SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                                    FORM 10-Q

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

                For the quarterly period ended September 30, 2002
                           Commission File No. 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)

     Indicate  by  checkmark  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 the number of shares  outstanding of each of the Issuer's  classes
of common stock, as of November 13, 2002:

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

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


<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES

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

                                                                            Page
                                                                            ----
PART I.   FINANCIAL INFORMATION

    Item 1.  Consolidated Financial Statements (unaudited)...............     1

             Consolidated Balance Sheets as of September 30, 2002
             and December 31, 2001.......................................     2

             Consolidated Statements of Operations and Comprehensive
             Income(Loss) for the Three Months and Nine Months Ended
             September 30, 2002 and 2001.................................     3

             Consolidated Statements of Cash Flows for the Nine
             Months Ended September 30, 2002 and 2001....................     4

             Notes to Consolidated Financial Statements..................     5

    Item 2.  Management's Discussion and Analysis of
             Financial Condition and Results of Operations...............    15

    Item 3.  Quantitative and Qualitative Disclosures About Market Risk..    37

    Item 4.  Controls and Procedures.....................................    37

PART II.  OTHER INFORMATION

    Item 1.  Legal Proceedings...........................................    38

    Item 4.  Submission of Matters to a Vote of Security Holders.........    41

    Item 5.  Other Information...........................................    41

    Item 6.  Exhibits and Reports on Form 8-K............................    42

SIGNATURES...............................................................    43

CERTIFICATIONS...........................................................    44



                                      - i -
<PAGE>

                          PART I. FINANCIAL INFORMATION

              ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)




                                      - 1 -
<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                    SEPTEMBER 30, 2002 AND DECEMBER 31, 2001

<TABLE>
<CAPTION>
                                                                             SEPTEMBER 30,          DECEMBER 31,
                                                                                 2002                   2001
                                ASSETS
<S>                                                                        <C>                   <C>
Current Assets:
   Cash and cash equivalents.......................................        $     1,980,000       $     2,138,000
   Accounts receivable, less allowance for doubtful accounts of
       $1,361,000 and $2,073,000 at September 30, 2002 and
       December 31, 2001, respectively.............................             16,087,000            13,519,000
   Unbilled services...............................................              7,992,000             7,536,000
   Prepaid income taxes............................................                462,000               342,000
   Deferred tax assets.............................................              1,736,000             1,736,000
   Other current assets............................................              1,999,000             3,548,000
   Note receivable - SeraNova......................................              4,000,000             9,140,000
                                                                           ---------------       ---------------

         Total current assets......................................             34,256,000            37,959,000
   Property and equipment, net.....................................              6,619,000             8,099,000
   Other assets....................................................              1,141,000             1,036,000
                                                                           ---------------       ---------------
                                                                           $    42,016,000       $    47,094,000
                                                                           ===============       ===============

                 LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
   Accounts payable................................................        $     4,213,000       $     3,548,000
   Accrued payroll and related taxes...............................              6,863,000             5,465,000
   Accrued expenses and other liabilities..........................              4,106,000             4,414,000
   Deferred revenue................................................              1,228,000             1,211,000
   Income taxes payable............................................                488,000               427,000
   Current portion of long term debt and obligations under
       capital leases..............................................              5,543,000             4,712,000
                                                                           ---------------       ---------------

           Total current liabilities...............................             22,441,000            19,777,000
Deferred tax liabilities...........................................                167,000               164,000
                                                                           ---------------       ----------------
Obligations under capital leases, less current portion.............                 67,000               371,000
                                                                           ---------------       ---------------
Other long-term liabilities........................................              1,029,000                    --
                                                                           ---------------       ---------------

Commitments and contingencies
Shareholders' Equity
   Preferred stock, $.01 par value, 5,000,000 shares authorized,
       none issued or outstanding..................................                     --                    --
   Common stock, $.01 par value, 25,000,000 shares authorized,
       16,630,125 shares issued and outstanding at September 30,
       2002 and December 31, 2001..................................                166,000               166,000
   Additional paid-in capital......................................             41,366,000            41,366,000
   Accumulated deficit.............................................            (19,222,000)          (10,685,000)
   Accumulated other comprehensive loss............................             (3,998,000)           (4,065,000)
                                                                           ---------------       ---------------
         Total shareholders' equity ...............................             18,312,000            26,782,000
                                                                           ---------------       ---------------
                                                                           $    42,016,000       $    47,094,000
                                                                           ===============       ===============
</TABLE>


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


                                     - 2 -
<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                         AND COMPREHENSIVE INCOME (LOSS)
     FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001

<TABLE>
<CAPTION>
                                                                THREE MONTHS                        NINE MONTHS ENDED
                                                                ------------                        -----------------
                                                            ENDED SEPTEMBER 30,                       SEPTEMBER 30,
                                                            -------------------                       -------------
                                                          2002                2001               2002               2001
                                                      -------------      --------------     --------------      --------------

<S>                                                   <C>                <C>                <C>                 <C>
Revenue..........................................     $  28,358,000      $   25,538,000     $   79,443,000      $   85,061,000
Cost of sales....................................        20,003,000          16,897,000         55,402,000          57,868,000
                                                      -------------      --------------     --------------      --------------
     Gross profit................................         8,355,000           8,641,000         24,041,000          27,193,000
                                                      -------------      --------------     --------------      --------------
Selling, general and administrative expenses.....         6,960,000           7,125,000         20,506,000          23,305,000
Depreciation and amortization....................           643,000             992,000          2,026,000           2,854,000
SeraNova receivable impairment and other
  charges........................................                --                  --          8,362,000                  --
Proxy contest charges............................           412,000                  --            876,000                  --
                                                      -------------      --------------     --------------      --------------
     Total operating expenses....................         8,015,000           8,117,000         31,770,000          26,159,000
                                                      -------------      --------------     --------------      --------------
     Operating income (loss).....................           340,000             524,000         (7,729,000)          1,034,000
Interest income..................................             6,000              60,000             26,000             536,000
Interest expense.................................           (97,000)           (151,000)          (297,000)           (581,000)
Other (expense) income...........................           (76,000)             60,000            (36,000)              3,000
                                                      -------------      --------------     --------------      --------------
Income (loss) before provision for income taxes..           173,000             493,000         (8,036,000)            992,000
Provision for income taxes.......................           160,000             347,000            501,000             480,000
                                                      -------------      --------------     --------------      --------------
Net income (loss)................................     $      13,000      $      146,000     $   (8,537,000)     $      512,000
                                                      =============      ==============     ==============      ==============

Earnings per share:
     Basic earnings per share:
       Net income (loss) per share...............     $        0.00      $        0.01      $       (0.51)      $        0.03
                                                      =============      =============      =============       =============
       Weighted average number of
       common shares - Basic.....................        16,630,000          16,630,000         16,630,000          16,630,000
                                                      =============      ==============     ==============      ==============

     Diluted earnings per share:
       Net income (loss) per share...............     $        0.00      $        0.01      $       (0.51)      $        0.03
                                                      =============      =============      =============       =============
       Weighted average number of
       common shares - Diluted...................        16,633,000          16,630,000         16,630,000          16,631,000
                                                      =============      ==============     ==============      ==============

Comprehensive Income (Loss)
---------------------------
Net income (loss)................................     $      13,000      $      146,000     $   (8,537,000)     $      512,000
Other comprehensive income (loss) -
       Currency translation adjustments..........            80,000              73,000             67,000            (848,000)
                                                      -------------      --------------     --------------      --------------
Comprehensive income (loss)......................     $      93,000      $      219,000     $   (8,470,000)     $     (336,000)
                                                      =============      ==============     ==============      ==============
</TABLE>


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


                                     - 3 -
<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001

<TABLE>
<CAPTION>
                                                                              NINE MONTHS ENDED SEPTEMBER 30,
                                                                                  2002               2001
                                                                             -------------        ------------
<S>                                                                          <C>                  <C>
Cash flows from operating activities:
   Net (loss) income....................................................     $  (8,537,000)       $    512,000
   Adjustments to reconcile net (loss) income to net cash provided by
      operating activities:
       Depreciation and amortization....................................         2,664,000           3,480,000
       Provision for doubtful accounts..................................           342,000           1,423,000
       SeraNova receivable impairment and other charges.................         8,362,000                  --
       Deferred income taxes............................................             3,000             147,000
   Changes in operating assets and liabilities:
     Accounts receivable................................................        (2,910,000)          3,996,000
     Unbilled services..................................................          (456,000)             77,000
     Other current assets...............................................           145,000            (657,000)
     Other assets.......................................................          (105,000)            376,000
     Accounts payable...................................................           665,000          (2,455,000)
     Accrued payroll and related taxes..................................         1,398,000            (898,000)
     Accrued expenses and other liabilities.............................          (688,000)           (794,000)
     Accrued restructuring charges......................................          (529,000)           (277,000)
     Deferred revenue...................................................            17,000            (257,000)
     Income taxes payable...............................................            61,000               8,000
                                                                             -------------        ------------
   Net cash provided by operating activities............................           432,000           4,681,000
                                                                             -------------        ------------

Cash flows from investing activities:
     Purchase of equipment .............................................        (1,184,000)         (2,996,000)
     Purchase of software licenses......................................                --          (2,678,000)
                                                                             -------------        ------------
   Net cash used in investing activities................................        (1,184,000)         (5,674,000)
                                                                             -------------        ------------

Cash flows from financing activities:
   Principal payments under capital leases..............................          (509,000)           (434,000)
   Other borrowings (repayments)........................................             3,000             (90,000)
   Net change in line of credit borrowings..............................         1,033,000             892,000
   Repayment of note receivable-SeraNova subsequent to spin-off date....                --           2,060,000
                                                                             -------------        ------------
     Net cash provided by financing activities..........................           527,000           2,428,000
                                                                             -------------        ------------
     Effect of foreign currency exchange rate changes on cash...........            67,000            (848,000)
                                                                             -------------        ------------
Net (decrease) increase in cash and cash equivalents ...................          (158,000)            587,000
Cash and cash equivalents at beginning of period........................         2,138,000           1,327,000
                                                                             -------------        ------------
Cash and cash equivalents at end of period..............................     $   1,980,000        $  1,914,000
                                                                             =============        ============
Supplemental disclosures of cash flow information:
   Cash paid for income taxes...........................................     $     864,000        $  1,081,000
                                                                             =============        ============
   Cash paid for interest...............................................     $     297,000        $    581,000
                                                                             =============        ============
</TABLE>


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


                                     - 4 -
<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - BASIS OF PRESENTATION

     The   consolidated   financial   statements  and   accompanying   financial
information  as of  September  30, 2002 and for the three months and nine months
ended  September  30,  2002  and 2001  are  unaudited  and,  in the  opinion  of
management,  include  all  adjustments  (consisting  only  of  normal  recurring
adjustments)  which the Company  considers  necessary for a fair presentation of
the financial  position of the Company at such dates and the  operating  results
and cash flows for those periods. The consolidated financial statements included
herein have been prepared in accordance  with  accounting  principles  generally
accepted in the United States of America and the  instructions  of Form 10-Q and
Rule  10-01 of  Regulation  S-X.  Pursuant  to  accounting  requirements  of the
Securities and Exchange Commission applicable to quarterly reports on Form 10-Q,
the  accompanying  consolidated  financial  statements  and  these  notes do not
include all disclosures required by accounting  principles generally accepted in
the United  States of America for  audited  financial  statements.  Accordingly,
these statements should be read in conjunction with the accounting  policies and
Notes to Consolidated Financial Statements included in the Company's most recent
annual financial statements.

     In November 2001, the Emerging  Issues Task Force ("EITF") of the Financial
Accounting Standards Board ("FASB") concluded that reimbursable  "out-of-pocket"
expenses should be classified as revenue,  and correspondingly cost of services,
in the statement of operations.  Most service  companies,  whose employees incur
incidental expenses such as airfare,  mileage, hotel and out-of-town meals while
working on behalf of customers, previously reported reimbursable "out-of-pocket"
expenses on a "net" basis in the statement of operations. Accordingly, effective
January 1, 2002,  the Company has reported  gross  reimbursable  "out-of-pocket"
expenses  incurred  as both  revenue  and  cost of  sales  in the  statement  of
operations. The Company has also reclassified prior period financial information
for presentation consistent with the new EITF accounting guidance. The impact of
this  reclassification  was an  increase  to both  revenue  and cost of sales of
$696,000 and $426,000  for the three months ended  September  30, 2002 and 2001,
respectively,  and $1,735,000 and $1,885,000 for the nine months ended September
30, 2002 and 2001, respectively.

     The Company's 2002 operating plan contains  assumptions  regarding  revenue
and  expenses.  The  achievement  of the operating  plan depends  heavily on the
timing of work performed by the Company on existing  projects and the ability of
the Company to gain and perform  work on new  projects.  Project  cancellations,
delays in the timing of work  performed  by the Company on existing  projects or
the inability of the Company to gain and perform work on new projects could have
an adverse  impact on the Company's  ability to execute its  operating  plan and
maintain  adequate  cash  flow.  In the  event  actual  results  do not meet the
operating  plan,  management  believes  it could  execute  contingency  plans to
mitigate such effects.  Such plans include additional cost reductions or seeking
additional  financing.  Considering  the cash on hand,  the credit  facility and
based on the achievement of the operating plan and management's actions taken to
date,  management believes it has the ability to continue to generate sufficient
cash to


                                     - 5 -
<PAGE>

NOTE 1 - BASIS OF PRESENTATION (CONTINUED)

satisfy its operating requirements in the normal course of business. However, no
assurance can be given that sufficient cash will be generated from operations.

     The  results  of  operations  for  interim   periods  are  not  necessarily
indicative of those that may be achieved for a full fiscal year.

NOTE 2 - EARNINGS PER SHARE

     Basic earnings per share is computed by dividing income (loss) available to
common  shareholders by the weighted average number of common stock  outstanding
for the period.  Diluted earnings per share reflects the potential dilution that
could  occur  if  securities  or other  contracts  to issue  common  stock  were
exercised or converted into common stock, unless they are antidilutive.

     A reconciliation of weighted average number of common shares outstanding to
weighted average common shares outstanding assuming dilution is as follows:

<TABLE>
<CAPTION>
                                            Three Months Ended              Nine Months Ended
                                            ------------------              -----------------
                                               September 30,                  September 30,
                                               -------------                  -------------
                                           2002            2001            2002           2001
                                           ----            ----            ----           ----
<S>                                     <C>             <C>             <C>            <C>
Weighted average number of
common shares........................   16,630,000      16,630,000      16,630,000     16,630,000

Common share equivalents of
outstanding stock options............        3,000              --              --          1,000
                                        ----------      ----------      ----------     ----------

Weighted average number of common
shares assuming dilution.............   16,633,000      16,630,000      16,630,000     16,631,000
                                        ==========      ==========      ==========     ==========
</TABLE>

     Stock options,  which would be antidilutive  (2,419,000 and 3,062,000 as of
September  30,  2002  and  2001,  respectively),  have  been  excluded  from the
calculations of diluted shares outstanding and diluted earnings per share.

