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SECURITIES AND EXCHANGE COMMISSIONWashington,
DC 20549

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FORM 10-Q

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

For the quarterly period
ended September 30, 2005
Commission file number 0-20943

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

|New
    Jersey                                                  |  | 11-2880025                                    
|--------------------------------------------------------------- |  | ----------------------------------------------
|                                                                |  |                                               
|(State
    or Other Jurisdiction of                             |  | (I.R.S.
          Employer
Identification No.)
|Incorporation
    or Organization)                              |  |                                               
|                                                                |  |                                               
|499
    Thornall Street, Edison, New Jersey 08837              
|                                                               
|(Address
    of Principal Executive Offices)                    |  | (Zip
    Code)                                
|                                                                |  |                                               
|(732)
    590-1600                                             
|                                                               
|(Registrant's
          Telephone
Number,                      
|Including
    Area Code)                                       
|                                                               
|                                                               
|Securities
    registered pursuant to Section 12(b) of the Act:
|                                                               
|                                                                |  | Name
    of each exchange on                  
|Title
    of each class                                         |  | which
    registered                          
|                                                                |  |                                               
|None                                                            |  |                                               
|                                                                |  |                                               
|                                                                |  |                                               
|Securities
    registered pursuant to Section 12(g) of the Act:
|                                                               
|Common
          Stock, $.01 par
value                         
|                                                               
|(Title
    of Class)                                           

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


|Yes: |  | No:
|---- |  | ---

Indicate
        by check mark whether the registrant is an accelerated filer (as defined
        in Exchange Act Rule 12b-2).


|Yes: |  | No:
|---- |  | ---

Indicate
        by check mark whether the registrant is a shell company (as defined in
        Exchange Act Rule 12b-2).


|Yes: |  | No:
|---- |  | ---

Indicate
        the number of shares outstanding of each of the registrant's classes
        of common stock, as of October 28, 2005:


|Class                                  | Number
          of Shares
|-------------------------------------- | --------------------------
|                                       |                           
|Common
          Stock, $.01 par value | 35,102,440                
|                                       |                           

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TABLE OF CONTENTS

|PART
         I. FINANCIAL
       INFORMATION |                                                                                                                                                           
|--------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|                                              |                                                                                                                                                           
|                                              |                                                                                                                                                           
|Item 1.                                       | Unaudited Condensed Consolidated Financial Statements                                                                                                     
|                                              |                                                                                                                                                           
|                                              | Condensed
    Consolidated Balance Sheets as of September 30, 2005 and December 31, 2004                                                                  
|                                              |                                                                                                                                                           
|                                              | Condensed
       Consolidated Statements of Operations and Comprehensive Income (Loss)
    for the Nine and Three Months Ended September 30, 2005 and 2004
|                                              |                                                                                                                                                           
|                                              | Condensed
    Consolidated Statements of Cash Flows for the Nine Months Ended September
    30, 2005 and 2004                                             
|                                              |                                                                                                                                                           
|                                              | Notes to Condensed Consolidated Financial Statements                                                                                                      
|                                              |                                                                                                                                                           
|Item 2.                                       | Managements
    Discussion and Analysis of Financial Condition and Results of Operations                                                                 
|                                              |                                                                                                                                                           
|Item 3.                                       | Quantitative and Qualitative Disclosures About Market Risk                                                                                                
|                                              |                                                                                                                                                           
|Item 4.                                       | Controls and Procedures                                                                                                                                   
|                                              |                                                                                                                                                           
|PART
       II. OTHER
       INFORMATION      |                                                                                                                                                           
|                                              |                                                                                                                                                           
|Item 1.                                       | Legal Proceedings                                                                                                                                         
|                                              |                                                                                                                                                           
|Item 5.                                       | Other Information                                                                                                                                         
|                                              |                                                                                                                                                           
|Item 6.                                       | Exhibits                                                                                                                                                  
|                                              |                                                                                                                                                           
|SIGNATURES                                    | 45                                                                                                                                                        

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This
      quarterly report on Form 10-Q contains forward-looking statements within
      the meaning of Section 27A of the Securities Act of 1933 and Section 21E
      of the Securities Exchange Act of 1934. Forward-looking statements include,
      among other things, business strategy and expectations concerning industry
      conditions, market position, future operations, margins, profitability,
      liquidity and capital resources. Forward-looking statements generally can
      be identified by the use of terminology such as may, will, expect, intend, estimate, anticipate or believe or similar expressions or the negatives thereof. These expectations are based on managements assumptions and current beliefs based on currently available information. Although the Company believes that the expectations reflected in such statements are reasonable, it can give no assurance that such expectations will be correct. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this quarterly report on Form 10-Q. The Companys operations are subject to a number of uncertainties, risks and other influences, many of which are outside its control, and any one of which, or a combination of which, could cause its actual results of operations to differ materially from the forward-looking statements. Important factors that
 could cause actual results to differ materially from its expectations are disclosed in Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations and
      elsewhere in this quarterly report on Form 10-Q.


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|PART I                    FINANCIAL STATEMENTS      
|----------------------------------------------------
|ITEM 1.                                             
|                                                    
|INTELLIGROUP, INC.                                  
|CONDENSED CONSOLIDATED BALANCE SHEETS               
|SEPTEMBER 30, 2005 (UNAUDITED) AND DECEMBER 31, 2004

|                                                                                                                                                           |  |   |               |   |  |   |              |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | ------------- | - |  | - | ------------ | -
|                                                                                                                                                           |  |   | September 30, |   |  |   | December 31, |  
|                                                                                                                                                           |  |   | 2005          |   |  |   | 2004         |  
|                                                                                                                                                           |  |   |               |   |  |   |              |  
|                                                                                                                                                           |  |   | (unaudited)   |   |  |   | (See Note 1) |  
|ASSETS                                                                                                                                                     |  |   |               |   |  |   |              |  
|CURRENT ASSETS                                                                                                                                             |  |   |               |   |  |   |              |  
|Cash and cash equivalents                                                                                                                                  |  | $ | 6,824,000     |   |  | $ | 6,239,000    |  
|Accounts
      receivable, less allowance for doubtful accounts of $1,605,000 and $1,627,000
    at September 30, 2005 and December 31, 2004, respectively |  |   | 19,595,000    |   |  |   | 23,136,000   |  
|Unbilled services                                                                                                                                          |  |   | 9,465,000     |   |  |   | 10,482,000   |  
|Prepaid expenses and other current assets                                                                                                                  |  |   | 3,097,000     |   |  |   | 3,218,000    |  
|                                                                                                                                                           |  |   |               |   |  |   |              |  
|Total
    current assets                                                                                                                                   |  |   | 38,981,000    |   |  |   | 43,075,000   |  
|                                                                                                                                                           |  |   |               |   |  |   |              |  
|Property and equipment, net                                                                                                                                |  |   | 3,408,000     |   |  |   | 3,485,000    |  
|Deferred tax and other assets                                                                                                                              |  |   | 2,435,000     |   |  |   | 1,611,000    |  
|                                                                                                                                                           |  |   |               |   |  |   |              |  
|                                                                                                                                                           |  |   |               |   |  |   |              |  
|Total
    assets                                                                                                                                           |  | $ | 44,824,000    |   |  | $ | 48,171,000   |  
|                                                                                                                                                           |  |   |               |   |  |   |              |  
|                                                                                                                                                           |  |   |               |   |  |   |              |  
|LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                                       |  |   |               |   |  |   |              |  
|CURRENT LIABILITIES                                                                                                                                        |  |   |               |   |  |   |              |  
|Line of credit                                                                                                                                             |  | $ | 2,654,000     |   |  | $ | 2,356,000    |  
|Accounts payable                                                                                                                                           |  |   | 4,859,000     |   |  |   | 3,424,000    |  
|Accrued payroll and related taxes                                                                                                                          |  |   | 10,239,000    |   |  |   | 10,635,000   |  
|Accrued expenses and other current liabilities                                                                                                             |  |   | 5,535,000     |   |  |   | 5,074,000    |  
|Deferred revenue                                                                                                                                           |  |   | 508,000       |   |  |   | 977,000      |  
|Income taxes payable                                                                                                                                       |  |   | 550,000       |   |  |   | 196,000      |  
|Current portion of obligations under capital lease                                                                                                         |  |   | 47,000        |   |  |   | 422,000      |  
|                                                                                                                                                           |  |   |               |   |  |   |              |  
|Total
    current liabilities                                                                                                                              |  |   | 24,392,000    |   |  |   | 23,084,000   |  
|                                                                                                                                                           |  |   |               |   |  |   |              |  
|                                                                                                                                                           |  |   |               |   |  |   |              |  
|Obligations under capital lease, net of current portion                                                                                                    |  |   | 609,000       |   |  |   | 45,000       |  
|Other long-term liabilities                                                                                                                                |  |   | 288,000       |   |  |   | 395,000      |  
|                                                                                                                                                           |  |   |               |   |  |   |              |  
|                                                                                                                                                           |  |   |               |   |  |   |              |  
|Total
    liabilities                                                                                                                                      |  |   | 25,289,000    |   |  |   | 23,524,000   |  
|                                                                                                                                                           |  |   |               |   |  |   |              |  
|                                                                                                                                                           |  |   |               |   |  |   |              |  
|Commitments and contingencies                                                                                                                              |  |   |               |   |  |   |              |  
|                                                                                                                                                           |  |   |               |   |  |   |              |  
|Shareholders' Equity                                                                                                                                       |  |   |               |   |  |   |              |  
|                                                                                                                                                           |  |   |               |   |  |   |              |  
|Preferred
    stock, $.01 par value, 5,000,000 shares authorized, none issued or outstanding                                                               |  |   |              |   |  |   |             |  
|Common
      stock, $.01 par value, 40,000,000 shares authorized, 35,103,000 shares
    issued and outstanding                                             |  |   | 351,000       |   |  |   | 351,000      |  
|Additional paid-in capital                                                                                                                                 |  |   | 58,012,000    |   |  |   | 58,012,000   |  
|Accumulated deficit                                                                                                                                        |  |   | (39,009,000   | ) |  |   | (33,455,000  | )
|Accumulated other comprehensive income (loss)                                                                                                              |  |   | 181,000       |   |  |   | (261,000     | )
|                                                                                                                                                           |  |   |               |   |  |   |              |  
|Total
    shareholders' equity                                                                                                                             |  |   | 19,535,000    |   |  |   | 24,647,000   |  
|                                                                                                                                                           |  |   |               |   |  |   |              |  
|                                                                                                                                                           |  |   |               |   |  |   |              |  
|Total
    liabilities and shareholders' equity                                                                                                             |  | $ | 44,824,000    |   |  | $ | 48,171,000   |  
|                                                                                                                                                           |  |   |               |   |  |   |              |  
|                                                                                                                                                           |  |   |               |   |  |   |              |  

See accompanying notes.

