................................         777       292    2,678     6,988      12,090
  Provision for income taxes.................         409       587      748     2,327       4,416
                                                  -------   -------  -------   -------    --------
  Income (loss) before extraordinary charge..         368      (295)   1,930     4,661       7,674
Extraordinary charge, net of income tax
    benefit of $296..........................          --        --    1,148        --          --
                                                  -------   -------  -------   -------    --------
    Net income (loss)........................     $   368   $  (295) $   782   $ 4,661    $  7,674
                                                  =======   =======  =======   =======    ========
Earnings (loss) per share(1):                                                             
  Basic earnings per share:
    Income (loss) before extraordinary charge     $  0.02   $ (0.02) $  0.18   $  0.37    $   0.57
    Extraordinary charge, net of income tax
        benefit..............................          --        --     0.11        --          --
                                                  -------   -------  -------   -------    --------
      Net income (loss)......................     $  0.02   $ (0.02) $  0.07   $  0.37    $   0.57
                                                  =======   =======  =======   =======    ========
Weighted average number of common shares -
  Basic......................................      15,011    15,011   11,003    12,636      13,386
                                                  =======   =======  =======   =======    ========
Diluted earnings per share:
  Income (loss) before extraordinary charge..     $  0.02   $ (0.02) $  0.16   $  0.36    $   0.55
  Extraordinary charge, net of income tax
    benefit..................................         --         --     0.10        --          --
                                                  -------   -------  -------   -------    --------
      Net income (loss)........                   $  0.02   $ (0.02) $  0.06   $  0.36    $   0.55
                                                  =======   =======  =======   =======    ========
Weighted average number of common shares -
  Diluted....................................      15,011    15,011   12,263    13,116      13,968
                                                  =======   =======  =======   =======    ========


                                                                AS OF DECEMBER 31,
                                                 -------------------------------------------------
                                                    1994      1995     1996      1997      1998
                                                 --------- --------- -------- --------- ----------
                                                                  (IN THOUSANDS)
 Balance Sheet Data:                                                                          
   Cash and cash equivalents.................     $ 1,399   $ 1,412  $ 8,301   $ 8,821    $  4,245
   Working capital surplus (deficit).........        (492)     (991)  16,246    29,672      29,611
   Total assets..............................       7,599    12,571   24,945    42,006      65,728
   Short-term debt, including subordinated
     debentures..............................       1,304     3,608      226       386          11
   Long-term debt and obligations under
      capital leases, less current portion...         141       206      108       355          59
   Shareholders' equity......................         557       128   18,280    33,208      44,920

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


                                     - 23 -
<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  services,
including  management  consulting,  enterprise-wide  business process solutions,
Internet applications services,  applications  outsourcing and maintenance,  web
site design and customization,  IT training  solutions,  systems integration and
custom software development based on leading technologies. The Company has grown
rapidly  since 1994 when it made a strategic  decision to diversify its customer
base by expanding the scope of its integration  and development  services and to
utilize software developed by SAP as a primary tool to implement enterprise-wide
business  process  solutions.  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.  In
September   1997,  the  Company  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 are  implementing or upgrading
Oracle applications.

     During 1998, the Company expanded its operations through  acquisitions.  On
May 7, 1998,  the  Company  acquired  thirty  percent of the  outstanding  share
capital of CPI Consulting Limited. The acquisition of CPI Consulting Limited was
accounted for  utilizing  purchase  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 $3.1 million,  and a future liability to the sellers
predicated  upon  operating  results for the  balance of 1998.  The value of the
liability has been determined as of December 31, 1998 to be $2.5 million,  which
is payable by the  issuance of an  additional  155,208  shares of the  Company's
Common  Stock.  Such shares were  issued by the Company on March 22,  1999.  The
excess of the purchase price over the fair value of the net assets  acquired was
attributed to intangible assets, amounting in the aggregate to $5.8 million.

     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.

     The CPI Companies provide consulting and implementation services related to
PeopleSoft applications.

                                     - 24 -
<PAGE>
     On November 25, 1998, the Company consummated the acquisition of all of the
outstanding  capital  stock  of  each of  Azimuth  Consulting  Limited,  Azimuth
Holdings Limited,  Braithwaite  Richmond Limited and Azimuth Corporation Limited
(collectively the "Azimuth Companies"). The acquisition of the Azimuth Companies
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 902,928 shares of the
Company's Common Stock.

     The Azimuth Companies provide business and management  consulting services.
Founded  in  1984,   Azimuth  has  built  a  strong  IT  management   consulting
organization  with  operations in New Zealand,  Australia,  the  Philippines and
Southeast Asian countries.

     In January  1999,  in order to  augment  the  Internet/Advanced  Technology
Practice,  the Company acquired the outstanding  capital stock of NPI located in
Provo,  Utah.  The  purchase  price  included  an  initial  cash  payment in the
aggregate of  $1,800,000  together with a cash payment of $200,000 to be held in
escrow.  In addition,  the purchase price included an earn-out  payment of up to
$2,212,650  in  restricted  shares of the  Company's  Common Stock payable on or
before April 15, 2000 and a potential lump sum cash payment of $354,024  payable
no later than March 31, 2000.  This  acquisition  has been accounted for in 1999
under the  purchase  method of  accounting.  NPI  provides  web site  design and
front-end application solutions services. NPI has built a strong track record in
designing  web-sites  that  enable  clients to  achieve  the  desired  sales and
marketing impact.

     In  addition,  by way of merger  transactions,  the Company  augmented  its
PeopleSoft  practice in North America by acquiring the Empower Companies located
in Plymouth,  Michigan on February 16, 1999. The purchase price consisted of the
issuance of an aggregate of 1,831,091  restricted shares of the Company's Common
Stock. The Company may be required to issue additional  shares of its restricted
Common  Stock  which  may be issued in  connection  with a net worth  adjustment
determined  as of the  closing  date.  The amount of such  adjustment  is in the
process of being  finalized by the parties.  The  acquisition has been accounted
for as pooling of interest and thus prior  financial  statements will be revised
to reflect the activities of such  companies for all periods in accordance  with
generally accepted accounting principles. The Empower Companies provide business
process  reengineering,  system design and development,  project  management and
training services.

     The  Company  generates  revenue  from  professional  services  rendered to
customers.  Revenue is  recognized  as services  are  performed.  The  Company's
services   range  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  written
contracts which can be terminated  with limited  advance  notice,  typically not
more than 30 days, and without  significant  penalty,  generally limited to fees
earned and expenses incurred by the Company through the date of termination. The
Company provides its services directly to end-user  organizations or as a member
of a consulting team assembled by another information technology consulting firm
to Fortune 1000 and other large and mid-sized  companies.  The Company generally
bills its customers semi-monthly for the services provided by its consultants at


                                     - 25 -
<PAGE>

contracted rates. 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 year
ended  December  31, 1998,  revenues  derived  from  projects  under fixed price
contracts represented approximately 5% of the Company's total revenue. No single
fixed price project was material to the Company's business during 1998. However,
one fixed price  project,  which began late in 1998,  is expected be material to
the Company during 1999.  The Company  believes that, as it pursues its strategy
of making turnkey project  management a larger portion of its business,  it will
continue  to offer  fixed price  projects.  The  Company  has had limited  prior
experience in pricing and performing under fixed price arrangements and believes
that there are certain risks related  thereto 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.

     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, 1996,  1997 and 1998, the Company's
ten largest customers accounted for in the aggregate, approximately 50%, 46% and
34% of its revenue,  respectively. In 1996 and 1997,  PricewaterhouseCoopers LLP
and  Bristol-Myers  Squibb each  accounted for more than 10% of revenue.  During
1998, no customer  accounted  for more than 10% of revenue.  For the years ended
December  31,  1996,  1997 and  1998,  34%,  32% and 25%,  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,  1996,  1997 and 1998,  57%,  58% and 59%,
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, 1997 and 1998, approximately 12% of the Company's total revenue was
derived from  projects in which the Company  implemented  software  developed by
Oracle.  For  each  of the  years  ended  December  31,  1998,  1997  and  1996,
approximately  9%, 8% and 9%,  respectively,  of the Company's total revenue was
derived from  projects in which the Company  implemented  software  developed by
PeopleSoft.  During the year ended December 31, 1998,  approximately  53% of the
Company's  revenue was derived from engagements at which the Company had project
management  responsibilities,  compared  to 28% and 12% during  the years  ended
December 31, 1997 and 1996, respectively.

     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
believes that turnkey  project  management  assignments  typically  carry higher
margins. The Company has been shifting to such higher-margin turnkey management

                                     - 26 -
<PAGE>

assignments  and more complex  projects by leveraging its  reputation,  existing
capabilities,  proprietary  implementation  methodology,  development  tools and
offshore development  capabilities with expanded sales and marketing efforts and
new service offerings to develop turnkey project sales  opportunities  with both
new and existing  customers.  The  Company's  inability to continue its shift to
higher-margin  turnkey  management  assignments  and more  complex  projects may
adversely impact the Company's future growth.