NOTE 3 - LINES OF CREDIT

     On May 31, 2000, the Company and PNC Bank, N.A. (the "Bank") entered into a
three-year  revolving  credit  facility.  Such credit facility is comprised of a
revolving  line of  credit  pursuant  to which  the  Company  can  borrow  up to
$20,000,000  either  at the  Bank's  prime  rate per annum or the Euro Rate plus
1.75%  to 2.5%  based  upon  the  Company's  ratio  of debt to  earnings  before
interest, taxes,  depreciation and amortization ("EBITDA").  The credit facility
is  collateralized  by  substantially  all of the assets of the Company's United
States based operations.  The maximum borrowing  availability  under the line of
credit is based upon a  percentage  of  eligible  billed and  unbilled  accounts
receivable,  as defined.  As of September 30, 2002, the Company had  outstanding
borrowings under the credit facility of $5,099,000. The Company


                                     - 6 -
<PAGE>

NOTE 3 - LINES OF CREDIT (CONTINUED)

estimates undrawn  availability under the credit facility to be $7,611,000 as of
September  30,  2002.  As of December  31,  2001,  the  Company had  outstanding
borrowings under the credit facility of $4,066,000.

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

     As of  December  31,  2001,  the  Company  was not in  compliance  with the
consolidated  net worth and  unconsolidated  net worth financial  covenants.  In
March  2002,  the  Company  finalized  with the Bank the  terms of a waiver  and
amendment  to the  credit  agreement.  The  terms of the  waiver  and  amendment
included,  among  other  things,  (1) a waiver of the  covenant  defaults  as of
December 31, 2001, (2) a modification to the financial covenants to require that
consolidated net worth and  unconsolidated  net worth as of December 31, 2002 be
not less than 102% of  consolidated  net worth  and  unconsolidated  net  worth,
respectively,  as of December 31, 2001, (3) a modification  to the  consolidated
net worth and  unconsolidated  net worth  covenants  to exclude  any  changes to
consolidated  net  worth  and   unconsolidated  net  worth  resulting  from  the
write-down or write-off of up to $10,833,000 of the note due from SeraNova,  and
(4) a new financial  covenant  requiring that the Company  generate EBITDA of at
least 90% of the prior year's EBITDA.

     During each of the quarters ended June 30, 2002 and September 30, 2002, the
Company incurred charges related to the Company's  contested 2002 Annual Meeting
of Shareholders  ("Proxy  Contest").  The Proxy Contest  charges  included legal
fees, proxy  solicitation  services and printing,  mailing and other costs. As a
direct  result of the Proxy Contest  charges,  the Company was not in compliance
with the EBITDA covenant as of June 30, 2002 and September 30, 2002. The Company
is  currently  negotiating  with the Bank and expects to receive a waiver of the
covenant defaults existing as of June 30, 2002 and September 30, 2002. There can
be no assurance,  however,  that the Company will be able to obtain a waiver and
appropriate amendment to the agreement on terms acceptable to the Company.


                                     - 7 -
<PAGE>

NOTE 3 - LINES OF CREDIT (CONTINUED)

     Interest expense on debt and obligations under capital leases  approximated
$297,000 and $581,000  for the nine months  ended  September  30, 2002 and 2001,
respectively.

NOTE 4 - NOTE RECEIVABLE - SERANOVA

     On May 31, 2000, SeraNova,  Inc.  ("SeraNova") and the Company formalized a
$15,100,000 unsecured promissory note (the "Note") relating to net borrowings by
SeraNova  from the Company  through  such date.  The Note bears  interest at the
prime rate plus 1/2%.  The  Company  had  recorded  total  accrued  interest  of
$940,000 as of December  31,  2001.  The  Company has not  recorded  any accrued
interest on the balance of the Note  subsequent to the maturity date of July 31,
2001. A payment of  $3,000,000  was made on September  29, 2000 with the balance
being due on July 31, 2001.

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

     The Company  received from SeraNova the $500,000  payment that was due upon
execution of the agreement and a $400,000 payment in December 2000 as an advance
payment  towards  the  principal  of the Note  since no  Hosting  Agreement  was
executed before December 15, 2000.

     In 2001, the Company received principal  payments totaling  $2,060,000 from
SeraNova.  However,  SeraNova  failed to make final  payment of all  amounts due
under the Note to the  Company  as of July 31,  2001.  On August 16,  2001,  the
Company filed a complaint against SeraNova and Silverline  Technologies  Limited
("Silverline"), which acquired SeraNova in March 2001. As of such date, SeraNova
was  obligated  to pay to the Company  the  remaining  principal  (approximately
$9,140,000) and accrued interest  (approximately  $940,000),  or an aggregate of
$10,080,000.  SeraNova  then  filed  a  counterclaim  against  the  Company  for
unspecified  damages as a set-off against the Company's  claims.  In response to
the Company's request for a statement of damages, SeraNova stated that it was in
the process of calculating its damages,  but for informational  purposes claimed
compensatory  damages in excess of $5,500,000 and punitive damages in the amount
of $10,000,000.  The parties have completed the discovery process and a trial is
scheduled for December 16, 2002. The Company  believes that there is no basis to
support the amounts claimed by SeraNova in its counterclaim for compensatory and


                                     - 8 -
<PAGE>

NOTE 4 - NOTE RECEIVABLE - SERANOVA (CONTINUED)

punitive  damages.  The  inability of the Company to collect the amount due from
SeraNova  and/or  Silverline or an adverse  decision with respect to the Company
relating  to  SeraNova's  counterclaim  could  negatively  affect the  Company's
business, financial condition or results of operations.

     In addition,  during late 2001,  SeraNova failed to pay certain outstanding
lease obligations to the Company's landlords. Accordingly, on March 4, 2002, the
Company filed an arbitration  demand with the American  Arbitration  Association
against SeraNova,  Silverline and Silverline  Technologies,  Inc. (collectively,
the "SeraNova Group"). The demand for arbitration, which sought damages, alleged
among other  things that the  SeraNova  Group  failed to pay  outstanding  lease
obligations to the Company's landlords and to reimburse the Company for all rent
payments made by the Company on their behalf. An arbitration hearing was held on
June  25,  2002  and  June  28,  2002  seeking  $525,000  in  outstanding  lease
obligations.  On August 9, 2002,  an award was issued in the amount of  $616,905
(including  attorney's fees) plus reimbursement of administrative fees, in favor
of the Company and against the SeraNova Group jointly and  severally.  The award
also includes a provision that jurisdiction is retained by the tribunal, and the
Company may seek from the tribunal any  additional  rents and other fees due and
owing on a quarterly basis.  Accordingly,  the Company filed a second demand for
$300,000  in  damages  for rents and other  fees due and owing for the months of
June through  September 2002. On August 12, 2002, an action was commenced in the
Superior  Court of New Jersey to confirm  the  award,  seek a writ of  execution
against the  SeraNova  Group's  assets,  restrain  the  disposal of the SeraNova
Group's  assets,  and enjoin the  distribution  of proceeds from any sale of the
SeraNova  Group's assets among other emergency  relief.  On August 13, 2002, the
Court,  among other things, (i) confirmed the award and entered judgment against
SeraNova in the amount of  $616,905  plus $7,100 in  administrative  fees,  (ii)
authorized the issuance of a writ of execution against  SeraNova's bank accounts
and other assets to satisfy the judgment,  (iii)  restrained  the SeraNova Group
from  disposing  of any assets,  including  funds in their bank  accounts,  (iv)
authorized the attachment of all net proceeds from the sale of any assets of the
SeraNova  Group  up to the  amount  of the  arbitration  award  to be held in an
interest  bearing escrow account pending further court order and (v) scheduled a
hearing for September 3, 2002 in order for the SeraNova  Group to show cause why
the relief granted by the Court to the Company  against  SeraNova  should not be
applied to the  SeraNova  Group  jointly  and  severally.  A trial was held over
several days in September  2002.  On October 3, 2002,  the Court  confirmed  the
$624,000  award,  jointly and severally as to all the  defendants,  and issued a
writ of execution against the defendant's  assets.  The Company does not believe
that the  outcome  of this claim will have a  materially  adverse  effect on the
Company's business, financial condition or results of operations.

     The Company is  continuing  to pursue its various  legal  options to obtain
payment from the SeraNova Group on the Note and outstanding  lease  obligations.
At the same time, the Company has also been actively engaged in discussions with
management of the SeraNova Group,  with the objective of seeking an out of court
resolution to all  outstanding  matters  involving  the Note,  and certain other
receivables  and lease  obligations.  However,  the  Company  believed  that the
liquidity  issues  plaguing the SeraNova Group  required a  reassessment  of the
realizability  of these  outstanding  amounts as of June 30,  2002.  Although no
final  resolution had been reached,  the Company  believed that the substance of
these discussions provided a basis for determining the


                                     - 9 -
<PAGE>

NOTE 4 - NOTE RECEIVABLE - SERANOVA (CONTINUED)

approximate  realizable value of the Note and other  receivables,  as well as an
estimate of the costs required to exit certain lease  obligations.  Accordingly,
the Company  recorded the  following  charges  during the quarter ended June 30,
2002:

<TABLE>
<CAPTION>
                                         WRITE-DOWN       WRITE-OFF       ASSUMPTION
                                           OF NOTE         OF OTHER       OF  CERTAIN
                                         RECEIVABLE     RECEIVABLES -       LEASE           OTHER
                                         - SERANOVA        SERANOVA       OBLIGATIONS       CHARGES         TOTAL
                                        ----------------------------------------------------------------------------

<S>                                     <C>             <C>              <C>             <C>            <C>
Charges to operations during 2002...    $  5,140,000    $  1,257,000     $  1,501,000    $   464,000    $  8,362,000
Costs paid during 2002..............              --              --         (205,000)      (202,000)       (407,000)
Non-cash items......................      (5,140,000)     (1,257,000)              --             --      (6,397,000)
                                        ------------    ------------     ------------    -----------    ------------
Accrued costs as of September 30,
2002................................    $         --    $         --     $  1,296,000    $   262,000    $  1,558,000
                                        ============    ============     ============    ===========    ============
</TABLE>

     At June 30, 2002,  the Company  recorded a $5,140,000  charge to write-down
the  carrying  value of the Note to  $4,000,000.  The  Company  also  recorded a
$1,257,000  charge  to  write-off  the  carrying  value  of the  other  SeraNova
receivables  (primarily,  accrued  interest on the Note and a  receivable  for a
system  implementation  project).  Additionally,  the  Company  had  recorded  a
liability of $1,501,000  for certain lease exit costs as of June 30, 2002.  Such
liability  represents  primarily  obligated  space  costs for which the  Company
currently  believes  it cannot  use or  sublease  and the  differential  between
certain  Company lease  obligations and sublease  amounts to be received.  As of
September 30, 2002,  $1,296,000 of the liability remains  outstanding,  of which
$1,029,000 is included in other long-term liabilities.

     At September 30, 2002, the Company  re-evaluated  the  realizability of the
carrying  value of the Note, as well as any required  change to the  obligations
associated  with the office  space costs.  Based upon the current  status of the
negotiations  with the SeraNova Group, the Company  determined that no change to
the carrying value of the Note or the recorded  liability was  appropriate as of
September 30, 2002. However, if the Company were to collect less than $4,000,000
on the Note recorded as of September 30, 2002, or incur  additional  obligations
or costs, the SeraNova  receivable  write-down and/or charges would be increased
in future periods.

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


                                     - 10 -
<PAGE>

NOTE 5 - RESTRUCTURING AND OTHER SPECIAL CHARGES (CONTINUED)

     During the quarter ended  December 31, 2001, in an effort to further refine
the Company's  business  strategy around its core competencies and to refocus on
more active markets, the Company recorded a $13,261,000  restructuring and other
special charges  provision.  The charges,  which were mainly non-cash in nature,
were related primarily to the ASP business in the United States, the termination
of an agreement to build and operate a technology development and support center
in  Puerto  Rico,  and to the  restructuring  and  downsizing  of the  Company's
operations in the United Kingdom.

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

<TABLE>
<CAPTION>
                                                Severance and          Asset
                                                Related Costs       Impairments        Exit Costs          Total
                                               ---------------------------------------------------------------------
<S>                                             <C>                <C>               <C>                <C>
Charges to operations during 1999.........      $   5,027,000      $         --      $      601,000     $  5,628,000
Costs paid during 1999....................         (4,162,000)               --            (517,000)      (4,679,000)
                                                -------------      ------------      --------------     ------------
Accrued costs as of December 31, 1999.....            865,000                --              84,000          949,000

Costs paid during 2000....................           (608,000)               --                  --         (608,000)
                                                -------------      ------------      --------------     ------------
Accrued costs as of December 31, 2000.....            257,000                --              84,000          341,000

Charges to operations during 2001.........            530,000        10,999,000           1,732,000       13,261,000
Costs paid during 2001....................           (402,000)               --            (172,000)        (574,000)
Non-cash utilization during 2001..........                 --       (10,999,000)         (1,177,000)     (12,176,000)
                                                -------------      ------------      --------------     ------------
Accrued costs as of December 31, 2001.....            385,000                --             467,000          852,000

Costs paid during 2002....................           (268,000)               --            (261,000)        (529,000)
                                                -------------      ------------      --------------     ------------
Accrued costs as of September 30, 2002....      $     117,000      $         --      $      206,000     $    323,000
                                                =============      ============      ==============     ============
</TABLE>

     The Company expects to pay out the remaining costs above within the next
9 months.

NOTE 6 - SEGMENT DATA AND GEOGRAPHIC INFORMATION

     The Company operates in one industry,  information technology solutions and
services.  The  Company  has  four  reportable  operating  segments,  which  are
organized and managed on a geographical basis, as follows:

     o    United  States  ("US") - the  largest  segment  of the  Company,  with
          operations  in the United  States,  Puerto  Rico,  South  America  and
          Canada.  Includes  the  operations  of the  Company's  US  subsidiary,
          Empower, Inc., and all corporate functions and activities.  The US and
          corporate headquarters are located in Edison, New Jersey;

     o    Asia-Pacific  ("APAC") - includes  the  operations  of the  Company in
          Australia, Hong Kong, Indonesia, Japan, New Zealand and Singapore. The
          APAC headquarters are located in Wellington, New Zealand;

     o    Europe - includes the operations of the Company in Denmark, Sweden and
          the United Kingdom. The European  headquarters are located in Norfolk,
          United Kingdom; and


                                     - 11 -
<PAGE>

NOTE 6 - SEGMENT DATA AND GEOGRAPHIC INFORMATION (CONTINUED)

     o    India - includes  the  operations  of the Company in India,  including
          services provided on behalf of other Company subsidiaries.  The Indian
          headquarters are located in Hyderabad, India.

     Each of the  operating  segments  has a Managing  Director,  or  equivalent
position,   which  reports  directly  to  the  Chief  Executive  Officer  (CEO).
Currently, the CEO and President is fulfilling the requirements of this position
in the US. The CEO has been  identified as the Chief  Operating  Decision  Maker
(CODM)  because he has final  authority over resource  allocation  decisions and
performance  assessment.  The CODM regularly receives certain discrete financial
information  about the  geographical  operating  segments,  including  primarily
revenue and operating income, to evaluate segment performance.

