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, 1999
                         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:  $373,363,733 at March 28, 2000 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 28, 2000:


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


Common Stock, $.01 par value                                     16,377,254


        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 2000 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.................................................. 21

           3.   Legal Proceedings........................................... 21

           4.   Submission of Matters to a Vote of Security Holders......... 22

PART II    5.   Market for the Company's Common Equity and Related
                Shareholder Matters......................................... 23

           6.   Selected Financial Data..................................... 25

           7.   Management's Discussion and Analysis of Financial
                Condition and Results of Operations......................... 27

           7A.  Quantitative and Qualitative Disclosure About Market Risk... 38

           8.   Financial Statements........................................ 38

           9.   Changes in and Disagreements with Accountants on
                Accounting and Financial Disclosure......................... 38

PART III   10.  Directors, Executive Officers, Promoters and Control
                Persons; Compliance with Section 16 (a) of the
                Exchange Act................................................ 39

           11.  Executive Compensation...................................... 39

           12.  Security Ownership of Certain Beneficial Owners
                and Management.............................................. 39

           13.  Certain Relationships and Related Transactions.............. 39

PART IV    14.  Exhibits, List and Reports on Form 8-K...................... 40

SIGNATURES.................................................................. 41

EXHIBIT INDEX............................................................... 43

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  enterprise-wide business process
solutions,  IT  training  solutions,  systems  integration  and custom  software
development based on leading technologies.  In addition,  through SeraNova, Inc.
("SeraNova"),  a 95.2% owned  subsidiary  of the Company,  the Company  provides
professional   services,   primarily   in  the  area  of  business  to  business
interactions  on  the  Internet.   Business  to  business  interactions  include
communication  and  commerce  conducted  between  a company  and its  customers,
suppliers  and  partners.  SeraNova  offers  a  comprehensive  set of  services,
including strategic consulting,  creative design,  technology implementation and
management of Internet applications.

     The Company was  incorporated  in New Jersey in October 1987 under the name
Intellicorp,   Inc.  to  provide   systems   integration   and  custom  software
development. The Company's name was changed to Intelligroup,  Inc. in July 1992.
In March 1994, the Company acquired Oxford Systems Inc. ("Oxford").  On December
31,  1996,  Oxford  was  merged  into  the  Company  and  ceased  to exist as an
independent  entity.  On September 9, 1999, the Company formed  Infinient,  Inc.
("Infinient")  as its  wholly-owned  subsidiary.  In November  1999, the Company
announced  its  intention  to spin off its  Internet  services  business  to the
shareholders  of  Intelligroup,  subject to certain  conditions.  On December 6,
1999,  Infinient  changed  its name to  SeraNova,  Inc.  On  January 1, 2000 the
Company  transferred its Internet services business to SeraNova.  On January 27,
2000,  SeraNova filed a Registration  Statement with the Securities and Exchange
Commission relating to the proposed spin-off of SeraNova from Intelligroup. Such
spin-off  is  expected  to be  effective  in the  second  quarter  of 2000.  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.



                                     - 4 -
<PAGE>

     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.

     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 it was the first
services company to achieve ISO 9001 certification for offshore SAP development.
In September 1999, the Company's ISO 9001  certification was extended to include
development,  support and optimization services for all enterprise, Internet and
client/server  solutions.  Such certification covers the Company's work with all
major enterprise software vendors including SAP, Oracle, PeopleSoft and Baan, as
well as  Internet  applications.  In November  1999,  the ADC  achieved  SEI CMM
Level-3 process certification. Such certification is required for the Capability
Maturity Model of Carnegie Mellon University's Software Engineering Institute.

     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 2000.
Upon  consummation  of such transfer,  Intelligroup  Asia will be a wholly owned
subsidiary of the Company.



                                     - 5 -
<PAGE>

     In October  1999,  the Company  created  its  Internet  Development  Center
("IDC") in Hyderabad, India. At its IDC, the Company provides Internet solutions
for its clients around the world.  The IDC shares the same quality  processes as
the ADC. Additionally,  the IDC also houses the Company's Enterprise Information
Portal  ("EIP")  solutions  architecture  team and provides  global  support and
training for SeraNova'a consultants.

     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  600 customers in
1999.  The  Company's  customers  are Fortune 1000 and other large and mid-sized
companies in the United States and abroad.  They have included  Armstrong  World
Industries, AT&T, Block Drug Company,  Bristol-Myers Squibb, IMC Global, Simon &
Schuster,  American Express and Volkswagen. 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:

     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 customer's 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  has  expanded  and  intends to continue 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,



                                     - 6 -
<PAGE>

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.

     In  December  1998,  the  Application   Management  Services  practice  was
reorganized as the worldwide Enterprise Sourcing Services ("ESS") practice.  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.  The ADC  enables  ESS to take on larger and
more  complex  implementation  projects  and  outsourcing  arrangements,   while
maintaining the Company's 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.

     In November 1999, the Company made a strategic  decision (1) to refocus its
core business to capitalize  upon the  Applications  Services  Provider  ("ASP")
market for  customized  eCommerce and  enterprise  applications  implementation,
management,  support  and  hosting  and (2) to spin  off its  Internet  services
business.  The Company services the ASP market with its ASPPlus  Solutions which
include  implementation,  management  and hosting of  e-commerce  solutions  and
enterprise  applications,  as well as its myADVISOR(sm)  offering which provides
web-based  customer-specific  user support.  ASPPlus is a mass  customization of
mission  critical  e-commerce  and  enterprise  business  applications.  Through
ASPPlus,  the Company offers  pre-configured  industry vertical solutions to its
clients' specific e-commerce and enterprise needs.

     The  Company's  Internet  services  business,  operated  through  SeraNova,
addresses the rapidly growing eBusiness  services market.  The Company helps its
clients achieve  improved  time-to-market  through a lifecycle suite of Internet
solutions services, from strategy, through design and implementation, to support
and hosting.  The Company  offers a  comprehensive  set of  services,  including
strategic consulting,  creative design, technology implementation and management
of Internet  applications.  The Company  uses its  proprietary  methodology,  or
Time-to-Market  Approach  to deliver  professional  services.  Such  methodology
identifies  and  prioritizes  initiatives,  rapidly  delivers  them  to  market,
captures  valuable market  experience and feedback and  immediately  applies the
feedback to refine the solution.  The Company believes that this process results
in a solution that  provides  measurable  competitive  advantage to its clients.
This  approach  allows the  Company to  identify,  capture  and re-use  valuable
Internet frameworks that it develops in client projects.

     The Company's services enable  traditional  businesses to combine the scope
and  efficiencies  of the Internet  with their  existing  business  practices to
provide  an  integrated   eBusiness.   The  Company  also  works  with  emerging
Internet-based companies that conduct their



                                     - 7 -
<PAGE>

business  exclusively  through the  Internet.  During the last three years,  the
Company  has  performed  Internet  solutions  services  for over 80 clients in a
variety of industries.

     Trademarks and Service Marks

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

     "Azimuth" is a trademark of Azimuth Consulting, a subsidiary of SeraNova.

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

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

     Safe Harbor Statements

     This Form 10-K contains  forward-looking  statements  within the meaning of
Section 21E of the  Securities  Exchange  Act of 1934,  as  amended,  including,
without  limitation,  statements  regarding the Company's  intention to shift 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 and the Company's
intent to spin-off  its  Internet  services  business  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;

                                     - 8 -
<PAGE>

     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;

     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.

     o    the Company's  ability to successfully  spin off its Internet services
          business.  The risks  relating  to such  spin-off  are set forth  more
          specifically  in the  Registration  Statement  filed  by  SeraNova  in
          connection with the proposed spin-off.

     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.



                                     - 9 -
<PAGE>

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

     As part of their client/server strategies,  organizations often acquire, or
consider   acquisition   of,   packaged    enterprise-wide   business   software
applications,  including  those  offered by leading  ERP  vendors,  such as SAP,
Oracle,   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.

     The Internet  represents a revolutionary and powerful vehicle through which
businesses  and entire  industries  will  conduct  day-to-day  operations.  As a
result,  many companies are being forced to reevaluate  their business models to
implement new or  supplement  current  Internet-based  business  solutions.  The
development and implementation of Internet-based services and solutions requires
the integration of strategic consulting, creative design and systems engineering
skills.  Given the increasing pressure to bring products and offerings to market
quickly,   training  in-house   employees  to  learn  the  requisite  skills  is
impractical. In addition, hiring and maintaining a full-service staff of trained
professionals can be inefficient and costly.  Accordingly,  many businesses have
chosen to  outsource  some or all of their  Internet  services  requirements  to
outside   specialists  with  strategic,   consulting,   creative  and  technical
expertise.



                                     - 10 -
<PAGE>

     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  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.



                                     - 11 -
<PAGE>

     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.

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.

     We  deliver 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  offshore  development,  support  and  optimization
services  for  all  enterprise,  Internet  and  client  server  solutions.  Such
certification  includes the Company's work with  virtually all major  enterprise
software vendors including SAP, Oracle, PeopleSoft and Baan, as well as Internet
applications.  The ADC has also received SEI CMM Level-3 process  certification.
Such  certification  is required for the  Capability  Maturity Model of Carnegie
Mellon University's Software Engineering Institute. 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



                                     - 12 -
<PAGE>

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.

     The  Company's  offshore  IDC  provides  Internet  solutions,   houses  the
Company's Enterprise  Information Portal (the "EIP") solutions architecture team
and provides  global  support and training for SeraNova's  consultants.  The IDC
shares the same quality processes as the ADC.

     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.

     Proprietary   Methodologies:   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.  SeraNova's  proprietary  methodology is SeraNova's  Time-to-Market
Approach. SeraNova's Time-to-Market Approach consists of five phases: eStrategy,
discover,  plan, implement and optimize.  SeraNova's  Time-to-Market Approach is
designed  to  effectively   strategize,   design  and  rapidly  deploy  Internet
solutions.

INTELLIGROUP SERVICES

     Intelligroup  provides a wide  range of  information  technology  services,
including  enterprise-wide  business process solutions,  IT training  solutions,
systems   integration   and  custom  software   development   based  on  leading
technologies.

     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, it is beginning to enter into  outsourcing


                                     - 13 -
<PAGE>

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.

ENTERPRISE RESOURCE PLANNING SOLUTIONS

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

     Accelerated  Implementation  Methodology  and  Toolset:  As a result of our
experience in implementing ERP software, the Company has developed a proprietary
methodology  (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.

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.

                                     - 14 -
<PAGE>

     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. Intelligroup
and SeraNova 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.

     The IDC is central to the Company's  global  resourcing  model for Internet
solutions.  The IDC provides Internet solutions for the Company's clients around
the world.  Through the IDC,  the  Company  can  provide  its clients  with 24x7
maintenance and support.  The IDC shares the same quality  processes as the ADC.
Consultants with expertise in technologies from Sun (Java), Microsoft,  Vignette
and other leading  Internet  vendors work out of the center.  Additionally,  the
center houses the Company's EIP solutions architecture team. The Company intends
to add  additional  technical  competencies  at the  center.  Such  competencies
include  the  technologies  that form the basis of the  Company's  EIP  solution
architecture such as Broadvision,  Corechange, CrossWorlds, Epicentric, Plumtree
and WebMethods.