     Since  late 1994,  the  Company  has made  substantial  investments  in its
infrastructure in order to support its rapid growth.  For example,  in 1994, the
Company  established  and funded an  operations  facility in India,  the Advance
Development  Center  (the  "ADC"),  and in 1995  established  a sales  office in
California. In addition, from 1994 to date, the Company has incurred expenses to
develop   proprietary   development   tools  and  its  proprietary   accelerated
implementation  methodology  and toolset.  Since 1995, the Company has also been
increasing  its  sales  force  and  its  marketing,   finance,   accounting  and
administrative  staff,  in order to manage its  growth.  The  Company  currently
maintains its headquarters in Edison, New Jersey, and branch offices in Chicago,
Detroit,  Foster City  (California),  Reston  (Virginia),  Edison (New  Jersey),
Dallas,  Atlanta,  Phoenix  and  Washington,  D.C.  The Company  also  currently
maintains offices in Europe (the United Kingdom, Denmark, and Belgium), and Asia
Pacific (Australia,  India, New Zealand,  the Philippines,  and Singapore).  The
Company leases its headquarters in Edison,  New Jersey,  totaling  approximately
48,475  square  feet.  Such lease has an initial  term of ten (10) years,  which
commenced in September 1998. In October 1998, the Company finalized an agreement
to sublet the space used for its prior  headquarters  for the  remainder  of the
term of its sublease, which expires November 15, 1999.

RESULTS OF OPERATIONS

     The following table sets forth for the periods  indicated certain financial
data expressed as a percentage of total revenue:
<TABLE>
<CAPTION>

                                                                PERCENTAGE OF REVENUE
                                                  ------------------------------------------
                                                                     YEAR ENDED
                                                                     DECEMBER 31,
                                                        1998             1997            1996
                                                        ----             ----            ----
<S>                                                     <C>              <C>             <C>   
Revenue..........................................       100.0%           100.0%          100.0%
Cost of sales....................................        65.0             69.5            69.9
                                                     --------          -------         -------
  Gross profit...................................        35.0             30.5            30.1
Selling, general and administrative expenses.....        25.2             23.4            23.6
Acquisition expenses.............................         1.5               --              --
                                                     --------          -------         -------
  Operating income...............................         8.3              7.1             6.5
Interest and other expense (income), net.........          --             (0.3)            2.2
                                                     --------          -------         -------
Income before provision for income taxes and
  extraordinary charge...........................         8.3              7.4             4.3
Provision for income taxes.......................         3.0              2.5             1.2
                                                     --------          -------         -------
Income before extraordinary charge...............         5.3              4.9             3.1
Extraordinary charge, net of income tax benefit..          --               --             1.8
                                                     --------          -------         -------
  Net income ....................................         5.3              4.9             1.3
                                                     ========          =======         =======
</TABLE>


                                     - 27 -
<PAGE>
     Year Ended December 31, 1998 Compared to Year Ended December 31, 1997

     Revenue. Revenue increased by 53.6% or $50.6 million, from $94.3 million in
1997 to $144.9  million in 1998.  This  increase was  attributable  primarily to
increased demand for the Company's ERP implementation  consulting  services and,
to a lesser extent,  to increased demand for the Company's  systems  integration
and Internet development services.

     Gross profit.  The Company's cost of sales  includes  primarily the cost of
salaries to consultants  and related  employee  benefits and payroll taxes.  The
Company's cost of sales increased by 43.7%, or $28.7 million, from $65.5 million
in 1997 to $94.2  million in 1998.  The increase was due to increased  personnel
costs  resulting  from the  hiring of  additional  consultants  to  support  the
increase  in demand for the  Company's  services.  The  Company's  gross  profit
increased by 76%, or $21.9 million,  from $28.8 million in 1997 to $50.7 million
in 1998. Gross profit margin increased from 30.5% of revenue in 1997 to 35.0% of
revenue  in 1998.  The  increase  in such  gross  profit  margin  was  primarily
attributable  to  both  the  expanded  utilization  of  the  Company's  offshore
development  facility  in India,  and the  increase  in  implementation  service
projects  where the  Company  has  project  management  responsibilities,  which
typically carry higher gross margins,  than those in which the Company  provides
supplemental staffing for client managed projects.

     Selling,  general  and  administrative   expenses.   Selling,  general  and
administrative  expenses  consist  primarily  of  administrative  salaries,  and
related benefits costs,  occupancy costs, sales person compensation,  travel and
entertainment,  costs associated with the ADC and related  development costs and
professional fees.  Selling,  general and  administrative  expenses increased by
65.7%,  or $14.5  million,  from $22.1 million in 1997 to $36.6 million in 1998,
and increased as a percentage of revenue from 23.4% to 25.2%, respectively.  The
increases in such  expenses in absolute  dollars and as a percentage  of revenue
were due primarily 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,  in  order to  manage  its  growth.  The
Company's  occupancy  costs  increased  as a  result  of the  relocation  of our
corporate  headquarters into  approximately  48,000 square feet of office space,
from our former location which consisted of approximately 17,000 square feet. 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 1998, the Company incurred costs
of $2,118,000 in connection  with the  acquisitions of the CPI Companies and the
Azimuth  Companies,  each of which were  accounted  for as pooling of interests.
These costs  primarily  consisted  of  professional  fees  associated  with such
acquisitions.

     Provision for income taxes. The Company's effective income tax rate was 37%
and 33% for the years ended December 31, 1998 and 1997. During 1997, the Company
reduced its valuation allowance by $207,000 as management determined that it was
more likely than not, that the applicable  portion of the net deferred tax asset
would be or had been realized.  The 1997 valuation allowance reduction favorably
impacted the  effective  income tax rate by 3%. In 1996,

                                     - 28 -
<PAGE>

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.  For
the year ended  December 31, 1998 and 1997, the tax holiday  favorably  impacted
the  effective  tax rate by  approximately  10% and 8%,  respectively.  Based on
current and anticipated profitability,  management believes all net deferred tax
assets are more likely than not to be realized.

     Year Ended December 31, 1997 Compared to Year Ended December 31, 1996

     Revenue.  Revenue increased by 52.9%, or $32.6 million,  from $61.7 million
in 1996 to $94.3 million in 1997.  This increase was  attributable  primarily to
increased  demand  for  the  Company's  SAP  related  implementation  consulting
services and, to a lesser extent,  to increased demand for the Company's systems
integration and custom software development services.

     Gross profit.  The  Company's  cost of sales  increased by 51.9%,  or $22.4
million,  from $43.1 million in 1996 to $65.5 million in 1997.  The increase was
due to  increased  personnel  costs  resulting  from the  hiring  of  additional
consultants  to support the increase in demand for the Company's  services.  The
Company's gross profit increased by 55.1%, or $10.2 million,  from $18.6 million
in 1996 to $28.8 million in 1997.  Gross profit margin  increased  from 30.1% of
revenue in 1996 to 30.5% of revenue in 1997.  The  increase in such gross profit
margin was attributable to the increase in implementation  services projects and
a combination of improved billing margins,  greater  consultant  utilization and
achieving certain customer performance incentives.

     Selling,  general  and  administrative   expenses.   Selling,  general  and
administrative  expenses increased by 51.7%, or $7.6 million, from $14.5 million
in 1996 to $22.1  million in 1997,  and  decreased  slightly as a percentage  of
revenue from 23.6% to 23.4%,  respectively.  The  increases in such  expenses in
absolute  dollars  and as a  percentage  of revenue  were due  primarily  to the
expansion of the Company's sales and marketing  activities in 1997 and increased
travel and  entertainment  expenses  due to the growth of the  business  and the
employee  base.  Such expenses were  increased to support the continued  revenue
growth of the  Company  in the United  States  and  abroad.  In  addition,  such
expenses  increased  due to increased  sales and  management  recruiting  costs,
support services, and an increase in the provision for doubtful accounts.

     Factor fees/Interest  (income) expense, net. Factor fees in the 1996 period
were the charges incurred by the Company to finance its accounts receivable.  On
October 10, 1996,  the Company  repaid the factor with a portion of the proceeds
from  the  Company's  initial  public  offering,   approximately  $4.4  million,
consisting of all amounts  outstanding  under the agreement  with its factor and
terminated  its factor  agreement.  Subsequent to the Company's  initial  public
offering,  interest income has been earned on interest bearing cash accounts and
short term investments.