     Accordingly,  the Company's  operating  results and financial  position are
presented  in the  following  geographic  segments for the three months and nine
months ended September 30, 2002 and 2001.

<TABLE>
<CAPTION>
                                    UNITED STATES    ASIA-PACIFIC        EUROPE            INDIA              TOTAL
                                    -------------    ------------        ------            -----              -----
<S>                                 <C>              <C>              <C>               <C>               <C>
Three Months Ended
------------------
September 30, 2002
------------------
Revenue.......................      $ 21,121,000     $  2,470,000     $  1,419,000      $ 3,348,000       $ 28,358,000
Depreciation & amortization...           434,000           43,000           48,000          118,000            643,000  (1)
Operating income (loss).......           771,000         (423,000)        (389,000)         381,000            340,000  (2)
Total assets..................        29,150,000        4,052,000        1,817,000        6,997,000         42,016,000

Three Months Ended
------------------
September 30, 2001
------------------
Revenue.......................      $ 17,516,000     $  3,117,000     $  2,076,000       $2,829,000       $ 25,538,000
Depreciation & amortization...           556,000           67,000          199,000          170,000            992,000  (3)
Operating income (loss).......           796,000          237,000         (972,000)         463,000            524,000
Total assets..................        43,783,000        5,943,000        7,307,000        5,841,000         62,874,000

Nine Months Ended
-----------------
September 30, 2002
------------------
Revenue.......................      $ 57,859,000     $  7,191,000     $  4,448,000       $9,945,000       $ 79,443,000
Depreciation & amortization...         1,359,000          126,000          163,000          378,000          2,026,000  (1)
Operating income (loss).......        (7,263,000)      (1,262,000)        (930,000)       1,726,000         (7,729,000) (4)

Nine Months Ended
-----------------
September 30, 2001
------------------
Revenue.......................      $ 56,493,000     $ 10,226,000     $  8,708,000       $9,634,000       $ 85,061,000
Depreciation & amortization...         1,630,000          236,000          564,000          424,000          2,854,000  (3)
Operating income (loss).......           815,000          343,000       (2,878,000)       2,754,000          1,034,000
</TABLE>

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

     (1)  Excludes  $195,000  and  $638,000  of  depreciation  and  amortization
          included in cost of sales for the three  months and nine months  ended
          September 30, 2002, respectively.
     (2)  Includes  $412,000 of proxy contest charges for the three months ended
          September 30, 2002.
     (3)  Excludes  $217,000  and  $626,000  of  depreciation  and  amortization
          included in cost of sales for the three  months and nine months  ended
          September 30, 2001, respectively.
     (4)  Includes  $8,362,000  of  SeraNova  receivable  impairment  and  other
          charges  and  $876,000  of proxy  contest  charges for the nine months
          ended September 30, 2002.


                                     - 12 -
<PAGE>

NOTE 6 - SEGMENT DATA AND GEOGRAPHIC INFORMATION (CONTINUED)

     Included  above  are  application   management  and  support   revenues  of
$7,424,000  and  $6,568,000  for the three months ended  September  30, 2002 and
2001, respectively. The application management and support revenues for the nine
months  ended  September  30,  2002 and 2001 are  $20,370,000  and  $17,779,000,
respectively.  Other  information  related  to the  application  management  and
support  business is not maintained and the Company  determined that it would be
impractical to calculate such data.

NOTE 7 - CONTINGENCIES

Tax-Free Spin-off of SeraNova

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

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

Tax Contingency in India

     The Company's Indian  subsidiary has received an assessment from the Indian
taxing  authority  denying tax  exemptions  claimed for certain  revenue  earned
during the fiscal years ended March 31, 1998 and March 31, 1999.  The assessment
is  for  25  million  rupees,  or  approximately  $520,000.   Management,  after
consultation  with its  advisors,  believes  the  Company is entitled to the tax
exemption  claimed and thus has not recorded a provision  for taxes  relating to
these items as of September  30, 2002. If the Company were not  successful  with
its appeals, which were filed in 2001 and 2002, a future charge of approximately
$520,000 would be recorded and reflected in the Company's consolidated statement
of operations.


                                     - 13 -
<PAGE>

NOTE 7 - CONTINGENCIES (CONTINUED)

Legal

     On February 7, 2001, NSA Investments II LLC filed a complaint in the United
States District Court for the District of  Massachusetts  naming,  among others,
SeraNova,  the Company and Rajkumar Koneru, a former director of the Company, as
defendants.  The  plaintiff  alleges that it invested  $4,000,000 in SeraNova as
part of a private placement of SeraNova common stock in March 2000, prior to the
spin-off of SeraNova by the Company. The complaint, which seeks compensatory and
punitive  damages,  alleges  that the  Company,  as a  "controlling  person"  of
SeraNova, is jointly and severally liable with and to the extent as SeraNova for
false and misleading statements constituting  securities laws violations.  After
being served with the complaint,  the Company made a request for indemnification
from  SeraNova  pursuant to the various  inter-company  agreements in connection
with the spin-off. By letter dated April 13, 2001,  SeraNova's counsel,  advised
the Company that SeraNova acknowledged liability for such indemnification claims
and has  elected to assume the  defense of the  plaintiff's  claims.  In October
2001,  the motion to dismiss,  filed on behalf of the  Company in May 2001,  was
denied  without  prejudice  to  refile  at the  close of the  discovery  period.
Court-ordered  mediation  between the plaintiff and SeraNova  during January and
February 2002 was  unsuccessful.  In January 2002,  plaintiff filed a motion for
partial  summary  judgment as to certain  claims  against  SeraNova.  No summary
judgment motion was filed against the Company.  SeraNova filed its opposition to
plaintiff's  motion for partial  summary  judgment in February  2002.  The court
heard argument on the motion for partial  summary  judgment on July 30, 2002. On
September  30,  2002,  the Court  granted  plaintiff's  motion in part,  finding
SeraNova  liable for breach of contract as a matter of law.  The Company  denies
the  allegations  made and intends to defend  vigorously  the claims made by the
plaintiff.  It is too early in the dispute  process to determine the impact,  if
any,  that  such  dispute  will  have  upon the  Company's  business,  financial
condition or results of operations.

     The  Company  is  engaged in other  legal and  administrative  proceedings.
Except for the litigation  related to the SeraNova Note (See Note 4), 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 - NEW ACCOUNTING PRONOUNCEMENT

     In June 2002, the Financial  Accounting Standards Board (the "FASB") issued
SFAS  No.  146,   "Accounting  for  Costs   Associated  with  Exit  or  Disposal
Activities." SFAS No. 146 addresses financial accounting and reporting for costs
associated with exit or disposal  activities and nullifies  Emerging Issues Task
Force  (EITF)  Issue No.  94-3,  "Liability  Recognition  for  Certain  Employee
Termination  Benefits  and Other  Costs to Exit an Activity  (including  Certain
Costs Incurred in a Restructuring)." The Company is evaluating the impact of the
adoption of SFAS No. 146,  which is  effective  for the Company as of January 1,
2003,  but does not  believe  it will have a  material  impact on the  Company's
financial position or results of operations.


                                     - 14 -
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

OVERVIEW

     The  Company  provides  a  wide  range  of   high-quality,   cost-effective
information  technology  solutions  and services.  These  services and solutions
include the development, integration, implementation,  management and support of
enterprise,  e-commerce  and  m-commerce  software  applications.  The Company's
onsite/offshore    delivery   model,    comprehensive   suite   of   tools   and
industry-specific  solutions provide customers with a faster  time-to-market and
lower total cost of ownership.

     In October 1987, the Company first began to provide systems integration and
custom software development services to customers. In 1994, the Company began to
diversify its customer  base by expanding  the scope of its systems  integration
and custom development  services to include Enterprise Resource Planning ("ERP")
software.  ERP software products are pre-packaged  solutions for a wide-range of
business  areas,  including  financial  information,   manufacturing  and  human
resources.  For  prospective  customers,  ERP products are an alternative to the
custom design and development of their own  applications.  Although ERP products
are  pre-packaged  solutions,  there is a significant  amount of technical  work
involved  in  implementing  them  and  tailoring  their  use  for  a  particular
customer's needs.

     Throughout  the  mid-to-late  1990s,  the  Company  grew  significantly  by
capitalizing  on  the  business   opportunity  to  provide   implementation  and
customization services work to the expanding ERP market. The Company first began
to provide  these  technical  services to  customers  implementing  SAP software
before  expanding  its service  offerings to include ERP  products  developed by
Oracle in 1995 and PeopleSoft in 1997.

     In late 1999,  the Company  made the  strategic  decision  to leverage  its
traditional  application  integration  and consulting  experience and reposition
Intelligroup for future growth by focusing on the emerging  Application  Service
Provider  ("ASP")  market.  At the same time,  the  Company  made the  strategic
decision  to  spin-off  its  Internet  services  business  to its  shareholders.
Accordingly,   on  January  1,  2000,  the  Company   transferred  its  Internet
applications  services and management  consulting  businesses to SeraNova,  Inc.
("SeraNova"),  a wholly owned subsidiary of the Company on such date. On July 5,
2000, the Company  distributed all of the outstanding shares of the common stock
of  SeraNova  then held by the  Company to  holders  of record of the  Company's
common stock as of the close of business on May 12, 2000 (or to their subsequent
transferees) in accordance  with the terms of a Distribution  Agreement dated as
of January 1, 2000 between the Company and SeraNova.

     During the second half of 2000,  finding  that the market for ASP  services
had not  developed  and grown as  projected  by  market  analysts,  the  Company
significantly reduced its investment in the ASP business model. Expenditures for
marketing and direct selling initiatives were significantly  decreased,  as were
the infrastructure and personnel that supported the Company's ASP services.  The
Company  renewed  its  focus  and  efforts  on  pursuing   shorter-term  success
opportunities of implementing and enhancing  application solutions based on SAP,
Oracle and PeopleSoft products (referred to as professional  consulting services
or "PCS"). At the same


                                     - 15 -
<PAGE>

time,  the  Company  redirected  some of its ASP  infrastructure  and  personnel
towards Application Management Services ("AMS").

     A key to the renewed focus around PCS and AMS is the Company's two offshore
development  facilities  located in Hyderabad,  India.  The  Company's  offshore
Advanced   Development   Center   ("ADC")   allows   the   Company   to  provide
cost-effective, timely and high-quality PCS services to customers throughout the
world.  The ADC  delivers  rapid,  24 by 7  development  services,  by utilizing
functional and technical consultants, in conjunction with on-site consultants at
customer  locations,  to  provide  customers  with  savings in  development  and
implementation costs and faster time to project completion.

     The  Company's  offshore  Global  Support  Center  ("GSC") helps to provide
responsive  global AMS support to  customers  through  delivery  teams that work
around-the-clock.  The GSC keeps customers' critical  applications,  systems and
infrastructure   stable,   current   and   optimized   through   efficient   and
cost-effective user, technical and operations support.

     In late 2000, the Company introduced Power Up Services. The Company's Power
Up  Services  include  the  proprietary  Uptimizer(SM)  and HotPac  Analyzer(SM)
services.  These services assist the Company's SAP customers in cost-effectively
sizing and analyzing  upgrade projects,  and efficiently  evaluating and testing
Support Packages.

     In 2001,  the Company  developed  Pharma  Express and  Contractor  Express.
Pharma  Express,  a solution  designed for  small-to-medium  sized life sciences
companies,  improves manufacturing efficiencies and helps control the total cost
of production. Contractor Express assists engineering and construction companies
in improving operational efficiency and controlling project schedules and costs.

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

     The 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 or referral sources of the Company):

     o    Consulting  and  software  integration  firms:  including,  IBM Global
          Services, Electronic Data Systems (EDS), Computer Sciences Corporation
          (CSC), Cap Gemini


                                     - 16 -
<PAGE>

          Ernst & Young (CGE&Y),  Deloitte  Consulting,  KPMG Consulting and PwC
          Consulting.

     o    Software applications vendors: SAP, Oracle and PeopleSoft.

     o    Application  management  consulting  firms:  such as  Covansys,  Wipro
          Technologies,   Infosys  Technologies  Limited,  and  Satyam  Computer
          Services Ltd.

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

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

     The Company 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, 2001,  revenues  derived  from  projects  under fixed price
contracts  represented  approximately 17% of the Company's total revenue.  Fixed
price  contracts,  in the  aggregate,  represented  23% of the  Company's  total
revenue  during the nine months ended  September 30, 2002. No single fixed price
project  was in excess of 10% of revenue  during  2001 or during the nine months
ended September 30, 2002. The Company  believes that, as it pursues its strategy
of providing Application  Management Services to customers,  it will continue to
offer fixed price  projects.  The Company  believes that there are certain risks
related to fixed price arrangements and thus prices such arrangements to reflect
the associated  risk. There can be no assurance that the Company will be able to
complete such projects within the fixed price timeframes. The failure to perform
within  such  fixed  price  contracts,  if entered  into,  could have a material
adverse  effect on the Company's  business,  financial  condition and results of
operations.

     The  Company has derived  and  believes  that it will  continue to derive a
significant  portion  of its  revenue  from a limited  number of  customers  and
projects.  For the nine  months  ended  September  30,  2002 and the year  ended
December 31, 2001,  the Company's ten largest  customers  accounted  for, in the
aggregate,  approximately  38% and 33% of  revenue,  respectively.  For the nine
months ended September 30, 2002, one customer accounted for approximately 10% of
revenue.  For the year ended December 31, 2001, no single customer accounted for
more than 10% of revenue.  For the nine months ended  September 30, 2002 and the
year ended  December  31,  2001,  36% and 42%,  respectively,  of the  Company's
revenue was generated by providing  supplemental  resources for consulting teams
assembled by other  information  technology  consulting firms or directly to the
end-customer.  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 nine months ended September 30, 2002 and the year ended December
31,  2001,  approximately  61% and 69%,  respectively,  of the  Company's  total
revenue was derived from  projects in which the Company  implemented,  extended,
maintained, managed or supported


                                     - 17 -
<PAGE>

software  developed by SAP. For the nine months ended September 30, 2002 and the
year ended December 31, 2001,  approximately 23% and 17%,  respectively,  of the
Company's  total  revenue  was  derived  from  projects  in  which  the  Company
implemented,  extended,  maintained,  managed or supported software developed by
PeopleSoft.  For each of the nine months ended  September  30, 2002 and the year
ended  December 31, 2001,  approximately  9% of the Company's  total revenue was
derived from projects in which the Company  implemented,  extended,  maintained,
managed or supported software developed by Oracle.

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

     The Company  currently  maintains its  headquarters in Edison (New Jersey),
and a branch office in Atlanta (Georgia).  The Company also maintains offices in
Europe (Denmark,  Sweden and the United Kingdom),  and Asia-Pacific  (Australia,
India, Japan, New Zealand,  and Singapore).  The Company leases its headquarters
in Edison,  New Jersey.  Such lease has an initial term of ten (10) years, which
commenced in September 1998.