APPLICATION SERVICE PROVIDER MARKET SOLUTIONS

     The  Company  services  the ASP market  with its  ASPPlus  Solutions  which
include  implementation,  management  and hosting of  e-commerce  solutions  and
enterprise  applications,  as well as its myADVISOR(sm)  offering which provides
web-based  customer-specific user support. ASPPlus utilizes a mass customization
approach,  providing  pre-configured  vertical  industry  solutions  of  mission
critical e-commerce and enterprise business  applications.  Through ASPPlus, the
Company  offers  customized  solutions to its client's  specific  e-commerce and
enterprise needs.



                                     - 15 -
<PAGE>

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.  Since January 1, 2000, the Company's
Internet  solutions  business has been conducted by its subsidiary  SeraNova and
SeraNova's subsidiary, NPI.

     The Company's  core  expertise has been in the  technical  development  and
integration  of these  solutions.  However,  a key  element  of the new breed of
Internet solution relates to the projection of the customers' offerings 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 the Company'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.  SeraNova intends to leverage its proven 4Sight methodologies
and  offshore  development  model to  pursue  Internet  business  opportunities.
SeraNova  believes  that the existing set of ERP  customers  will be a receptive
audience  for  Internet  solutions.   These  customers  represent  a  large  and
well-defined  target,  which  can be  reached  by  SeraNova'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.  SeraNova  intends to promote the use of  enterprise  information
portals in marketing its Internet solutions  services.  SeraNova's core platform
for business to business  solutions  development is the EIP. EIP for enterprises
is a customized  browser-based interface which allows a company to aggregate all
disparate  systems  within  an  enterprise,   such  as  ERP  systems,   workflow
applications,  customer  relationship  management  systems  and  other  business
applications as well as databases under a common platform.  Every constituent of
a company,  including senior management,  salespeople,  engineers,  suppliers or
customers interact with the enterprise through a single customized browser-based
interface.  An EIP  integrates  all  the  internal  systems,  connects  them  to
applications residing outside the company while managing the security and access
to content and  applications.  In summary,  it provides a flexible and scaleable
platform for business to business activities on the web.



                                     - 16 -
<PAGE>

MANAGEMENT CONSULTING SERVICES

     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  strengthened  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.   Since  its  contribution  to  SeraNova  by
Intelligroup  on  January  1,  2000,  Azimuth  now  operates  as a  wholly-owned
subsidiary of SeraNova with headquarters in Wellington, New Zealand. The Company
has integrated its existing management  consulting services groups in the United
States and Europe, under Azimuth worldwide.

SALES AND MARKETING

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

     The Company has  dedicated  an  increased  level of  resources to sales and
marketing  efforts.  The Company will continue to market to potential  customers
with  demonstrated  needs  for  the  Company's  expertise  in ERP  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. On December 21, 1999, the Company and SeraNova  entered into a consulting
services agreement with Mueller/Shields.  Additionally, on February 4, 2000, the
Company  entered  into a consulting  services  agreement  with  Mueller/Shields.
Pursuant  to such  agreements,  Mueller/Shields  will  provide  the  Company and
SeraNova with sales, marketing, training and strategic planning services.


                                     - 17 -
<PAGE>

     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, 1999, the Company's  sales and marketing group consisted
of 34 employees in the United States, 9 for Europe,  and 30 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, D.C.; Atlanta, GA; Fayetteville, GA; Rosemont, IL; Auburn Hills, MI;
Houston,  TX and Provo,  UT serve the United  States  market.  In addition,  the
Company,  also  maintains  offices in Europe  (Denmark,  the United  Kingdom and
Sweden);  Asia Pacific  (Australia,  India,  Japan,  New  Zealand,  Philippines,
Singapore and Thailand). Azimuth Consulting operates worldwide with headquarters
in  Wellington,  New Zealand.  During 1999,  the Company's  existing  management
consulting  services  groups in the United  States and Europe,  were 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.

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 600 customers in the year ended December 31, 1999.

     The  Company's  ten largest  customers  accounted  for,  in the  aggregate,
approximately  44%,  38%  and  38%  of its  revenue  in  1997,  1998  and  1999,
respectively.  During 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.  During 1999,  the  Government of Puerto
Rico accounted for more than 10% of revenue.  In 1997,  1998 and 1999,  31%, 19%
and 38%,  respectively,  of the Company's  revenue was generated by serving as a
member of consulting teams assembled by other information  technology consulting
firms.

     Although  the Company has  contracts  with many of its large  customers  to
provide its services,  in general such contracts are terminable  upon relatively
short notice, typically not more



                                     - 18 -
<PAGE>

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):

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

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

     o    Software applications vendors: SAP, Oracle, Baan and PeopleSoft.

     o    Internet  professional service providers:  including Sapient,  Scient,
          Viant and Proxicom.

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

     o    ASP service providers:  Breakaway Solutions, Inc.,  USinternetworking,
          Inc., Interliant, Inc. and Futurelink Corporation.

     In addition,  the Company  competes with smaller  companies  such as Plaut,
Clarkson-Potomac 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



                                     - 19 -
<PAGE>

Company's  markets and the  Company has faced,  and expects to continue to face,
additional competition from new entrants into its markets.

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

     The Company  believes that it competes  based on its  expertise  across the
full life cycle of its  clients'  ERP 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, 1999, the Company employed 1,628 full-time employees, of
whom 1,268 were  engaged  as  consultants  or as  software  developers,  73 were
engaged  in sales and  marketing,  and 287 were  engaged  in sales and  delivery
management,  finance and administration.  Of the total number of employees,  718
were based in the United  States,  810 were based in the Asia Pacific region and
100 were based in Europe.  In  addition,  the Company  engaged  112  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 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



                                     - 20 -
<PAGE>

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, 1999,  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, D.C.; Atlanta, GA; Fayetteville,  GA; Rosemont, IL;
Auburn  Hills,  MI;  Houston,  TX; and Provo,  UT, and  operations in Hyderabad,
India; Australia; Sweden, Denmark; Japan; New Zealand;  Philippines,  Singapore,
Thailand and the United Kingdom.


ITEM 3.   LEGAL PROCEEDINGS.

     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. On October 12, 1999, the parties negotiated a settlement to dispose of
all claims  asserted in this  lawsuit.  The Company  drafted  and  circulated  a
settlement  agreement which has been executed by the parties and disposes of the
lawsuit with no material effect on the Company's  business,  financial condition
or results of operations.

     On January 20, 1999, Tony Knight, a former employee of the Company, filed a
complaint in the Superior  Court of the State of  California,  San Mateo County,
naming the Company,  among others,  as a defendant.  The complaint,  which seeks
damages,  alleges,  among other things, that the Company  discriminated  against
plaintiff because of his race, ancestry, religious creed and national origin and
thereafter  wrongfully  terminated the plaintiff's  employment with the Company.
The  Company,  through  its  counsel,  acknowledged  receipt of the  summons and
complaint on April 20, 1999.  On May 19,  1999,  the Company  removed the action
from the California  Superior Court to the United States  District Court for the
Northern District of California. A discovery scheduling order was entered at the
case  management  conference held on December 2, 1999.  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.



                                     - 21 -
<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.




                                     - 22 -
<PAGE>

                                     PART II


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

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

              Quarter Ended             High           Low
              -------------             ----           ---

          March 31, 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
          March 31, 1999              $  20 1/2       $ 5 1/4
          June 30, 1999               $   9 5/8       $ 5
          September 30, 1999          $   7 11/16     $ 5 1/8
          December 31, 1999           $  27 11/16     $ 6 7/8

     As of March 28, 2000,  the  approximate  number of holders of record of the
Common  Stock was 89 and the  approximate  number of  beneficial  holders of the
Common Stock was 2,730.

     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  May 7,  1998,  the  Company,  through  its  wholly-owned
         subsidiary   Intelligroup   Europe  Limited  (No.   3205142),   a
         corporation  formed  pursuant  to the laws of  England  and Wales
         ("Intelligroup   Europe"),   consummated  the  acquisition   (the
         "Consulting  Acquisition")  of thirty percent (30%) of the equity
         interests in CPI Consulting Limited (No. 3316554),  a corporation
         formed pursuant to the laws of England and Wales  ("Consulting").
         In  addition,  on May  21,  1998,  the  Company  consummated  the
         acquisition  (the "Resources  Acquisition")  of all of the equity
         interests in CPI Resources Limited (No.  2080824),  a corporation
         formed  pursuant to the laws of England and Wales  ("Resources").
         As a result of the Resources  Acquisition,  the Company  acquired
         Resources'  seventy  percent (70%)  interest in  Consulting.  The
         principal  activity  of  each  of  Resources  and  Consulting  is
         providing information  technology consulting staffing services in
         the United Kingdom.

                                     - 23 -
<PAGE>

              In connection with the Consulting Acquisition,  on March 22,
         1999,  the  Company  issued an  aggregate  of 155,208  restricted
         shares of its Common  Stock,  $0.01 par value per  share,  to the
         minority  investors  relating to the  earn-out  provision  of the
         Agreement  of Purchase and Sale.  On June 10,  1999,  the Company
         filed an amendment to its  Registration  Statement on Form S-3 to
         register an aggregate  of 77,604 of such  shares.  On January 28,
         2000,  the  Company  filed  an  amendment  to  its   Registration
         Statement  on  Form  S-3 to  register  an  aggregate  of  77,604,
         representing  the  balance of such shares The Company did not and
         will not receive any of the proceeds  from sales of the shares by
         the minority investors.

              On February 16, 1999, the Company consummated (i) the merger
         of  Empower  Solutions,  L.L.C.,  a  Michigan  limited  liability
         company, with and into the Company's  wholly-owned  subsidiary ES
         Merger Corp., a Michigan  corporation  ("ES Merger  Corp."),  and
         (ii) the merger of ES Merger Corp. with and into Empower,  Inc. a
         Michigan  corporation  and an  affiliate  of  Empower  Solutions,
         L.L.C.  (the  mergers  of  Empower  Solutions,   L.L.C.  and  its
         affiliate Empower,  Inc. shall be referred to herein collectively
         as the  "Merger").  As a  result  of the  Merger,  Empower,  Inc.
         ("Empower")  became a  wholly-owned  subsidiary  of the  Company.
         Empower  is an  implementation  partner  of  PeopleSoft  and  its
         principle activities are business process reengineering,  systems
         design development, project management and training services. The
         Merger was accounted for as a pooling of interests.

              In  connection  with the Merger,  on December 22, 1999,  the
         Company issued an aggregate of 179,611  restricted  shares of its
         Common Stock, $0.01 par value per share, to Patrick J. Kavanaugh,
         Kurt A. Collins,  Marcelo J. Casas and Jay D. Hiller  relating to
         the provisions of the Net Book Value Adjustment  provision of the
         Agreement  and Plan of Merger.  On January 28, 2000,  the Company
         filed an amendment to its  Registration  Statement on Form S-3 to
         register  such  shares.  The Company did not and will not receive
         any  of  the  proceeds  from  sales  of  the  shares  by  Messrs.
         Kavanaugh, Collins, Casas and Hiller.

              On January 8, 1999, the Company  consummated the acquisition
         (the  "NPI  Acquisition")  of all of the  shares  of  outstanding
         capital  stock  of  Network  Publishing,  Inc.  ("NPI"),  a  Utah
         corporation  located  in  Provo,  Utah.  As a  result  of the NPI
         Acquisition, NPI became a wholly-owned subsidiary of the Company.
         The principal activities of NPI are web site design and front-end
         application solutions services.