     Provision for Income Taxes. The Company's effective income tax rate was 33%
and 28% for the years ended  December  31, 1997 and 1996.  During 1997 and 1996,
the  Company  reduced  their  valuation  allowance  by  $207,000  and  $461,000,
respectively as management determined that it was more likely than not, that the
applicable portion of the net deferred tax asset would be or


                                     - 29 -
<PAGE>

had been realized.  The 1997 and 1996 valuation  allowance  reduction  favorably
impacted the effective income tax rate by 3% and 14%, respectively. 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.  For the
year ended December 31, 1997, the tax holiday  favorably  impacted the effective
tax rate by approximately 8%. There was no significant impact for 1996. Based on
current and anticipated profitability,  management believes all net deferred tax
assets are more likely than not to be realized.

BACKLOG

     The Company  normally  enters into written  contracts with its customers at
the time it commences work on a project. These written contracts contain varying
terms  and  conditions  and  the  Company  does  not  generally  believe  it  is
appropriate  to  characterize  such written  contracts as creating  backlog.  In
addition, because these written contracts often provide that the arrangement can
be terminated with limited advance notice and without significant  penalty,  the
Company does not believe that projects in process at any one time are a reliable
indicator or measure of expected  future  revenue.  In the event that a customer
terminates  a project,  the  customer  remains  obligated to pay the Company for
services performed by it through the date of termination.

LIQUIDITY AND CAPITAL RESOURCES

     The Company funds its  operations  primarily  from cash flow generated from
operations,  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 $4.2 million at December 31,
1998 and $8.8 million at December 31, 1997.  The Company had working  capital of
$29.6 million at December 31, 1998 and $29.7 million at December 31, 1997.

     Cash  provided by operating  activities  was $2.6  million  during the year
ended  December 31, 1998,  resulting  primarily  from net income of $7.7 million
during the year ended December 31, 1998, an increase of $7.6 million in accounts
payable,  accrued payroll and accrued  expenses,  offset by an increase of $14.6
million in accounts  receivable  and unbilled  services.  Cash used in operating
activities  for the years ended  December 31, 1997 and 1996 was $7.5 million and
$4.6 million, respectively.

     In accordance with investment guidelines approved by the Company's Board of
Directors,  cash balances in excess of those  required to fund  operations  have
been invested in short-term U.S. Treasury securities and commercial paper with a
credit rating no lower than A1/P1.

     The  Company  invested  $7.1  million,  $2.4  million  and $1.0  million in
computer  equipment and office  furniture  and fixtures in 1998,  1997 and 1996,
respectively. The increase reflects purchases of computer and telecommunications
equipment for  consultants  and  administrative  staff and office  furniture and
fixtures  related to the Company's new headquarters in Edison,  New Jersey,  and
other offices opened during 1998.

                                     - 30 -
<PAGE>

     During 1996 the  Company's  factoring  agreement  required that the Company
offer all of its trade accounts receivable to the factor for financing; however,
the factor was under no obligation to accept any or all of such receivables. For
a variety of reasons,  including  the rapid growth of the  Company,  the lack of
available  tangible  security  to  utilize  as  collateral  and the  absence  of
historical  operating  profits  prior to 1996,  the Company was unable to obtain
more   traditional   financing.   On  October  10,  1996,   the  Company  repaid
approximately  $4.4  million  consisting  of all amounts  outstanding  under the
agreement with the factor and terminated the factoring agreement.

     In March 1996, in anticipation of the debenture  financing described below,
the Company obtained a $750,000 line of credit,  payable on demand, from a bank.
The  line of  credit  carried  interest  at the  federal  funds  rate  plus  1%.
Borrowings  under the line  totaled  $200,000 at March 31, 1996 and  $300,000 in
April 1996, when the Company repaid all amounts  outstanding  under such line in
connection with the debenture  financing described below. The line of credit has
been terminated in accordance with the terms of such debenture financing.

     In April  1996,  the  Company  issued and sold  five-year  9%  subordinated
debentures in the aggregate  principal amount of $6.0 million to Summit Ventures
IV, L.P. and Summit Investors III, L.P. The subordinated  debentures were issued
to raise funds for working capital and general corporate purposes, to repurchase
from the then-current shareholders,  Messrs. Pandey, Koneru and Valluripalli, an
aggregate of 4,881,066  shares of Common Stock for an aggregate of $1.5 million,
to repay approximately $300,000 outstanding under a $750,000 credit facility and
to satisfy  approximately  $358,000 of cash overdrafts.  Upon receipt of the net
proceeds from the Company's initial public offering in October 1996, the Company
prepaid  approximately $6.3 million,  representing all amounts outstanding under
such debentures, including interest.

     Subsequent  to  December  31,  1995,  the  Company  determined  that it had
unrecorded  and  unpaid  federal  and state  payroll-related  taxes for  certain
employees.  As a result of the  Company's  voluntary  disclosure to the Internal
Revenue Service of certain unpaid tax liabilities,  on June 5, 1996, the Company
received an audit  assessment from the Internal  Revenue Service for unpaid 1994
and 1995 federal  income tax  withholding,  FICA and FUTA taxes in the aggregate
amount of  approximately  $800,000  which was paid in full in  August  1996.  No
interest  or  penalties  were  assessed.  Reserves,  aggregating  $1.0  million,
including  the amount of the Internal  Revenue  Service audit  assessment,  were
recorded  at  December  31,  1995.  No  assurance  may be given,  however,  that
interest, penalties or additional state or federal taxes will not be assessed in
the future. The Company's principal  shareholders,  Messrs.  Pandey,  Koneru and
Valluripalli,  have agreed to indemnify the Company for any and all losses which
the Company may sustain,  in excess of the $1.0 million reserve,  net of any tax
benefits  realized by the Company,  arising from or relating to federal or state
tax,  interest or penalty payment  obligations  resulting from the above subject
matter.  The Company  believes  that its failure to record and pay 1994 and 1995
federal and state  payroll-related  taxes for certain employees  resulted from a
combination  of  factors,  including  lack  of  internal  controls  and  lack of
financial expertise and oversight.

     From January 1997 until  January  1999,  the Company had a credit  facility
with a bank,  which  included a  revolving  line of credit and a  component  for
equipment term loans. As of

                                     - 31 -
<PAGE>

December 31, 1998, there were no amounts outstanding under the revolving line of
credit and no equipment term loans outstanding.

     On January 29, 1999, the Company  entered into an unsecured  three-year $30
million  Revolving  Credit Loan Agreement (the "Loan  Agreement")  with PNC Bank
(the "Bank").  Subject to certain post-closing  conditions,  the proceeds of the
credit  facility  may be used by the  Company  for  financing  acquisitions  and
general corporate  purposes.  At the Company's option,  for each loan,  interest
shall be computed either at the Bank's prime rate per annum or the Adjusted Libo
Rate  plus  the  Applicable  Margin,  as such  terms  are  defined  in the  Loan
Agreement.  The Company's  obligations under the credit agreement are payable at
the expiration of such facility on January 29, 2002.

     The Company believes that its available funds, together with current credit
arrangements 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

     SFAS No.  130,  "Reporting  Comprehensive  Income" was issued in June 1997.
This  statement is effective for the Company's  fiscal year ending  December 31,
1998.  This statement  addresses the reporting and  displaying of  comprehensive
income and its components. Adoption of SFAS No. 130 relates to disclosure within
the financial  statements  and is not expected to have a material  effect on the
Company's consolidated financial statements.  The Company adopted the provisions
of SFAS No. 130 on January 1, 1998.

     SFAS No. 131,  "Disclosures  about  Segments of and  Enterprise and Related
Information"  was issued in June  1997.  This  statement  is  effective  for the
Company's  fiscal year ending December 31, 1998. This statement  changes the way
public  companies report  information  about segments of their business in their
annual  financial  statements  and  requires  them to  report  selected  segment
information in their  quarterly  reports.  The Company adopted the provisions in
1998.

     In  April,  1998,  the  Accounting  Standards  Executive  Committee  issued
Statement  of  Position  (SOP)  98-5,   "Reporting  on  the  Costs  of  Start-Up
Activities."   The  SOP  requires  all  costs  incurred  as  start-up  costs  or
organization costs be expenses as incurred.  Adoption of the SOP is required for
fiscal years  beginning  after  December 15, 1998.  The Company does not believe
that the new standard will have a material impact on the Company's  consolidated
financial statements.

     In March,  1998, the Accounting  Standards  Executive  Committee issued SOP
98-1.  Accounting for the Costs of Computer  Software  Developed or Obtained for
Internal Use." This SOP required that computer  software costs that are incurred
in the  preliminary  project  stage be expensed as incurred and that criteria be
met before  capitalization  of costs to develop or obtain  internal use computer
software.  Adoption  of the SOP is required  for fiscal  years  beginning  after
December 15, 1998.  The Company does not believe that the new standard will have
a material impact on the Company's consolidated financial statements.