CRITICAL ACCOUNTING POLICIES, ESTIMATES AND RISKS

     The  Company's  critical  accounting  policies  are set forth in its Annual
Report on Form 10-K for the year  ended  December  31,  2001.  There has been no
change,  update  or  revision  to the  Company's  critical  accounting  policies
subsequent to the filing of the Company's  Form 10-K for the year ended December
31, 2001.

FORWARD-LOOKING STATEMENTS

     This Form 10-Q 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 more
of its focus  towards  the  management  and  support of  customers'  enterprise,
e-commerce and m-commerce applications.  Such forward-looking statements include
risks and uncertainties, including, but not limited to:

     o    the continued  uncertainty  associated  with the slowdown in economies
          worldwide, including its impact on IT spending habits by customers;

     o    the  continued  uncertainty  of the  outsourcing  market and  revenues
          derived from anticipated application management and support business;

     o    the failure to maintain the minimum bid price of $1.00 per share for a
          period of 30  consecutive  business days or other criteria as required
          for continued listing by the Nasdaq National Market;

     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


                                     - 18 -
<PAGE>

          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 business  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 limited operating history within the outsourcing line of
          business;

     o    the Company's  reliance on continued  relationships  with SAP America,
          Oracle and PeopleSoft, and the Company's present partnership status;

     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 protect its intellectual property rights;

     o    uncertainties  resulting  from  pending  litigation  matters  and from
          potential  administrative  and  regulatory  immigration  and  tax  law
          matters and from the outstanding  liability of SeraNova to the Company
          under the promissory note dated May 31, 2000, as amended; and

     o    in  addition,  in March 2001,  SeraNova  and  Silverline  Technologies
          Limited  ("Silverline")  consummated  the  acquisition  of SeraNova by
          Silverline.   SeraNova's   management   has   represented   that  such
          acquisition  was  not  contemplated  at the  time of the  spin-off  of
          SeraNova  by the  Company,  and  accordingly  should  not  impact  the
          tax-free  nature of the  spin-off.  Should the spin-off be  ultimately
          construed to be taxable,


                                     - 19 -
<PAGE>

          there is a risk  that if  SeraNova  and/or  Silverline  are  unable or
          unwilling to pay the resultant  tax  liability  pursuant to SeraNova's
          indemnification  obligations  under its Tax Sharing Agreement with the
          Company,  the Company would bear the  liability to pay such  resultant
          tax liability.

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

RESULTS OF OPERATIONS - CONSOLIDATED

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

<TABLE>
<CAPTION>
                                                                        PERCENTAGE OF REVENUE
                                                    ---------------------------------------------------------------
                                                        THREE MONTHS ENDED                    NINE MONTHS ENDED
                                                    -------------------------             -------------------------
                                                           SEPTEMBER 30,                        SEPTEMBER 30,
                                                    -------------------------             -------------------------
                                                     2002               2001               2002               2001
                                                     ----               ----               ----               ----

<S>                                                  <C>                <C>                <C>                <C>
Revenue....................................          100.0%             100.0%             100.0%             100.0%
Cost of sales..............................           70.5               66.2               69.7               68.0
                                                    ------             ------             ------             ------
     Gross profit..........................           29.5               33.8               30.3               32.0
Selling, general and administrative
   expenses................................           24.5               27.9               25.8               27.4
Depreciation and amortization expenses.....            2.3                3.9                2.6                3.4
SeraNova settlement and related charges....             --                 --               10.5                 --
Proxy contest charges......................            1.5                 --                1.1                 --
                                                    ------             ------             ------             ------
     Total operating expenses..............           28.3               31.8               40.0               30.8
                                                    ------             ------             ------             ------
     Operating income (loss)...............            1.2                2.0               (9.7)               1.2
Other expense, net.........................           (0.6)              (0.1)              (0.4)               0.0
                                                    ------             ------             ------             ------
Income (loss) before provision for income
    taxes..................................            0.6                1.9              (10.1)               1.2
Provision for income taxes.................            0.6                1.3                0.6                0.6
                                                    ------             ------             ------             ------
Net income (loss)..........................            0.0%               0.6%             (10.7)%              0.6%
                                                    ======             ======             ======             ======
</TABLE>

     Three  Months  Ended  September  30, 2002  Compared to Three  Months  Ended
     September 30, 2001

     The following  discussion  compares the consolidated  results for the three
months ended September 30, 2002 and the three months ended September 30, 2001.

     Revenue.  Total revenue  increased by 11.0%,  or $2.9  million,  from $25.5
million for the three months ended  September 30, 2001, to $28.4 million for the
three months ended September 30, 2002. The increase was  attributable  primarily
to growth in  revenue  generated  in the  United  States  (an  increase  of $3.6
million)  and India (an  increase of  $519,000),  offset by a decline in revenue
generated  in Europe and  Asia-Pacific  (decreases  of  $657,000  and  $647,000,
respectively).  The  revenue  growth in the  United  States  and  India  results
directly  from  increased  demand for the  majority of the  Company's  services,
including traditional  consulting service offerings,  application management and
support  services,  offshore  development  services and Power Up  services.  The
majority of the revenue generated in India is derived from providing


                                     - 20 -
<PAGE>

offshore  development  and support  services to  customers  sourced  through the
Company's   affiliated   entities  in  other  parts  of  the  world,   but  most
predominately  with the United  States.  The decline in Europe and  Asia-Pacific
reflects the  continuing  uncertain  and weakened  local  economic  climate,  as
customers delayed, decreased or canceled IT projects.

     In November 2001, the Emerging  Issues Task Force ("EITF") of the Financial
Accounting Standards Board ("FASB") concluded that reimbursable  "out-of-pocket"
expenses should be classified as revenue,  and correspondingly cost of services,
in the statement of operations.  Most service  companies,  whose employees incur
incidental expenses such as airfare,  mileage, hotel and out-of-town meals while
working on behalf of customers, previously reported reimbursable "out-of-pocket"
expenses on a "net" basis in the statement of operations. Accordingly, effective
January 1, 2002,  the Company has reported  gross  reimbursable  "out-of-pocket"
expenses  incurred  as both  revenue  and  cost of  sales  in the  statement  of
operations. The Company has also reclassified prior period financial information
for presentation consistent with the new EITF accounting guidance. The impact of
this  reclassification  was an  increase  to both  revenue  and cost of sales of
$696,000 and $426,000  for the three months ended  September  30, 2002 and 2001,
respectively.

     Gross profit.  The Company's cost of sales  primarily  includes the cost of
salaries to consultants  and related  employee  benefits and payroll taxes.  The
Company's cost of sales increased by 18.4%, or $3.1 million,  from $16.9 million
for the three months ended  September  30, 2001,  to $20.0 million for the three
months ended September 30, 2002. The Company's  gross profit  decreased by 3.3%,
or $286,000, from $8.6 million for the three months ended September 30, 2001, to
$8.4  million for the three  months  ended  September  30,  2002.  Gross  margin
decreased to 29.5% for the three months ended September 30, 2002, from 33.8% for
the three months ended  September 30, 2001. The decrease in gross margin results
from competitive pricing pressures  experienced  throughout the Company's global
operations  as well as an increase  in  non-billable  consultant  time and other
related costs, primarily in Europe and Asia Pacific.

     Selling,  general  and  administrative   expenses.   Selling,  general  and
administrative  expenses  primarily  consist  of  administrative  salaries,  and
related benefits costs,  occupancy costs, sales person compensation,  travel and
entertainment  and  professional  fees.  Selling,   general  and  administrative
expenses  decreased  by 2.3% or  $165,000,  to $7.0 million for the three months
ended September 30, 2002, from $7.1 million for the three months ended September
30,  2001,  and  decreased  as a  percentage  of revenue  to 24.5%  from  27.9%,
respectively.  The decrease in selling,  general and administrative expenses, in
absolute  dollars and as a percentage of revenue,  was related  primarily to the
further containment of discretionary spending throughout the Company, as well as
the downsizing initiative completed in Europe during the fourth quarter 2001.

     Depreciation  and  amortization.  Depreciation  and  amortization  expenses
decreased  35.2% to $643,000  for the three  months  ended  September  30, 2002,
compared to $992,000 for the three months ended September 30, 2001. The decrease
is due  primarily  to the  amortization  and  depreciation  associated  with the
intangible  assets and long-lived  assets that were  written-down as part of the
Company's  restructuring  and other special charges provision during the quarter
ended December 31, 2001.


                                     - 21 -
<PAGE>

     Proxy contest  charges.  During the three months ended  September 30, 2002,
the Company incurred $412,000 in charges associated with the proxy contest.  The
charges resulted  directly from a shareholder of the Company launching a hostile
and costly proxy  contest to take control of the  Company's  Board of Directors.
The charges  included  legal fees of $360,000,  proxy  solicitation  services of
$17,000, and printing, mailing and other costs of $35,000.

     Interest  income.  The Company earned $6,000 in interest  income during the
three months ended  September 30, 2002,  compared with $60,000  during the three
months ended September 30, 2001. The Company  discontinued  accruing interest on
the balance of the note receivable with SeraNova subsequent to the maturity date
of the note of July 31, 2001.  Such note  receivable is currently in default and
the Company has  commenced  litigation  against  SeraNova  (see Part II, Item 1,
Legal Proceedings).

     Interest  expense.  The Company  incurred  $97,000 and $151,000 in interest
expense during the three months ended September 30, 2002 and 2001, respectively,
related  primarily to borrowings under its line of credit.  Borrowings under the
line of credit were used to fund operating activities and the charges associated
with the  proxy  contest.  The  decrease  in  interest  expense  results  from a
combination of lower average outstanding borrowings under the line of credit and
lower interest rates charged on outstanding  borrowings  during the three months
ended September 30, 2002.

     Other (expense) income. Other (expense) income results primarily from gains
or (losses)  associated with changes in foreign  currency  exchange  rates.  The
Company  reported  other  expense  of  $76,000  during  the three  months  ended
September  30,  2002,  compared  with other  income of $60,000  during the three
months ended  September  30,  2001.  The change  results  from foreign  currency
fluctuations.

     Provision for income  taxes.  The  Company's  effective  rate was 92.5% and
70.4% for the three months ended September 30, 2002 and 2001, respectively.  The
tax rate for the three months ended  September  30, 2002 and 2001,  results from
taxable income in certain  countries and valuation  allowances  provided for the
current year losses  generated in Europe and  Asia-Pacific.  The  Company's  net
deferred  tax  asset  as of  September  30,  2002  relates  primarily  to the US
operations.  Based on anticipated  profitability in the near future,  management
believes it is more likely than not, that the deferred tax asset of $1.7 million
will be realized.

     In  1996,  the  Company  elected  a five  year tax  holiday  in  India,  in
accordance with a local tax incentive  program whereby no income tax will be due
in such period.  Such tax holiday was extended an additional five years in 1999.
Effective  April 1, 2000 pursuant to changes  introduced  by the Indian  Finance
Act, 2000,  the tax holiday  previously  granted is no longer  available and has
been  replaced  in the form of a tax  deduction  incentive.  The  impact of this
change is not expected to be material to the consolidated  financial  statements
of the Company.  Effective April 1, 2002, the tax deduction incentive for income
from the export of software and related  services is  restricted  to 90% of such
income. Further,  domestic revenue from software and related services is taxable
in India.  For the three  months  ended  September  30,  2002 and 2001,  the tax
holiday and new tax deduction  favorably  impacted the  Company's  effective tax
rate.


                                     - 22 -
<PAGE>

     The Company's Indian  subsidiary has received an assessment from the Indian
taxing  authority  denying tax  exemptions  claimed for certain  revenue  earned
during the fiscal years ended March 31, 1998 and March 31, 1999.  The assessment
is  for  25  million  rupees,  or  approximately  $520,000.   Management,  after
consultation with its tax advisors,  believes the Company is entitled to the tax
exemption  claimed and thus has not recorded a provision  for taxes  relating to
these items as of September  30, 2002. If the Company were not  successful  with
its appeals, which were filed in 2001 and 2002, a future charge of approximately
$520,000 would be recorded and reflected in the Company's consolidated statement
of operations.

     Nine  Months  Ended  September  30,  2002  Compared  to Nine  Months  Ended
     September 30, 2001

     The following  discussion  compares the  consolidated  results for the nine
months ended September 30, 2002 and the nine months ended September 30, 2001.

     Revenue.  Total  revenue  decreased by 6.6%,  or $5.7  million,  from $85.1
million for the nine months ended  September  30, 2001, to $79.4 million for the
nine months ended September 30, 2002. This decrease was  attributable  primarily
to the  weakness  in the  global  economy  and the  resulting  impact  on the IT
services  market.  The effects of the  uncertain and weakened  economic  climate
impacted the Company,  as customers delayed,  decreased or canceled IT projects,
and as the Company experienced competitive pricing pressures in the provision of
consulting services.

     In November 2001, the Emerging  Issues Task Force ("EITF") of the Financial
Accounting Standards Board ("FASB") concluded that reimbursable  "out-of-pocket"
expenses should be classified as revenue,  and correspondingly cost of services,
in the statement of operations.  Most service  companies,  whose employees incur
incidental expenses such as airfare,  mileage, hotel and out-of-town meals while
working on behalf of customers, previously reported reimbursable "out-of-pocket"
expenses on a "net" basis in the statement of operations. Accordingly, effective
January 1, 2002,  the Company has reported  gross  reimbursable  "out-of-pocket"
expenses  incurred  as both  revenue  and  cost of  sales  in the  statement  of
operations. The Company has also reclassified prior period financial information
for presentation consistent with the new EITF accounting guidance. The impact of
this  reclassification was an increase to both revenue and cost of sales of $1.7
million and $1.9 million for the nine months ended  September 30, 2002 and 2001,
respectively.

     Gross  profit.  The  Company's  cost of sales  decreased  by 4.3%,  or $2.5
million,  from $57.9  million for the nine months ended  September  30, 2001, to
$55.4 million for the nine months ended  September 30, 2002. The Company's gross
profit  decreased by 11.6%,  or $3.2  million,  from $27.2  million for the nine
months  ended  September  30, 2001,  to $24.0  million for the nine months ended
September 30, 2002. This decrease was attributable  primarily to lower revenues.
Gross margin  decreased to 30.3% for the nine months ended  September  30, 2002,
from 32.0% for the nine months ended  September 30, 2001.  The decrease in gross
margin results from competitive  pricing  pressures  experienced  throughout the
Company's  global  operations as well as an increase in non-billable  consultant
time and other related costs, primarily in Europe and Asia Pacific.


                                     - 23 -
<PAGE>

     Selling,  general  and  administrative   expenses.   Selling,  general  and
administrative  expenses  decreased by 12.0%, or $2.8 million,  to $20.5 million
for the nine months ended  September  30, 2002,  from $23.3 million for the nine
months ended  September  30, 2001,  and  decreased as a percentage of revenue to
25.8%  from  27.4%,   respectively.   The  decrease  in  selling,   general  and
administrative expenses, in absolute dollars and as a percentage of revenue, was
related  primarily to the Company's  efforts to contain  discretionary  spending
throughout  the  Company's  operations,  as  well as the  downsizing  initiative
completed in Europe during the fourth quarter 2001.