              Subsequent  to the year  ended  December  31,  1999,  and in
         connection  with the NPI  Acquisition,  on January 11, 2000,  the
         Company  issued an aggregate of 99,558  restricted  shares of its
         Common Stock,  $0.01 par value per share, to Richard Maw, Richard
         Farr  and  Michael  Donahue  relating  to the  provisions  of the
         earn-out  provision of the Stock Purchase  Agreement.  On January
         28, 2000,  the Company  filed an  amendment  to its  Registration
         Statement on Form S-3 to register  such  shares.  The Company did
         not and will not  receive any of the  proceeds  from sales of the
         shares by Messrs. Maw, Farr and Donahue.


                                     - 24 -
<PAGE>

ITEM 6.      SELECTED FINANCIAL DATA.

     The selected  statement of operations data for the years ended December 31,
1997, 1998 and 1999 and the selected  balance sheet data as of December 31, 1998
and 1999 are derived from,  are qualified by reference to, and should be read in
conjunction with, the more detailed audited  consolidated  financial  statements
and the related notes thereto included  elsewhere herein. The selected statement
of  operations  data  for the  year  ended  December  31,  1995 and 1996 and the
selected  balance  sheet data as of December 31,  1995,  1996 and 1997 have been
derived from audited financial  statements of the Company which are not included
elsewhere  herein.  Prior  period  financial  information  has been  restated to
reflect  the  Company's  acquisitions  of  Empower  Solutions,  L.L.C.  and  its
affiliate Empower, Inc. during 1999, which were accounted for in accordance with
the pooling of interests rules under generally accepted accounting principles.

     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>
                                                                1995        1996        1997         1998         1999
                                                             ----------  ----------  ----------   ----------   ----------
                                                                         (In thousands, except per share data)
<S>                                                          <C>         <C>         <C>          <C>          <C>
STATEMENT OF OPERATIONS DATA:
Revenue................................................      $ 39,283    $ 61,699    $ 98,301     $ 162,840    $ 186,067
Cost of sales..........................................        29,263      43,142      67,452       104,984      119,857
                                                             --------    --------    --------     ---------    ---------
  Gross profit.........................................        10,020      18,557      30,849        57,856       66,210
                                                             --------    --------    --------     ---------    ---------
Selling, general and administrative expenses...........         8,401      14,544      22,449        38,074       60,807
Acquisition expenses...................................            --          --          --         2,118        2,115
Spin-off costs.........................................            --          --          --            --          751
Restructuring and other special charges................            --          --          --            --        7,328
                                                             --------    --------    --------     ---------    ---------
  Total selling, general and administrative expenses...         8,401      14,544     22,449         40,192       71,001
                                                             --------    --------    --------     ---------    ---------
  Operating (loss) income..............................         1,619       4,013      8,400         17,664      (4,791)
Factor charges/interest expense (income), net..........         1,327       1,335       (265)          (187)         593
                                                             --------    --------    --------     ---------    ---------
(Loss) income before provision for income taxes and
  extraordinary charge.................................           292       2,678       8,665        17,851      (5,384)
Provision for income taxes.............................           587         748       2,327         4,451        1,206
                                                             --------    --------    --------     ---------    ---------
(Loss) Income before extraordinary charge..............          (295)      1,930       6,338        13,400      (6,590)
Extraordinary charge, net of income tax
  benefit of $296......................................            --       1,148          --            --           --
                                                             --------    --------    --------     ---------    ---------
      Net (loss) income................................      $   (295)   $    782    $  6,338     $  13,400    $ (6,590)
                                                             ========    ========    ========     =========    =========
Earnings (loss) per share(1):
  Basic earnings (loss) per share:
    (Loss) income before extraordinary charge..........      $  (0.02)   $   0.18    $   0.43     $    0.87    $   (0.42)
    Extraordinary charge, net of income tax benefit....            --        0.11          --           --            --
                                                             --------    --------    --------     ---------    ---------
      Net (loss) income................................      $  (0.02)   $   0.07    $   0.43     $    0.87    $   (0.42)
                                                             ========    ========    ========     =========    =========
Weighted average number of common shares - Basic.......        15,011      11,003      14,637        15,387       15,766
                                                             ========    ========    ========     =========    =========
Diluted earnings (loss) per share:
  (Loss) income before extraordinary charge............      $  (0.02)   $   0.16    $   0.42     $    0.84    $   (0.42)
  Extraordinary charge, net of income tax benefit......            --        0.10          --           --            --
                                                             --------    --------    --------     ---------    ---------
      Net (loss) income................................      $  (0.02)   $   0.06    $   0.42         0.84     $   (0.42)
                                                             ========    ========    ========     =========    =========
Weighted average number of common shares - Diluted.....        15,011      12,263      15,117        15,969       15,766
                                                             ========    ========    ========     =========    =========
</TABLE>

                                     - 25 -
<PAGE>

<TABLE>
<CAPTION>
                                                                                   As of December 31,
                                                             -----------------------------------------------------------
                                                                 1995        1996        1997         1998        1999
                                                             ----------- ----------- -----------  ----------  ----------
                                                                                    (In thousands)
<S>                                                          <C>         <C>         <C>          <C>         <C>
 Balance Sheet Data:
   Cash and cash equivalents...........................      $   1,412   $   8,301   $   8,825    $   4,245   $   6,121
   Working capital surplus (deficit)...................           (991)     16,246      30,500       32,641      29,133
   Total assets........................................         12,571      24,945      43,064       69,565      83,062
   Short-term debt, including subordinated
     debentures........................................          3,608         226         386           11      10,705
   Long-term debt and obligations under capital leases,
    less current portion...............................            206         108         355           60         618
   Shareholders' equity................................            128      18,280      34,036       47,949      48,654
</TABLE>


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


                                     - 26 -
<PAGE>

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

OVERVIEW

     The  Company  provides a wide  range of  information  technology  services,
including  enterprise-wide  business process solutions,  IT training  solutions,
systems   integration   and  custom  software   development   based  on  leading
technologies. In November 1999, the Company announced its intentions to spin-off
its Internet  applications services business (SeraNova).  Through SeraNova,  the
Company  provides  professional  services,  primarily in the area of business to
business interactions on the Internet. Business to business interactions include
communication  and  commerce  conducted  between  a company  and its  customers,
suppliers  and  partners.  SeraNova  offers  a  comprehensive  set of  services,
including strategic consulting,  creative design,  technology implementation and
management  of Internet  applications.  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  and  1999,  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  the  purchase   method  of
accounting.  The  consideration  paid by the Company  included  the  issuance of
165,696  shares of the  Company's  Common Stock with a fair market value of $3.1
million at the time of purchase.  An additional  155,208 shares of the Company's
Common Stock with a fair market value of $2.5 million was paid on March 22, 1999
pursuant to an earn-out  relating to the operational  results for the balance of
1998.  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.



                                     - 27 -
<PAGE>

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

     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.

     On January 8, 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.  The value of the earn-out  was  determined  to be
$2,430,000  which was payable by the issuance of an additional  99,558 shares of
the Company's Common Stock and cash of $340,000.  Such shares were issued by the
Company on January 11, 2000,  however,  such  transaction  was  accounted for in
1999.  This  acquisition has been accounted for utilizing the purchase method of
accounting.  The  excess of the  purchase  price  over the fair value of the net
assets acquired was attributed to intangible  assets  amounting to $4,061,471 in
the aggregate.  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.  In addition,  the Company  issued an  additional  179,611  shares of its
Common Stock in  connection  with a net worth  adjustment  determined  as of the
closing date. The  acquisition  of the Empower  Companies was accounted for as a
pooling of  interests.  Prior  results  for all  periods  have been  restated in
accordance with pooling of interests  accounting.  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



                                     - 28 -
<PAGE>

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 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, 1999,  revenues  derived  from  projects  under fixed price
contracts represented approximately 9% of the Company's total revenue. No single
fixed price project was material to the Company's business during 1999. However,
one  fixed  price  project,  which  began  late in 1998  and is  expected  to be
completed in early 2000,  represented  4% of the Company's  revenue 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  financial  condition and results of
operations.

     The  Company has derived  and  believes  that it will  continue to derive a
significant  portion  of its  revenue  from a limited  number of  customers  and
projects.  For the years ended  December 31, 1997,  1998 and 1999, the Company's
ten largest customers accounted for in the aggregate, approximately 44%, 38% and
38% of its revenue, respectively. In 1997,  PricewaterhouseCoopers LLP accounted
for  approximately 10% of revenue.  During 1998, no customer  accounted for more
than 10% of revenue.  During 1999,  the  Government of Puerto Rico accounted for
more than 10% of revenue.  For the years ended December 31, 1997, 1998 and 1999,
31%,  19% and 38%,  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,
1997,  1998 and 1999,  56%, 52% and 42%,  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 1998 and 1999,
approximately 12% 11% and 7%,  respectively,  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,  1997,  1998  and  1999,
approximately 12%, 19% and 26%, respectively, of the Company's total revenue was
derived from  projects in which the Company  implemented  software  developed by
PeopleSoft.

     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



                                     - 29 -
<PAGE>

typically  carry  higher  margins.   The  Company  has  been  shifting  to  such
higher-margin  turnkey  management  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 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.
Additionally,  in September  1999, the Company  established  its IDC in India to
provide  Internet  solutions  for its  clients  around  the world.  The  Company
currently  maintains its headquarters in Edison,  New Jersey, and branch offices
in  Houston,   Fayetteville   (Georgia),   Rosemont  (Illinois),   Auburn  Hills
(Michigan),  Foster City (California),  Atlanta, Phoenix,  Washington,  D.C. and
Provo (Utah). The Company also currently maintains offices in Europe (the United
Kingdom,  Denmark, and Sweden),  and Asia Pacific (Australia,  India, Japan, New
Zealand,  the  Philippines,  Singapore  and  Thailand).  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.

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,
                                                    -------------------------------------------
                                                        1999             1998            1997
                                                        ----             ----            ----
<S>                                                     <C>              <C>             <C>
Revenue..........................................       100.0%           100.0%          100.0%
Cost of sales....................................        64.4             64.5            68.6
                                                       ------           ------          ------
  Gross profit...................................        35.6             35.5            31.4
Selling, general and administrative expenses.....        32.7             23.4            22.8
Acquisition expenses.............................         1.1              1.3              --
Spin-off costs...................................         0.4               --              --
Restructuring and other special charges..........         3.9               --              --
                                                       ------           ------          ------
  Operating (loss) income........................        (2.5)            10.8             8.6
Interest and other (expense) income, net.........        (0.3)             0.1             0.3
                                                       ------           ------          ------
(Loss) income before provision for income taxes
and extraordinary charge.........................        (2.8)            10.9             8.9
Provision for income taxes.......................         0.7              2.7             2.4
                                                       ------           ------          ------
(Loss) income before extraordinary charge........        (3.5)             8.2             6.5
Extraordinary charge, net of income tax benefit..         --                --              --
                                                       ------           ------          ------
  Net (loss) income .............................        (3.5)%            8.2%            6.5%
                                                       ======           ======          ======
</TABLE>



                                     - 30 -
<PAGE>

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

     Revenue.  Total revenue  increased by 14.3% or $23.3  million,  from $162.8
million in 1998 to $186.1  million  in 1999.  Enterprise  applications  services
("EAS") revenue  declined by 0.8% or $1.2 million from $147.5 million in 1998 to
$146.3 million in 1999.  This decrease was primarily  attributable to a decrease
in  expenditures  on ERP  implementations,  related to Y2K concerns as companies
shifted  resources  away from mission  critical,  enterprise-wide  applications.
Internet  applications  services ("IAS") revenue  increased by 158.4%,  or $24.4
million,  from $15.4 million in 1998 to $39.8  million in 1999.  The increase in
revenue is the result of an increase in the number of clients and an increase in
the  average  size  of  engagements,  as  well  as the  acquisition  of  Network
Publishing, Inc. on January 8, 1999.