                                     - 32 -
<PAGE>
YEAR 2000 COMPLIANCE

     Historically,  certain computer programs have been written using two digits
rather  than four to define  the  applicable  year,  which  could  result in the
computer  recognizing a date using "00" as the year 1900 rather than 2000.  This
in turn,  could  result in major  system  failures  or  miscalculations,  and is
generally  referred to as the "Year 2000 Problem".  The Company believes that it
has  sufficiently  assessed its state of readiness with respect to its Year 2000
compliance. Based on its assessment, the Company does not believe that Year 2000
compliance  will result in material  investments  by the  Company,  nor does the
Company  anticipate  that the Year 2000 Problem will have any adverse effects on
the business  operations or financial  performance  of the Company.  The Company
does not believe that it has any material exposure to the Year 2000 Problem with
respect to its own information systems.  Based upon its assessment,  the Company
has established no reserve nor instituted any contingency plans.

     However,  the purchasing  patterns of customers and potential customers may
be affected by issues associated with the Year 2000 Problem. As companies expend
significant  resources to correct  their current data storage  solutions,  these
expenditures  may result in reduced  funds to  purchase  products  or  undertake
projects  such as those offered by the Company.  There can be no assurance  that
the Year 2000 Problem, as it relates to customers, potential customers and other
third-parties,  will not  adversely  affect the  Company's  business,  operating
results and  financial  condition.  Conversely,  the Year 2000 Problem may cause
other  companies  to  accelerate  purchases,  thereby  causing  an  increase  in
short-term  demand  and a  consequent  decrease  in  long-term  demand  for  the
Company's products.

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   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.


                                     - 33 -
<PAGE>

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

     Not applicable.


ITEM 8.   FINANCIAL STATEMENTS.

     The financial  statements  required to be filed pursuant to this Item 7 are
included in this Annual Report on Form 10-K. A list of the financial  statements
filed herewith is found at "Item 13. Exhibits, List, and Reports on Form 8-K."


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

     Not applicable.



                                     - 34 -
<PAGE>
                                    PART III


ITEM 10.  DIRECTORS,   EXECUTIVE   OFFICERS,   PROMOTERS  AND  CONTROL  PERSONS;
          COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

     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
1999 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 1999  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 1999 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 1999 Annual
Meeting  of  Shareholders  is  incorporated  herein by  reference  to such proxy
statement.


                                     - 35 -
<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.

      (a) (2)  Financial Statement Schedules.

          None.

      (a) (3)  Exhibits.

          Reference is made to the Index to Exhibits on Page 39.

      (b) Reports on Form 8-K.

          On  November  9,  1998,  the  Company  filed a  report  on Form 8-K to
          disclose  the  adoption  by the  Company of a  Shareholder  Protection
          Rights Plan.

          On  December  8,  1998,  the  Company  filed a  report  on Form 8-K to
          disclose  the  acquisitions  of each of  Azimuth  Consulting  Limited,
          Azimuth  Holdings  Limited,  Braithwaite  Richmond Limited and Azimuth
          Corporation Limited.

          Subsequent to the year ended December 31, 1998, the Company filed,  on
          January  20,  1999,  a report on Form 8-K  relating  to the  Company's
          acquisition of Network Publishing, Inc.

          Subsequent to the year ended December 31, 1998, the Company filed,  on
          February  24,  1999,  a report on Form 8-K  relating to the  Company's
          acquisition of Empower Solutions, LLC and its affiliate Empower, Inc.


                                     - 36 -
<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 1st day of April,
1999.


                                            INTELLIGROUP, INC. 



                                            By:/s/ Stephen A. Carns
                                               ---------------------------------
                                               Stephen A. Carns, President and
                                               Chief Executive Officer



                                     - 37 -
<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/ Stephen A. Carns            President and Chief Executive     April 1, 1999
--------------------------
Stephen A. Carns                Officer (principal executive
                                officer)

/s/ Rajkumar Koneru             Co-Chairman of the Board and      April 1, 1999
--------------------------
Rajkumar Koneru                 Director


/s/ Ashok Pandey                Co-Chairman of the Board and      April 1, 1999
--------------------------
Ashok Pandey                    Director


/s/ Nagarjun Valluripalli       Co-Chairman of the Board and      April 1, 1999
--------------------------
Nagarjun Valluripalli           Director


/s/ Gerard E. Dorsey            Senior Vice President-Finance     April 1, 1999
--------------------------
Gerard E. Dorsey                and Chief Financial Officer
                                (principal financial and
                                accounting officer)


/s/ Klaus Besier                Director                          April 1, 1999
--------------------------
Klaus Besier


/s/ David Finley                Director                          April 1, 1999
--------------------------
David Finley


/s/ Kevin P. Mohan              Director                          April 1, 1999
--------------------------
Kevin P. Mohan


/s/ John E. Steuri              Director                          April 1, 1999
--------------------------
John E. Steuri


                                     - 38 -
<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 of the Company.  (Incorporated  by reference
                    to  the  Company's   Registration  Statement  on  Form  SB-2
                    (Registration  Statement No. 333-5981) declared effective on
                    September 26, 1996).

    10.2*           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            Sublease Agreement between Micrognosis,  Inc., as sublessor,
                    the Company, as sublessee, with master lease.  (Incorporated
                    by reference to the Company's Registration Statement on Form
                    SB-2   (Registration   Statement  No.   333-5981)   declared
                    effective on September 26, 1996).

    10.5            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).

                                     - 39 -
<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 10.9.

    10.7            Amended and Restated Agreement by Messrs. Pandey, Koneru and
                    Valluripalli  dated July 16, 1996 to  indemnify  the Company
                    for  certain  losses.  (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            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).

    10.9            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.

    10.10           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 10.12 and 10.28.

    10.11*          Employment  Agreement  dated  December  6, 1996  between the
                    Company and Anthony Knight,  as amended on February 18, 1997
                    (Incorporated by reference to the Company's Quarterly Report
                    on Form 10-QSB for the quarter ended March 31, 1997).

    10.12           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 10.10 and 10.28.

    10.13           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
                    10.27.


                                     - 40 -
<PAGE>
     Exhibit No.    Description of Exhibit
     -----------    ----------------------

    10.14           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).

    10.15           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).

    10.16*          Employment  Agreement  dated  April  22,  1998  between  the
                    Company and Gerard E. Dorsey.  (Incorporated by reference to
                    the Company's  Quarterly Report on Form 10-Q for the quarter
                    ended March 31, 1998).

    10.17*          Employment  Agreement  dated  April  27,  1998  between  the
                    Company and Stephen A. Carns.  (Incorporated by reference to
                    the Company's  Quarterly Report on Form 10-Q for the quarter
                    ended March 31, 1998).

    10.18**         Change in Control  Severance Pay Agreement dated November 4,
                    1998 between the Company and Gerard Dorsey.

    10.19**         Change in Control  Severance Pay Agreement dated November 4,
                    1998 between the Company and Alan Ziegler.

    10.20**         Revolving Credit Loan Agreement  between PNC Bank,  National
                    Association and the Company dated January 29, 1999.

     10.21          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).

    10.22           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).

    10.23           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).


                                     - 41 -
<PAGE>

    10.24           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).

    10.25           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.)

    10.26           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.)

    10.27**         Fifth  Amendment  to the  Implementation  Partner  Agreement
                    dated July 15,  1998,  between the  Company and  PeopleSoft,
                    Inc. See Exhibit 10.13.

    10.28**         Amendment to the National  Implementation  Partner Agreement
                    dated as of January 1, 1999,  between  SAP  America  and the
                    Company. See Exhibits 10.10 and 10.12.

    21**            Subsidiaries of the Registrant.

    23**            Consent of Arthur Andersen LLP.

    27.1**          Financial  Data  Schedule  for the year ended  December  31,
                    1998.

    27.2**          Financial  Data  Schedule  for the year ended  December  31,
                    1997.

    27.3**          Financial  Data  Schedule  for the year ended  December  31,
                    1996.

----------

 *      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.



                                     - 42 -
<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, 1998 and 1997............  F-3

Consolidated Statements of Income for the
     years ended December 31, 1998, 1997 and 1996.......................  F-4

Consolidated Statements of Shareholders' Equity for the
     years ended December 31, 1998, 1997 and 1996.......................  F-5

Consolidated Statements of Cash Flows for the years ended 
     December 31, 1998, 1997 and 1996...................................  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 the Consolidated Financial Statements
     or are 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. and  subsidiaries  as of December 31, 1998 and 1997, and the
related consolidated  statements of income,  shareholders' equity and cash flows
for each of the  three  years in the  period  ended  December  31,  1998.  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  generally  accepted  auditing
standards.  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,  1998  and  1997,  and the  results  of their
operations  and their cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.