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INTELLIGROUP, INC.CONDENSED CONSOLIDATED
  STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)FOR THE NINE AND THREE
  MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
  (UNAUDITED)

|                                                                             | NINE MONTHS ENDED SEPTEMBER 30, |            | THREE MONTHS ENDED SEPTEMBER 30, |  
|---------------------------------------------------------------------------- | ------------------------------- | ---------- | -------------------------------- | -
|                                                                             |                                 |            |                                  |  
|                                                                             |                                 | 2005       |                                  |  
|                                                                             |                                 |            |                                  |  
|Revenue                                                                      | $                               | 95,865,000 |                                  | $
|Cost of revenue                                                              |                                 | 71,514,000 |                                  |  
|                                                                             |                                 |            |                                  |  
|Gross profit                                                                 |                                 | 24,351,000 |                                  |  
|                                                                             |                                 |            |                                  |  
|Selling, general and administrative expenses                                 |                                 | 27,957,000 |                                  |  
|Depreciation and amortization                                                |                                 | 1,628,000  |                                  |  
|                                                                             |                                 |            |                                  |  
|Total operating expenses                                                     |                                 | 29,585,000 |                                  |  
|                                                                             |                                 |            |                                  |  
|Operating income (loss)                                                      |                                 | (5,234,000 | )                                |  
|Interest income                                                              |                                 | 63,000     |                                  |  
|Interest expense                                                             |                                 | (249,000   | )                                |  
|Other income (expense)                                                       |                                 | (286,000   | )                                |  
|                                                                             |                                 |            |                                  |  
|Income (loss) before income tax provision (benefit)                          |                                 | (5,706,000 | )                                |  
|Provision for (benefit of) income taxes                                      |                                 | (153,000   | )                                |  
|                                                                             |                                 |            |                                  |  
|Net income (loss)                                                            | $                               | (5,553,000 | )                                | $
|                                                                             |                                 |            |                                  |  
|Earnings (loss) per share:                                                   |                                 |            |                                  |  
|Basic earnings (loss) per share                                              | $                               | (0.16      | )                                | $
|                                                                             |                                 |            |                                  |  
|Weighted
    average number of commonshares
    outstanding –  basic         |                                 | 35,103,000 |                                  |  
|                                                                             |                                 |            |                                  |  
|Diluted earnings (loss) per share                                            | $                               | (0.16      | )                                | $
|                                                                             |                                 |            |                                  |  
|Weighted
    average number of commonshares
    outstanding –  diluted       |                                 | 35,103,000 |                                  |  
|                                                                             |                                 |            |                                  |  
|Comprehensive income (loss)                                                  |                                 |            |                                  |  
|Net income (loss)                                                            | $                               | (5,553,000 | )                                | $
|Other
    comprehensive income (loss) – currency
    translation adjustments |                                 | 442,000    |                                  |  
|                                                                             |                                 |            |                                  |  
|Comprehensive income (loss)                                                  | $                               | (5,111,000 | )                                | $
|                                                                             |                                 |            |                                  |  

See accompanying notes.

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INTELLIGROUP, INC.CONDENSED CONSOLIDATED
  STATEMENTS OF CASH FLOWSFOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
  (UNAUDITED)

|                                                                                                          | September 30, |            | September 30, |  
|--------------------------------------------------------------------------------------------------------- | ------------- | ---------- | ------------- | -
|                                                                                                          | 2005          |            | 2004          |  
|                                                                                                          |               |            |               |  
|Cash flows from operating activities:                                                                     |               |            |               |  
|Net income (loss)                                                                                         | $             | (5,553,000 | )             | $
|Adjustments
    to reconcile net income (loss) to net cash
    provided by (used in) operating activities |               | 7,320,000  |               |  
|                                                                                                          |               |            |               |  
|Net cash provided by (used in) operating activities                                                       |               | 1,767,000  |               |  
|                                                                                                          |               |            |               |  
|Cash flows from investing activities:                                                                     |               |            |               |  
|Purchase of property and equipment                                                                        |               | (1,098,000 | )             |  
|                                                                                                          |               |            |               |  
|Net cash used in investing activities                                                                     |               | (1,098,000 | )             |  
|                                                                                                          |               |            |               |  
|Cash flows from financing activities:                                                                     |               |            |               |  
|Principal payments under capital leases                                                                   |               | (277,000   | )             |  
|Net proceeds from private placement                                                                       |               | —          |               |  
|Proceeds from exercise of stock options                                                                   |               | —          |               |  
|Net change in line of credit borrowings                                                                   |               | 298,000    |               |  
|                                                                                                          |               |            |               |  
|Net cash provided by financing activities                                                                 |               | 21,000     |               |  
|                                                                                                          |               |            |               |  
|Effect of foreign currency exchange rate changes on cash                                                  |               | (105,000   | )             |  
|                                                                                                          |               |            |               |  
|Net increase in cash and cash equivalents                                                                 |               | 585,000    |               |  
|Cash and
    cash equivalents – beginning of period                                                       |               | 6,239,000  |               |  
|                                                                                                          |               |            |               |  
|Cash and
    cash equivalents – end of period                                                             | $             | 6,824,000  |               | $
|                                                                                                          |               |            |               |  
|Supplemental
      disclosure of cash flow information
           equipment obtained with capital lease   | $             | 485,000    |               | $
|                                                                                                          |               |            |               |  

See accompanying notes.

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INTELLIGROUP, INC.
  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  SEPTEMBER 30, 2005 AND 2004

NOTE
  1 -	BASIS OF PRESENTATION

The condensed consolidated
financial statements and accompanying financial information as of September 30,
2005 and for the nine and three months ended September 30, 2005 and 2004 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 unaudited condensed
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 unaudited condensed 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 consolidated financial statements filed
on Form 10-K for the year ended December 31, 2004.The amounts for December 31, 2004 have been extracted from the audited consolidated financial statements included in Form 10-K for the year ended December 31, 2004.




The results of the Companys
operations for the nine and three months ended September 30, 2005 are not necessarily
indicative of the results of operations to be expected for the full year ending
December 31, 2005.


NOTE
2-	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Stock-Based Compensation

Employee stock awards
under the Company's compensation plans are accounted for in accordance with Accounting
Principles Board Opinion No. 25 (APB 25), Accounting for Stock
Issued to Employees, and related interpretations. The Company provides
the disclosure requirements of Statement of Financial Accounting Standards No.
123, Accounting for Stock-Based Compensation (SFAS 123),
and related interpretations. Stock-based awards to non-employees are accounted
for under the provisions of SFAS No. 123 and the Company has adopted the enhanced
disclosure
provisions of SFAS 148 Accounting for Stock-Based Compensation-Transition
and Disclosure, an amendment of SFAS No. 123.


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INTELLIGROUP, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  (CONTINUED)SEPTEMBER 30, 2005 AND 2004

NOTE
  2 -	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The Company measures compensation expense for its employee stock-based compensation using the intrinsic-value method. Under the intrinsic-value method of accounting for stock-based compensation, when the exercise price of options granted to employees is less than the estimated fair value of the underlying stock on the date of grant, deferred compensation is recognized and is amortized to compensation expense over the applicable vesting period. In each of the periods presented, the vesting period varies from immediate to four years.


For disclosure purposes, pro forma net loss and loss per share impacts are provided as if the fair value method under SFAS 123 had been applied:


|                                                                                                                                                                        | Nine Months Ended |      | Three Months Ended |      |              
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------- | ---- | ------------------ | ---- | -------------
|                                                                                                                                                                        |                   |      |                    |      |              
|                                                                                                                                                                        | September 30,     |      | September 30,      |      | September 30,
|                                                                                                                                                                        | 2005              | 2004 | 2005               | 2004 |              
|                                                                                                                                                                        |                   |      |                    |      |              
|Net income (loss), as reported                                                                                                                                          |                   | $    | (5,553,000         | )    | $            
|Less:
           Total stock-based employee compensation
           expense determined under
    fair-value based method for all awards,
    net of related tax effects |                   |      | 569,000            |      |              
|                                                                                                                                                                        |                   |      |                    |      |              
|Pro forma net income (loss)                                                                                                                                             |                   | $    | (6,318,000         | )    | $            
|                                                                                                                                                                        |                   |      |                    |      |              
|Basic and diluted income (loss) per share:                                                                                                                              |                   |      |                    |      |              
|As reported                                                                                                                                                             |                   | $    | (0.16              | )    | $            
|                                                                                                                                                                        |                   |      |                    |      |              
|Pro forma                                                                                                                                                               |                   | $    | (0.18              | )    | $            
|                                                                                                                                                                        |                   |      |                    |      |              

Earnings (Loss) Per Share of Common Stock

Basic earnings (loss)
per common share (EPS) is computed using the weighted average number
of common shares outstanding for the period. Diluted earnings per share includes
additional dilution from potential common stock, such as stock issuable pursuant
to the exercise of stock options and warrants.


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INTELLIGROUP, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
  SEPTEMBER 30, 2005 AND 2004

NOTE
  2 -	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The following is a reconciliation of the computation for basic and diluted EPS:


|                                                     | Nine Months Ended |            | Three Months Ended |  
|---------------------------------------------------- | ----------------- | ---------- | ------------------ | -
|                                                     |                   |            |                    |  
|                                                     | September 30,     |            | September 30,      |  
|                                                     | 2005              |            | 2004               |  
|                                                     |                   |            |                    |  
|Net income (loss)                                    | $                 | (5,553,000 | )                  | $
|                                                     |                   |            |                    |  
|Weighted-average
    common shares outstanding
    : |                   |            |                    |  
|Basic                                                |                   | 35,103,000 |                    |  
|Effect of
    dilutive securities- stock
    options |                   | —          |                    |  
|                                                     |                   |            |                    |  
|Diluted                                              |                   | 35,103,000 |                    |  
|                                                     |                   |            |                    |  
|Basic net earnings (loss) per share                  | $                 | (0.16      | )                  | $
|                                                     |                   |            |                    |  
|Diluted net earnings (loss) per share                | $                 | (0.16      | )                  | $
|                                                     |                   |            |                    |  

In September 2004, the Company issued 17,647,000 shares of Common Stock in a private placement transaction for gross proceeds of $15,000,000 and net proceeds of $14,675,000.