     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 14.2%,  or $14.9  million,  from  $105.0
million in 1998 to $119.9 million in 1999. The Company's gross profit  increased
$8.4 million, or 14.5%, from $57.8 million in 1998 to $66.2 million in 1999. The
Company's gross profit margin remained  relatively  constant at 35.5% of revenue
in 1998 and 35.6% of revenue in 1999. The EAS cost of sales  increased  1.4%, or
$1.3 million, from $96.0 million in 1998 to $97.3 million in 1999. The EAS gross
profit margin  decreased  from 34.9% in 1998 to 33.4% in 1999.  The decrease was
primarily attributable to lower staff utilization,  experienced as a result of a
decrease in the ERP implementation  market. IAS cost of sales increased by $13.5
million,  or 150.0%,  from $9.0  million in 1998 to $22.5  million in 1999.  The
increase  was due to personnel  costs  resulting  from the hiring of  additional
consultants  to support the increase in demand for IAS. IAS gross profit margins
increased  from 41.6% in 1998 to 43.5% in 1999,  primarily  attributable  to the
higher margins generated by Network Publishing, Inc.

     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 the IDC and related development
costs and  professional  fees.  Selling,  general  and  administrative  expenses
increased  by 59.7%,  or $22.7  million,  from  $38.1  million  in 1998 to $60.8
million in 1999,  and  increased as a percentage of revenue from 23.4% to 32.7%,
respectively.  EAS selling,  general and  administrative  expenses  increased by
35.4%,  or $11.2  million,  from $31.6 million in 1998 to $42.8 million in 1999.
IAS selling, general, and administrative expenses increased by $11.6 million, or
181.3%,  from $6.4 million in 1998 to $18.0  million in 1999.  The  increases in
such expenses in absolute  dollars and as a percentage of revenue were primarily
due to the  increase in  salaries  and related  benefits,  reflecting  headcount
increases in the Company's  sales force and its marketing,  finance,  accounting
and administrative staff through acquisitions and in order to manage its growth.
The Company's  occupancy  costs  increased as a result of the  relocation of its
corporate  headquarters into  approximately  48,000 square feet of office space,
from its 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.  The
Company has also entered into an agreement with a strategic marketing



                                     - 31 -
<PAGE>

consulting  company,  which will generate sales leads,  support sales force, and
build a  salessystems  infrastructure,  for  both  the  enterprise  applications
services and Internet applications services businesses.

     Acquisition  expense.  During the year ended December 31, 1999, the Company
incurred costs of $2.1 million in connection with the acquisition of the Empower
Companies.  This  acquisition  was  accounted  for as a  pooling  of  interests.
Acquisition costs primarily  consisted of professional fees associated with such
acquisition.

     Spin-off  costs.  During the year ended  December  31,  1999,  the  Company
incurred costs of $751,000 in connection with the proposed  spin-off of SeraNova
from the Company. These costs primarily consisted of professional fees.

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

     Interest  expense  (income).  Interest  income has been  earned on interest
bearing cash accounts and short term investments.  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 incurred  approximately  $800,000 in interest expense during
the year ended December 31, 1999,  primarily related to its borrowings under its
line of credit.  Borrowings under the line of credit were used to fund operating
activities,  purchases of computer  equipment and office furniture and fixtures,
as well as for  acquisitions.  The  interest  expense  was  partially  offset by
interest income of $207,000 in 1999.

     Provision  for  income  taxes.  While the  Company  experienced  an overall
pre-tax loss, profits generated in certain foreign jurisdictions resulted in tax
expense for the year ended December 31, 1999. Although the Company expects these
foreign taxes to produce  foreign tax credits in the United States,  the ability
to apply these credits may be limited and, therefore, the Company has provided a
valuation  allowance  against  such tax credits  which has  negatively  impacted
income tax expense.  The Company's effective income tax rate was 22% and 25% for
the years ended  December 31, 1999 and 1998,  respectively.  The 1999  effective
income tax rate was negatively  impacted by nondeductible  amortization from the
NPI  Acquisition.  In 1996, the Company elected a five year tax holiday in India
in accordance  with a local tax incentive  program whereby no income tax will be
due during such period.  Such tax holiday was extended



                                     - 32 -
<PAGE>

an additional five years in 1999. For the year ended December 31, 1999 and 1998,
the taxholiday  favorably  impacted the effective tax rate by approximately  18%
and 7%, respectively. Based on current and anticipated profitability, management
believes  all  recorded  net  deferred tax assets are more likely than not to be
realized.

     As  discussed  in  Note 11 to the  consolidated  financial  statements,  on
February 16, 1999, the Company  acquired Empower Solutions,  L.L.C. and Empower,
Inc. (a corporation  organized under subchapter S of the Internal Revenue Code).
The acquisitions were accounted for as poolings of interests and thus prior year
financial  statements  have been  restated  in  accordance  with the  pooling of
interests  rules.  The Empower  Companies  were  pass-through  entities  for tax
reporting  purposes,  thus their  income was not taxed at the  corporate  level.
Accordingly, the Company's federal statutory tax rate was reduced by 17% and 13%
for 1999 and 1998, respectively.

     Year Ended December 31, 1998 Compared to Year Ended December 31, 1997

     Revenue. Revenue increased by 65.7% or $64.5 million, from $98.3 million in
1997 to $162.8  million  in 1998.  EAS  revenue  increased  by  65.5%,  or $58.4
million, from $89.1 million in 1997 to $147.5 million in 1998. This increase was
attributable  primarily to increased demand for the Company's ERP implementation
consulting services.  IAS revenue increased by 67.4%, or $6.2 million, from $9.2
million in 1997 to $15.4 million in 1998.  The increase in revenue is the result
of an increase  in the number of clients and an increase in the average  size of
engagements.

     Gross profit.  The  Company's  cost of sales  increased by 55.6%,  or $37.5
million,  from $67.5 million in 1997 to $105.0 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 87.5%, or $27.0 million,  from $30.8 million
in 1997 to $57.9 million in 1998.  The Company's  gross profit margin  increased
from 31.4% of revenue in 1997 to 35.5% of revenue in 1998. The EAS cost of sales
increased  53.6%, or $33.5 million,  from $62.5 million in 1997 to $96.0 million
in 1998.  The EAS gross profit margin  increased  from 29.9% in 1997 to 34.9% in
1998.  These  increases  in gross  profit and margin  reflect  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.  IAS cost of sales  increased  by $4.1  million,  or 83.7%,  from $4.9
million in 1997 to $9.0 million in 1998. IAS gross profit margins decreased from
46.7%  in 1997 to 41.6% in 1998,  primarily  attributable  to lower  utilization
rates attained during expansion of the United States operations,  and therefore,
higher costs as compared with established foreign operations.

     Selling,  general  and  administrative   expenses.   Selling,  general  and
administrative expenses increased by 69.6%, or $15.6 million, from $22.4 million
in 1997 to $38.1 million in 1998,  and increased as a percentage of revenue from
22.8% to 23.4%,  respectively.  EAS selling, general and administrative expenses
increased  by 73.6%,  or $13.4  million,  from  $18.2  million  in 1997 to $31.6
million in 1998. IAS selling,  general, and administrative expenses increased by



                                     - 33 -
<PAGE>

$2.2 million,  or 52.4%,  from $4.2 million in 1997 to $6.4 million in 1998. 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 through acquisitions and in order to manage
its  growth.  The  Company's  occupancy  costs  increased  as a  result  of  the
relocation of its corporate  headquarters into approximately  48,000 square feet
of office space,  from its 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 Resources  Limited
and the  Azimuth  Companies,  each of which was  accounted  for as a 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 25%
and 27% 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,  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 7% and 6%, respectively.  Based on current and anticipated
profitability,  management  believes all net deferred tax assets are more likely
than not to be realized.

     As  discussed  in  Note 11 to the  consolidated  financial  statements,  on
February 16, 1999, the Company  acquired Empower Solutions,  L.L.C. and Empower,
Inc. (a corporation  organized under subchapter S of the Internal Revenue Code).
The acquisitions were accounted for as poolings of interests and thus prior year
financial  statements  have been  restated  in  accordance  with the  pooling of
interests  rules.  The Empower  Companies  were  pass-through  entities  for tax
reporting  purposes,  thus their  income was not taxed at the  corporate  level.
Accordingly,  the Company's federal statutory tax rate was reduced by 13% and 6%
for 1998 and 1997, respectively.

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



                                     - 34 -
<PAGE>

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

     The Company had cash and cash  equivalents  of $6.1 million at December 31,
1999 and $4.2 million at December 31, 1998.  The Company had working  capital of
$29.1 million at December 31, 1999 and $32.6 million at December 31, 1998.

     Cash used in operating  activities  was $4.8 million  during the year ended
December 31, 1999,  resulting  primarily from the net loss, as well as growth in
accounts  receivable,  unbilled services and income taxes  receivable.  This was
offset partially by depreciation  and amortization of $4.1 million,  a provision
for  doubtful  accounts of $4.9  million and  increases  in accrued  payroll and
related taxes,  accrued expenses and other liabilities and income taxes payable.
Cash  provided by operating  activities  was $6.1 million  during the year ended
December  31,  1998.  Cash used in  operating  activities  during the year ended
December 31, 1997 was $6.6 million.

     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  $4.3  million,  $7.1  million  and $2.4  million in
computer  equipment and office  furniture  and fixtures in 1999,  1998 and 1997,
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  headquarters in Edison, New Jersey, and other
offices opened during 1999.

     On January 8, 1999, the Company acquired Network Publishing, Inc., based 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
not later than March 31,  2000.  The earn-out was  determined  to be  $2,430,000
which  was  payable  by the  issuance  of an  additional  99,558  shares  of the
Company's  Common Stock and $340,000 in cash.  The Company issued such shares on
January 11, 2000.

     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. Such credit facility was terminated in January 1999.




                                     - 35 -
<PAGE>

     On January 29, 1999, the Company  entered into an unsecured  three-year $30
million  Revolving  Credit Loan Agreement (the "Loan  Agreement") with PNC Bank,
N.A.  (the  "Bank").  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 Libor 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. Approximately $10.6 million was outstanding under this credit facility
at December 31, 1999.

     The credit agreement contains financial 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  ("Consolidated Cash Flow
Leverage  Ratio"),  (ii)  maintain  a  consolidated  net  worth of not less than
consolidated  net worth of the prior fiscal year plus 50% of positive net income
for such  fiscal  year  ("Consolidated  Net  Worth"),  (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) not cause or permit the minimum fixed charge coverage ratio,  calculated on
the basis of a rolling four quarters to be less than 1.4 to 1.0 as at the end of
each fiscal quarter ("Minimum Fixed Charge Coverage Ratio").