                               ARTHUR ANDERSEN LLP

Roseland, New Jersey
February 4, 1999 (except with respect to the
                  third paragraph of Note 11
                  as to which the date is
                  February 16, 1999)





                                     F - 2
<PAGE>
                             INTELLIGROUP, INC. AND SUBSIDIARIES
                                 CONSOLIDATED BALANCE SHEETS
                                  December 31, 1998 and 1997

<TABLE>
<CAPTION>
                                                                   1998               1997
                                                                   ----               ----
                        ASSETS
<S>                                                            <C>                <C>          
Current Assets:
  Cash and cash equivalents.................................   $   4,245,000      $   8,821,000
  Accounts receivable, less allowance for doubtful
    accounts of $1,053,000 and $799,000 at 
    December 31, 1998 and 1997, respectively................      30,419,000         20,052,000
  Unbilled services.........................................      10,842,000          7,840,000
  Deferred tax asset........................................         808,000            404,000
  Other current assets......................................       3,563,000            749,000
                                                               -------------      -------------
      Total current assets..................................      49,877,000         37,866,000

Property and equipment, net.................................       9,506,000          3,781,000
Other assets................................................       6,345,000            359,000
                                                               -------------      -------------
                                                               $  65,728,000      $  42,006,000
                                                               =============      =============

            LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
  Accounts payable..........................................   $   5,337,000      $   1,960,000
  Accrued payroll and related taxes.........................       5,602,000          3,387,000
  Accrued expenses and other liabilities....................       2,854,000          1,382,000
  Accrued acquisition costs.................................       3,302,000                 --
  Income taxes payable......................................       3,160,000          1,079,000
 Current portion of long term debt and obligations under
  capital leases............................................          11,000            386,000
                                                               -------------      -------------
      Total current liabilities.............................      20,266,000          8,194,000
                                                               -------------      -------------
Long term debt and obligations under capital leases, less
  current portion...........................................          59,000            355,000
                                                               -------------      -------------

Deferred income taxes.......................................         483,000            171,000
                                                               -------------      -------------
Minority interest...........................................              --             78,000
                                                               -------------      -------------
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, 13,572,000 and 13,262,000 shares issued
    and outstanding at December 31, 1998 and 1997,
    respectively............................................         136,000            133,000
  Additional paid-in capital................................      35,263,000         30,814,000
  Retained earnings.........................................      10,066,000          2,360,000
  Currency translation adjustments..........................        (545,000)           (99,000)
                                                               -------------      -------------
      Total shareholders' equity ...........................      44,920,000         33,208,000
                                                               -------------      -------------
                                                               $  65,728,000      $  42,006,000
                                                               =============      =============
</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 INCOME
              For the Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>

                                                                   1998              1997              1996
                                                               -------------     -------------     -------------
<S>                                                            <C>               <C>               <C>          
Revenue.................................................       $ 144,861,000     $  94,326,000     $  61,699,000
Cost of sales...........................................          94,203,000        65,535,000        43,142,000
                                                               -------------     -------------     -------------

    Gross profit........................................          50,658,000        28,791,000        18,557,000
                                                               -------------     -------------     -------------

Selling, general and administrative expenses............          36,570,000        22,060,000        14,544,000

Acquisition expenses....................................           2,118,000                --                --
                                                               -------------     -------------     -------------

    Total selling, general and administrative expenses..          38,688,000        22,060,000        14,544,000
                                                               -------------     -------------     -------------

    Operating income....................................          11,970,000         6,731,000         4,013,000
                                                               -------------     -------------     -------------

Other expenses:
  Interest (income) expense, net........................            (120,000)         (257,000)          336,000
  Factor charges........................................                  --                --           999,000
                                                               -------------     -------------     -------------
                                                                    (120,000)         (257,000)        1,335,000
                                                               --------------    --------------    -------------

Income before provision for income taxes and
  extraordinary charge..................................          12,090,000         6,988,000         2,678,000

Provision for income taxes..............................           4,416,000         2,327,000           748,000
                                                               -------------     -------------     -------------

Income before extraordinary charge......................           7,674,000         4,661,000         1,930,000

Extraordinary charge-Loss on early extinguishment of
  debt, net of income tax benefit of $296,000...........                  --                --         1,148,000
                                                               -------------     -------------     -------------
Net income..............................................       $   7,674,000     $   4,661,000     $     782,000
                                                               =============     =============     =============

Earnings per share:

  Basic earnings per share:
      Income before extraordinary charge................       $        0.57     $        0.37     $        0.18

      Extraordinary charge, net of income tax benefit...                  --                --             (0.11)
                                                               -------------     -------------     -------------

        Net income per share............................       $        0.57     $        0.37     $        0.07
                                                               =============     =============     =============

      Weighted average number of common shares - Basic..          13,386,000        12,636,000        11,003,000
                                                               =============     =============     =============

  Diluted earnings per share:
      Income before extraordinary charge................       $        0.55     $        0.36     $        0.16

      Extraordinary charge, net of income tax benefit...                  --                --             (0.10)
                                                               -------------     -------------     -------------

        Net income per share............................       $        0.55      $       0.36     $        0.06
                                                               =============     =============     =============

      Weighted average number of common shares -
        Diluted.........................................          13,968,000        13,116,000        12,263,000
                                                               =============     =============     =============

  </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, 1998, 1997 and 1996

<TABLE>
<CAPTION>

                                                                                        Cumulative
                                                                          Retained       Foreign                     Comprehensive
                                                           Additional     Earnings       Currency        Total         Income
                                       Common Stock         Paid-in     (Accumulated    Translation   Shareholders'     for the
                                       ------------
                                   Shares      Amount       Capital        Deficit)     Adjustments     Equity          Period
                                 ----------   --------   ------------    -----------    -----------   ------------   -------------
<S>                              <C>          <C>        <C>             <C>             <C>           <C>              <C>   
Balance at December 31, 1995.    13,477,000   $135,000   $   639,000     $  (701,000)    $  17,000     $   90,000             --

Repurchase and retirement
of common  stock.............    (4,881,000)   (49,000)           --      (1,451,000)           --     (1,500,000)            --

Issuance of common stock,
net of related costs.........     2,050,000     20,000    17,815,000              --            --     17,835,000             --

Exercise of warrants.........     1,364,000     14,000     1,386,000              --            --      1,400,000             --

Currency transactions
adjustments..................            --         --            --              --        68,000         68,000         68,000

Shareholder dividends........            --         --            --        (931,000)           --       (931,000)            --

Net income...................            --         --            --         782,000            --        782,000        782,000
                                 ----------   --------   -----------      ----------      --------     ----------     ----------

Balance at December 31, 1996.    12,010,000    120,000    19,840,000      (2,301,000)       85,000     17,744,000     $  850,000
                                                                                                                      ==========

Issuance of common stock,
net of related costs.........     1,150,000     12,000     9,888,000              --            --      9,900,000             --

Exercise of stock options....       102,000      1,000       838,000              --            --        839,000             --

Tax benefit from exercise
of stock options.............            --         --       248,000              --            --        248,000             --

Currency translation
adjustments..................            --         --            --              --      (184,000)      (184,000)      (184,000)

Net income...................            --         --            --       4,661,000            --      4,661,000      4,661,000
                                 ----------   --------   -----------     -----------      --------     ----------     ----------

Balance at December 31, 1997.    13,262,000    133,000    30,814,000       2,360,000       (99,000)    33,208,000     $4,477,000
                                                                                                                      ==========

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             --

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

Net income...................            --         --            --       7,674,000            --      7,674,000      7,674,000
                                 ----------   --------   -----------     -----------     ---------    -----------     ----------

Balance at December 31, 1998.    13,572,000   $136,000   $35,263,000     $10,066,000     $(545,000)   $44,920,000     $7,228,000
                                 ==========   ========   ===========     ===========     =========    ===========     ==========
</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, 1998, 1997 and 1996

<TABLE>
<CAPTION>
                                                                  1998             1997             1996
                                                               ------------    -------------    -------------
<S>                                                            <C>              <C>              <C>        
Cash flows from operating activities:
  Net income...............................................    $ 7,674,000      $ 4,661,000      $   782,000
  Adjustments to reconcile net income to net cash
   (provided by) used in operating activities:
      Depreciation and amortization........................      1,538,000          571,000          362,000
      Provision for doubtful accounts......................      1,268,000          765,000          590,000
      Extraordinary charge.................................             --               --        1,148,000
      Deferred income taxes................................        (92,000)         178,000         (411,000)
      Tax benefit from exercise of stock options...........        302,000          248,000               --
      Minority interest....................................             --           78,000               --
  Changes in operating assets and liabilities:
      Accounts receivable..................................    (11,635,000)     (10,182,000)      (3,691,000)
      Unbilled services....................................     (3,002,000)      (4,920,000)      (1,208,000)
      Other current assets.................................     (2,814,000)        (213,000)          52,000
      Other assets.........................................       (357,000)        (134,000)        (193,000)
      Cash overdraft.......................................             --               --          (83,000)
      Accounts payable.....................................      3,377,000        1,086,000       (1,252,000)
      Accrued payroll and related taxes....................      2,215,000          561,000       (1,137,000)
      Accrued expenses and other liabilities...............      2,033,000         (611,000)        (313,000)
      Income taxes payable.................................      2,081,000          441,000          141,000
                                                               -----------      -----------      -----------
         Net cash provided by (used in) operating
         activities........................................      2,588,000       (7,471,000)      (4,587,000)
                                                               -----------      -----------      -----------