     SeraNova  receivable  impairment and other charges.  During the nine months
ended  September 30, 2002, the Company  recorded  approximately  $8.4 million in
special charges  associated with the note receivable from SeraNova,  and certain
other  related  issues.  The Company is  continuing  to pursue its various legal
options to obtain payment from  SeraNova,  Silverline  Technologies  Limited and
Silverline Technologies,  Inc. (collectively,  the "SeraNova Group") on the Note
and outstanding lease  obligations.  At the same time, the Company has also been
actively engaged in discussions with management of the SeraNova Group,  with the
objective  of  seeking an out of court  resolution  to all  outstanding  matters
involving  the Note,  and  certain  other  receivables  and  lease  obligations.
However,  the Company  believed that the liquidity  issues plaguing the SeraNova
Group required a reassessment of the realizability of these outstanding amounts.
Although no final  resolution  had been reached,  the Company  believed that the
substance of these discussions  provided a basis for determining the approximate
realizable  value of the Note and other  receivables,  as well as an estimate of
the costs required to exit certain lease obligations.  Accordingly,  the Company
recognized  an  impairment  charge in the amount of $5.1 million  related to the
note. In addition,  the Company  recorded a write-off of $1.3 million related to
interest on the note and other  receivables  due from the  SeraNova  Group.  The
Company  also  recorded  $1.5 million in costs  required to exit  certain  lease
obligations related to the SeraNova Group.

     Proxy contest charges. During the nine months ended September 30, 2002, the
Company  incurred  $876,000 in charges  associated  with the proxy contest.  The
charges resulted  directly from a shareholder of the Company launching a hostile
and costly proxy  contest to take control of the  Company's  Board of Directors.
The charges  included  legal fees of $684,000,  proxy  solicitation  services of
$117,000, and printing, mailing and other costs of $75,000.

     Depreciation  and  amortization.  Depreciation  and  amortization  expenses
decreased  29.0% to $2.0 million for the nine months ended  September  30, 2002,
compared to $2.9  million for the nine months  ended  September  30,  2001.  The
decrease is due primarily to the amortization  and depreciation  associated with
the intangible  assets and long-lived  assets that were  written-down as part of
the Company's  restructuring  and other  special  charges  provision  during the
quarter ended December 31, 2001.

     Interest  income.  The Company earned $26,000 in interest income during the
nine months ended  September 30, 2002,  compared  with $536,000  during the nine
months ended September 30, 2001. The Company  discontinued  accruing interest on
the balance of the note receivable with SeraNova subsequent to the maturity date
of the note of July 31, 2001.  Such note  receivable is currently in default and
the Company has  commenced  litigation  against  SeraNova  (see Part II, Item 1,
Legal Proceedings).


                                     - 24 -
<PAGE>

     Interest  expense.  The Company incurred  $297,000 and $581,000 in interest
expense during the nine months ended September 30, 2002 and 2001,  respectively,
related  primarily to borrowings under its line of credit.  Borrowings under the
line of credit were used to fund operating activities and the charges associated
with the  proxy  contest.  The  decrease  in  interest  expense  results  from a
combination of lower  outstanding  borrowings under the line of credit and lower
interest  rates charged on outstanding  borrowings  during the nine months ended
September 30, 2002.

     Other (expense) income. Other (expense) income results primarily from gains
or (losses)  associated with changes in foreign  currency  exchange  rates.  The
Company reported other expense of $36,000 during the nine months ended September
30,  2002,  compared  with other  income of $3,000  during the nine months ended
September 30, 2001. The change results from foreign currency fluctuations.

     Provision  for income taxes.  For the nine months ended  September 30, 2002
despite a loss,  a provision  for income  taxes of $501,000  was required due to
taxable  income in certain  jurisdictions  combined  with a valuation  allowance
offsetting other loss benefits in other  jurisdictions.  The Company's effective
tax rate was 48.4% for the nine months ended September 30, 2001 and results from
taxable income in certain  countries and valuation  allowances  provided for the
losses generated in the United States,  Europe and  Asia-Pacific.  The Company's
net  deferred tax asset as of  September  30, 2002  relates  primarily to the US
operations.  Based on anticipated  profitability in the near future,  management
believes it is more likely than not, that the deferred tax asset of $1.7 million
will be realized.

     In  1996,  the  Company  elected  a five  year tax  holiday  in  India,  in
accordance with a local tax incentive  program whereby no income tax will be due
in such period.  Such tax deduction  incentive  was extended an additional  five
years in 1999.  Effective  April 1, 2000  pursuant to changes  introduced by the
Indian  Finance  Act,  2000,  the tax  holiday  previously  granted is no longer
available and has been replaced in the form of a tax  deduction  incentive.  The
impact  of this  change  is not  expected  to be  material  to the  consolidated
financial statements of the Company.  Effective April 1, 2002, the tax deduction
incentive  for income  from the  export of  software  and  related  services  is
restricted to 90% of such income.  Further,  domestic  revenue from software and
related  services is taxable in India.  For the nine months ended  September 30,
2002 and 2001,  the tax holiday and new tax  deduction  favorably  impacted  the
Company's effective tax rate.

     The Company's Indian  subsidiary has received an assessment from the Indian
taxing  authority  denying tax  exemptions  claimed for certain  revenue  earned
during the fiscal years ended March 31, 1998 and March 31, 1999.  The assessment
is  for  25  million  rupees,  or  approximately  $520,000.   Management,  after
consultation  with its  advisors,  believes  the  Company is entitled to the tax
exemption  claimed and thus has not recorded a provision  for taxes  relating to
these items as of September  30, 2002. If the Company were not  successful  with
its appeals, which were filed in 2001 and 2002, a future charge of approximately
$520,000 would be recorded and reflected in the Company's consolidated statement
of operations.


                                     - 25 -
<PAGE>

RESULTS OF OPERATIONS BY BUSINESS SEGMENT

     The Company has four reportable operating segments, which are organized and
managed on a geographical basis, as follows:

     o    United  States  ("US") - the  largest  segment  of the  Company,  with
          operations  in the United  States,  Puerto  Rico,  South  America  and
          Canada.  Includes  the  operations  of the  Company's  US  subsidiary,
          Empower, Inc., and all corporate functions and activities.  The US and
          corporate headquarters are located in Edison, New Jersey;

     o    Asia-Pacific  ("APAC") - includes  the  operations  of the  Company in
          Australia, Hong Kong, Indonesia, Japan, New Zealand and Singapore. The
          APAC headquarters are located in Wellington, New Zealand;

     o    Europe - includes the operations of the Company in Denmark, Sweden and
          the United Kingdom. The European  headquarters are located in Norfolk,
          United Kingdom; and

     o    India - includes  the  operations  of the Company in India,  including
          services provided on behalf of other Company subsidiaries.  The Indian
          headquarters are located in Hyderabad, India.

     Each of the operating segments has a Managing Director,  or manager with an
equivalent position,  who reports directly to the Chief Executive Officer (CEO).
Currently,  the CEO is fulfilling the  requirements  of this position in the US.
The CEO has been identified as the Chief Operating Decision Maker (CODM) because
he has final  authority  over  resource  allocation  decisions  and  performance
assessment.  The CODM regularly receives certain discrete financial  information
about the  geographical  operating  segments,  including  primarily  revenue and
operating income, to evaluate segment performance.

     Three  months  Ended  September  30, 2002  Compared to Three  months  Ended
     September 30, 2001

     The following  discussion compares the segment results for the three months
ended September 30, 2002 and the three months ended September 30, 2001.

     Revenue.  The following table displays  revenues by reportable  segment (in
thousands).

<TABLE>
<CAPTION>
                                                   THREE MONTHS ENDED SEPTEMBER 30,
                                       ---------------------------------------------------------
                                                 2002                           2001
                                       -------------------------       -------------------------
                                                   PERCENTAGE OF                   PERCENTAGE OF
                                       DOLLARS         TOTAL           DOLLARS         TOTAL
                                       -------     -------------       -------     -------------
<S>                                    <C>             <C>             <C>             <C>
United States...................       $21,121          74.5%          $17,516          68.6%
Asia-Pacific....................         2,470           8.7             3,117          12.2
Europe..........................         1,419           5.0             2,076           8.1
India...........................         3,348          11.8             2,829          11.1
                                       -------         ------          -------         ------
Total...........................       $28,358         100.0%          $25,538         100.0%
                                       =======         ======          =======         ======
</TABLE>


                                     - 26 -
<PAGE>

     US revenue increased by 20.6%, or $3.6 million,  from $17.5 million for the
three months ended  September  30, 2001,  to $21.1  million for the three months
ended September 30, 2002. The increase was  attributable  primarily to increased
demand  for  the  majority  of  the  Company's  service   offerings,   including
traditional  consulting  service offerings,  application  management and support
services, offshore development services and Power Up services.

     APAC  revenue  decreased  by 20.8% or  $647,000,  from $3.1 million for the
three months  ended  September  30,  2001,  to $2.5 million for the three months
ended September 30, 2002. The decrease was due primarily to challenging economic
conditions  in Japan (a  decrease  of  $395,000)  and  Australia  (a decrease of
$268,000),  while the rest of the  Asia-Pacific  region  increased  slightly (an
increase of $16,000).

     Europe revenue  decreased by 31.6%, or $657,000,  from $2.1 million for the
three months  ended  September  30,  2001,  to $1.4 million for the three months
ended September 30, 2002. The decrease was attributable  primarily to the United
Kingdom  ("UK")  operations  (a decrease of  $512,000),  while the  consolidated
Nordic  operations  (Denmark  and  Sweden)  decreased  slightly  (a  decrease of
$145,000).  As a result of the  decline in  operating  performance,  the Company
executed a plan to reorganize and downsize the Company's operations in the UK in
the fourth quarter of 2001. The UK operations now consist of a much smaller core
group of  billable  consultants,  focused  primarily  on  providing  application
management and support services in the PeopleSoft market. The decrease in Nordic
operations resulted primarily from challenging economic conditions in Sweden.

     India revenue  increased by 18.3%,  or $519,000,  from $2.8 million for the
three months  ended  September  30,  2001,  to $3.3 million for the three months
ended September 30, 2002. The increase was  attributable  primarily to increased
demand for  services in the United  States,  as a majority of the total  revenue
generated in India is derived from providing  offshore  development  and support
services to customers sourced through the Company's affiliated entities in other
parts of the world, but most predominantly with the United States.

     Operating  Income (Loss).  The following  table displays  operating  income
(loss) by reportable segment (in thousands).

                                             THREE MONTHS ENDED SEPTEMBER 30,
                                             --------------------------------
                                                2002                  2001
                                             ----------            ----------

United States.......................          $   771               $   796
Asia-Pacific........................             (423)                  237
Europe..............................             (389)                 (972)
India...............................              381                   463
                                              -------               -------
Total...............................          $   340               $   524
                                              =======               =======

     US  operating  income  decreased  by $25,000,  from  $796,000 for the three
months  ended  September  30,  2001,  to  $771,000  for the three  months  ended
September 30, 2002. The decrease in operating income was attributable  primarily
to the $412,000 of charges  associated  with the proxy contest  during the three
months ended September 30, 2002. Excluding these proxy charges, the US operating
income for the three months ended September 30, 2002 was $1.2


                                     - 27 -
<PAGE>

million,  or an increase of $387,000,  compared to the same period of 2001.  The
increase in operating income was attributable  primarily to further  containment
of  discretionary  selling,  general and  administrative  expenditures,  such as
employee bonuses and travel and entertainment expenses.

     APAC operating performance decreased by $660,000,  from operating income of
$237,000 for the three months ended  September 30, 2001, to an operating loss of
$423,000  for the three  months  ended  September  30,  2002.  The  decrease was
attributable  primarily to the operating performance in Australia (a decrease of
$190,000),  Indonesia  (a  decrease  of  $173,000),  Singapore  (a  decrease  of
$158,000),  Japan (a  decrease  of  $117,000),  and New  Zealand (a  decrease of
$22,000), as a result of local market conditions.

     Europe operating  performance improved by $583,000,  from an operating loss
of $972,000 for the three months ended  September 30, 2001, to an operating loss
of $389,000 for the three months ended  September 30, 2002. The  improvement was
attributable  primarily to an improvement in the operating performance of the UK
of $745,000,  while the Nordic operations declined by $162,000.  The improvement
in the UK  operating  performance  resulted  primarily  from  the  restructuring
program  initiated  in the UK  during  late  2001.  The  decline  in the  Nordic
operating  performance  resulted from competitive  local  conditions,  primarily
within the SAP software market.

     India operating  income  decreased by $82,000,  from $463,000 for the three
months  ended  September  30,  2001,  to  $381,000  for the three  months  ended
September 30, 2002.  The decrease was  attributable  primarily to an increase in
consultant  salaries (as a result of both  increased  headcount and local market
adjustments to base consultant salaries), non-billable consultant time and other
related costs as well as a decrease in average consultant billing rates.

     Nine  months  Ended  September  30,  2002  Compared  to Nine  months  Ended
     September 30, 2001

     The following  discussion  compares the segment results for the nine months
ended September 30, 2002 and the nine months ended September 30, 2001.

     Revenue.  The following table displays  revenues by reportable  segment (in
thousands).

<TABLE>
<CAPTION>
                                                   NINE MONTHS ENDED SEPTEMBER 30,
                                       ---------------------------------------------------------
                                                 2002                           2001
                                       -------------------------       -------------------------
                                                   PERCENTAGE OF                   PERCENTAGE OF
                                       DOLLARS         TOTAL           DOLLARS         TOTAL
                                       -------     -------------       -------     -------------
<S>                                    <C>             <C>             <C>             <C>
United States....................      $57,859          72.8%          $56,493          66.4%
Asia-Pacific.....................        7,191           9.1            10,226          12.0
Europe...........................        4,448           5.6             8,708          10.3
India............................        9,945          12.5             9,634          11.3
                                       -------         ------          -------         ------
Total............................      $79,443         100.0%          $85,061         100.0%
                                       =======         ======          =======         ======
</TABLE>

     US revenue  increased by 2.4%, or $1.4 million,  from $56.5 million for the
nine months ended September 30, 2001, to $57.9 million for the nine months ended
September 30, 2002.  Since the latter half of 2001, the Company had  experienced
challenging economic conditions that


                                     - 28 -
<PAGE>

precluded  many  companies  from  spending  resources on IT projects,  which had
adversely impacted the demand for the Company's services. Since mid-2002, the US
has begun to  experience  an  increase  in demand for  services,  including  its
professional consulting and application management services.

     APAC revenue  decreased by 29.7%,  or $3.0 million,  from $10.2 million for
the nine months ended  September  30, 2001,  to $7.2 million for the nine months
ended September 30, 2002. The decrease was due primarily to challenging economic
conditions  throughout the Asia-Pacific  region,  including Japan (a decrease of
$1.5  million),  Australia (a decrease of $578,000),  New Zealand (a decrease of
$488,000),  Indonesia  (a decrease of  $307,000)  and  Singapore  (a decrease of
$133,000).