     As a result of the  restructuring and other special charges incurred during
the quarter  ended June 30,  1999,  the Company was not in  compliance  with the
Consolidated  Cash Flow  Leverage  Ratio and  Consolidated  Net Worth  financial
covenants at June 30, 1999.  On August 12, 1999,  the Bank  notified the Company
that  such  non-compliance  constituted  an  Event  of  Default  under  the Loan
Agreement.  At September 30, 1999,  while the Company was in compliance with the
Consolidated  Net Worth  financial  covenant,  it was not in compliance with the
Consolidated  Cash Flow Leverage  Ratio and Minimum Fixed Charge  Coverage Ratio
financial  covenants.  On January 26, 2000, the Company  finalized with the Bank
the terms of a waiver and  amendment to the Loan  Agreement  to remedy  defaults
which  existed under the Loan  Agreement.  The terms of the waiver and amendment
include,  among other things,  (i) a $15 million reduction in availability under
the Loan Agreement,  (ii) a first priority perfected security interest on all of
the assets of the Company and its domestic  subsidiaries and (iii)  modification
of certain financial covenants and a waiver of prior covenant defaults.

     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.



                                     - 36 -
<PAGE>

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.  The  Company  adopted the SOP on
January  1, 1999 and it did not have any  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 requires 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.  The Company  adopted the SOP on January 1, 1999 and it did not have a
material impact on the Company's consolidated financial statements.

     In June 1998,  the FASB  issued  SFAS No. 133,  Accounting  for  Derivative
Instruments  and Hedging  Activities.  SFAS No. 133  establishes  accounting and
reporting standards for derivative financial  instruments and hedging activities
related to those instruments,  as well as other hedging activities.  Because the
Company does not currently hold any derivative  instruments  and does not engage
in hedging activities, the Company expects the adoption of SFAS No. 133 will not
have a material impact on its financial position, results of operations, or cash
flows.  The  Company  will be  required  to adopt SFAS No. 133 in fiscal 2001 in
accordance with SFAS No. 137, which delays the required  implementation  of SFAS
No. 133 for one year.

YEAR 2000 COMPLIANCE

     The Company did not experience any significant computer or systems problems
relating to the Year 2000.  Upon review of the  Company's  internal and external
systems  during 1999, the Company  determined  that it did not have any material
exposure to such computer problems and that the software and systems required to
operate its  business and provide its services  were Year 2000  compliant.  As a
result,  the Company did not incur,  and does not expect to incur,  any material
expenditures relating to Year 2000 systems issues.

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



                                     - 37 -
<PAGE>

the Company participates and the potential actions which may or may not be taken
by the Company's competitors and suppliers.

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

     Not applicable.


ITEM 8.   FINANCIAL STATEMENTS.

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


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

     Not applicable.




                                     - 38 -
<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 2000 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 2000 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 2000 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 2000 Annual
Meeting  of  Shareholders  is  incorporated  herein by  reference  to such proxy
statement.




                                     - 39 -
<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 43.

        (b)  Reports on Form 8-K.

             Subsequent to the year ended  December 31,  1999,  the Company,  on
             March  22,  2000,  filed a report on  Form 8-K relating to the sale
             by  SeraNova,  Inc.,  the  Company's  wholly-owned  subsidiary,  of
             approximately  4.8% of  its  common  stock  to  four  institutional
             investors for an aggregate purchase price of $10 million.




                                     - 40 -
<PAGE>

                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized this 30th day of March,
2000.


                                            INTELLIGROUP, INC.



                                            By: /s/ Ashok Pandey
                                               ---------------------------------
                                                Ashok Pandey, Co-Chief Executive
                                                Officer



                                     - 41 -
<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/ Ashok Pandey              Co-Chief Executive Officer and      March 30, 2000
--------------------------
Ashok Pandey                  Director (principal executive
                              officer)

/s/ Nagarjun Valluripalli     Co-Chief Executive Officer and      March 30, 2000
--------------------------
Nagarjun Valluripalli         Director

/s/ Nicholas Visco            Vice President- Finance             March 30, 2000
--------------------------
Nicholas Visco                (principal financial and
                              accounting officer)

/s/ Rajkumar Koneru           Director                            March 30, 2000
--------------------------
Rajkumar Koneru

/s/ Klaus Besier              Director                            March 30, 2000
--------------------------
Klaus Besier

/s/ Dennis McIntosh           Director                            March 30, 2000
--------------------------
Dennis McIntosh


                                     - 42 -
<PAGE>

                                  EXHIBIT INDEX


Exhibit No.                           Description of Exhibit

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

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

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

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

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

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

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

10.4+     Employment  Agreement  dated  October 1, 1999  between the Company and
          Nicholas Visco.

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).


                                     - 43 -
<PAGE>

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.



                                     - 44 -
<PAGE>

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. See Exhibit 10.36 and 10.37.

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).

                                     - 45 -
<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.

10.29+    Contribution Agreement by and between Intelligroup, Inc. and SeraNova,
          Inc. dated as of January 1, 2000.

10.30+    Distribution Agreement by and between Intelligroup, Inc. and SeraNova,
          Inc. dated as of January 1, 2000.

10.31+    Services  Agreement by and between  Intelligroup,  Inc. and  SeraNova,
          Inc. dated as of January 1, 2000.

10.32+    Space Sharing Agreement by and among Intelligroup,  Inc. and SeraNova,
          Inc. dated as of January 1, 2000.

10.33+    Tax Sharing Agreement by and between Intelligroup,  Inc. and SeraNova,
          Inc. dated as of January 1, 2000.

10.34+    Master Consulting Services Agreement by and between Intelligroup, Inc.
          and Mueller/Shields dated as of February 4, 2000.

10.35+    Master  Consulting  Services  Agreement  by  and  among  Intelligroup,
          SeraNova, Inc. and Mueller/Shields dated as of December 21, 1999.



                                     - 46 -
<PAGE>

10.36*    First  Amendment  to  Revolving  Credit Loan  Agreement by and between
          Intelligroup,  Inc., a New Jersey corporation,  and PNC Bank, National
          Association,   a  national  banking   association.   (Incorporated  by
          reference to the Company's  Amendment No. 1 to Registration  Statement
          on  Form  S-3  (Registration  No.  333-94285)  declared  effective  on
          February 9, 2000. See Exhibit 10.20 and 10.37.

10.37+    Second  Amendment  to Revolving  Credit Loan  Agreement by and between
          Intelligroup,  Inc., a New Jersey corporation,  and SeraNova,  Inc., a
          New Jersey corporation, and PNC Bank, National Association, a national
          banking association. See Exhibit 10.20 and 10.36.

21+       Subsidiaries of the Registrant.

23+       Consent of Arthur Andersen LLP.

27.1+     Financial Data Schedule for the year ended December 31, 1999.

27.2+     Financial Data Schedule for the year ended December 31, 1998.

27.3+     Financial Data Schedule for the year ended December 31, 1997.

----------

 *      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.



                                     - 47 -
<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, 1999 and 1998................ F-3

Consolidated Statements of Operations for the years ended
          December 31, 1999, 1998 and 1997.................................. F-4

Consolidated Statements of Shareholders' Equity for the years
          ended December 31, 1999, 1998 and 1997............................ F-5

Consolidated Statements of Cash Flows for the years ended
          December 31, 1999, 1998 and 1997.................................  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. (a New Jersey  corporation)  and subsidiaries as of December
31,  1999 and 1998,  and the  related  consolidated  statements  of  operations,
shareholders'  equity and cash  flows for each of the three  years in the period
ended December 31, 1999. These financial  statements are the  responsibility  of
the Company's  management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

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

        In our  opinion,  the  financial  statements  referred to above  present
fairly, in all material respects,  the financial position of Intelligroup,  Inc.
and its  subsidiaries as of December 31, 1999 and 1998, and the results of their
operations  and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting  principles  generally accepted
in the United States.


                                             /s/ Arthur Andersen LLP

                                             ARTHUR ANDERSEN LLP

Roseland,  New Jersey
March 6, 2000 (except with
respect to Note 13, as to which
the date is March 14, 2000).


                                     F - 2
<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           December 31, 1999 and 1998
<TABLE>
<CAPTION>
                                                                   1999               1998
                                                                   ----               ----
                          ASSETS
Current Assets:
<S>                                                            <C>                <C>
  Cash and cash equivalents.............................       $   6,121,000      $   4,245,000
  Accounts receivable, less allowance for doubtful
    accounts of $3,292,000 and $1,053,000 at
    December 31, 1999 and 1998, respectively............          35,063,000         33,622,000
  Unbilled services.....................................          11,372,000         10,842,000
  Income taxes receivable...............................           3,612,000                 --
  Deferred tax asset....................................           2,481,000            808,000
  Other current assets..................................           3,468,000          4,197,000
                                                               -------------      -------------
      Total current assets..............................          62,117,000         53,714,000
Property and equipment, net.............................          11,420,000          9,506,000
Intangible assets, net..................................           8,681,000          5,629,000
Other assets............................................             844,000            716,000
                                                               -------------      -------------
                                                               $  83,062,000      $  69,565,000
                                                               =============      =============
            LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
  Accounts payable......................................       $   4,672,000      $   5,347,000
  Accrued payroll and related taxes.....................           7,078,000          6,254,000
  Accrued expenses and other liabilities................           5,599,000          2,999,000
  Accrued acquisition costs.............................             810,000          3,302,000
  Income taxes payable..................................           4,120,000          3,160,000
  Current portion of long term debt and obligations
    under capital leases................................          10,705,000             11,000
                                                               -------------      -------------
      Total current liabilities.........................          32,984,000         21,073,000
                                                               -------------      -------------
Long term debt and obligations under capital leases, less
  current portion.......................................             618,000             60,000
                                                               -------------      -------------
Deferred tax liability..................................             806,000            483,000
                                                               -------------      -------------
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, 15,949,000 and 15,573,000 shares issued
    and outstanding at December 31, 1999 and 1998,
    respectively........................................             160,000            156,000
  Additional paid-in capital............................          43,356,000         35,261,000
  Retained earnings.....................................           6,317,000         13,077,000
  Currency translation adjustments......................          (1,179,000)          (545,000)
                                                               -------------      -------------
      Total shareholders' equity .......................          48,654,000         47,949,000
                                                               -------------      -------------
                                                               $  83,062,000      $  69,565,000
                                                               =============      =============
</TABLE>


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

                                      F - 3

<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
              For the Years Ended December 31, 1999, 1998 and 1997

<TABLE>
<CAPTION>
                                                                    1999              1998              1997
                                                               -------------     -------------     -------------
<S>                                                            <C>               <C>               <C>
Revenue.................................................       $ 186,067,000     $ 162,840,000     $  98,301,000
Cost of sales...........................................         119,857,000       104,984,000        67,452,000
                                                               -------------     -------------     -------------
      Gross profit......................................          66,210,000        57,856,000        30,849,000
                                                               -------------     -------------     -------------
Selling, general and administrative expenses............          60,807,000        38,074,000        22,449,000

Acquisition expenses....................................           2,115,000         2,118,000                --

Spin-off costs..........................................             751,000                --                --

Restructuring and other special charges.................           7,328,000                --                --
                                                               -------------     -------------     -------------
      Total operating expenses..........................          71,001,000        40,192,000        22,449,000
                                                               -------------     -------------     -------------

      Operating (loss) income...........................          (4,791,000)       17,664,000         8,400,000
                                                               --------------    -------------     -------------

Other expenses:

  Interest expense (income), net........................             593,000          (187,000)         (265,000)
                                                               -------------     --------------    --------------


(Loss) income before provision for income taxes.........          (5,384,000)       17,851,000         8,665,000