For the nine months ended September 30, 2005 and 2004, respectively, options to purchase 4,012,000 and 673,000 shares of common stock were not included in the computation of diluted EPS because inclusion would have been anti-dilutive. Options to purchase 4,012,000 and 1,269,000 shares of common stock for the three months ended September 30, 2005 and 2004, respectively, were excluded in the computation of diluted EPS because inclusion would have been anti-dilutive.


NOTE
3-	LINE OF CREDIT

On May 31, 2000, the Company
and PNC Bank, N.A. (the Bank) entered into a three-year revolving
credit facility. In July 2003, the credit facility was extended until May 31,
2006. The credit facility is currently comprised of a revolving line of credit
pursuant to which the Company may borrow up to $15,000,000 at the Bank's prime
rate per annum. 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.


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INTELLIGROUP, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  (CONTINUED)
  SEPTEMBER 30, 2005 AND 2004

NOTE
3 - LINE OF CREDIT (CONTINUED)

On September 30, 2005
the Company and the Bank executed the Sixth Amendment to the Loan Documents and
Waiver Agreement (the Sixth Amendment). The terms of the Sixth Amendment amend the Loan Documents as follows: (i) to prevent the Company from electing to borrow, convert to or continue a Eurodollar Rate Loan and to provide that all Advances bear an interest rate per annum equal to the Base Rate (as such term is defined in the Credit Agreement); (ii) to define Change in Management as any change in the Companys Chief Executive Officer or Chief Financial Officer, which is not acceptable to the Bank; (iii) to define Revolving Interest Rate as interest rate per annum equal to the Base Rate; (iv) to define Undrawn Availability to include the redemption value of a specified bank account in the calculation of Undrawn Availability; and (v) to add an early termination fee in an amount equal to one-half of one percent (.50%) of the maximum revolving advance amount. Under the terms of the Sixth Amendment, the Company was required, among other
 things, to deliver draft, unaudited financial statements to the Bank on or before September 30, 2005 and to deliver audited annual financial statements to the Bank on or before October 15, 2005. The Company has satisfied each of these two requirements. The Company also agreed to resume timely filing of the periodic reports due to the listing exchange upon which the Companys shares are traded and to any governmental agency beginning with the filing of the Companys annual report on Form 10-K for the year ending December 31, 2005. The Bank agreed to waive any events of default arising from the Companys failure to timely deliver to the Bank the monthly reporting schedules, monthly financial statements, quarterly financial statements and annual financial statements and the Companys
removal of Arjun Valluri from his position as Chief Executive Officer, President
and Chairman of the Board.


As of September 30, 2005,
the Company had outstanding borrowings under the credit facility of $2,654,000.
The Company estimates undrawn availability under the credit facility to be $11,307,000
as of September 30, 2005.


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INTELLIGROUP, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
  SEPTEMBER 30, 2005 AND 2004

For the nine months ended September 30, 2005 and 2004, the Company paid $51,996 and $54,538, respectively, in fees to SBLI USA Mutual Life Insurance Company, Inc.  A member of the Board of Directors served as the Chief Financial Officer of SBLI USA Mutual Life Insurance Company during 2004.


Nagarjun Valluripalli,
  the Companys former Chairman of the Board, President, Chief Executive Officer and a former Director of the Company is an owner (the Owner) of real estate located at 5-9-22, Secretariat Road in Hyderabad, India. On October 2, 2003, Intelligroup Asia Private, Ltd. (IGA) and the Owner executed a memorandum of understanding (the MOA)
  relating to a proposed lease whereby the Owner would lease the 5th and 6th floors
  of the property (Premises) to the Company for certain of the Companys
  India operations. As contemplated in the MOA, on June 18, 2004, the Owner and
  IGA executed leases for the Premises and the amenities, furnishings and fittings.
  The leases provide for a minimum lease period of three years with a renewal
  option for an additional three years. The leases provide for a three-month
  notice period for either party to terminate the lease. Under the terms of the
  lease for the amenities, IGA paid a deposit of 5,820,000 Indian rupees (approximately
  $133,000) and advance lease rentals of 11,640,000 Indian rupees (approximately
  $266,000) upon the handing over of the amenities and shall pay monthly rent
  of 1,164,000 Indian rupees (approximately $27,000). Under the terms of the
  lease for the Premises, IGA paid a deposit of 4,656,000 Indian rupees (approximately
  $106,000) and advance lease rentals of 9,312,000 Indian rupees (approximately
  $213,000) upon handing over of the Premises and shall pay monthly rent of 931,000
  Indian rupees (approximately $21,000). Rent expense for the nine months ended
  September 30, 2005 towards the lease was 22,613,000 Indian rupees (approximately
  $518,000). The value of un-amortized rentals as of September 30, 2005 was 5,238,000
Indian rupees (approximately $119,000).


Effective
  August 1, 2005,
  the Companys India subsidiary entered into an agreement to lease certain premises for certain of the Companys India operations from iLABS Hyderabad Technology Center PVT. LTD. (iLabs), a party with whom two members of the Companys
  Board of Directors, Srini Raju and Sandeep Reddy, are affiliated. The terms of
  the lease agreement provide for, among other things: (i) a minimum lease period
  of five years with an option for two three-year renewal periods; (ii) payment
  of a security deposit in the amount of 15,282,000 Indian rupees (approximately
  $352,000); (iii) payment of monthly lease fees in the amount of 1,698,000 Indian
  rupees (approximately $40,000), subject to yearly five percent (%5) escalation;
  and (iv) monthly operations and maintenance fees of 283,000 India rupees (approximately
  $6,500).


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INTELLIGROUP, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
  SEPTEMBER 30, 2005 AND 2004

India Tax Assessments

The Company's
    India subsidiary has received tax assessments dated February 12, 2002, July
    23, 2002,
  August 22, 2003, and December 31, 2003 from the India taxing authority denying
  tax exemptions claimed for certain revenue earned and disallowing certain expenses
  claimed during the Indian subsidiarys fiscal years ended March 31, 1998 through March 31, 2001. The revised tax assessments were for 14.6 million, 9.5 million, 2.8 million, and 5.6 million Indian rupees, respectively, or approximately $742,000 in total. An additional assessment for tax penalties and interest for the fiscal year ended March 31, 2001 of 1.7 million Indian rupees, or approximately $39,000, was also received. The Company has made payments of approximately $815,000 (consisting of $682,000 for taxes paid under protest, $39,000 for tax penalties and interest and $94,000 for other tax adjustments not in dispute) to the India tax authority. The Companys
resulting overpayment of $34,000 has been refunded.


On
        March 29, 2005, the Companys India subsidiary received an additional
        revised assessment for 15.0 million Indian rupees, or approximately $345,000
        for the fiscal year ended
    March 31, 2002. The assessment disallowed some of the export revenue claimed
    by the Company and also disallowed certain expenses claimed by the Company.
    The Company has paid approximately 6.0 million Indian rupees, or approximately
    $137,000,
    under protest and has also paid an additional 5.1 million Indian rupees,
        or approximately $118,000, for agreed-to adjustments through October
        2005. The
    Company is currently
    challenging the remaining unpaid assessment with the Commissioner of Tax
        Appeals but pending resolution of such appeal, the Company plans to pay
        the remaining
    $89,000 tax assessment in installments over the following 12 to 18 months
  as permitted by the India tax authority.


The Company is currently at the Appellant Tribunal stage for the fiscal years
          ended March 31, 1998 through March 31, 2001 and at the Commissioner of
          Income Tax Appeals stage for fiscal year ended March 31, 2002. All applicable
  amounts noted above had been paid or accrued as of September 30, 2005.


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INTELLIGROUP, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
  SEPTEMBER 30, 2005 AND 2004

NOTE
        5 - LITIGATION (CONTINUED)

Shareholder Class Actions

On
    or about October 12, 2004, the first of six class action lawsuits was filed,
    purportedly
    on
  behalf of plaintiffs who purchased the Companys securities, against the Company and former officers Arjun Valluri, Nicholas Visco, Edward Carr and David Distel (Defendants) in the United States District Court, District of New Jersey (District of New Jersey). In August 2005, the District of New Jersey consolidated the six class actions (the Shareholder Class Action) and appointed a lead plaintiff.  Plaintiffs subsequently dropped Mr. Distel and Mr. Carr from the Shareholder Class Action, failing to name either of them as a defendant in the amended consolidated complaint filed on or about October 10, 2005. The Shareholder Class Action generally alleges violations of federal securities laws, including allegations that the Defendants made materially false and misleading statements regarding the Companys
  financial condition and that the Defendants materially overstated financial
  results by engaging in improper accounting practices. The Class Period alleged
  is May 1, 2001 through September 24, 2004. The Shareholder Class Action generally
  seeks relief in the form of unspecified compensatory damages and reasonable
costs, expenses and legal fees.


SEC Investigation

On
    January 28, 2005, the Company received subpoenas in connection with a formal
    investigation
    by
  the Securities Exchange Commission (the SEC) regarding whether federal securities laws were violated in connection with the issuance of the Companys
  financial statements for prior periods. The Company is cooperating with the
SEC to produce documents in response to the subpoenas.


Broadview Claim

On or about March 23, 2005, Jefferies & Company, Inc. initiated an arbitration proceeding to recover fees in the amount of $750,000 plus interest and reasonable attorneys fees and costs allegedly owed to Broadview International, a division of Jefferies & Company (Broadview) as a result of the private placement transaction that the Company closed on September 30, 2004 with SB Asia Infrastructure Fund, L.P. and Venture Tech Assets Pvt. Ltd. The arbitration proceeding is in the discovery phase. In the event the Company does not prevail at the arbitration proceeding the Company will be liable for $750,000 plus interest and reimbursement of attorneys fees
  and costs.


There is no other litigation
  pending to which the Company is a party or to which any of its property is
    subject which would have a material impact on the Companys consolidated
    financial condition, results of operations or cash flows in the event the
    Company was unsuccessful
  in such litigation.


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INTELLIGROUP, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
  SEPTEMBER 30, 2005 AND 2004

NOTE
        6 -   SEGMENT DATA AND GEOGRAPHIC INFORMATION

The Company operates in one industry segment, information technology solutions and services.