Cash flows from investing activities:
  Purchases of equipment...................................     (7,116,000)      (2,436,000)        (984,000)
                                                               -----------      -----------      -----------

Cash flows from financing activities:
  Proceeds from issuance of common stock, net of issuance
    costs..................................................             --        9,900,000       17,835,000
  Proceeds from exercise of stock options..................      1,022,000          839,000               --
  Proceeds from subordinated debentures and warrants, net
    of issuance costs......................................             --               --        5,888,000
  Repayment of subordinated debentures.....................             --               --       (6,000,000)
  Repurchase of common stock...............................             --               --       (1,500,000)
  Repayments to factors, net...............................             --               --       (3,343,000)
  Proceeds from shareholder loans..........................             --          235,000           13,000
  Repayments to shareholders...............................       (618,000)        (357,000)        (434,000)
  Repayments of lines of credit, net.......................             --               --          (45,000)
  Principal payments under capital leases..................         (6,000)         (6,,000)         (22,000)
                                                               -----------      -----------      -----------
         Net cash provided by financing activities.........        398,000       10,611,000       12,392,000
                                                               -----------      -----------      -----------
  Effect of foreign currency exchange rate changes on cash.       (446,000)        (184,000)          68,000
                                                               -----------      -----------      -----------
         Net increase (decrease) in cash and cash
         equivalents.......................................     (4,576,000)         520,000        6,889,000
Cash and cash equivalents at beginning of year.............      8,821,000        8,301,000        1,412,000
                                                               -----------      -----------      -----------
Cash and cash equivalents at end of year...................    $ 4,245,000      $ 8,821,000      $ 8,301,000
                                                               ===========      ===========      ===========

Supplemental disclosures of cash flow information:
  Cash paid for interest...................................    $    24,000      $        --      $ 1,264,000
                                                               ===========      ===========      ===========

  Cash paid for income taxes...............................    $ 2,428,000      $ 1,707,000      $ 1,109,000
                                                               ===========      ===========      ===========
</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  services,  including  management  consulting,
enterprise-wide  business  process  solutions,  Internet  application  services,
applications  outsourcing  and  maintenance,   systems  integration  and  custom
software  development  based on leading  technologies.  The Company  markets its
services to a wide variety of  industries  primarily in the United  States.  The
majority  of  the  Company's  business  is  with  large  established  companies,
including consulting firms serving numerous industries.

Principles of Consolidation and Use of Estimates

     The accompanying financial statements include the accounts of Intelligroup,
Inc.  and  its  majority  owned   subsidiaries.   Minority  interests  were  not
significant at December 31, 1998 and 1997. All significant intercompany balances
and transactions have been eliminated.

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  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.

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.

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 (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.

Other Assets

     Other assets at December 31, 1998  include  goodwill and other  intangibles
totaling  $5,629,000,  that were attributable to the acquisition of the minority
interest  of CPI  Consulting  (See Note 9).  These  intangible  assets are being
amortized  over the estimated  useful lives ranging from 6 to 15 years using the
straight-line method. Amortization expense was $147,000 in 1998.


                                     F - 7
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

Revenue Recognition

     The Company 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.  Substantially  all  customers  are
billed on a 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, 1998 and 1997
represent  services provided which are billed  subsequent to year-end.  All such
amounts are anticipated to be realized in the following year.

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  $1,268,000,  $765,000 and $590,000 in 1998, 1997
and 1996,  respectively.  Accounts written off totaled $1,014,000,  $512,000 and
$575,000 in 1998, 1997 and 1996, respectively.

Recoverability of Long-Lived Assets

     The  Company  reviews  the  recoverability  of its  long-lived  assets on a
periodic  basis in order to identify  business  conditions  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  does not believe that any such  impairment  existed at December 31,
1998.

Stock-Based Compensation

     Stock-based  compensation  is recognized  using the intrinsic  value method
under APB No. 25. For disclosure purposes, pro forma net income and earnings 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, 1998,  1997 and 1996,  approximately  59%,
58% and 57% of revenue,  respectively,  was derived  from  projects in which the
Company's personnel


                                     F - 8
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

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,  1999 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 February  1997,  the Company
achieved a National Logo Partner relationship with SAP.  Additionally,  for each
of the years ended December 31, 1998 and 1997,  approximately 12%, and less than
10% during  1996 of revenue  was derived  from  projects in which the  Company's
personnel 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, 1998, 1997 and 1996, 25%, 32% and 34%,  respectively,  of the
Company's  revenue  was  generated  by serving as a member of  consulting  teams
assembled by other information technology consulting firms.

     One customer accounted for approximately 7%, 9% and 10% of revenue in 1998,
1997 and 1996,  respectively.  Accounts  receivable  due from this  customer was
approximately  $2,045,000,  $1,628,000  and  $2,268,000 as of December 31, 1998,
1997 and 1996,  respectively.  Another customer  accounted for approximately 5%,
10%  and  15% of  revenue  for  1998,  1997  and  1996,  respectively.  Accounts
receivable due from this customer was approximately  $1,395,000,  $2,049,000 and
$988,000 as of December 31, 1998, 1997 and 1996, respectively.

     During  1998,  the Company  derived  revenue  totaling  $1.7  million  from
contracts  with an entity  whose  chief  executive  officer is a director of the
Company.

Income Taxes

     The  Company  accounts  for income  taxes  pursuant  to the  provisions  of
Statement of Financial  Accounting  Standards  No. 109,  "Accounting  for Income
Taxes," ("SFAS No. 109") which utilizes the liability  method and results in the
determination  of deferred  taxes based on the  estimated  future tax effects of
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.


                                     F - 9
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

Earnings Per Share

     Basic  earnings per share is computed by dividing  income  attributable  to
common stockholders by the weighted average number of common shares outstanding.
Diluted  earnings per share is computed by dividing  income  available to common
stockholders  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>
                                                  1998              1997               1996
                                              -----------        -----------        ----------

<S>                                           <C>                <C>               <C>       
Net Income                                    $ 7,674,000        $ 4,661,000       $   782,000
                                               ----------         ----------        ----------

Denominator:

   Weighted average number of common
   shares...................................   13,386,000         12,636,000        11,003,000
   Basic earnings per share.................  $      0.57        $      0.37       $      0.07
                                               ==========         ==========        ==========

Denominator:

   Weighted average number of common
   shares...................................   13,386,000         12,636,000        11,003,000
   Common share equivalents of
   outstanding stock options................      582,000            480,000         1,260,000
                                               ----------         ----------        ----------
Total shares................................   13,968,000         13,116,000        12,263,000
                                               ----------         ----------        ----------
Diluted earnings per share..................  $      0.55        $      0.36       $      0.06
                                               ==========         ==========        ==========
</TABLE>


     Vested stock  options which would be  antidilutive  have been excluded from
the calculations of diluted shares outstanding and diluted earnings per share.

Recently Issued Accounting Standards

     In  April,  1998,  the  Accounting  Standards  Executive  Committee  issued
Statement  of  Position  (SOP)  98-5,   "Reporting  on  the  Costs  of  Start-Up
Activities."   The  SOP  requires  all  costs  incurred  as  start-up  costs  or
organization costs be expenses as incurred.  Adoption of the SOP is required for
fiscal years  beginning  after  December 15, 1998.  The Company does not believe
that the new standard will have a material impact on the Company's  consolidated
financial statements.

     In March,  1998, the Accounting  Standards  Executive  Committee issued SOP
98-1.  Accounting for the Costs of Computer  Software  Developed or Obtained for
Internal Use." This SOP required that computer  software costs that are incurred
in the  preliminary  project  stage be expensed as incurred and that criteria be
met before  capitalization  of costs to develop or obtain  internal use computer
software.  Adoption  of the SOP is required  for fiscal  years  beginning  after
December 15, 1998.  The Company does not believe that the new standard will have
a material impact on the Company's consolidated financial statements.

                                     F - 10
<PAGE>

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.

NOTE 2 - PROPERTY AND EQUIPMENT

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

                                                1998              1997
                                             ---------         ---------
        Vehicles........................    $  109,000        $   26,000
        Furniture.......................     2,459,000           785,000
        Equipment.......................     8,438,000         4,337,000
        Computer software...............       816,000            25,000
        Leasehold improvements..........       474,000                --
                                            ----------        ----------
                                            12,296,000         5,173,000
        Less-Accumulated depreciation...    (2,790,000)       (1,392,000)
                                            -----------       ----------
                                            $9,506,000        $3,781,000
                                            ==========        ==========

     Included in the above is $102,000 of equipment held under capital leases at
December 31, 1998, 1997 and 1996. Depreciation expense was $1,391,000,  $571,000
and $362,000 in 1998, 1997 and 1996, respectively.