Provision for income taxes..............................           1,206,000         4,451,000         2,327,000
                                                               -------------     -------------     -------------

Net (loss) income.......................................       $  (6,590,000)    $  13,400,000     $   6,338,000
                                                               =============     =============     =============
Earnings per share:

  Basic earnings per share:

        Net (loss) income per share.....................       $       (0.42)    $        0.87     $        0.43
                                                               =============     ============      =============


      Weighted average number of common shares - Basic..          15,766,000        15,387,000        14,637,000
                                                               ============      ============      =============

  Diluted earnings per share:

        Net (loss) income per share.....................       $      (0.42)     $       0.84      $        0.42
                                                               =============     ============      =============


      Weighted average number of common shares - Diluted         15,766,000        15,969,000         15,117,000
                                                               ============      ============      =============
</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, 1999, 1998 and 1997

<TABLE>
<CAPTION>
                                                                                            CUMULATIVE
                                                                              RETAINED       FOREIGN                   COMPREHENSIVE
                                                              ADDITIONAL      EARNINGS       CURRENCY       TOTAL      (LOSS) 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>          <C>           <C>
Balance at December 31, 1996..... 14,011,000     $  140,000  $19,838,000    $(2,319,000)    $  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            --

Shareholder dividends............         --             --           --       (849,000)           --       (849,000)           --

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

Net income.......................         --             --           --      6,338,000            --      6,338,000     6,338,000
                                  ----------     ----------  -----------    -----------   -----------    -----------   -----------

Balance at December 31, 1997..... 15,263,000        153,000   30,812,000      3,170,000       (99,000)    34,036,000   $ 6,154,000
                                                                                                                       ===========

Issuance of common stock in
connection with acquisitions.....    166,000          2,000    3,126,000             --            --      3,128,000            --

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

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

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

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

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

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

Balance at December 31, 1998..... 15,573,000        156,000   35,261,000     13,077,000      (545,000)    47,949,000   $12,954,000
                                                                                                                       ===========

Issuance of common stock in
connection with acquisitions.....    155,000          2,000    4,589,000             --            --      4,591,000            --

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

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

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

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

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

Balance at December 31, 1999..... 15,949,000     $  160,000  $43,356,000    $ 6,317,000   $(1,179,000)   $48,654,000   $(7,224,000)
                                  ==========     ==========  ===========    ===========   ===========    ===========   ===========
</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, 1999, 1998 and 1997
<TABLE>
<CAPTION>
                                                                                 1999                1998                 1997
                                                                                 ----                ----                 ----
<S>                                                                         <C>                <C>                  <C>
Cash flows from operating activities:
   Net (loss) income....................................................    $  (6,590,000)     $  13,400,000        $   6,338,000
   Adjustments to reconcile  net (loss) income to net cash (used in)
     provided by operating activities:
       Depreciation and amortization....................................        4,061,000          1,538,000              571,000
       Provision for doubtful accounts..................................        4,931,000          1,268,000              765,000
       Deferred income taxes............................................       (1,400,000)           (92,000)              98,000
       Tax benefit from exercise of stock options.......................          510,000            302,000              248,000
       Other............................................................               --                 --               78,000
   Changes in operating assets and liabilities, net of acquired
     businesses:
       Accounts receivable..............................................       (5,461,000)       (13,826,000)         (11,194,000)
       Unbilled services................................................         (530,000)        (3,002,000)          (4,920,000)
       Income taxes receivable..........................................       (3,612,000)                --                   --
       Other current assets.............................................          786,000         (3,406,000)            (255,000)
       Other assets.....................................................         (128,000)          (357,000)            (134,000)
       Accounts payable.................................................         (680,000)         3,388,000            1,086,000
       Accrued payroll and related taxes................................          412,000          2,685,000              743,000
       Accrued expenses and other liabilities...........................        2,179,000          2,130,000             (563,000)
       Income taxes payable.............................................          772,000          2,081,000              521,000
                                                                            -------------      -------------        -------------
           Net cash (used in) provided by operating activities..........       (4,750,000)        6,109,000            (6,618,000)
                                                                            -------------      -------------        -------------
Cash flows from investing activities:
   Purchases of equipment...............................................       (4,349,000)        (7,116,000)          (2,436,000)
   Acquisition of businesses, net of cash acquired......................       (1,682,000)                --                   --
                                                                            -------------      -------------        -------------
           Net cash used in investing activities........................       (6,031,000)        (7,116,000)          (2,436,000)
                                                                            -------------      -------------        -------------
Cash flows from financing activities:
   Proceeds from issuance of common stock, net of issuance costs........               --                 --            9,918,000
   Proceeds from exercise of stock options..............................        2,998,000          1,022,000              839,000
   Proceeds from shareholder loans......................................               --                 --              235,000
   Repayments of shareholders' loans....................................               --           (618,000)            (375,000)
   Shareholder dividends - Empower Companies............................         (170,000)        (3,525,000)            (849,000)
   Proceeds from line of credit borrowings, net.........................       10,585,000                 --                   --
   Repayments of other borrowings.......................................         (110,000)                --                   --
   Principal payments under capital leases..............................          (12,000)            (6,000)              (6,000)
                                                                            -------------      -------------        -------------
           Net cash provided by (used in) financing activities..........       13,291,000         (3,127,000)           9,762,000
                                                                            -------------      -------------        -------------
   Effect of foreign currency exchange rate changes on cash.............         (634,000)          (446,000)            (184,000)
                                                                            -------------      -------------        -------------
           Net increase (decrease) in cash and cash equivalents.........        1,876,000         (4,580,000)             524,000
Cash and cash equivalents at beginning of year..........................        4,245,000          8,825,000            8,301,000
                                                                            -------------      -------------        -------------
Cash and cash equivalents at end of year................................    $   6,121,000      $   4,245,000        $   8,825,000
                                                                            =============      =============        =============
Supplemental disclosures of cash flow information:
   Cash paid for interest...............................................    $     834,000      $      24,000        $          --
                                                                            =============      =============        =============

   Cash paid for income taxes...........................................    $   3,858,000      $   2,428,000        $   1,707,000
                                                                            =============      =============        =============
Supplemental disclosures of non-cash transactions:
   Issuance of common stock in connection with acquisitions.............    $   4,591,000      $   3,128,000        $          --
                                                                            =============      =============        =============
</TABLE>

The accompanying notes to consolidated financial statements are an integral part
of these statements.
                                     F - 6
<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

     Intelligroup,  Inc., and its  subsidiaries  (the "Company")  provide a wide
range of  information  technology  services,  including  management  consulting,
enterprise-wide  business process  solutions,  Internet  applications  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,  the  majority  of which are in the
United States.  The majority of the Company's business is with large established
companies, including consulting firms serving numerous industries.

Principles of Consolidation and Use of Estimates

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

     The  preparation  of financial  statements  in  conformity  with  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.

Intangible Assets

     Intangible  assets at December 31, 1999 and 1998 include goodwill and other
intangibles  totaling  $8,681,000  and  $5,629,000,   respectively,   that  were
attributable to the acquisitions of Network Publishing,  Inc. and CPI Consulting
(See Note 11). These  intangible  assets are being  amortized over the estimated
useful  lives  ranging  from  5 to 15  years  using  the  straight-line  method.
Amortization expense was $1,009,000 and $147,000 in 1999 and 1998, respectively.



                                     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 an hourly or per diem basis whereby actual time is charged directly to
the customer. Billings to customers for out-of-pocket expenses are recorded as a
reduction of expenses incurred.  Unbilled services at December 31, 1999 and 1998
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 $4,931,000,  $1,268,000 and $765,000 in 1999, 1998
and 1997, respectively.  Accounts written off totaled $2,692,000, $1,143,000 and
$512,000 in 1999, 1998 and 1997, respectively.

Recoverability of Long-Lived Assets

     The  Company  reviews  the  recoverability  of its  long-lived  assets on a
periodic basis whenever events and changes in circumstances  have occurred which
may indicate a possible  impairment.  The assessment for potential impairment is
based  primarily on the Company's  ability to recover the carrying  value of its
long-lived  assets from  expected  future cash flows from its  operations  on an
undiscounted basis. The Company does not believe that any such events or changes
in  circumstances  have occurred.  The amount of impairment of goodwill would be
determined as part of the long-lived asset groupings being evaluated.

Stock-Based Compensation

     Stock-based  compensation  is recognized  using the intrinsic  value method
under  Accounting  Principles Board (APB) No. 25. For disclosure  purposes,  pro
forma net (loss)  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.



                                     F - 8
<PAGE>

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


Concentrations

     For the years ended December 31, 1999,  1998 and 1997,  approximately  42%,
52% and 56% of revenue,  respectively,  was derived  from  projects in which the
Company's personnel  implemented software developed by SAP. The Company's future
success in its SAP-related  consulting services depends largely on its continued
relationship   with  SAP  and  on  its  continued   status  as  a  SAP  National
Implementation  Partner,  which  was  first  obtained  in  1995.  The  Company's
agreement  with SAP  (the  "Agreement")  is  awarded  on an  annual  basis.  The
Company's  current  contract  expires on December 31, 2000 and is  automatically
renewed for successive one-year periods, unless terminated by either party. This
Agreement contains no minimum revenue  requirements or cost sharing arrangements
and does not provide for commissions or royalties to either party. In July 1997,
the Company achieved  Accelerated SAP Partner Status with SAP by meeting certain
established  criteria  established by SAP.  Additionally,  for each of the years
ended  December  31,  1999,  1998  and  1997,  approximately  7%,  11% and  12%,
respectively,  of revenue  was  derived  from  projects  in which the  Company's
personnel  implemented software developed by Oracle. For each of the years ended
December 31, 1999, 1998 and 1997,  approximately 26%, 19% and 12%, respectively,
of the  Company's  total  revenue was derived from projects in which the Company
implemented software developed by PeopleSoft.

     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, 1999, 1998 and 1997, 38%, 19% and 31%,  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 11% and 8% of revenue in 1999 and
1998, respectively. Accounts receivable due from this customer was approximately
$5,900,000 and $2,560,000 as of December 31, 1999, and 1998,  respectively.  One
customer accounted for approximately 10% of revenue in 1997.

     During 1999 and 1998, the Company  derived  revenues  totaling  $58,000 and
$1.7 million, respectively,  from contracts with an entity whose chief executive
officer is a director of the Company.

Income Taxes

     The  provisions  of Statement of Financial  Accounting  Standards  No. 109,
"Accounting  for Income Taxes,"  ("SFAS No. 109") 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  shareholders by the weighted average number of common shares outstanding
for the period.  Diluted  earnings  per share is  computed  by  dividing  income
available to common shareholders by the weighted average number of common shares
outstanding, adjusted for the incremental dilution of outstanding stock options.
The computation of basic earnings per share and diluted  earnings per share were
as follows:

<TABLE>
<CAPTION>
                                                 1999               1998              1997
                                            -------------      -------------     --------------
<S>                                         <C>                 <C>                <C>
Net (Loss) Income.........................  $(6,590,000)        $13,400,000        $ 6,338,000
                                             ----------          ----------         ----------

Denominator:
   Weighted average number of common
   shares.................................   15,766,000          15,387,000         14,637,000
   Basic (loss) earnings per share........  $     (0.42)        $      0.87        $      0.43
                                             ==========          ==========         ==========

Denominator:
   Weighted average number of common
   shares.................................   15,766,000          15,387,000         14,637,000
   Common share equivalents of
   outstanding stock options..............           --             582,000            480,000
                                             ----------          ----------         ----------
Total shares..............................   15,766,000          15,969,000         15,117,000
                                             ----------          ----------         ----------
Diluted (loss) earnings per share.........  $     (0.42)        $      0.84        $      0.42
                                             ==========          ==========         ==========
</TABLE>

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


Financial Instruments

     Financial  instruments that potentially  subject the Company to credit risk
consist  principally of trade receivables and unbilled  services.  Management of
the Company believes the fair value of accounts receivable and unbilled services
approximates the carrying value.