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


| | • | United States
    (US)  the largest segment of the Company, with operations in the United States and Puerto Rico. Includes the operations of the Companys
    US subsidiary, Empower, Inc., and all corporate functions and activities.
    The US and corporate headquarters is located in Edison, New Jersey;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                    
| | • | India  includes
    the operations of the Company in India, including services provided on behalf
    of other group subsidiaries, primarily to the US. The India headquarters
    is located in Hyderabad, India;                                                                                                
| |   |                                                                                                                                                                                                                                                                                                                    
| | • | Europe  includes
    the operations of the Company in Denmark, Sweden and the United Kingdom.
    The European headquarters is located in Milton Keynes, United Kingdom;                                                                                                                                          
| |   |                                                                                                                                                                                                                                                                                                                    
| | • | Japan  includes
    the operations of the Company in Japan. The Japanese headquarters is located
    in Tokyo, Japan.                                                                                                                                                                                             

Each of the geographic
segments has a Managing Director, or equivalent position, who 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
consolidated operating results for the nine and three months ended September
30, 2005 and 2004 and financial position as of September 30, 2005 and 2004 are
presented in the following geographic segments:


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INTELLIGROUP, INC.NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)SEPTEMBER
30, 2005 AND 2004

NOTE 6 - SEGMENT
  DATA AND GEOGRAPHIC INFORMATION (CONTINUED)

|                                     |       | United     |       |       |            |  |   |            |   |   |           |   |   |            |  
|------------------------------------ | ----- | ---------- | ----- | ----- | ---------- |  | - | ---------- | - | - | --------- | - | - | ---------- | -
|States                               | India | Europe     | Japan | Total
|                                     |       |            |       |      
|                                     |       |            |       |       |            |  |   |            |   |   |           |   |   |            |  
|Nine months ended September 30, 2005 |       |            |       |       |            |  |   |            |   |   |           |   |   |           
|                                     |       |            |       |       |            |  |   |            |   |   |           |   |   |            |  
|Revenue                              | $     | 67,006,000 |       | $     | 20,932,000 |  | $ | 5,248,000  |   | $ | 2,679,000 |   | $ | 95,865,000 |  
|Operating income (loss)              |       | (7,158,000 | )     |       | 2,904,000  |  |   | (637,000   | ) |   | (343,000  | ) |   | (5,234,000 | )
|Income (loss) before income taxes    |       | (6,927,000 | )     |       | 2,956,000  |  |   | (1,286,000 | ) |   | (449,000  | ) |   | (5,706,000 | )
|                                     |       |            |       |       |            |  |   |            |   |   |           |   |   |            |  
|Total assets                         |       | 30,011,000 |       |       | 11,892,000 |  |   | 1,577,000  |   |   | 1,344,000 |   |   | 44,824,000 |  
|                                     |       |            |       |       |            |  |   |            |   |   |           |   |   |            |  
|Nine months ended September 30, 2004 |       |            |       |       |            |  |   |            |   |   |           |   |   |           
|                                     |       |            |       |       |            |  |   |            |   |   |           |   |   |            |  
|Revenue                              | $     | 73,032,000 |       | $     | 15,982,000 |  | $ | 5,280,000  |   | $ | 3,798,000 |   | $ | 98,092,000 |  
|Operating income (loss)              |       | (1,451,000 | )     |       | 2,909,000  |  |   | 115,000    |   |   | 874,000   |   |   | 2,447,000  |  
|Income (loss) before income taxes    |       | (1,590,000 | )     |       | 2,982,000  |  |   | (53,000    | ) |   | 887,000   |   |   | 2,226,000  |  
|                                     |       |            |       |       |            |  |   |            |   |   |           |   |   |            |  
|Total assets                         |       | 49,153,000 |       |       | 10,894,000 |  |   | 2,506,000  |   |   | 1,693,000 |   |   | 64,246,000 |  

|  |                                                                                                                                                             
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
|• | Of the total capital expenditures incurred for the nine months ended September 30, 2005, $194,000 was incurred in the US and $886,000 was incurred in India.

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INTELLIGROUP, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
SEPTEMBER 30, 2005 AND 2004

NOTE 6 - SEGMENT
  DATA AND GEOGRAPHIC INFORMATION (CONTINUED)

|                                      |       | United     |       |       |            |  |   |           |   |   |           |   |   |            |  
|------------------------------------- | ----- | ---------- | ----- | ----- | ---------- |  | - | --------- | - | - | --------- | - | - | ---------- | -
|States                                | India | Europe     | Japan | Total
|                                      |       |            |       |      
|                                      |       |            |       |       |            |  |   |           |   |   |           |   |   |            |  
|Three months ended September 30, 2005 |       |            |       |       |            |  |   |           |   |   |           |   |   |           
|                                      |       |            |       |       |            |  |   |           |   |   |           |   |   |            |  
|Revenue                               | $     | 20,570,000 |       | $     | 6,788,000  |  | $ | 1,417,000 |   | $ | 963,000   |   | $ | 29,738,000 |  
|Operating income (loss)               |       | (3,829,000 | )     |       | 604,000    |  |   | (444,000  | ) |   | (42,000   | ) |   | (3,711,000 | )
|Income (loss) before income taxes     |       | (3,737,000 | )     |       | 844,000    |  |   | (462,000  | ) |   | (88,000   | ) |   | (3,443,000 | )
|                                      |       |            |       |       |            |  |   |           |   |   |           |   |   |            |  
|Total assets                          |       | 30,011,000 |       |       | 11,892,000 |  |   | 1,577,000 |   |   | 1,344,000 |   |   | 44,824,000 |  
|                                      |       |            |       |       |            |  |   |           |   |   |           |   |   |            |  
|Three months ended September 30, 2004 |       |            |       |       |            |  |   |           |   |   |           |   |   |           
|                                      |       |            |       |       |            |  |   |           |   |   |           |   |   |            |  
|Revenue                               | $     | 26,060,000 |       | $     | 6,552,000  |  | $ | 1,485,000 |   | $ | 1,395,000 |   | $ | 35,492,000 |  
|Operating income (loss)               |       | 329,000    |       |       | 1,645,000  |  |   | (106,000  | ) |   | 332,000   |   |   | 2,200,000  |  
|Income before
    income taxes        |       | 288,000    |       |       | 1,553,000  |  |   | 4,000     |   |   | 311,000   |   |   | 2,156,000  |  
|                                      |       |            |       |       |            |  |   |           |   |   |           |   |   |            |  
|Total assets                          |       | 49,153,000 |       |       | 10,894,000 |  |   | 2,506,000 |   |   | 1,693,000 |   |   | 64,246,000 |  

|  |                                                                                                                                                             
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
|• | Of the total capital expenditures incurred for the three months ended September 30, 2005, $64,000 was incurred in the US and $799,000 was incurred in India.

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INTELLIGROUP, INC.NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
  SEPTEMBER 30, 2005 AND 2004

NOTE 7- COMMITMENTS
AND CONTINGENCIES

Tax-Free Spin-off of SeraNova

On July 5, 2000, the Company
distributed all of the outstanding common stock of SeraNova Inc. (SeraNova)
common stock to its shareholders in a transaction that was structured to be and
reported
as
a
tax-free
spinoff
pursuant to Section 355 of the Internal Revenue Code (IRC Section 355).
For distributions of stock qualifying under IRC Section 355, neither the Company
nor the Companys shareholders recognize any gain or income in connection
with the transaction. The Company and SeraNova executed a Tax Sharing Agreement,
dated January 1, 2000 (Tax Sharing Agreement), whereby SeraNova agreed
to 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. However, subsequently
SeraNova and its parent company, Silverline Technologies, Inc. (Silverline)
filed for Chapter 7 Bankruptcy. Additionally, as a condition to the distribution,
SeraNova management represented that there was no present plan nor intent to
enter into a subsequent transaction that would disturb the intended taxfree
nature of the distribution.


On October 27, 2000, SeraNova and Silverline Technologies, Inc. announced that they had entered into an agreement and plan of merger, under which Silverline Technologies, Inc. would acquire control of SeraNova in exchange for American depository shares of Silverline. Subsequently, SeraNova and Silverline Technologies, Inc. filed for Chapter 7 Bankruptcy on August 8, 2003.


IRC Section 355(e) provides that the Company may be required to recognize a gain equal to the excess of the fair market value of the SeraNova shares distributed over their tax basis 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. Should the spin-off ultimately be construed as taxable, the resultant tax liability could be up to $65,000,000, plus interest and penalties, depending on the facts that ultimately are established. No future benefits would inure to the Company as a result of imposition of a tax on the SeraNova distribution, and no reserve has been recorded for this potential tax. However, should such a tax liability be imposed, the Company may be able to utilize some of its existing net operating losses to mitigate this tax liability, an issue that is currently being analyzed.


Employment Agreements

As
        of September 30, 2005, the Company had employment agreements with certain
        of its executive officers,
which provide for minimum payments in the event of termination for reasons other
than just cause. The aggregate amount of compensation commitment in the event
of termination under such agreements is approximately $1,238,000. In addition,
the Companys India subsidiary had severance packages with certain employees
who resigned in April 2005 which provided for severance obligations in the amount
of approximately $652,000 upon the fulfillment of certain events, including
a Change in Management (as defined in the severance package) of the Company or
IGA. In April 2005, following the
termination of the Companys Chief Executive Officer, certain members of
the IGA management team, some of whom had a severance package, resigned. Except
as set forth below,
to date, the Company has not received any claim for payment of the amounts potentially
due under the severance package as a result of these resignations. In or about
September
2005,
two
former
members
of
the
IGA
management
team sent IGA notices under Section 433 and 434 of the Indian Companies Act,
1956 for payment of such severance package. The Company does not believe that
such severance amount is owed. In the event the Company is unsuccessful in defending
against such claim for payment, the Company would owe approximately $560,000
to such individuals.


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INTELLIGROUP, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
SEPTEMBER 30, 2005 AND 2004

NOTE 7 -COMMITMENTS
AND CONTINGENCIES (CONTINUED)

Tax Contingency in India

The Company is currently
appealing the tax assessments received by the Companys India subsidiary denying tax exemptions claimed during each of the fiscal years ended March 31, 1999 through March 31, 2002. In the event the Companys
appeal is not successful, future cash outlays of approximately $89,000 would
be required. The tax provisions for these assessments have already been recorded
in prior year consolidated financial statements (see Note 5).