     Europe  revenue  decreased by 48.9% or $4.3 million,  from $8.7 million for
the nine months ended  September  30, 2001,  to $4.4 million for the nine months
ended September 30, 2002. The decrease was attributable  primarily to the United
Kingdom ("UK")  operations (a decrease of $3.9 million),  while the consolidated
Nordic  operations  (Denmark  and  Sweden)  decreased  slightly  (a  decrease of
$384,000).  As a result of the  decline in  operating  performance,  the Company
executed a plan to reorganize and downsize the Company's operations in the UK in
the fourth quarter of 2001. The UK operations now consist of a much smaller core
group of  billable  consultants,  focused  primarily  on  providing  application
management and support services in the PeopleSoft market. The decrease in Nordic
operations resulted primarily from challenging economic conditions in Sweden.

     India  revenue  increased by 3.2%,  or $311,000,  from $9.6 million for the
nine months ended  September 30, 2001, to $9.9 million for the nine months ended
September 30, 2002. The increase was attributable  primarily to increased demand
for  services in the US over the past couple of  quarters,  as a majority of the
total revenue generated in India is derived from providing offshore  development
and support  services to  customers  sourced  through the  Company's  affiliated
entities in other  parts of the world,  but most  predominantly  with the United
States.

     Operating  Income (Loss).  The following  table displays  operating  income
(loss) by reportable segment (in thousands).

                                              NINE MONTHS ENDED SEPTEMBER 30,
                                             --------------------------------
                                                2002                  2001
                                             ----------            ----------

United States.......................          $(7,263)              $   815
Asia-Pacific........................           (1,262)                  343
Europe..............................             (930)               (2,878)
India...............................            1,726                 2,754
                                              -------               -------
Total...............................          $(7,729)              $ 1,034
                                              =======               =======

     US operating  performance  decreased by $8.1 million, from operating income
of $815,000 for the nine months ended  September 30, 2001, to an operating  loss
of $7.3 million for the nine months ended  September 30, 2002.  The  significant
decline in operating performance was a result of the charges associated with the
SeraNova receivable impairment and other charges and the proxy contest ("Special
Charges"). Excluding these Special Charges, the US operating income for the nine
months ended September 30, 2002 was $2.0 million, or an increase of $1.2


                                     - 29 -
<PAGE>

million,  compared  to the same  period  of the  prior  year.  The  increase  in
operating  income  resulted  primarily  from the  containment  of  discretionary
expenditures,  such as employee bonuses,  marketing and travel and entertainment
expenses.

     APAC operating  performance declined by $1.6 million, from operating income
of $343,000 for the nine months ended  September 30, 2001, to an operating  loss
of $1.3 million for the nine months ended  September 30, 2002.  The decrease was
attributable  primarily  to the  operating  performance  in Japan (a decrease of
$585,000),   Singapore  (a  decrease  of  $402,000)  Australia  (a  decrease  of
$390,000),  Indonesia  (a decrease of  $129,000)  and New Zealand (a decrease of
$99,000), as gross margins declined as a result of local market conditions.

     Europe operating  performance  improved by $1.9 million,  from an operating
loss of $2.9  million  for the nine  months  ended  September  30,  2001,  to an
operating  loss of $930,000 for the nine months ended  September  30, 2002.  The
improvement  was  attributable  primarily  to an  improvement  in the  operating
performance of the UK of $2.4 million,  while the Nordic operations  declined by
$466,000.  The improvement in the UK operating  performance  resulted  primarily
from the  restructuring  program  initiated in the UK during late 2001. As noted
above,  the UK  operations  now consist of a much smaller core group of billable
consultants,  focused primarily on providing application  management and support
services  in  the  PeopleSoft  market.  The  decline  in  the  Nordic  operating
performance resulted from competitive local conditions, primarily within the SAP
software market.

     India operating income decreased by $1.1 million, from $2.8 million for the
nine months ended  September 30, 2001, to $1.7 million for the nine months ended
September 30, 2002.  The decrease was  attributable  primarily to an increase in
consultant  salaries (as a result of both  increased  headcount and local market
adjustments to base consultant salaries), non-billable consultant time and other
related costs as well as a decrease in average consultant billing rates.

LIQUIDITY AND CAPITAL RESOURCES

     The Company had cash and cash  equivalents of $2.0 million at September 30,
2002 and $2.1 million at December 31, 2001.  The Company had working  capital of
$11.8 million at September 30, 2002 and $18.2 million at December 31, 2001.

     Cash  provided by  operating  activities  was  $432,000 for the nine months
ended September 30, 2002, resulting primarily from depreciation and amortization
of $2.7 million,  the provision for doubtful accounts of $342,000,  the SeraNova
receivable  impairment  and other charges of $8.4  million,  a decrease in other
current  assets of $145,000 and  increases  in accounts  payable of $665,000 and
accrued payroll and related taxes of $1.4 million.  These amounts were partially
offset  by the net loss,  increases  in  accounts  receivable  of $2.9  million,
unbilled  services of $456,000  and other  assets of $105,000  and  decreases in
accrued  expenses and other  liabilities  of $688,000 and accrued  restructuring
charges of $529,000.  The increases in accounts receivable and unbilled services
result  primarily  from the growth in  revenue  during  the three  months  ended
September 30, 2002. The changes in other current assets, other assets,  accounts
payable,  accrued  payroll and  related  taxes and  accrued  expenses  and other
liabilities  result primarily from timing  differences.  The decrease in accrued
restructuring charges results from the payment of severance


                                     - 30 -
<PAGE>

and related costs and exit costs.  Cash provided by operating  activities during
the nine months ended September 30, 2001 was $4.7 million.

     The Company  invested $1.2 million and $3.0 million in computer  equipment,
internal-use computer software and office furniture and fixtures during the nine
months ended  September 30, 2002 and 2001,  respectively.  The decrease  results
from  concerted  efforts by  management to closely  monitor and curtail  capital
expenditures.

     In  conjunction  with the  strategic  decision to focus on the emerging ASP
market,  the  Company  invested  $2.7  million in  purchased  computer  software
licenses during the nine months ended September 30, 2001. The computer  software
was to be re-sold to customers as part of the  Company's  ASPPlus  solutions and
services.  However, during the three months ended December 31, 2001, the Company
recorded a write-down of the purchased computer software, as management believed
the  recoverability  of the  value  of the  assets  acquired  for use in the ASP
service   offering  was  unlikely  given  current  and  future  expected  market
conditions.

     On May 31, 2000, the Company and PNC Bank, N.A. (the "Bank") entered into a
three-year  revolving  credit  facility.  Such credit facility is comprised of a
revolving  line of credit  pursuant  to which the Company can borrow up to $20.0
million either at the Bank's prime rate per annum or the Euro Rate plus 1.75% to
2.5% based upon the Company's ratio of debt to earnings before interest,  taxes,
depreciation and amortization ("EBITDA").  The credit facility is collateralized
by  substantially  all of  the  assets  of the  Company's  United  States  based
operations. The maximum borrowing availability under the line of credit is based
upon a  percentage  of eligible  billed and  unbilled  accounts  receivable,  as
defined. As of September 30, 2002, the Company had outstanding  borrowings under
the credit facility of $5.1 million.  The Company estimates undrawn availability
under the credit  facility to be $7.6  million as of September  30, 2002.  As of
December  31,  2001,  the Company had  outstanding  borrowings  under the credit
facility of $4.1 million.

     The credit facility provides for the following financial  covenants,  among
other things,  (1) the Company must maintain  consolidated net worth, as defined
("consolidated   net  worth")  of  (a)  not  less  than  95%  of  the  Company's
consolidated  net worth of the immediately  preceding fiscal year-end as at each
such  fiscal  quarter  after  December  31,  2000;  and (b) at least 105% of the
Company's consolidated net worth as of the immediately preceding fiscal year-end
as at each such fiscal  year-end  subsequent  to December  31,  2000;  provided,
however,  the foregoing  covenant shall not be tested for any quarter so long as
the  Company  maintains,  at all  times  during  such  fiscal  quarter,  undrawn
availability  of more  than  $5.0  million  and (2) the  Company  must  maintain
unconsolidated  net worth,  as defined  ("unconsolidated  net worth") of (a) not
less  than 95% of the  Company's  unconsolidated  net  worth of the  immediately
preceding  fiscal  year-end as at each such fiscal  quarter  after  December 31,
2000; and (b) at least 105% of the Company's  unconsolidated net worth as of the
immediately preceding fiscal year-end as at each such fiscal year-end subsequent
to December 31, 2000;  provided,  however,  the foregoing  covenant shall not be
tested for any quarter so long as the  Company  maintains,  at all times  during
such  fiscal   quarter,   undrawn   availability  of  more  than  $5.0  million.
Additionally,  the credit facility contains material adverse change clauses with
regard to the financial  condition of the assets,  liabilities and operations of
the Company.


                                     - 31 -
<PAGE>

     As of  December  31,  2001,  the  Company  was not in  compliance  with the
consolidated  net worth and  unconsolidated  net worth financial  covenants.  In
March  2002,  the  Company  finalized  with the Bank the  terms of a waiver  and
amendment  to the  credit  agreement.  The  terms of the  waiver  and  amendment
included,  among  other  things,  (1) a waiver of the  covenant  defaults  as of
December 31, 2001, (2) a modification to the financial covenants to require that
consolidated net worth and  unconsolidated  net worth as of December 31, 2002 be
not less than 102% of  consolidated  net worth  and  unconsolidated  net  worth,
respectively,  as of December 31, 2001, (3) a modification  to the  consolidated
net worth and  unconsolidated  net worth  covenants  to exclude  any  changes to
consolidated  net  worth  and   unconsolidated  net  worth  resulting  from  the
write-down  or write-off of up to $10.8  million of the note due from  SeraNova,
and (4) a new financial  covenant  requiring that the Company EBITDA of at least
90% of the prior year's EBITDA.

     During each of the quarters ended June 30, 2002 and September 30, 2002, the
Company incurred charges related to the Company's  contested 2002 Annual Meeting
of Shareholders  ("Proxy  Contest").  The Proxy Contest  charges  included legal
fees, proxy  solicitation  services and printing,  mailing and other costs. As a
direct  result of the Proxy Contest  charges,  the Company was not in compliance
with the EBITDA covenant as of June 30, 2002 and September 30, 2002. The Company
is  currently  negotiating  with the Bank and expects to receive a waiver of the
covenant defaults existing as of June 30, 2002 and September 30, 2002. There can
be no assurance,  however,  that the Company will be able to obtain a waiver and
appropriate amendment to the agreement on terms acceptable to the Company.

     On May 31,  2000,  SeraNova  and the  Company  formalized  a $15.1  million
unsecured  promissory  note (the "Note")  relating to net borrowings by SeraNova
from the Company  through such date.  The Note bears  interest at the prime rate
plus 1/2%. The Company had recorded total accrued interest of $1.0 million as of
December  31, 2001.  The Company has not  recorded  any accrued  interest on the
balance  of the  Note  subsequent  to the  maturity  date of July 31,  2001.  On
September 29, 2000, the Company received a $3.0 million payment from SeraNova.

     In September  2000,  SeraNova  consummated an $8.0 million  preferred stock
financing  with  two  institutional   investors.   According  to  the  mandatory
prepayment provisions of the Note, SeraNova was required to make a prepayment of
$3.0 million on the Note as a result of the stock financing.  Subsequently,  the
Company  finalized with SeraNova the terms of an agreement to waive,  subject to
certain conditions, certain of the mandatory prepayment obligations arising as a
result of the financing.  The terms of the new agreement  included,  among other
things,  that  SeraNova  pay the  Company (i)  $500,000  upon  execution  of the
agreement;  (ii)  $500,000 on or before each of January 31,  2001,  February 28,
2001,  March 31, 2001, April 30, 2001 and May 31, 2001; and (iii) $400,000 on or
before  December 15, 2000 to be applied either as (a) an advance payment towards
a  contemplated  services  arrangement  for  hosting  services to be provided to
SeraNova by the Company (the "Hosting  Agreement");  or (b) in the event that no
such Hosting Agreement is executed on or before December 15, 2000, an additional
advance prepayment toward the principal of the Note.

     The Company  received from SeraNova the $500,000  payment that was due upon
execution of the agreement and a $400,000 payment in December 2000 as an advance
payment  towards  the  principal  of the Note  since no  Hosting  Agreement  was
executed before December 15, 2000.


                                     - 32 -
<PAGE>

     In 2001, the Company received principal payments totaling $2.1 million from
SeraNova.  However,  SeraNova  failed to make final  payment of all  amounts due
under the Note to the  Company  as of July 31,  2001.  On August 16,  2001,  the
Company filed a complaint against SeraNova and Silverline  Technologies  Limited
("Silverline"), which acquired SeraNova in March 2001. As of such date, SeraNova
was obligated to pay to the Company the remaining principal  (approximately $9.1
million) and accrued interest  (approximately $1.0 million),  or an aggregate of
$10.1  million.  SeraNova  then filed a  counterclaim  against  the  Company for
unspecified  damages as a set-off against the Company's  claims.  In response to
the Company's request for a statement of damages, SeraNova stated that it was in
the process of calculating its damages,  but for informational  purposes claimed
compensatory  damages  in excess of $5.5  million  and  punitive  damages in the
amount of $10.0 million.  The parties have completed the discovery process and a
trial is scheduled for December 16, 2002. The Company  believes that there is no
basis to  support  the  amounts  claimed by  SeraNova  in its  counterclaim  for
compensatory and punitive  damages.  The inability of the Company to collect the
amount due from SeraNova and/or  Silverline or an adverse  decision with respect
to the Company relating to SeraNova's  counterclaim  could negatively affect the
Company's business, financial condition or results of operations.

     In addition,  during late 2001,  SeraNova failed to pay certain outstanding
lease obligations to the Company's landlords. Accordingly, on March 4, 2002, the
Company filed an arbitration  demand with the American  Arbitration  Association
against the SeraNova Group (see Part II, Item 1, Legal Proceedings).  The demand
for  arbitration,  which  sought  damages,  alleged  among other things that the
SeraNova  Group failed to pay  outstanding  lease  obligations  to the Company's
landlords and to reimburse the Company for all rent payments made by the Company
on their behalf.  An arbitration  hearing was held on June 25, 2002 and June 28,
2002 seeking $525,000 in outstanding  lease  obligations.  On August 9, 2002, an
award was  issued in the amount of  $616,905  (including  attorney's  fees) plus
reimbursement of  administrative  fees, in favor of Intelligroup and against the
SeraNova Group jointly and  severally.  The award also includes a provision that
jurisdiction  is  retained  by the  tribunal,  and the Company may seek from the
tribunal any additional rents and other fees due and owing on a quarterly basis.
Accordingly, the Company filed a second demand for $300,000 in damages for rents
and other fees due and owing for the months of June through  September  2002. On
August 12, 2002, an action was commenced in the Superior  Court of New Jersey to
confirm the award, seek a writ of execution against the SeraNova Group's assets,
restrain  the  disposal  of  the  SeraNova   Group's  assets,   and  enjoin  the
distribution  of proceeds  from any sale of the  SeraNova  Group's  assets among
other emergency relief. On August 13, 2002, the Court,  among other things,  (i)
confirmed  the award and  entered  judgment  against  SeraNova  in the amount of
$616,905 plus $7,100 in  administrative  fees, (ii) authorized the issuance of a
writ of execution  against  SeraNova's bank accounts and other assets to satisfy
the judgment,  (iii) restrained the SeraNova Group from disposing of any assets,
including  funds in their bank accounts,  (iv)  authorized the attachment of all
net proceeds from the sale of any assets of the SeraNova  Group up to the amount
of the  arbitration  award  to be held in an  interest  bearing  escrow  account
pending further court order and (v) scheduled a hearing for September 3, 2002 in
order for the SeraNova  Group to show cause why the relief  granted by the Court
to the Company  against  SeraNova  should not be applied to the  SeraNova  Group
jointly and severally.  A trial was held over several days in September 2002. On
October 3, 2002, the Court confirmed the $624,000  award,  jointly and severally
as to all the defendants, and issued a writ of


                                     - 33 -
<PAGE>

execution against the defendant's  assets. The Company does not believe that the
outcome of this claim will have a  materially  adverse  effect on the  Company's
business, financial condition or results of operations.