                                     F - 10
<PAGE>

NOTE 2 - PROPERTY AND EQUIPMENT

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

                                                     1999              1998
                                                ------------       -----------
     Vehicles...............................    $    172,000       $   109,000
     Furniture..............................       3,105,000         2,459,000
     Equipment..............................      11,907,000         8,438,000
     Computer software......................       1,708,000           816,000
     Leasehold improvements.................         648,000           474,000
                                                ------------       -----------
                                                  17,540,000        12,296,000
     Less-Accumulated depreciation..........      (6,120,000)       (2,790,000)
                                                ------------       -----------
                                                $ 11,420,000       $ 9,506,000
                                                ============       ===========

     Depreciation expense was $3,052,000,  $1,391,000 and $571,000 in 1999, 1998
and 1997, respectively.

NOTE 3 - LINES OF CREDIT

     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. Such credit facility was terminated in January 1999.

     On January 29, 1999, the Company  entered into an unsecured  three-year $30
million  Revolving  Credit Loan Agreement (the "Loan  Agreement") with PNC Bank,
N.A.  (the  "Bank").  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 LIBOR 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 credit agreement contains financial 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  ("Consolidated Cash Flow
Leverage  Ratio"),  (ii)  maintain  a  consolidated  net  worth of not less than
consolidated  net worth of the prior fiscal year plus 50% of positive net income
for such  fiscal  year  ("Consolidated  Net  Worth"),  (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) not cause or permit the minimum fixed charge coverage ratio,  calculated on
the basis of a rolling four quarters to be less than 1.4 to 1.0 as at the end of
each fiscal quarter ("Minimum Fixed Charge Coverage Ratio").



                                     F - 11
<PAGE>

NOTE 3 - LINES OF CREDIT (CONTINUED)

     As a result of the  restructuring and other special charges incurred during
the  quarter-ended  June 30, 1999,  the Company was not in  compliance  with the
Consolidated  Cash Flow  Leverage  Ratio and  Consolidated  Net Worth  financial
covenants at June 30, 1999.  On August 12, 1999,  the Bank  notified the Company
that  such  non-compliance  constituted  an  Event  of  Default  under  the Loan
Agreement.  At September 30, 1999,  while the Company was in compliance with the
Consolidated  Net Worth  financial  covenant,  it was not in compliance with the
Consolidated  Cash Flow Leverage  Ratio and Minimum Fixed Charge  Coverage Ratio
financial  covenants.  On January 26, 2000, the Company  finalized with the Bank
the terms of a waiver and  amendment to the Loan  Agreement  to remedy  defaults
which  existed under the Loan  Agreement.  The terms of the waiver and amendment
include,  among other things,  (i) a $15 million reduction in availability under
the Loan Agreement,  (ii) a first priority perfected security interest on all of
the assets of the Company and its domestic  subsidiaries and (iii)  modification
of certain financial  covenants and a waiver of prior covenant  defaults.  As of
December 31, 1999 and 1998, the Company had  outstanding  borrowings on the Loan
Agreement of $10,585,000 and $0, respectively.

     In addition,  the Company  assumed an $875,000 note payable between Network
Publishing,  Inc.  and a bank in  connection  with the  acquisition  of  Network
Publishing, Inc. on January 8, 1999 (See Note 11). The note, which is secured by
certain  equipment,  furniture and fixtures of Network  Publishing,  Inc., bears
interest  at the bank's  prime rate (8.5% as of December  31,  1999) plus 2% and
matures  on April 25,  2007.  Principal  and  interest  are  payable  in monthly
installments.  The aggregate amount of principal maturities of long-term debt as
of December 31, 1999 are as follows:

            For the Years Ending December 31,            Amount
        -------------------------------------------    -----------

        2000.....................................      $  120,000
        2001.....................................          73,000
        2002.....................................          81,000
        2003.....................................          89,000
        2004.....................................          99,000
        Thereafter...............................         276,000
                                                        ---------
                                                       $  738,000

NOTE 4 - PROPOSED SPIN-OFF OF INTERNET APPLICATIONS SERVICES BUSINESS

     In November  1999,  the Company  announced  its  intentions to spin off its
Internet  applications  services business to SeraNova,  Inc., subject to certain
approvals  and  conditions.  On January 1, 2000,  the  Company  transferred  its
Internet applications  services business to SeraNova, a wholly-owned  subsidiary
(see Note 13).  Internet  applications  services  revenues  and net loss totaled
$39.8  million  and  $1.3  million  for  the  year  ended   December  31,  1999,
respectively,  and $15.4  million and $631,000  for the year ended  December 31,
1998,  respectively.  Total assets of SeraNova were $18.9 million as of December
31, 1999.



                                     F - 12
<PAGE>

NOTE 4 - PROPOSED  SPIN-OFF  OF  INTERNET   APPLICATIONS   SERVICES  BUSINESS
         (CONTINUED)

     In  connection  with the spin off,  the  Company  incurred a  non-recurring
charge of $751,000  related to professional  fees during the year ended December
31, 1999.

NOTE 5 - RESTRUCTURING AND OTHER SPECIAL CHARGES

     In connection with the Company's plan to reduce costs and improve operating
efficiencies,  the Company incurred a non-recurring charge of approximately $5.6
million related to restructuring  initiatives during the year ended December 31,
1999. The restructuring charge included settlement of the former chief executive
officer's  employment  agreement  and  additional  severance  payment,  expenses
associated  with the  termination of certain  employees in the United States and
United Kingdom,  the closing of certain  satellite  offices in the United States
and an  additional  office in  Belgium,  and costs to exit  certain  contractual
obligations.

     Activity  in accrued  costs for  restructuring  and other  special  charges
during the year ended December 31, 1999 is as follows:

<TABLE>
<CAPTION>
                                       Charges to         Costs           Accrued Costs
                                       Operations         Paid          December 31, 1999
                                      -------------   --------------   -------------------

<S>                                     <C>             <C>                 <C>
  Severance and related costs....       $5,027,000      $4,162,000          $865,000

  Other costs primarily to exit
  facilities, contracts, and
  certain activities ............          601,000         517,000            84,000
                                        ----------      ----------          --------

                                        $5,628,000      $4,679,000          $949,000
                                        ==========      ==========          ========
</TABLE>


     Additionally,  in 1999 the Company recorded a reserve of approximately $1.7
million  against an outstanding  receivable  from a large account,  whose parent
corporation filed for protection under Chapter 11 of the U.S. bankruptcy laws.

NOTE 6 - INCOME TAXES

     Income taxes consist of the following:
<TABLE>
<CAPTION>
                                              1999               1998              1997
                                          -------------     --------------   ---------------
<S>                                        <C>                <C>              <C>
Current:
  Federal..............................    $1,737,000         $2,878,000       $1,384,000
  State................................       290,000            783,000          389,000
  Foreign..............................       579,000            882,000          456,000
                                           ----------         ----------       ----------
                                            2,606,000          4,543,000        2,229,000
                                           ----------         ----------       ---------

Deferred:
  Federal..............................    (1,239,000)           (71,000)          76,000
  State................................      (161,000)           (21,000)          22,000
                                           ----------         -----------      ----------
                                           (1,400,000)           (92,000)          98,000
                                           -----------        ----------       ----------
Total..................................    $1,206,000         $4,451,000       $2,327,000
                                           ==========         ==========       ==========
</TABLE>



                                     F - 13
<PAGE>

NOTE 6 - INCOME TAXES (CONTINUED)

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

<TABLE>
<CAPTION>
                                                            1999              1998             1997
                                                          --------          --------         --------
<S>                                                         <C>                <C>               <C>
Tax at federal statutory rate......................         (34)%              34%               34%
Nondeductible expenses.............................          77                 5                 1
State income tax, net of federal benefit...........           4                 4                 4
Foreign losses for which no benefit is available...           8                 7                --
Changes in valuation allowance.....................          --                --                (3)
Foreign operations taxed at less than U.S.
  statutory rate, primarily India..................         (12)              (11)               (7)
S Corp and L.L.C. income passed through
  to shareholders..................................         (17)              (13)               (6)
Other..............................................          (4)               (1)                4
                                                           ----              ----              ----
Effective tax rate.................................          22%               25%               27%
                                                           ====              ====              ====
</TABLE>

     Nondeductible   expenses  in  1999  primarily  represent   amortization  of
intangibles related to the Network Publishing,  Inc.  acquisition.  In 1996, the
Company  elected a five year tax holiday in India in accordance with a local tax
incentive program whereby no income taxes will be due for such period.  Such tax
holiday  was  extended  for an  additional  five  years in 1999.  Prior to their
acquisition,  the Empower Companies (see Note 11) were pass-through entities for
tax reporting purposes,  thus their income was not taxed at the corporate level.
Accordingly,  the Company's  federal  statutory tax rate was reduced by 17%, 13%
and 6% for 1999, 1998 and 1997, respectively.

     Deferred  income  taxes  reflect  the tax effect of  temporary  differences
between the carrying amount of assets and  liabilities  for financial  reporting
purposes  and  the  amounts  used  for  income  tax  purposes.  The  significant
components of the Company's  deferred tax assets and  liabilities as of December
31, 1999 and 1998 are as follows:

                                                      1999         1998
                                                   ----------   ----------
Deferred tax assets:
  Allowance for doubtful accounts................. $1,247,000   $  432,000
  Vacation accrual................................    334,000      280,000
  Net operating losses............................    570,000           --
  Foreign tax credits.............................  2,200,000           --
  Other accrued liabilities.......................    739,000       96,000
                                                    ---------    ---------
Total deferred tax assets.........................  5,090,000      808,000
Deferred tax liability-accelerated depreciation...   (806,000)    (483,000)
Valuation allowance............................... (2,609,000)          --
                                                    ---------    ---------
Net deferred tax asset............................ $1,675,000   $  325,000
                                                    =========    =========


                                     F - 14
<PAGE>

NOTE 6 - INCOME TAXES (CONTINUED)

     Realization  of the net  deferred  tax assets is dependent on the timing of
the  reversal of  temporary  differences.  The Company has  provided a valuation
allowance  against foreign tax credits and certain foreign net operating  losses
as the ability to apply  these  credits and losses may be limited in the future.
Although  realization  of the net deferred tax asset is not assured,  management
believes  it is more likely than not,  that the 1999 and 1998 net  deferred  tax
asset will be realized.

NOTE 7 - COMMITMENTS AND CONTINGENCIES

Employment Agreements

     As of December 31, 1999, 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 $1,500,000.

Leases

     The Company  leases office space and office  equipment  and vehicles  under
operating  leases that have initial or remaining  non-cancelable  lease terms in
excess of one year as of December  31, 1999.  Future  minimum  aggregate  annual
lease payments are as follows:

            For the Years Ending December 31,
        -------------------------------------------
        2000.....................................   $  3,651,000
        2001.....................................      3,204,000
        2002.....................................      2,896,000
        2003.....................................      2,515,000
        2004.....................................      2,624,000
        Thereafter...............................      4,488,000

     Rent  expense  for the years ended  December  31,  1999,  1998 and 1997 was
$3,941,000, $2,217,000 and $713,000, respectively.