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

Overview

In this Section, the Company
will discuss the following: (i) key factors in evaluating the Companys
financial performance; (ii) application of critical accounting principles, which
explains the accounting principles necessary to understand how the Company records
its financial information; (iii) forward looking statements; (iv) results of
operations - consolidated, in which the Companys
consolidated results are compared year to year to recognize trends; (v) results
of operations by business segment, which allows the Company to compare the results
of its different business units; and (vi) liquidity and capital resources.


Key Factors in
Evaluating the Companys Financial Performance

Management
      believes the following factors should be considered when evaluating the
      Companys reported financial information contained in Management's
      Discussion and Analysis of Financial Condition and Results of Operations.


Revenue

The majority of the Company's revenue is 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 IT consulting firm. Where contractual provisions permit, customers also are billed for reimbursement of expenses incurred by the Company on the customers'
 behalf.


Fixed Price Projects

The Company has provided services on certain projects in which it, at the request of the clients, offers a fixed price for its services. For both the nine months ended September 30, 2005 and 2004, revenue derived from projects under fixed price contracts represented approximately 44% of the Company's total revenue. No single fixed price project was material to the Company's business during 2005 or 2004. 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.


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Customer Concentration

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, 2005 and 2004, the Company's ten largest customers accounted for in the aggregate approximately 48% and 46% of its revenue, respectively. During the nine months ended September 30, 2005, one customer accounted for 10% or more of revenue. During the nine months ended September 30, 2004, no single customer accounted for 10% or more of revenue. For the nine months ended September 30, 2005 and 2004, 12% and 22%, respectively, of the Company's revenue was generated by providing supplemental resources directly to the end-customer or as part of a consulting team assembled by another IT consulting firm. There can be no assurance that such IT consulting firms will continue to engage the Company in the future at current levels of retention, if at
 all.


Software Partners

For the nine months ended September, 2005 and 2004, the Company derived the following percentages of total revenue from projects in which the Company implemented, extended, maintained, managed or supported software developed by SAP, PeopleSoft and Oracle.


|           | Percentage of Revenue                                          |  
|---------- | -------------------------------------------------------------- | -
|           |                                                                |  
|           | Nine
           MonthsEnded
           September 30, 
    2005 |  
|           |                                                                |  
|           |                                                                |  
|SAP        | 71                                                             | %
|PeopleSoft | 20                                                             | %
|Oracle     | 3                                                              | %

Markets

The Company currently serves the United States market with its headquarters in Edison (New Jersey), and branch offices in Atlanta (Georgia), Warrenville (Illinois) and Pleasanton (California). The Company also maintains local offices to serve the markets in India, the United Kingdom, Denmark and Japan. The Company leases its headquarters in Edison, New Jersey. Such lease has an initial term of ten (10) years, which commenced in September 1998.


Expenses

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


Application of Critical Accounting Policies

The
      preparation of the Companys condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Companys
      estimates, judgments
and assumptions are continually
evaluated based on available information and experience. Because of the use of
estimates inherent in the financial reporting process, actual results could differ
from those estimates.


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Certain
      of the Companys accounting policies require higher degrees of judgment
      than others in their application. These include revenue recognition and
      allowance for doubtful accounts, impairments and estimation of useful lives
      of long-term assets, income tax recognition of current and deferred tax
      items and accruals for contingencies.


The accounting policies and estimates used as of December 31, 2004, as outlined in our previously filed Form 10-K, have been applied consistently for the nine and three months ended September 30, 2005.


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 are subject to risks and uncertainties, including, but not limited to:


|• | the Companys ability to remediate its material weaknesses in its internal control over financial reporting and to continue to improve its control environment in order to effectively manage the business and to timely record, process, summarize and report financial statements that fairly present, in all material aspects, the Companys
    financial condition, statements of operations and cash flows;                                                                                                                             
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|• | compliance with the Sarbanes-Oxley Act of 2002, including without limitation Section 404, and other regulations may be costly, time consuming and may divert management attention from managing ongoing business operations;                                                                                                                                                                                                                                                                                                                  
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|• | the Companys
    ability to manage and grow the business in light of the executive and Board
    level turnover and the associated loss of historical knowledge and experience;                                                                                                                                                                                                                                                                                                                                                              
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|• | the
        Companys ability to manage increasing compensation costs for its
        existing and prospective India employees which is driven by the increasing
        demand for global delivery and competition for skilled, experienced information
        technology personnel in the India market. The Company expects that such
        compensation costs will continue to increase in the future, and any such
    increases could adversely affect the Companys results of operations;                                           
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|• | the Company's
    ability to attract and retain a sufficient number of highly skilled employees
    including, but not limited to, concerns regarding the Companys financial
    condition, competition from departing executives and competition for employees
    in India which may cause increasing compensation for existing and prospective
    employees, and the continued ability to use stock options to compensate such
    highly skilled employees in light of pending changes in accounting rules
    related to stock options;
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|• | the Companys
    ability to manage the transition to a new Chief Executive Officer without
    a significant disruption in business;                                                                                                                                                                                                                                                                                                                                                                                                         
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|• | the Companys ability to continue to generate new business given the turnover in the Companys
    sales managers and personnel;                                                                                                                                                                                                                                                                                                                                                                                                              
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|• | the Companys
    ability to maintain compliance with the financial and other covenants in
    its credit facility and thereby continue its access to its line of credit
    or in the event of default the Companys
    ability tonegotiate
    a waiver with the Bank which may be unavailable or if available may only
    be on terms disadvantageous to the Company;                                                                                                                                                                    

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|• | the Companys
    reliance on continued borrowing availability under the credit facility with
    the Bank as its sole source of external financing and the cash generated
    by its operating activities to fund its ongoing operations and growth. However,
    in the event such borrowing is not available or the Company is unable to
    timely collect cash from its customers, the Company may be forced to secure
    alternate financing to operate the business and such financing may be unavailable
    and, if available, may be available only on disadvantageous terms to the
    Company;                                                                                                                                                                                                                                                                                                                                                                                                                                       
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|• | the Companys
    ability to obtain an extension of its existing credit facility beyond May
    31, 2006 or to secure an alternate credit facility either of which may be
    unavailable or if available may only be available on terms disadvantageous
    to the Company;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|• | the uncertainty surrounding the technology consulting outsourcing market and revenues derived from such market;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|• | the continued
    availability of a market in which the Companys securities may be traded;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|• | the Company's ability to cause its Common Stock to be listed on a national stock exchange and the ability to comply with ongoing listing requirements;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|• | the Company's
    reliance on continued relationships and business associated with SAP America
    and Oracle, including, but not limited to, the continued uncertainty relating
    to Oracles integration of PeopleSoft into its product offerings and the affect that this may have on general market acceptance of PeopleSofts
    products and, accordingly, its ability to continue to sell professional consulting
    services relating to PeopleSoft applications; the Company's limited operating
    history within the outsourcing line of business;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|• | 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 (i) patterns of software and hardware capital spending by customers, (ii) IT outsourcing trends, (iii) the timing, size and stage of projects, (iv) timing and impact of acquisitions, (v) new service introductions by the Company or its competitors and the timing of new product introductions by the Company's ERP partners, (vi) levels of market acceptance for the Company's services, (vii) general economic conditions and (viii) the hiring of additional staff;                                                                                                                                                                                                                                                                                                                                                                                                
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|• | increased competition in the industry may, among other negative effects, cause a decrease in the Company's billing and employee utilization rates;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|• | uncertainty
    relating to worldwide currency exchange rates particularly in regard to the
    Indian rupee, U.S. Dollar, the Euro, British Pound and Japanese Yen, and
    the effect that fluctuations in such exchange rates may have on the Companys
    quarterly and/or annual financial results;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|• | the Company's
    ability to manage its business effectively, which will require the Company:
    (i) to continue developing and improving its operational, financial and other
    internal systems and controls, as well as its business development capabilities,
    (ii) to attract, train, retain, motivate and manage its employees, (iii)
    to continue to maintain high rates of employee utilization at profitable
    billing rates, (iv) to successfully transition certain operations and executive
    functions; (v) to successfully integrate thepersonnel
    and businesses acquired by the Company, (vi) to maintain project quality,
    particularly if the size and scope of the Company's projects increase, (vii)
    to properly plan, price and deliver fixed bid projects and service level
    based agreements within the requisite timeframes and quality levels and (viii)
    to reorganize its internal structure and personnel and to improve its processes
    without suffering a loss in business momentum;

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|• | the potential for future legislation regulating or taxing outsourcing;                                                                                                                                                                                                                                         
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                
|• | the Companys
    substantial reliance on key customers and large projects;                                                                                                                                                                                                                                    
|  |                                                                                                                                                                                                                                                                                                                
|• | the Companys
    ability to manage fixed price projects effectively and efficiently;                                                                                                                                                                                                                          
|  |                                                                                                                                                                                                                                                                                                                
|• | the potential for significant claims against the Company relating to its professional services from customers or otherwise and the inability of the Company to adequately mitigate the risk of such potential claims;                                                                                          
|  |                                                                                                                                                                                                                                                                                                                
|• | the potential
    risks and penalties associated with the ongoing investigation by the United
    States Securities and Exchange Commission (SEC) related to the Companys restatement of prior periods consolidated
    financial statements;                                                              
|  |                                                                                                                                                                                                                                                                                                                
|• | the Companys ability to defend itself and resolve the ongoing shareholder litigation related to the Companys restatement of prior periods consolidated financial statements within the limits of the Companys
    director and officer liability insurance policy;                                         
|  |                                                                                                                                                                                                                                                                                                                
|• | the Company's ability to successfully address the continuing changes in IT, evolving industry standards and changing customer objectives and preferences;                                                                                                                                                      
|  |                                                                                                                                                                                                                                                                                                                
|• | the Company's reliance on the continued services of its key technical personnel;                                                                                                                                                                                                                               
|  |                                                                                                                                                                                                                                                                                                                
|• | the continued
    uncertainty relating to the current geopolitical climate, particularly relative
    to internal India politics and their relation to Indias continuing efforts to liberalize its economy and be receptive to economic conditions and policies favorable to the Companys
    business model;
|  |                                                                                                                                                                                                                                                                                                                
|• | the Company's ability to protect its intellectual property rights; and                                                                                                                                                                                                                                         
|  |                                                                                                                                                                                                                                                                                                                
|• | uncertainties resulting from pending litigation matters and from potential administrative and regulatory issues including, but not limited to, accounting, corporate governance, immigration and taxation matters.                                                                                             

In addition, in July 2000,
the Company completed the tax-free spin-off of SeraNova, its former subsidiary.
In March 2001, SeraNova and Silverline Technologies Limited consummated the acquisition
of SeraNova by Silverline. Had the acquisition of SeraNova by Silverline been
contemplated at the time of the spin-off, the spin-off would have been a taxable
transaction. 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. Although the
Company and SeraNova are parties to a tax sharing agreement pursuant to which
SeraNova agreed to indemnify the Company with respect to any possible tax liability
related to the spin-off, SeraNova has filed for bankruptcy protection under Chapter
7 of the United States Bankruptcy Code and would be unable to pay the resultant
tax liability pursuant to SeraNova's indemnification obligations under its tax
sharing agreement with the Company. If it were determined that the spin-off was
taxable, the Company
would bear the liability
to pay such the tax liability, which would be material. Please refer to Note
7 to the unaudited condensed consolidated financial statements of the Company
included elsewhere in this report for further information.