     The Company is  continuing  to pursue its various  legal  options to obtain
payment from the SeraNova Group on the Note and outstanding  lease  obligations.
At the same time, the Company has also been actively engaged in discussions with
management of the SeraNova Group,  with the objective of seeking an out of court
resolution to all  outstanding  matters  involving  the Note,  and certain other
receivables  and lease  obligations.  However,  the  Company  believed  that the
liquidity  issues  plaguing the SeraNova Group  required a  reassessment  of the
realizability  of these  outstanding  amounts as of June 30,  2002.  Although no
final  resolution had been reached,  the Company  believed that the substance of
these  discussions  provided a basis for determining the approximate  realizable
value of the Note and other  receivables,  as well as an  estimate  of the costs
required to exit certain lease  obligations.  Accordingly,  the Company recorded
the following charges during the quarter ended June 30, 2002:

<TABLE>
<CAPTION>
                                         WRITE-DOWN       WRITE-OFF       ASSUMPTION
                                           OF NOTE         OF OTHER       OF  CERTAIN
                                         RECEIVABLE     RECEIVABLES -       LEASE           OTHER
                                         - SERANOVA        SERANOVA       OBLIGATIONS       CHARGES         TOTAL
                                        ----------------------------------------------------------------------------

<S>                                     <C>             <C>              <C>             <C>            <C>
Charges to operations during 2002...    $  5,140,000    $  1,257,000     $  1,501,000    $   464,000    $  8,362,000
Costs paid during 2002..............              --              --         (205,000)      (202,000)       (407,000)
Non-cash items......................      (5,140,000)     (1,257,000)              --             --      (6,397,000)
                                        ------------    ------------     ------------    -----------    ------------
Accrued costs as of September 30,
2002................................    $         --    $         --     $  1,296,000    $   262,000    $  1,558,000
                                        ============    ============     ============    ===========    ============
</TABLE>

     At June 30, 2002, the Company  recorded a $5.1 million charge to write-down
the carrying value of the Note to $4.0 million. The Company also recorded a $1.3
million  to  write-off  the  carrying  value of the other  SeraNova  receivables
(primarily,  accrued  interest  on  the  Note  and a  receivable  for  a  system
implementation project).  Additionally,  the Company had recorded a liability of
$1.5 million for certain  lease exit costs as of June 30, 2002.  Such  liability
represents  primarily  obligated  space  costs for which the  Company  currently
believes it cannot use or sublease and the differential  between certain Company
lease obligations and sublease amounts to be received. As of September 30, 2002,
$1.3  million of the  liability  remains  outstanding,  of which $1.0 million is
included in other long-term liabilities.

     At September 30, 2002, the Company  re-evaluated  the  realizability of the
carrying  value of the Note, as well as any required  change to the  obligations
associated  with the office  space costs.  Based upon the current  status of the
negotiations  with the SeraNova Group, the Company  determined that no change to
the carrying value of the Note or the recorded  liability was  appropriate as of
September  30,  2002.  However,  if the Company  were to collect  less than $4.0
million on the Note  recorded as of  September  30,  2002,  or incur  additional
obligations or costs, the SeraNova receivable impairment and/or charges would be
increased in future periods.

     The Company's 2002 operating plan contains  assumptions  regarding  revenue
and  expenses.  The  achievement  of the operating  plan depends  heavily on the
timing of work performed by the Company on existing  projects and the ability of
the Company to gain and perform  work on new  projects.  Project  cancellations,
delays in the timing of work performed by


                                     - 34 -
<PAGE>

the Company on existing  projects  or the  inability  of the Company to gain and
perform  work on new  projects  could  have an adverse  impact on the  Company's
ability to execute its  operating  plan and maintain  adequate cash flow. In the
event actual  results do not meet the  operating  plan,  management  believes it
could execute  contingency  plans to mitigate  such effects.  Such plans include
additional cost reductions or seeking additional financing. Considering the cash
on hand, the remaining  availability  under the credit facility and based on the
achievement  of the  operating  plan  and  management's  actions  taken to date,
management  believes it has the ability to continue to generate  sufficient cash
to satisfy its operating requirements in the normal course of business. However,
no  assurance  can  be  given  that  sufficient  cash  will  be  generated  from
operations.

     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.

NASDAQ NATIONAL MARKET

     On April 4,  2002,  the  Company  received a letter  from the Nasdaq  Stock
Market   ("Nasdaq")   advising  the  Company  that  it  failed  to  meet  Nasdaq
requirements  for continued  listing as the closing "bid" price of the Company's
common  stock was less than  $1.00 for 30 trading  days.  On May 13,  2002,  the
Company  received a letter from Nasdaq advising the Company that it had regained
compliance with the continued listing requirements.

     On November 7, 2002, the Company received a letter from Nasdaq advising the
Company  that it has again  failed to meet  Nasdaq  requirements  for  continued
listing as the closing "bid" price of the  Company's  common stock was less than
$1.00 for 30 trading days.  The Company now has 90 days from the notice date (or
until  February  5,  2003) to regain  compliance  by having the bid price of the
Company's Common Stock close at $1.00 or greater for a minimum of 10 consecutive
trading days during the 90-day  compliance  period.  A delisting from the Nasdaq
National Market could severely and adversely  affect the market liquidity of the
Company's Common Stock.

COMMITMENTS

     During  late  2001,  SeraNova  failed  to  pay  certain  outstanding  lease
obligations  to the  Company's  landlords.  Accordingly,  on March 4, 2002,  the
Company filed an arbitration  demand with the American  Arbitration  Association
against the SeraNova Group (see Part II, Item 1, Legal Proceedings).  The demand
for  arbitration,  which  sought  damages,  alleged  among other things that the
SeraNova  Group failed to pay  outstanding  lease  obligations  to the Company's
landlords and to reimburse the Company for all rent payments made by the Company
on their behalf.  An arbitration  hearing was held on June 25, 2002 and June 28,
2002 seeking $525,000 in outstanding  lease  obligations.  On August 9, 2002, an
award was  issued in the amount of  $616,905  (including  attorney's  fees) plus
reimbursement of  administrative  fees, in favor of Intelligroup and against the
SeraNova Group jointly and  severally.  The award also includes a provision that
jurisdiction  is  retained  by the  tribunal,  and the Company may seek from the
tribunal any additional rents and other fees due and owing on a quarterly basis.
Accordingly, the Company filed a second demand for $300,000 in damages for rents
and other fees due and owing for the months of June through  September  2002. On
August 12, 2002, an action was commenced


                                     - 35 -
<PAGE>

in the  Superior  Court of New  Jersey  to  confirm  the  award,  seek a writ of
execution  against the  SeraNova  Group's  assets,  restrain the disposal of the
SeraNova  Group's assets,  and enjoin the distribution of proceeds from any sale
of the SeraNova Group's assets among other emergency relief. On August 13, 2002,
the Court,  among other things,  (i)  confirmed  the award and entered  judgment
against SeraNova in the amount of $616,905 plus $7,100 in  administrative  fees,
(ii)  authorized  the issuance of a writ of execution  against  SeraNova's  bank
accounts and other assets to satisfy the judgment, (iii) restrained the SeraNova
Group from disposing of any assets, including funds in their bank accounts, (iv)
authorized the attachment of all net proceeds from the sale of any assets of the
SeraNova  Group  up to the  amount  of the  arbitration  award  to be held in an
interest  bearing escrow account pending further court order and (v) scheduled a
hearing for September 3, 2002 in order for the SeraNova  Group to show cause why
the relief granted by the Court to the Company  against  SeraNova  should not be
applied to the  SeraNova  Group  jointly  and  severally.  A trial was held over
several days in September  2002.  On October 3, 2002,  the Court  confirmed  the
$624,000  award,  jointly and severally as to all the  defendants,  and issued a
writ of execution against the defendant's  assets.  The Company does not believe
that the  outcome  of this claim will have a  materially  adverse  effect on the
Company's business, financial condition or results of operations.

NEW ACCOUNTING PRONOUNCEMENT

     In June 2002, the Financial  Accounting Standards Board (the "FASB") issued
SFAS  No.  146,   "Accounting  for  Costs   Associated  with  Exit  or  Disposal
Activities." SFAS No. 146 addresses financial accounting and reporting for costs
associated with exit or disposal  activities and nullifies  Emerging Issues Task
Force  (EITF)  Issue No.  94-3,  "Liability  Recognition  for  Certain  Employee
Termination  Benefits  and Other  Costs to Exit an Activity  (including  Certain
Costs Incurred in a Restructuring)." The Company is evaluating the impact of the
adoption of SFAS No. 146,  which is  effective  for the Company as of January 1,
2003,  but does not  believe  it will have a  material  impact on the  Company's
financial position or results of operations.

EUROPEAN MONETARY UNION (EMU)

     The euro was  introduced  on  January  1,  1999,  at which  time the eleven
participating  EMU member countries  established  fixed conversion rates between
their  existing   currencies  (legacy  currencies)  and  the  euro.  The  legacy
currencies  will  continue to be used as legal tender  through  January 1, 2002;
thereafter, the legacy currencies will be canceled and euro bills and coins will
be used for cash  transactions  in the  participating  countries.  The Company's
European sales and operations  offices have already addressed the systems issues
raised  by the  euro  currency  conversion  and are  cognizant  of the  business
implications  of converting to a common  currency.  Since the Company  currently
only operates in certain European  countries that do not participate in the EMU,
the  Company  believes  the  conversion  to the  euro  did not  have a  material
financial  impact on its operations in Europe.  Should those  countries in which
the Company  operates  decide to join the EMU, the Company plans to  re-evaluate
the financial impact of the conversion to the euro on its operations.


                                     - 36 -
<PAGE>

ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4.     CONTROLS AND PROCEDURES

     The Company maintains  disclosure controls and procedures that are designed
to ensure  that  information  required  to be  disclosed  by the  Company in the
reports that it files or submits under the  Securities  Exchange Act of 1934, as
amended, is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms, and that such information is accumulated
and  communicated  to the Company's  management,  President and Chief  Executive
Officer and Senior Vice President-Finance and Administration and Chief Financial
Officer, as appropriate to allow timely decisions regarding required disclosure.

     Within 90 days prior to the date of this report, the Company carried out an
evaluation,  under the supervision and with the  participation  of the Company's
management,   President   and  Chief   Executive   Officer   and   Senior   Vice
President-Finance  and  Administration  and  Chief  Financial  Officer,  of  the
effectiveness of the design and operation of the Company's  disclosure  controls
and procedures.  Based upon that evaluation,  the Company's  President and Chief
Executive Officer and Senior Vice President-Finance and Administration and Chief
Financial  Officer,  have concluded that the Company's  disclosure  controls and
procedures  are  effective.  There  have  been  no  significant  changes  in the
Company's internal controls or in other factors that could significantly  affect
the  internal  controls  subsequent  to  the  date  the  Company  completed  its
evaluation.


                                     - 37 -
<PAGE>

PART II.    OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS

     On February 7, 2001, NSA Investments II LLC filed a complaint in the United
States District Court for the District of  Massachusetts  naming,  among others,
SeraNova,  the Company and Rajkumar Koneru, a former director of the Company, as
defendants.  The  plaintiff  alleges that it invested  $4,000,000 in SeraNova as
part of a private placement of SeraNova common stock in March 2000, prior to the
spin-off of SeraNova by the Company. The complaint, which seeks compensatory and
punitive  damages,  alleges  that the  Company,  as a  "controlling  person"  of
SeraNova, is jointly and severally liable with and to the extent as SeraNova for
false and misleading statements constituting  securities laws violations.  After
being served with the complaint,  the Company made a request for indemnification
from  SeraNova  pursuant to the various  inter-company  agreements in connection
with the spin-off. By letter dated April 13, 2001,  SeraNova's counsel,  advised
the Company that SeraNova acknowledged liability for such indemnification claims
and has  elected to assume the  defense of the  plaintiff's  claims.  In October
2001,  the motion to dismiss,  filed on behalf of the  Company in May 2001,  was
denied  without  prejudice  to  refile  at the  close of the  discovery  period.
Court-ordered  mediation  between the plaintiff and SeraNova  during January and
February 2002 was  unsuccessful.  In January 2002,  plaintiff filed a motion for
partial  summary  judgment as to certain  claims  against  SeraNova.  No summary
judgment motion was filed against the Company.  SeraNova filed its opposition to
plaintiff's  motion for partial  summary  judgment in February  2002.  The court
heard argument on the motion for partial  summary  judgment on July 30, 2002. On
September  30,  2002,  the Court  granted  plaintiff's  motion in part,  finding
SeraNova  liable for breach of contract as a matter of law.  The Company  denies
the  allegations  made and intends to defend  vigorously  the claims made by the
plaintiff.  It is too early in the dispute  process to determine the impact,  if
any,  that  such  dispute  will  have  upon the  Company's  business,  financial
condition or results of operations.

     On August 16, 2001,  the Company filed a complaint in the Superior Court of
New Jersey, Middlesex County, against SeraNova, Inc. and Silverline Technologies
Limited,  which  acquired  SeraNova in March 2001.  The  complaint,  which seeks
damages,  alleges among other things that  SeraNova  failed to pay amounts owing
under (i) an unsecured promissory note totaling  $10,079,717,  and (ii) a system
implementation  project totaling $511,573.  On September 25, 2001,  SeraNova and
Silverline  filed  a joint  Answer  to the  Company's  complaint.  In  addition,
SeraNova filed a counterclaim  against the Company for unspecified  damages as a
set-off against the Company's claims.  Thereafter,  in response to the Company's
request for a statement of damages,  SeraNova  stated that it was in the process
of calculating its damages, but for informational  purposes claimed compensatory
damages  in  excess  of  $5,500,000  and  punitive  damages  in  the  amount  of
$10,000,000.  The parties have  completed the  discovery  process and a trial is
scheduled for December 16, 2002. The Company  believes that there is no basis to
support the amounts claimed by SeraNova in its counterclaim for compensatory and
punitive  damages.  The  inability of the Company to collect the amount due from
SeraNova  and/or  Silverline or an adverse  decision with respect to the Company
relating  to  SeraNova's  counterclaim  could  negatively  affect the  Company's
business, financial condition or results of operations.