Legal

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

NOTE 8 - STOCK OPTION PLANS

     The  Company's  stock  option  plans  permit  the  granting  of  options to
employees,  non-employee directors and consultants.  The Option Committee of the
Board of Directors  generally has the authority to select individuals who are to
receive  options  and to  specify  the terms and  conditions  of each  option so
granted,  including  the  number of shares  covered by the  option,  the type of
option  (incentive  stock option or  non-qualified  stock option),  the exercise
price, vesting


                                     F - 15
<PAGE>

NOTE 8 - STOCK OPTION PLANS (CONTINUED)

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, 1999, the Company  granted options to purchase an aggregate of 23,750 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.

                                                                   Weighted
                                             Number of             Average
                                              Shares            Exercise Price
      -------------------------------------------------------------------------
      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)            $ 14.91
      -------------------------------------------------------------------------
      Options Outstanding,
        December 31, 1998
        (262,156 exercisable)                1,899,141             $ 14.14

      Granted                                3,465,759             $  8.82

      Exercised                               (220,645)            $ 13.47

      Canceled                              (1,216,975)            $ 14.00
      -------------------------------------------------------------------------
      Options Outstanding,
        December 31, 1999
        (336,090 exercisable)                3,927,280             $  9.55
                                             =========             =======




                                     F - 16
<PAGE>

NOTE 8 - STOCK OPTION PLANS (CONTINUED)

     The following table summarizes  information about stock options outstanding
and exercisable at December 31, 1999:

<TABLE>
<CAPTION>
                                    Outstanding                             Exercisable
                                    -----------                             -----------
                                      Weighted        Weighted                        Weighted
                                      Average         Average                         Average
 Exercise Price      Number of       Remaining        Exercise        Number of       Exercise
     Range            shares       Life (in years)      Price           shares         Price
-----------------------------------------------------------------------------------------------
<S>                  <C>                 <C>          <C>             <C>            <C>
$5 to 8              2,103,308           9.0          $  7.44         190,624        $   7.65
$8 to 10               940,500           9.7          $  8.60              --              --
$10 to 12              151,592           6.6          $ 10.71          46,203        $  10.90
$12 to 15               54,500           7.9          $ 14.34           8,000        $  12.13
$15 to 18              509,380           8.4          $ 16.00          71,576        $  16.28
$18 to 24              168,000           8.4          $ 19.04          19,687        $  18.82
                    ----------         -----           ------       ---------         -------
$5 to 24             3,927,280           9.0          $  9.55         336,090        $  10.69
                     =========                                      =========
</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>
                                        1999                 1998                 1997
----------------------------------------------------------------------------------------------
<S>                                  <C>                  <C>                  <C>
Net (Loss) Income:
    as reported                       ($6,590,000)        $ 13,400,000         $  6,338,000
    pro forma                        ($14,975,000)        $  8,894,000         $  5,336,000
----------------------------------------------------------------------------------------------
Basic Earnings per Share:
    as reported                            ($0.42)               $0.87                $0.43
    pro forma                              ($0.95)               $0.58                $0.36
----------------------------------------------------------------------------------------------
Diluted Earnings per Share:
    as reported                            ($0.42)               $0.84                $0.42
    pro forma                              ($0.95)               $0.56                $0.35
</TABLE>


     The fair value of option grants for disclosure purposes is estimated on the
date of grant using the Black-Scholes  option-pricing  model using the following
weighted-average assumptions: expected volatility of 82%, 78% and 62%, risk-free
interest  rate of 5.6%,  5.4% and 7.0% and  expected  lives of 2.9,  8.5 and 4.5
years, in 1999, 1998 and 1997, respectively. The



                                     F - 17
<PAGE>

NOTE 8 - STOCK OPTION PLANS (CONTINUED)

weighted  average fair value of options  granted during 1999,  1998 and 1997 was
$9.75, $13.49 and $6.96, respectively.

     The Company's subsidiary,  SeraNova,  Inc. adopted the SeraNova,  Inc. 1999
Stock  Plan  covering  its   employees,   officers  and  directors  and  certain
consultants,  agents and key  contractors  and reserved 5 million  shares of its
common stock for future  issuances.  During  1999,  SeraNova  granted  employees
3,236,092  (2,694,711 that were outside the Plan) options to purchase its common
stock as of December 31, 1999. After year-end,  an additional  1,667,575 options
were granted.

NOTE 9 - 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 10 - FOLLOW-ON PUBLIC OFFERING

     In July 1997,  the Company  consummated  a follow-on  public  offering (the
"Offering") of 1,150,000  shares of its Common Stock at a price to the public of
$9.50 per share.  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 11 - ACQUISITIONS

     On February 16, 1999, the Company acquired both Empower  Solutions,  L.L.C.
and its affiliate Empower,  Inc. (a corporation organized under sub-chapter S of
the Internal Revenue Code).  The acquisitions  were accounted for as poolings of
interests. The accompanying consolidated financial statements as of December 31,
1998 and 1997 and each of the three years in the period ended December 31, 1999,
have been  restated in  accordance  with  pooling of  interests  accounting.  In
connection with these acquisitions,  the Company issued approximately  2,000,000
shares of the Company's Common Stock. The pre-merger results of the Empower


                                     F - 18
<PAGE>

NOTE 11 - ACQUISITIONS

Companies were revenues of $18.0 million and net income of $6.2 million for 1998
and  revenues  of $4.0  million  and net  income of $1.7  million  for 1997.  In
connection with the mergers,  acquisition expenses of $2.1 million were expensed
during 1999. These costs primarily relate to professional fees incurred.

     On January 8, 1999, the Company acquired Network Publishing, Inc., based 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
not later than March 31, 2000.  The value of the earn-out was  determined  to be
$2,430,000  which was payable by the issuance of an additional  99,558 shares of
the Company's  Common Stock and $340,000 in cash. The Company issued such shares
on January 11, 2000.  This  acquisition  has been  accounted  for  utilizing the
purchase  method of  accounting.  The excess of the purchase price over the fair
value of the net assets acquired was attributed to intangible  assets  amounting
to $4,061,471.  Pro-forma  financial  information has not been presented as this
acquisition was immaterial to the Company's operations.

     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.

     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 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. 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.




                                     F - 19
<PAGE>

NOTE 11 - ACQUISITIONS (CONTINUED)

     On May 7, 1998,  the Company  acquired  thirty  percent of the  outstanding
share capital of CPI  Consulting  Limited.  This  acquisition  was accounted for
utilizing  the purchase  method of  accounting.  The  consideration  paid by the
Company  included the issuance of 165,696  shares of the Company's  Common Stock
with a fair market value of $3.1 million at the time of purchase.  An additional
155,208  shares of the  Company's  Common Stock with a fair market value of $2.5
million was paid during 1999  pursuant to an earn-out  relating to the operating
results  for the  balance of 1998.  The excess of  purchase  price over the fair
value of the net assets acquired was attributed to intangible assets,  amounting
in the aggregate to $5.8 million.

NOTE 12 - 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 two groups:

     o  Enterprise  Applications  Services 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  Internet  Applications   Services  provides  professional   services,
        primarily  in the area of business to  business  interactions  on the
        Internet. Business to business interactions include communication and
        commerce conducted between a company and its customers, suppliers and
        partners.

     The following table presents financial information based upon the Company's
identifiable  business  segments for the years ended December 31, 1999 and 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.



                                     F - 20
<PAGE>

NOTE 12 - SEGMENT DATA AND GEOGRAPHIC INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
                                          Enterprise           Internet
                                         Applications        Applications
Year ended December 31, 1999               Services            Services              Total
------------------------------           ------------        ------------        ------------
<S>                                       <C>                 <C>                <C>
Revenue                                   $146,272,000        $39,795,000        $186,067,000

Depreciation & amortization                  2,930,000          1,131,000           4,061,000

Operating loss                              (3,375,000)        (1,416,000)         (4,791,000)

Capital expenditures                         2,174,000          2,175,000           4,349,000

Total assets                                64,182,000         18,880,000          83,062,000



Year ended December 31, 1998
------------------------------

Revenue                                   $147,462,000        $15,378,000        $162,840,000

Depreciation & amortization                  1,387,000            151,000           1,538,000

Operating income (loss)                     17,680,000            (16,000)         17,664,000

Capital expenditures                         6,513,000            603,000           7,116,000

Total assets                                65,331,000          4,234,000          69,565,000
</TABLE>


     Included in the Enterprise  Applications  Services  segment are application
maintenance and support revenues of $16.3 million and $3.5 million for the years
ended December 31, 1999 and 1998, respectively. Other information related to the
application  maintenance  and support  business is not available and the Company
determined that it would be impractical to recreate such data.

     Included  in the  above  operating  income  (loss)  figures  are  corporate
expenses for selling,  general and administrative  activities of $24,582,000 and
$12,820,000  and  non-recurring  and other special  charges of  $10,194,000  and
$2,118,000 for the years ended December 31, 1999 and 1998, respectively.



                                     F - 21
<PAGE>

NOTE 12 - SEGMENT DATA AND GEOGRAPHIC INFORMATION (CONTINUED)

     The following table presents financial information based upon the Company's
geographic  segments  for the years  ended  December  31,  1999,  1998 and 1997.
Information on depreciation and amortization 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.
<TABLE>
<CAPTION>

                              UNITED STATES   ASIA-PACIFIC      EUROPE        INDIA          TOTAL
<S>                            <C>            <C>            <C>           <C>           <C>
1999

Revenue                        $134,639,000   $19,951,000    $24,601,000   $6,876,000    $186,067,000

Depreciation & amortization       2,725,000       237,000        806,000      293,000       4,061,000

Operating income (loss)          (7,655,000)      213,000       (115,000)   2,766,000      (4,791,000)

Total assets                     59,456,000     6,772,000     12,174,000    4,660,000      83,062,000

1998

Revenue                        $119,543,000   $13,650,000    $23,831,000   $5,816,000    $162,840,000

Depreciation & amortization       1,286,000        78,000        115,000       59,000       1,538,000

Operating income (loss)          13,419,000      (945,000)     1,945,000    3,245,000       17,664,000

Total assets                     52,820,000     6,382,000      8,270,000    2,093,000      69,565,000

1997

Revenue                         $73,253,000    $9,642,000    $12,610,000   $2,796,000     $98,301,000

Operating income                  5,744,000       403,000        781,000    1,472,000       8,400,000

Total assets                     35,103,000     2,635,000      4,112,000    1,214,000      43,064,000
</TABLE>


NOTE 13 - SUBSEQUENT EVENT

               On March 14, 2000,  SeraNova,  a  wholly-owned  subsidiary of the
Company, entered into an agreement with four institutional investors pursuant to
which such  investors  purchased an aggregate of 50 shares of SeraNova's  common
stock as a price per share of $200,000,  for an aggregate  purchase price of $10
million. The investment  represents  approximately 4.8% of SeraNova's issued and
outstanding  shares of common stock.  In connection with such sale of its common
stock, SeraNova granted certain demand and piggyback registration rights to such
investors. In addition, at its option, SeraNova may sell an additional 25 shares
of its common stock for an additional $5 million to another investor.




                                     F - 22