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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, for continuing operations:


|                                                    |  | Percentage
    of Revenue          |   
|--------------------------------------------------- |  | ---------------------------------- | --
|                                                    |  |                                    |   
|                                                    |  | Nine
    Months Ended September30, |   
|                                                    |  |                                    |   
|                                                    |  | 2005                               |   
|                                                    |  |                                    |   
|Revenue                                             |  | 100.0                              | % 
|Cost of revenue                                     |  | 74.6                               |   
|                                                    |  |                                    |   
|Gross profit                                        |  | 25.4                               |   
|                                                    |  |                                    |   
|Selling, general and administrative expenses        |  | 29.2                               |   
|Depreciation and amortization                       |  | 1.7                                |   
|                                                    |  |                                    |   
|Total operating expenses                            |  | 30.9                               |   
|                                                    |  |                                    |   
|Operating income (loss)                             |  | (5.5                               | ) 
|Interest income                                     |  | 0.1                                |   
|Interest expense                                    |  | (0.3                               | ) 
|Other income (expense)                              |  | (0.3                               | ) 
|                                                    |  |                                    |   
|Income (loss) before income tax provision (benefit) |  | (6.0                               | ) 
|Income tax benefit                                  |  | (0.2                               | ) 
|                                                    |  |                                    |   
|Net income (loss)                                   |  | (5.8                               | )%
|                                                    |  |                                    |   

Nine Months Ended September 30, 2005 Compared to Nine Months Ended September 30, 2004

The following discussion compares the consolidated results of operations for the nine months ended September 30, 2005 and 2004.


Revenue.
      Total revenue decreased by 2.3%, or $2.2 million, from $98.1 million for
      the nine months ended September 30, 2004 to $95.9 million for the nine
      months ended September 30, 2005. The net decrease was attributable primarily
      to growth in revenue generated in India (an increase of $4.9 million),
      offset by decreases in revenue generated in the United States (a decrease
      of $6.0 million), Japan (a decrease of $1.1 million). The revenue growth
      in India results directly from increased demand in the US from both new
      and existing customers for the majority of the Companys offshore
      services, including traditional consulting service offerings, application
      management and support services and offshore development services. The
      decrease in the United States revenue results primarily from the completion
      of several major implementation projects during 2004 and the lack of new
      projects to replace the revenue as these major implementation projects
      ramped down. The decreases in Japan revenue results primarily from decreased
      demand for the Companys
      consulting services within the local SAP market, as customers delayed SAP
      upgrade projects pending a new release of the software. However, the Company
      does not expect revenue for the full year 2005 to exceed the revenue for
      2004.


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Cost
        of revenue and gross profit.
        The Company's cost of revenue increased by 4.8%, or $3.2 million, from
        $68.3 million for the nine months ended September 30, 2004, to $71.5
        million for the nine months ended September 30, 2005, due primarily to
        the increase in headcount and compensation costs for consultants. The
        Company's gross profit decreased by 18.4%, or $5.4 million, from $29.8
        million for the nine months ended September 30, 2004, to $24.4 million
        for the nine months ended September 30, 2005. Gross margin decreased
        to 25.4% for the nine months ended September 30, 2005, from 30.4% for
        the nine months ended September 30, 2004. The decrease in gross profit
        and gross margin results from a reduction in revenue as headcount, compensation
        costs and certain project related expenses increased. The Company expects
 lower gross margin through the full year  2005.


Selling,
        general and administrative expenses.
        Selling, general and administrative expenses primarily consist of salaries,
        and related benefits costs for sales and general administrative personnel,
        occupancy costs, sales person compensation, travel and entertainment
        and professional fees. Selling, general and administrative expenses increased
        by 7.7%, or $2.0 million, to $28.0 million for the nine months ended
        September 30, 2005, from $26.0 million for the nine months ended September
        30,
        2004 and increased as a percentage of revenue to 29.2% from 26.4%, respectively.
        The increase in selling, general and administrative expenses, was related
        primarily to costs associated with accounting and legal fees incurred
        in connection with restating and re-auditing prior period financials
        and costs related to compliance with Section 404 of the Sarbanes-Oxley
        Act of 2002.


Depreciation and amortization.  Depreciation and amortization expenses increased to $1.6 million for the nine months ended September 30, 2005, compared to $1.4 million for the nine months ended September 30, 2004. The increase was due to purchases of fixed assets during 2005.


Interest income. The Company earned $63,000 in interest income for the nine months ended September 30, 2005, compared with $21,000 for the nine months ended September 30, 2004. The interest income is related primarily to certain interest-bearing bank accounts in India and Japan.


Interest expense.The Company incurred $0.2 million and $0.4 million in interest expense for the nine months ended September 30, 2005 and 2004, respectively, related to borrowings under its line of credit. Borrowings under the line of credit were used primarily to fund operating activities.


Other income (expense).Other income (expense) results primarily from foreign currency transaction gains or (losses) associated with changes in foreign currency exchange rates. The Company reported other expense of $0.3 million for the nine months ended September 30, 2005 versus other income of $0.1 million for the nine months ended September 30, 2004. The change results primarily from foreign currency fluctuations in the UK, Denmark, Sweden and Japan.


Income tax provision (benefit). The Company recorded a benefit for income taxes of $0.2 million on a pretax loss of $5.7 million for the nine months ended September 30, 2005 as opposed to a provision for taxes of $0.3 million on pretax income of $2.2 million for the nine months ended September 30, 2004 due to taxable income in certain jurisdictions combined with a valuation allowance offsetting other loss benefits in other jurisdictions.


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Three Months Ended September 30, 2005 Compared to Three Months Ended September 30, 2004

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


|                                                    | Percentage of Revenue |     
|--------------------------------------------------- | --------------------- | ----
|                                                   
|Three
           Months Ended September30,         
|                                                   
|2005                                                |                       | 2004
|                                                    |                      
|Revenue                                             | 100.0                 | %   
|Cost of revenue                                     | 76.8                  |     
|                                                    |                       |     
|Gross profit                                        | 23.2                  |     
|                                                    |                       |     
|Selling, general and administrative expenses        | 33.7                  |     
|Depreciation and amortization                       | 2.0                   |     
|                                                    |                       |     
|Total operating expenses                            | 35.7                  |     
|                                                    |                       |     
|Operating income (loss)                             | (12.5                 | )   
|Interest income                                     | 0.1                   |     
|Interest expense                                    | (0.2                  | )   
|Other income                                        | 1.0                   |     
|                                                    |                       |     
|Income (loss) before income tax provision (benefit) | (11.6                 | )   
|Income tax provision (benefit)                      | 0.4                   |     
|                                                    |                       |     
|Net income (loss)                                   | (12.0                 | )%  
|                                                    |                       |     

The following discussion compares the consolidated results of operations for the three months ended September 30, 2005 and 2004.


Revenue.
      Total revenue decreased by 16.2%, or $5.8 million, from $35.5 million for
      the three months ended September 30, 2004 to $29.7 million for the three
      months ended September 30, 2005. The decrease was attributable primarily
      to a reduction in revenue generated in the United States (a decrease of
      $5.5 million) and Japan (a decrease of $0.4 million). The decrease in the
      United States revenue results primarily from the completion of several
      major implementation projects during 2004 and the lack of new projects
      to replace the revenue as these major implementation projects ramped down.
      The Company does not expect revenue for the full year
      2005 to exceed revenue for 2004.


Cost
        of revenue and gross profit.
        The Company's cost of revenue decreased by 7.2%, or $1.8 million, from
        $24.6 million for the three months ended September 30, 2004, to $22.8
        million for the three months ended September 30, 2005 due primarily to
        decrease in revenue. The Company's gross profit decreased by 36.6%, or
        $4.0 million, from $10.9 million for the three months ended September
        30,
        2004, to $6.9 million for the three months ended September 30, 2005.
        Gross margin decreased to 23.2% for the three months ended September
        30, 2005, from 30.7% for the three months ended September 30, 2004. The
        decrease in gross margin results from an increase in
        headcount, compensation costs and certain project related expenses. The
        Company expects lower gross margin for the full year 2005.


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Selling,
        general and administrative expenses.
        Selling, general and administrative expenses primarily consist of salaries,
        and related benefits costs for sales and general administrative personnel,
        occupancy costs, sales person compensation, travel and entertainment
        and professional fees. Selling, general and administrative expenses increased
        by 22.2% or $1.8 million to $10.0 million for the three months ended
        September 30, 2005 from $8.2 million for the three months ended September
        30, 2004, and increased as a percentage of revenue to 33.7% from 23.2%,
        respectively. The increase in selling, general and administrative expenses
        was related primarily to costs
        associated with accounting and legal fees incurred in connection with
        restating and re-auditing prior period financials and costs related to
        compliance with Section 404 of the Sarbanes-Oxley Act of 2002.


Depreciation and amortization.  Depreciation and amortization expenses increased to $0.6 million for the three months ended September 30, 2005, compared to $0.5 million for the three months ended September 30, 2004. The increase was due to purchases of fixed assets during 2005.


Interest income. The Company earned $39,000 in interest income for the three months ended September 30, 2005, compared with $3,000 for the three months ended September 30, 2004. The interest income is related primarily to certain interest-bearing bank accounts in India and Japan.