NOTE 3 - LINES OF CREDIT AND SUBORDINATED DEBENTURES

     In January  1997,  and as later  amended on August 18,  1997,  the  Company
entered into a two-year  credit  agreement with a bank (the "Bank").  The credit
facility with the Bank has two  components  comprised of (i) a revolving line of
credit pursuant to which the Company may borrow up to $7.5 million either at the
Bank's prime rate per annum or the EuroRate plus 2% (at the  Company's  option),
and (ii)  equipment term loans pursuant to which the Company may borrow up to an
aggregate  of  $350,000  (at the Bank's  prime rate plus 1/4 of 1% per annum) to
purchase  equipment.  The credit agreement  contains covenants which require the
Company to (i) maintain its working  capital during the year at no less than 90%
of the working capital at the end of the immediately  preceding  fiscal year and
at the end of each fiscal  year at no less than 105% of its  working  capital at
the end of the immediately preceding fiscal year; and (ii) maintain its tangible
net worth  during the year at no less than 95% of its  tangible net worth at the
end of the immediately  preceding fiscal year and at the end of each fiscal year
at no less  than  108%  of  tangible  net  worth  at the end of the  immediately
preceding fiscal year. The Company's  obligations under the credit agreement are
collateralized  by  substantially  all of the  Company's  assets,  including its
accounts receivable and intellectual  property. At December 31, 1998 the Company
was in compliance with all covenants.  The facility was due to expire in January
1999, but was extended until a new  three-year  credit  agreement took effect on
January 29, 1999. (See Note 11).


                                     F - 11
<PAGE>
NOTE 4 - INCOME TAXES

     Income tax  attributable to income from continuing  operations  consists of
the following:
<TABLE>
<CAPTION>
                                                  1998               1997             1996
                                               ----------       ----------        ----------
<S>                                            <C>              <C>               <C>       
Current:
  Federal.................................     $2,843,000       $1,384,000        $  631,000
  State...................................        783,000          389,000           200,000
  Foreign.................................        882,000          456,000           248,000
                                               ----------       ----------        ----------
                                                4,508,000        2,229,000         1,079,000
                                               ----------       ----------        ----------

Deferred:
  Federal.................................        (71,000)          76,000          (259,000)
  State...................................        (21,000)          22,000           (72,000)
                                               ----------       ----------        ----------
                                                  (92,000)          98,000          (331,000)
                                               ----------       ----------        ----------

Total.....................................     $4,416,000       $2,327,000        $  748,000
                                               ==========       ==========        ==========
</TABLE>


     The provision for income taxes differs from the amount computed by applying
the statutory rate of 34%, 35% and 35% in 1998, 1997 and 1996, respectively,  to
income before income taxes. The principal reasons for this difference are:
<TABLE>
<CAPTION>
                                                  1998               1997             1996
                                               ----------       ----------        ----------
<S>                                                 <C>                <C>              <C>
Tax at federal statutory rate.............          34%                34%              34%
Nondeductible expenses....................           5                  1                1
State income tax, net of federal benefit..           4                  4               (3)
Utilization of net operating loss
  carryforwards...........................          (1)                --               (8)
Foreign losses for which no benefit is
  available...............................           7                 --               16
Changes in valuation allowance............          --                 (3)             (14)
Foreign operations taxed at less than
  U.S. statutory rate, primarily India....         (11)                (7)              (1)
Other.....................................          (1)                 4                3
                                                 -----               -----           -----
Effective tax rate........................          37%                33%              28%
                                                 =====               =====           =====
</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.



                                     F - 12
<PAGE>
NOTE 4 - INCOME TAXES - (CONTINUED)

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, 1998 and 1997
are as follows:

                                                    1998            1997
                                                  ---------      ---------
Deferred tax assets:
  Allowance for doubtful accounts............     $ 432,000       $ 327,000
  Certain accrued liabilities................       376,000          77,000
                                                  ---------       ---------
Total deferred tax assets....................       808,000         404,000

Deferred tax liability-accelerated
  depreciation...............................      (483,000)       (171,000)
                                                  ---------       ---------

Net deferred tax asset.......................     $ 325,000       $ 233,000
                                                  =========       =========

     Realization  of the net  deferred  tax assets is dependent on the timing of
the  reversal of temporary  differences.  Although  realization  is not assured,
management  believes it is more likely than not,  that the 1998 net deferred tax
assets will be realized.

NOTE 5 - COMMITMENTS AND CONTINGENCIES

Employment Agreements

     As of December 31, 1998, the Company had employment agreements with certain
of its executives which provide for minimum payments in the event of termination
in other than for just cause. The aggregate amount of compensation commitment in
the event of termination under such agreements is approximately $682,000.

Leases

     The Company  leases office space and 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, 1998.  Future  minimum  aggregate
annual lease payments are as follows:

            FOR THE YEARS ENDING DECEMBER 31,           CAPITAL       OPERATING
            --------------------------------------  -------------   ------------
        1999.....................................      $  11,000     $ 3,113,000
        2000.....................................          9,000       2,865,000
        2001.....................................             --       2,175,000
        2002.....................................             --       1,658,000
        2003.....................................             --       1,346,000
                                                       ---------       ---------
        Subtotal                                          20,000      11,157,000

        Thereafter...............................             --       5,702,000
        Less-Interest............................             --
                                                       ---------
                                                          20,000
        Less-Current portion.....................        (11,000)
                                                       ---------
                                                       $   9,000

     Rent  expense  for the years ended  December  31,  1998,  1997 and 1996 was
$2,153,000, $656,000 and $444,000, respectively.


                                     F - 13
<PAGE>
NOTE 5 - COMMITMENTS AND CONTINGENCIES - (CONTINUED)

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.

NOTE 6 - STOCK OPTION PLANS AND WARRANTS

     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 1,590,000
shares  of Common  Stock  have  been  reserved  for  issuance  under the  plans.
Subsequent  to December 31,  1998,  the Company  granted  options to purchase an
aggregate of 388,100 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.



                                     F - 14
<PAGE>
NOTE 6 - STOCK OPTION PLANS AND WARRANTS - (CONTINUED)

     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 78%, 62% and 41%, risk-free
interest  rate of 5.4%,  7.0% and 5.6% and  expected  lives of 8.5,  4.5 and 3.1
years, in 1998, 1997 and 1996, respectively.  The weighted average fair value of
options  granted  during  1998,  1997 and  1996 was  $13.49,  $6.96  and  $2.93,
respectively.

                                                                     Weighted
                                                Number of            Average
                                                 Shares           Exercise Price
     ---------------------------------------------------------------------------
     Options Outstanding,
        December 31, 1995                            --               $   --
     Granted                                    580,000               $ 8.38
     Canceled                                    (8,200)              $ 8.00
     ---------------------------------------------------------------------------
     Options Outstanding,
        December 31, 1996
        (none exercisable)                      571,800               $ 8.39
     Granted                                    647,640               $11.52
     Exercised                                 (102,381)              $ 8.20
     Canceled                                   (74,113)              $ 9.78
     ---------------------------------------------------------------------------
     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)              $ 4.91
     ---------------------------------------------------------------------------
     Options Outstanding,
        December 31, 1998 
        (262,156 exercisable)                 1,899,141               $14.14
                                              =========                =====



                                     F - 15
<PAGE>

NOTE 6 - STOCK OPTION PLANS AND WARRANTS - (CONTINUED)

     The following table summarizes  information about stock options outstanding
and exercisable at December 31, 1998:
<TABLE>
<CAPTION>

                                   Outstanding                             Exercisable
                                   -----------                             -----------
                                     Weighted        Weighted                        Weighted
 Exercise Price     Number of        Average         Average        Number of        Average
     Range            shares        Remaining        Exercise         shares         Exercise
                                     Life (in         Price                           Price
                                      years)
---------------------------------------------------------------------------------------------
<S><C>   <C>              <C>               <C>           <C>           <C>                <C>  
$8 to 10               282,706           6.0           $8.14         156,944            $8.10
$10 to 12              448,605           5.8          $10.82          70,282           $10.92
$12 to 15              142,000           9.5          $14.11           8,000           $12.13
$15 to 22            1,020,830           8.2          $17.21          26,930           $16.40
$22 to 24                5,000           9.6          $23.38              --               --
                    ----------                                      --------
$8 to 24             1,899,141           7.4          $14.14         262,156            $9.83
</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>

                                        1998                 1997                1996
---------------------------------------------------------------------------------------------
<S>                                   <C>                 <C>                   <C>         
Net income:
    as reported                       $  7,674,000        $  4,661,000          $    782,000
    pro forma                         $  2,759,000        $  2,433,000          $    423,000
---------------------------------------------------------------------------------------------
Basic Earnings per Share:
    as reported                              $0.57               $0.37                 $0.07
    pro forma                                $0.21               $0.29                 $0.04
---------------------------------------------------------------------------------------------
Diluted Earnings per Share:
    as reported                              $0.55               $0.36                 $0.06
    pro forma                                $0.20               $0.28                 $0.03
</TABLE>




                                     F - 16
<PAGE>
NOTE 7 - 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 8 - INITIAL PUBLIC OFFERING, STOCK SPLIT AND PREFERRED STOCK AUTHORIZATION

     In July 1996, the Company's Board of Directors recommended and shareholders
approved an amendment to the Company's Certificate of Incorporation to effect an
81,351.1111-for-1  stock split.  All common  shares and per share amounts in the
accompanying  financial  statements  have been  adjusted  retroactively  to give
effect to the stock split.