     On March 4, 2002, the Company filed an arbitration demand with the American
Arbitration  Association against the SeraNova Group. The demand for arbitration,
which sought damages,  alleged among other things that the SeraNova Group failed
to pay outstanding lease


                                     - 38 -
<PAGE>

obligations to the Company's landlords and to reimburse the Company for all rent
payments made by the Company on their behalf. An arbitration hearing was held on
June  25,  2002  and  June  28,  2002  seeking  $525,000  in  outstanding  lease
obligations.  On August 9, 2002,  an award was issued in the amount of  $616,905
(including  attorney's fees) plus reimbursement of administrative fees, in favor
of Intelligroup and against the SeraNova Group jointly and severally.  The award
also includes a provision that jurisdiction is retained by the tribunal, and the
Company may seek from the tribunal any  additional  rents and other fees due and
owing on a quarterly basis.  Accordingly,  the Company filed a second demand for
$300,000  in  damages  for rents and other  fees due and owing for the months of
June through  September 2002. On August 12, 2002, an action was commenced in the
Superior  Court of New Jersey to confirm  the  award,  seek a writ of  execution
against the  SeraNova  Group's  assets,  restrain  the  disposal of the SeraNova
Group's  assets,  and enjoin the  distribution  of proceeds from any sale of the
SeraNova  Group's assets among other emergency  relief.  On August 13, 2002, the
Court,  among other things, (i) confirmed the award and entered judgment against
SeraNova in the amount of  $616,905  plus $7,100 in  administrative  fees,  (ii)
authorized the issuance of a writ of execution against  SeraNova's bank accounts
and other assets to satisfy the judgment,  (iii)  restrained  the SeraNova Group
from  disposing  of any assets,  including  funds in their bank  accounts,  (iv)
authorized the attachment of all net proceeds from the sale of any assets of the
SeraNova  Group  up to the  amount  of the  arbitration  award  to be held in an
interest  bearing escrow account pending further court order and (v) scheduled a
hearing for September 3, 2002 in order for the SeraNova  Group to show cause why
the relief granted by the Court to the Company  against  SeraNova  should not be
applied to the  SeraNova  Group  jointly  and  severally.  A trial was held over
several days in September  2002.  On October 3, 2002,  the Court  confirmed  the
$624,000  award,  jointly and severally as to all the  defendants,  and issued a
writ of execution against the defendant's  assets.  The Company does not believe
that the  outcome  of this claim will have a  materially  adverse  effect on the
Company's business, financial condition or results of operations.

     On June 14, 2002,  the Company  filed a complaint in the Superior  Court of
New Jersey,  Mercer  County,  against  Ashok Pandey,  a  shareholder  and former
officer and  director of the  Company.  The  complaint,  which seeks  damages in
excess of $400,000,  alleges among other things that Mr. Pandey breached certain
terms and conditions of a separation  agreement he entered into with the Company
and that Mr. Pandey has been unjustly enriched in an amount of $350,000 from the
Company.  Mr. Pandey has filed an Answer to the Company's  complaint denying the
Company's  claims.  The  parties are  currently  proceeding  with the  discovery
process. The Company does not believe that the outcome of this claim will have a
material  adverse  effect on the  Company's  business,  financial  condition  or
results of operations.

     On June 26,  2002,  Ashok  Pandey  filed a Complaint  in the United  States
District   Court  for  the  District  of  New  Jersey,   alleging  that  certain
shareholders  of the Company  constituted  a group that held more than 5% of the
outstanding  shares of the  Company's  common stock and had not filed a Schedule
13D disclosure  statement with the Securities and Exchange  Commission.  On June
28, 2002, plaintiff obtained an ex parte injunctive order from the Court barring
Srini Raju, an alleged member of the "group" and a shareholder  holding 4.61% of
the Company's  common  stock,  from voting in the  Company's  Annual  Meeting of
Shareholders  (the "Annual  Meeting").  On July 12, 2002, after reviewing actual
evidence of record,  and hearing  argument from plaintiff's  counsel,  the Court
held that  there was no basis to enjoin Mr.  Raju from  voting his shares at the
Annual Meeting.  After the election,  Pandey sought to file an amended complaint
dropping  certain  defendants,  and adding  others,  including  the Company.  On
September 27,

                                     - 39 -
<PAGE>

2002,  the  Court  granted  plaintiff's  motion,  and  allowed  certain  limited
discovery  to proceed.  On October  11,  2002,  the  Company  filed a motion for
Judgment  on the  Pleadings  in its favor,  arguing  that the  relief  sought by
plaintiff,   the  retroactive   sterilization  of  Mr.  Raju's  shares  and  the
invalidation of his votes at the Annual  Meeting,  is not sanctioned by law, and
is unavailable as a remedy.  On November 11, 2002,  Pandey notified the Court of
and served on the  Company's  counsel his cross motion  seeking to file a second
amended  complaint  seeking,  among other things, a resolicitation of proxies to
elect new directors to the Company's  Board of Directors.  The Company's  motion
and Pandey's  cross motion are awaiting  further  briefing and a decision by the
Court

     On July 2, 2002,  Ashok Pandey  filed a complaint in the Superior  Court of
New Jersey,  Middlesex  County,  in connection  with the Company's  recent Proxy
contest with respect to the Annual Meeting. In his Complaint,  plaintiff claimed
that  Intelligroup's  Board of  Directors  violated  their  fiduciary  duties by
adjourning  the Annual  Meeting from July 2, 2002 to July 16,  2002.  On July 3,
2002, the Court denied  Plaintiff's  application for emergent relief,  and ruled
that  Intelligroup  could adjourn its Annual Meeting,  finding that  plaintiff's
conduct in obtaining ex parte  injunctive  relief in federal court enjoining the
voting of 4.61% of the Company's  outstanding common stock without notice to the
Company, "estopped [Pandey] from complaining about the adjournment." Despite the
court's denial of his emergent application,  plaintiff indicated to the Court on
August 16, 2002,  that he would continue the litigation in an effort to have the
court sanction his unilateral  attempt to hold an annual meeting and election on
July 2, 2002,  despite the Company's  adjournment of the meeting and the absence
of its Board of Directors and a quorum of its  shareholders on July 2, 2002. The
Company  filed its  Answer  and  Affirmative  Defenses  on August  30,  2002 and
discovery has commenced.

     On July 3,  2002,  the  Company  filed a  complaint  in the  United  States
District  Court for the  District  of New  Jersey,  naming  Ashok  Pandey,  TAIB
Securities,  Inc.,  Beechrock  Holdings  Limited and Braydon Holdings Limited as
defendants.  The  complaint  alleges,  among other things,  that the  defendants
violated  federal  securities laws in connection with the Company's recent proxy
contest.  The defendants have filed an Answer to the Company's complaint denying
the Company's  claims.  A case  management  conference has been scheduled by the
Court for November  18,  2002.  The Company does not believe that the outcome of
this  claim  will have a  material  adverse  effect on the  Company's  business,
financial condition or results of operations.

     On October 4, 2002,  the Company filed a complaint in the Superior Court of
New  Jersey,  Middlesex  County  against  the  SeraNova  Group and HSBC Bank USA
(`HSBC") seeking compensatory, consequential and punitive damages arising out of
SeraNova's  and  Silverline's  failure to pay certain  amounts due and owing the
Company,  SeraNova's  fraudulent  conveyance of assets and customer  accounts to
Silverline, and HSBC's allegedly knowing acceptance of a fraudulent guarantee of
Silverline's debt to HSBC from SeraNova.  Defendants have been served,  but have
not yet answered the Complaint. The inability of the Company to collect the full
amount due from SeraNova and/or Silverline could negatively affect the Company's
business, financial condition or results of operation.

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


                                     - 40 -
<PAGE>

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

     The Annual  Meeting of  Shareholders  of the  Company  was held on July 16,
2002.

     There  were  present  at the  meeting  in person  or by proxy  shareholders
holding an aggregate of 13,837,314  shares of Common  Stock.  The results of the
vote taken at such meeting  with  respect to each  nominee for Director  were as
follows:

     Common Stock Nominees                    For                   Withheld
     ---------------------                    ---                   --------
     Nagarjun Valluripalli                  7,178,024                 6,655
     Klaus P. Besier                        7,174,024                10,655
     Dennis McIntosh                        7,176,774                 7,905
     Alexander Graham Wilson                7,178,774                 5,905
     Prabhas Panigrahi                      7,177,024                 7,655
     Nick Di Iorio                          7,177,024                 7,655

     Ashok Pandey                           6,641,469                11,166
     Wendy Rayner                           6,641,469                11,166
     Stephen Savitt                         6,641,469                11,166
     John Supplee                           6,641,469                11,166
     Tarun Chandra                          6,641,469                11,166
     Yoshikazu "Jin" Nakamura               6,641,469                11,166

     Accordingly,  Nagarjun  Valluripalli,  Klaus P.  Besier,  Dennis  McIntosh,
Alexander Graham Wilson, Prabhas Panigrahi and Nic Di Iorio were duly elected as
Directors of the Company.

ITEM 5.     OTHER INFORMATION

     In June  2002,  after a  review  of the  recent  events  concerning  Arthur
Andersen LLP  ("Andersen"),  the Company's  Board of Directors  delegated to its
Audit  Committee the  responsibility  to work with the  Company's  management to
review the qualification of the major national  accounting firms to serve as the
Company's independent public accountants for the fiscal year ending December 31,
2002.  On July 25,  2002,  the  Company  dismissed  Andersen,  as the  Company's
auditors.  Andersen's reports on the Company's consolidated financial statements
for each of the years ended December 31, 2001,  2000 and 1999 did not contain an
adverse opinion or disclaimer of opinion, nor were they qualified or modified as
to  uncertainty,  audit scope or accounting  principals.  During the years ended
December 31, 2001 and 2000 and the  subsequent  interim  period through July 25,
2002,  there were no  disagreements  with  Andersen on any matter of  accounting
principles or practices,  financial statement  disclosure,  or auditing scope or
procedure which, if not resolved to Andersen's  satisfaction,  would have caused
Andersen to make reference to the subject  matter in connection  with its report
on the Company's  consolidated  financial  statements  for such years.  Further,
there were no reportable  events as defined in Item  304(a)(1)(v)  of Regulation
S-K.


                                     - 41 -
<PAGE>

     On July 25, 2002, the Company's Board of Directors, upon the recommendation
of its Audit  Committee,  engaged  Deloitte  & Touche LLP as the  Company's  new
independent auditors.

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits.

          10.1 Employment   Agreement   between   the   Company   and   Nagarjun
               Valluripalli dated September 20, 2002.

          99.1 Certification pursuant to 18 U.S.C Section 1350.

     (b)  Reports on Form 8-K.

          On July 2, 2002,  the Company filed a Form 8-K with the Securities and
          Exchange  Commission  relating  to the  Company's  adjournment  of its
          Annual Meeting from Tuesday, July 2, 2002 to Tuesday, July 16, 2002.

          On August 1, 2002,  the Company  filed a Form 8-K with the  Securities
          and Exchange  Commission relating to the Company's dismissal of Arthur
          Andersen LLP as the Company's auditor and its engagement of Deloitte &
          Touche LLP as the Company's new independent auditor.



                                     - 42 -
<PAGE>

                                   SIGNATURES


     Pursuant to the  requirements  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.

                                 Intelligroup, Inc.


DATE: November 14, 2002          By: /s/ Nagarjun Valluripalli
                                    --------------------------------------------
                                    Nagarjun Valluripalli,
                                    Chairman of the Board, President and
                                    Chief Executive Officer
                                    (Principal Executive Officer)


DATE: November 14, 2002          By: /s/ Nicholas Visco
                                    --------------------------------------------
                                    Nicholas Visco,
                                    Senior Vice President-Finance and
                                    Administration and Chief Financial Officer
                                    (Principal Financial and Accounting Officer)





                                     - 43 -
<PAGE>

                                 CERTIFICATIONS

I, Nagarjun Valluripalli certify that:

     1.   I have reviewed this  Quarterly  Report on Form 10-Q of  Intelligroup,
          Inc.;

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

     3.   Based on my knowledge,  the financial statements,  and other financial
          information  included in this Quarterly Report,  fairly present in all
          material respects the financial  condition,  results of operations and
          cash flows of the registrant as of, and for, the periods  presented in
          this Quarterly Report;

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

               a.   designed such  disclosure  controls and procedures to ensure
                    that  material   information  relating  to  the  registrant,
                    including its consolidated subsidiaries, is made known to us
                    by others  within those  entities,  particularly  during the
                    period in which this Quarterly Report is being prepared;

               b.   evaluated the  effectiveness of the registrant's  disclosure
                    controls and procedures as of a date within 90 days prior to
                    the filing date of this  Quarterly  Report (the  "Evaluation
                    Date"); and

               c.   presented in this Quarterly Report our conclusions about the
                    effectiveness  of the  disclosure  controls  and  procedures
                    based on our evaluation as of the Evaluation Date;

     5.   The registrant's other certifying officers and I have disclosed, based
          on our most recent  evaluation,  to the registrant's  auditors and the
          audit  committee  of  registrant's  board  of  directors  (or  persons
          performing the equivalent function):

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

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


                                     - 44 -
<PAGE>

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

DATE: November 14, 2002                     By: /s/ Nagarjun Valluripalli
                                               ---------------------------------
                                            Nagarjun Valluripalli
                                            Chairman of the Board, President
                                            and Chief Executive Officer


I, Nicholas Visco certify that:

     1.   I have reviewed this  Quarterly  Report on Form 10-Q of  Intelligroup,
          Inc.;

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

     3.   Based on my knowledge,  the financial statements,  and other financial
          information  included in this Quarterly Report,  fairly present in all
          material respects the financial  condition,  results of operations and
          cash flows of the registrant as of, and for, the periods  presented in
          this Quarterly Report;

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

               a.   designed such  disclosure  controls and procedures to ensure
                    that  material   information  relating  to  the  registrant,
                    including its consolidated subsidiaries, is made known to us
                    by others  within those  entities,  particularly  during the
                    period in which this Quarterly Report is being prepared;

               b.   evaluated the  effectiveness of the registrant's  disclosure
                    controls and procedures as of a date within 90 days prior to
                    the filing date of this  Quarterly  Report (the  "Evaluation
                    Date"); and

               c.   presented in this Quarterly Report our conclusions about the
                    effectiveness  of the  disclosure  controls  and  procedures
                    based on our evaluation as of the Evaluation Date;

     5.   The registrant's other certifying officers and I have disclosed, based
          on our most recent  evaluation,  to the registrant's  auditors and the
          audit  committee  of  registrant's  board  of  directors  (or  persons
          performing the equivalent function):


                                     - 45 -
<PAGE>

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

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

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


DATE: November 14, 2002               By: /s/ Nicholas Visco
                                         ---------------------------------------
                                      Nicholas Visco
                                      Senior Vice President-Finance and
                                      Administration and Chief Financial Officer



                                     - 46 -