Interest expense.The Company incurred $73,000 and $130,000 in interest expense for the three months ended September 30, 2005 and 2004, respectively, related to borrowings under its line of credit. Borrowings under the line of credit were used primarily to fund operating activities. The decrease in interest expense results from lower average outstanding borrowings under the line of credit during 2005.


Other income (expense).Other income (expense) results primarily from gains or (losses) associated with changes in foreign currency exchange rates.  The Company reported other income of $302,000 versus other income of $83,000 for the three months ended September 30, 2005 and 2004, respectively. The change results from primarily foreign currency fluctuations in India.


Income tax provision.  A provision for income taxes of $132,000 and $297,000 was required for the three months ended September 30, 2005 and 2004, respectively, due to taxable income in certain jurisdictions combined with a valuation allowance offsetting other loss benefits in other jurisdictions.


Results of Operations by Business Segment

The Company operates in one industry segment, information technology solutions and services.


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


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

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| | • | India  includes
    the operations of the Company in India, including services provided on behalf
    of other Company subsidiaries, primarily to the US. The Indian headquarters
    is located in Hyderabad, India;                                                            
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                   
| | • | Europe  includes
    the operations of the Company in Denmark, Sweden and the United Kingdom.
    However, the Company transitioned its operations in Sweden to Denmark as
    of January 1, 2003. The European headquarters is located in Milton Keynes,
    United Kingdom; and
| |   |                                                                                                                                                                                                                                                                                   
| | • | Japan  includes
    the operations of the Company in Japan. The Japanese headquarters is located
    in Tokyo, Japan.                                                                                                                                                            

Each
      of the geographic 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.


Nine Months Ended September 30, 2005 Compared to Nine Months Ended September 30, 2004

The following discussion compares the segment results of operations for the nine months ended September 30, 2005 and 2004.


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


|              |   | Nine Months Ended September 30, |      
|------------- | - | ------------------------------- | -----
|              |   |                                
|              |   | 2005                            |      
|              |   |                                 |      
|              |   |                                 |      
|              |   | Amount                          | Total
|              |   |                                 |      
|United States | $ | 67,006                          |      
|India         |   | 20,932                          |      
|Europe        |   | 5,248                           |      
|Japan         |   | 2,679                           |      
|              |   |                                 |      
|Total         | $ | 95,865                          |      
|              |   |                                 |      

US revenue decreased by 8.3%, or $6.0 million, from $73.0 million for the nine months ended September 30, 2004 to $67.0 million for the nine months ended September 30, 2005. The decrease in the United States revenue results primarily from the completion of several major implementation projects during 2004 and the lack of new projects to replace the revenue as these major implementation projects ramped down.


India
      revenue increased by 31.0%, or $4.9 million, from $16.0 million for the
      nine months ended September 30, 2004, to $20.9 million for the nine months
      ended September 30, 2005. The increase was attributable primarily to increased
      demand for offshore services by customers 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.
While the Company expects further revenue growth in Indias operations,
it does not expect to continue to see increases at similar rates through 2005.


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Europe revenue was constant at $5.2 million for the nine months ended September 30, 2005 and 2004.


Japan
      revenue decreased by 29.5% or $1.1, from $3.8 million for the nine months
      ended September 30, 2004, to $2.7 million for the nine months ended September
      30, 2005. The decrease was due primarily to less demand for the Companys
      consulting services within the local SAP market, as customers delayed SAP
      upgrade projects pending a new release of the software.


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


|              |   | Nine
    Months Ended September 30, |  
|------------- | - | ----------------------------------- | -
|              |   |                                     |  
|              |   | 2005                                |  
|              |   |                                     |  
|United States | $ | (7,158                              | )
|India         |   | 2,904                               |  
|Europe        |   | (637                                | )
|Japan         |   | (343                                | )
|              |   |                                     |  
|Total         | $ | (5,234                              | )
|              |   |                                     |  

US operating performance
decreased by $5.8 million, from an operating loss of $1.4 million for the nine
months ended September 30, 2004, to an operating loss of $7.2 million for the
nine months ended September 30, 2005. The decrease in operating income was primarily
related to decreased revenues and increased general and administrative costs
associated with accounting and legal fees incurred in connection with restating
and re-auditing prior period financials and other legal fees.


India operating income was constant at $3.0 million for the nine months ended September 30, 2005 and 2004.


Europe operating performance decreased by $0.7 million from operating income of $0.1 million for the nine months ended September 30, 2004, to an operating loss of $0.6 million for the nine months ended September 30, 2005. The decrease was attributable primarily to increased project related costs.


Japan operating performance
decreased by $1.2 million, from operating income of $0.9 million for the nine
months ended September 30, 2004, to operating losses of $0.3 million for the
nine months ended September 30, 2005. The decrease was attributable primarily
to lower revenue and an increase in compensation costs.


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Three Months Ended September 30, 2005 Compared to Three Months Ended September 30, 2004


The following discussion compares the segment results of operations for the three months ended September 30, 2005 and 2004.


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


|              | Three Months Ended September 30, | 
|------------- | -------------------------------- | 
|              |                                  | 
|              | 2005                             | 
|              |                                  | 
|              |                                  | 
|              | Amount                           | 
|              |                                  | 
|United States |                                  | 
|India         |                                  | 
|Europe        |                                  | 
|Japan         |                                  | 
|              |                                  | 
|Total         |                                  | 
|              |                                  | 

US revenue decreased by 21.1%, or $5.5 million, from $26.1 million for the nine months ended September 30, 2004 to $20.6 million for the nine months ended September 30, 2005. The decrease in the United States revenue results primarily from the completion of several major implementation projects during 2004 and the lack of new projects to replace the revenue as these major implementation projects ramped down.


India
      revenue increased by 3.6%, or $0.2 million, from $6.6 million for the three
      months ended September 30, 2004, to $6.8 million for the three months ended
      September 30, 2005. The increase was attributable primarily to slightly
      increased demand for offshore services from customers 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.


Europe revenue was constant at approximately $1.4 million for the nine months ended September 30, 2005 and 2004.


Japan
      revenue decreased by 31.0% or $0.4 million, from $1.4 million for the three
      months ended September 30, 2004, to $1.0 million for the three months ended
      September 30, 2005. The decrease was due primarily to less demand for the
      Companys consulting services within the local SAP market, as customers
      delayed SAP upgrade projects pending a new release of the software.


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


|              | Three Months Ended September 30, | 
|------------- | -------------------------------- | 
|              |                                  | 
|              | 2005                             | 
|              |                                  | 
|United States |                                  | 
|India         |                                  | 
|Europe        |                                  | 
|Japan         |                                  | 
|              |                                  | 
|Total         |                                  | 
|              |                                  | 

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US operating performance
    decreased from operating income of $0.3 million for the three months ended
    September 30, 2004 to an operating loss of $3.8 million for the three months
    ended September 30, 2005. The decrease in the operating loss was primarily
    related to decreased revenue and increased general and administrative costs
    associated with accounting and legal fees incurred in connection with restating
    and re-auditing prior period financials compliance with Section 404 of the
    Sarbanes-Oxley Act of 2002, and other legal fees.


India operating income decreased by $1.0 million, from $1.6 million for the three months ended September 30, 2004, to $0.6 million for the three months ended September 30, 2005. The decrease in operating income was primarily related to increased compensation costs and additional infrastructure costs as a result of increased headcount and newly leased premises.


Europe operating performance decreased by $0.3 million from an operating loss of $0.1 million for the three months ended September 30, 2004, to an operating loss of $0.4 million for the three months ended September 30, 2005. The decrease was attributable primarily to increased project related costs.


Japan operating performance decreased by $0.4 million from operating income of $0.3 million for the three months ended September 30, 2004, to an operating loss of $0.1 million for the three months ended September 30, 2005.  The decrease was attributable primarily to a decrease in revenues and an increase in compensation costs.


Liquidity and Capital Resources

Cash Flows

The Company had cash and cash equivalents of $6.8 million at September 30, 2005 and $6.2 million at December 31, 2004.  The Company had working capital of $14.6 million at September 30, 2005 and $20.0 million at December 31, 2004.


Cash provided by operating activities was $1.8 million for the nine months ended September 30, 2005, resulting primarily from a net loss of $5.5 million and increases in other current assets ($0.8 million) and other assets ($0.6 million) and a decrease in accrued payroll ($0.9 million), offset by decreases in accounts receivable ($3.1 million) and unbilled services ($0.8 million), increases in accounts payable ($1.6 million) and income taxes payable ($1.4 million).


The Company invested $1.1 million and $1.9 million in computer equipment, internal-use computer software and office furniture and fixtures during the nine months ended September 30, 2005 and 2004, respectively. The increase results primarily from the replacement of computer equipment and the development of certain internal-use software.


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Compliance with Loan Agreement

On
      May 31, 2000, the Company and the Bank entered into a three-year revolving
      credit facility (the credit facility). In July 2003, the credit
      facility was extended until May 31, 2006. The credit facility is currently
      comprised of a revolving line of credit pursuant to which the Company could
      borrow up to $15.0 million at the Bank's prime rate per annum. 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.


On
      September 30, 2005, the Company and the Bank executed the Sixth Amendment
      to the Loan Document and Waiver Agreement (the Sixth Amendment). The terms of the Sixth Amendment amend the Loan Documents as follows: (i) to prevent the Company from electing to borrow, convert to or continue a Eurodollar Rate Loan and to provide that all Advances bear an interest rate per annum equal to the Base Rate (as such term is defined in the Credit Agreement); (ii) to define Change in Management as any change in the Companys Chief Executive Officer or Chief Financial Officer, which is not acceptable to the Bank; (iii) to define Revolving Interest Rate as interest rate per annum equal to the Base Rate; (iv) to define Undrawn Availability to
      include the redemption value of a specified bank account in the calculation
      of Undrawn Availability; and (v) to add an early termination fee in an
      amount equal to one-half of one percent (.50%) of the maximum revolving
      advance amount. Under the terms of the Sixth Amendment, among other things,
      the Company was required to deliver draft, unaudited financial statements
      to the Bank on or before September 30, 2005 and to deliver audited annual
      financial statements to the Bank on or before October 15, 2005. The Company
      has satisfied each of these two requirements.