     The Company's  initial public offering for the sale of 2,050,000  shares of
its Common Stock became  effective on September 26, 1996 and the net proceeds of
approximately $19,065,000 (before deducting expenses of the offering paid by the
Company) were received on October 2, 1996.

     On July 2, 1997, the Company  consummated a follow-on  public offering (the
"Offering") of 1,000,000  shares of its Common Stock at a price to the public of
$9.50 per share.  On July 15, 1997 and as part of the  Offering,  an  additional
150,000  shares at $9.50 per share were  issued and sold by the Company to cover
over-allotments.  The net  proceeds  to the  Company  from the  Offering,  after
underwriting discounts and commissions and other expenses of the Offering,  were
approximately $9,900,000.

NOTE 9 - ACQUISITIONS

     On May 7, 1998,  the Company  acquired  thirty  percent of the  outstanding
share capital of CPI  Consulting  Limited.  This  acquisition  was accounted for
utilizing  purchase  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 $3.1 million,  and a future  liability to the sellers  predicated  upon
operating  results for the balance of 1998.  The value of the liability has been
determined  as of  December  31,  1998 to be $2.5  million,  which is payable by
issuance of additional  155,208 shares of the Company's Common Stock. The excess
of purchase price over the fair value of the net assets  acquired was attributed
to intangible assets, amounting in the aggregate to $5.8 million.


                                     F - 17
<PAGE>

     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.

     On November 25, 1998, the Company consummated the acquisition of all of the
outstanding  capital  stock  of  each of  Azimuth  Consulting  Limited,  Azimuth
Holdings Limited,  Braithwaite  Richmond Limited and Azimuth Corporation Limited
(collectively the "Azimuth Companies"). The acquisition of the Azimuth Companies
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 902,928 shares of the
Company's Common Stock.

     The pre-merger  results of CPI Resources  Limited and the Azimuth Companies
were revenues of  $14,137,000  and net income of $190,000 for 1997, and revenues
of  $14,510,000  and a net loss after taxes of $11,000 for 1996.  In  connection
with these mergers, $2,118,000 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 mergers.

NOTE 10 - SEGMENT DATA AND GEOGRAPHIC INFORMATION

     The Company operates in one industry,  IT Services.  The Company's  service
lines share similar customer bases. The Company's identifiable business segments
can be categorized into three groups:

     o    ERP Implementation Services ("ERP") is the largest business segment of
          the   Company's   operations,   and   includes   the   implementation,
          integration,  and  development  of solutions  for clients  utilizing a
          class of application  products known as Enterprise  Resource  Planning
          software.  This class of products include  software  developed by such
          companies as SAP, Oracle, PeopleSoft, and Baan.

     o    Management  Consulting ("MC") includes business  consulting  services,
          such  as  Business  Process  Re-engineering,   Change  Management,  IT
          Strategy, and Software Selection.

     o    Advanced  Technology  Practice  ("ATP") includes  Internet  technology
          solutions  and custom  application  and  enhancement  development  for
          clients.



                                     F - 18
<PAGE>

     The following table presents financial information based upon the Company's
identifiable business segments for the year ended December 31, 1998. Information
on revenue, operating income and margins for these segments is not available for
the year ended  December 31, 1997, and the Company  determined  that it would be
impractical to recreate such data. Substantially all of the Company's operations
for the year ended December 31, 1996 were in the ERP segment:

<TABLE>
<CAPTION>
Year Ended December 31, 1998                    ERP                MC                ATP
                                            ------------       -----------        -----------

<S>                                         <C>                 <C>                <C>        
Revenues                                    $120,761,000        $8,873,000         $15,227,000

Operating Income                             $25,836,000       ($1,232,000)         $2,304,000

Operating Margin                               21.4%               N/A              15.1%
</TABLE>


     The Company also  incurred  corporate  expenses  for  selling,  general and
administrative  activities of $12,820,000 and non-recurring  acquisition related
charges of  $2,118,000  during the year ended  December 31,  1998,  resulting in
total operating income of $11,970,000. Other 1998 information is as follows:

        Income before taxes                 $12,090,000

        Total assets                        $65,728,000

        Capital expenditures                $ 7,410,000

        Depreciation and amortization       $ 1,538,000

     The following table presents financial information based upon the Company's
geographic segments for the years ended December 31, 1998 and 1997. For the year
ended December 31, 1996, substantially all of the Company's revenues,  operating
income, and assets were located within the United States.

                            Net               Operating         Identifiable
    1998                  Revenues             Income              Assets  
                          -------------------------------------------------

United States            $101,563,000      $  7,719,000         $48,983,000
Asia-Pacific               19,466,000         2,299,000           8,475,000
Europe                     23,832,000         1,952,000           8,270,000
                         --------------------------------------------------
Total                    $144,861,000       $11,970,000         $65,728,000
                         ==================================================

                            Net               Operating         Identifiable
    1997                  Revenues             Income              Assets  
                          -------------------------------------------------

United States            $ 69,278,000      $  4,075,000         $34,045,000
Asia-Pacific               12,438,000         1,875,000           3,849,000
Europe                     12,610,000           781,000           4,112,000
                         --------------------------------------------------
Total                    $ 94,326,000      $  6,731,000         $42,006,000
                         ==================================================


                                     F - 19
<PAGE>
NOTE 11 - SUBSEQUENT EVENTS

     On January 8, 1999, the Company acquired Network Publishing, Inc., based in
Provo,  Utah, for a purchase price of approximately  $4.5 million  consisting of
cash and Intelligroup  common stock.  NetPub shareholders will receive a portion
of this  consideration  as an  earnout,  payable  at a  later  date  subject  to
operating performance.

     On January 29,  1999,  the Company  entered  into a new  three-year  credit
agreement (the "Credit Agreement") with the PNC Bank N.A. (the "Bank").  The new
credit  facility  with the  Bank is  comprised  of a  revolving  line of  credit
pursuant  to which the  Company  may  borrow up to $30.0  million  either at the
Bank's prime rate per annum or the EuroRate plus 2% (at the  Company's  option).
The  Credit  Agreement  contains  covenants  which  require  the  Company to (i)
maintain a  consolidated  cash flow leverage  ratio equal to or less than 2.5 to
1.0 for the period of four fiscal quarters  preceding the date of  determination
taken together as one accounting period,  (ii) maintain a consolidated net worth
of not less than 90% of the consolidated net worth as of September 30, 1998 plus
50% of positive net income commencing October 1, 1998, and thereafter at the end
of each fiscal  year,  to be not less than  consolidated  net worth of the prior
fiscal year plus 50% of  positive  net income for such  fiscal  year,  (iii) not
enter into any agreement to purchase and/or pay for, or become  obligated to pay
for capital expenditures,  long term leases, capital leases or sale lease-backs,
in an amount at any time outstanding  aggregating in excess of $5,000,000 during
any fiscal year,  provided,  however,  in a one year  carry-forward  basis,  the
Company  may incur  capital  expenditures  not to exceed  $8,000,000  during any
fiscal  year,  and (iv)  shall not  cause or permit  the  minimum  fixed  charge
coverage  ratio,  calculated  on the basis of a  rolling  four  quarters  of (a)
consolidated  EBITDA to (b) the sum of cash  income tax  expense  plus  interest
expense,  plus  scheduled  principal  payments  under  any  indebtedness,   plus
dividends or  distributions  paid or declared,  to be less than 1.4 to 1.0 as at
the end of each fiscal quarter. The proceeds of the Credit Agreement may be used
by the Company for financing acquisitions and general corporate purposes. At the
Company's option, for each loan, interest shall be computed either at the Bank's
prime rate per annum or the Adjusted Libo Rate plus the  Applicable  Margin,  as
such terms are defined in the Loan Agreement.  The Company's  obligations  under
the credit  facility are payable at the  expiration  of such facility on January
29, 2002.

     On February 16, 1999,  the Company  completed  the  acquisition  of Empower
Solutions,  LLC, in a  transaction  expected to be accounted for as a pooling of
interests.  Intelligroup  issued  approximately 1.8 million shares of its common
stock in exchange for 100% Empower's outstanding equity.



                                     F - 20