The
      Company also agreed to resume timely filing of the periodic reports due
      to the listing exchange upon which the Companys shares are traded and to any governmental agency beginning with the filing of the Companys annual report on Form 10-K for the year ending December 31, 2005. The Bank agreed to waive any events of default arising from the Companys failure to timely deliver to the Bank the monthly reporting schedules, monthly financial statements, quarterly financial statements and annual financial statements and the Companys
      removal of Arjun Valluri from his position as Chief Executive Officer and
      President.


Cash to Fund Operating Activities

The Company relies on the cash generated by
operating activities and the financing available under its credit facility to
fund ongoing operations. The Company’s credit facility with the Bank
represents the sole source of external financing for ongoing business operations.
The
Company’s operating plan depends on continued borrowing availability under
this credit facility or securing alternate sources of financing. The Company
must comply with certain covenants or secure from the Bank waivers of its default
on such covenants to maintain its line of credit with the Bank. Given the
Company’s variable operating performance in the past few years, there can
be no assurances that the Company will be able to maintain compliance with its
bank covenants or obtain waivers of any defaults. In addition, there can
be no assurances that the Company will be able to secure alternate sources of
financing to fund its operations or that such financing will be available on
terms that are advantageous to the Company. Furthermore, the Company’s
credit facility is scheduled to expire on May 31, 2006. There can be no assurance
that the Company will be able to secure an extension of its existing credit facility
beyond May 31, 2006 or to secure an alternate credit facility to fund its operations
or that such extension or alternate credit facility will be available on terms
that are advantageous to the Company.


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The
    Company's 2005 operating plan contains assumptions regarding revenue and
    expenses. The Companys significant cash requirements for 2005 include
    operating expenses, capital investments in infrastructure for its Indian
    operations amounting to approximately $2 million, and legal and professional
    fees including but not limited to, the costs incurred as part of the restatement
    and re-audit process, costs incurred in complying with Section 404 of the
    Sarbanes Oxley Act of 2002 and legal fees incurred in connection with the
    Shareholder Class Actions and SEC investigation. 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, or ability to timely collect cash from its customers
    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. In addition, the Company may seek additional
    financing from time to time for general corporate purposes, provided however
    that the availability of financing may be limited because the Company is
    not currently listed on a national stock exchange and previous to this filing
    was not current in its reporting obligations under SEC rules. Considering
    the cash on hand, the availability under the credit facility, and assuming
    the extension of the existing credit facility or securing alternate financing
    prior to the expiration of the existing credit facility in May 2006, the
    achievement of the operating plan and management's actions taken to date,
    management believes that it has the ability to continue to generate sufficient
    cash to satisfy its operating requirements in the normal course of business,
    and that its available credit arrangements and the cash flow expected to
    be generated from operations will be adequate to satisfy its current and
    planned operations through at least the next twelve months.


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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 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 and results of operations in the future. If there is a material adverse change in the relationship between European currencies and/or Asian currencies and the United States Dollar, such change would adversely affect the result of the Companys European and/or Asian operations as reflected in the Companys
condensed consolidated financial statements. The Company has not hedged its exposure
with respect to this currency risk as of September 30, 2005, but intends to review
its exposure on a quarterly basis, and using a cost-benefit analysis, determine
whether it should enter into arrangements to mitigate this risk.


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Item 4. Controls
and Procedures.

Disclosure Controls and Procedures

The Company is responsible
  for maintaining disclosure controls and procedures designed to ensure that
  information required to be disclosed in its Exchange Act reports is recorded,
  processed, summarized and reported within the time periods specified in the
  Securities Exchange Commissions rules and regulations, and that such
  information is accumulated and communicated to its management, including its
  chief executive officer and chief financial officer, as appropriate, to allow
for timely decisions regarding required disclosure.


In designing and evaluating
  the Companys disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures and implementing controls and procedures based upon the application of managements
judgment.


The Companys management, with the participation of the Companys Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Companys disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report.    Based upon this evaluation, the Companys Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures were not effective to ensure that information required to be disclosed in the reports the Company files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SECs
rules and regulations, due to the material weaknesses disclosed in our 2004 annual
report on Form 10-K for the year ended December 31, 2004 filed on October 24,
2005, which are discussed below under the heading material weaknesses.


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Material Weaknesses:

A material
      weakness is a significant deficiency (as defined in Auditing Standard No.
      2), or a combination of significant deficiencies, that results in there
      being more than a remote likelihood that a material misstatement of the
      annual or interim financial statements will not be prevented or detected
      on a timely basis. As part of its assessment of internal
      control over financial reporting that was included in its annual report
      on Form 10-K for the year ended December 31, 2004, filed on October 24,
      2005, management has identified the following material weaknesses in its
      internal control over financial reporting as of December 31, 2004. Although
      the Company believes that is made substantial progress in remediating these
      material weaknesses, it cannot determine which, if any, had been remediated
      as of September 30, 2005, and it will not be able to determine whether
      such weaknesses have been completely remediated until it completes
      its year-end testing and assessment of internal control over financial
      reporting for 2005 and its independent registered public accounting firm
  has audited such assessment.


|• | Accounting and Finance Personnel Weaknesses The Company had insufficient resources to perform the accounting and financial reporting functions and such resources lacked the appropriate level of accounting knowledge, experience and training in the application of generally accepted accounting principles and were inadequately supervised. The lack of sufficient and adequately trained accounting and finance personnel resulted in an ineffective segregation of duties relative to key financial reporting functions. These in turn caused a lack of senior level review and oversight over key accounting decisions and resulted in errors in both the entry of financial information and in the preparation of consolidated financial statements. Furthermore the Company experienced significant turnover in finance and accounting personnel during 2004
 and the Company lacked adequate transition and knowledge transfer processes which resulted in the loss of a significant amount of historical knowledge related to the Companys
    business and its prior accounting practices, processes and policies.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|• | Accounting Policies and Procedures WeaknessesThe Company had inadequate documentation regarding the appropriate application
      of generally accepted accounting principles, as well inadequate documentation
      regarding the Companys accounting policies and procedures and the
    application of those policies and procedures.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|• | Weaknesses Related to Implementation of ERP System The Company failed to adapt its accounting and business processes to conform to the requirements of the Companys new ERP system and provided insufficient training of its finance and accounting personnel on the functionalities of the ERP system prior to the Companys April 1, 2004 go-live date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

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|• | Weaknesses Related to Record RetentionInadequate record retention polices and procedures caused a failure to obtain, retain and safeguard key documents and narratives necessary to provide supporting documentation for how the Company recorded transactions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|• | Closing and Consolidation ProceduresManagement identified deficiencies in the analysis and reconciliation of
      certain general ledger accounts. Specifically, accounting personnel did
      not perform timely reconciliations and did not properly resolve reconciling
      items for the inter-company accounts, foreign currency translation adjustment
      account, unbilled revenues, deferred revenues, payroll accounting, vacation
      accrual and fixed assets. Unreconciled differences in the Companys inter-company accounts were improperly recorded as changes to the currency translation account, which resulted in misstatements of revenue, foreign currency translation adjustments and retained earnings. In addition, there were deficiencies in the analysis and reconciliation of intercompany accounts in connection with the charges reported as a result of the divestiture of the Companys Asia-Pacific operations, which resulted in misstatements of the charges in connection with the loss recorded for the divestiture of the Companys Asia-Pacific operations. Finally, there were inadequate controls over the consolidation process for the Companys
    international subsidiaries.
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|• | Inadequate Controls Over Income Tax AccountingThe Company had ineffective controls over the determination and reporting of the provision for income taxes and related prepaid income taxes, income taxes payable and deferred income tax asset and liability balances. As a result, prepaid income taxes, income taxes payable, deferred income tax assets and liabilities and retained earnings were not properly recorded in accordance with accounting principles generally accepted in the United States of America.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|• | Lack of an Effective Internal Audit SystemThe Company had an inadequately staffed, inadequately trained and inexperienced internal audit department, which was ineffective in preventing and detecting control lapses and errors in the accounting of certain key areas like revenue recognition, inter-company reconciliations, fixed assets, currency translation adjustments, vacation accrual and income taxes, which resulted in misstatements in prior period consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

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Remediation Plan regarding the Material Weaknesses

Management is actively
engaged in remediation efforts to address the material weaknesses identified
in the Companys internal control over financial reporting as of December 31, 2004. These on-going remediation efforts, outlined below, are specifically designed to address the material weaknesses identified by management and to improve and strengthen the Companys
overall control environment.


|• | During the fourth quarter of 2004, the Company appointed a new Chief Financial Officer and began to centralize and reorganize its finance organization to create a unified global finance team with responsibility for the accounting and financial reporting functions for the Company and each of its subsidiaries worldwide.                                                                                                                                                                       
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|• | During the fourth quarter of 2004, the Company began to redesign and more fully document its business processes, policies, and procedures related to record retention, closing and consolidation procedures, income tax accounting, internal audit and other key financial reporting functions.                                                                                                                                                                                                       
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|• | In connection with redesigning its business process, policies and procedures the Company strengthened senior level oversight related to key financial reporting functions by designating an approval process which required approvals from senior finance management personnel.                                                                                                                                                                                                                       
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|• | The Company
    has reallocated resources and added personnel to the Companys finance
    and accounting staff to strengthen the accounting function and reorganized
    the accounting function to provide for increased segregation of duties.                                                                                                                                                                                                                                                     
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|• | The Company
    trained and cross-trained its finance and accounting personnel in multiple
    functions and processes related to financial reporting. The Company is implementing
    a series of training programs to educate its finance and accounting personnel
    regarding the Companys internal control standards, with a particular emphasis on the Companys
    accounting policies and procedures, record retention, closing and consolidation
    procedures and income tax accounting.
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|• | In 2005, the Company strengthened its internal audit function by re-establishing, and allocating additional resources to, its Internal Assurance Department redefining its scope, and reinforcing its mandate.                                                                                                                                                                                                                                                                                        
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|• | The Company confirmed and communicated its revenue recognition polices to its global accounting teams.                                                                                                                                                                                                                                                                                                                                                                                                
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|• | The Company
    implemented the Asset Accounting module, and is in the process of implementing Materials Management module and SEM BCS (Strategic Enterprise Management Business Consolidation) module,
    within its ERP system, to strengthen the control environment surrounding
    financial reporting.                                                                                                                                                                                   
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|• | In addition
    to further strengthen and improve senior level oversight and review over
    key financial reporting decisions, the Company also implemented a process
    whereby each team members work is reviewed by a collective group of
    senior level finance personnel as at the end of each accounting period.                                                                                                                                                                           

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Furthermore, in the second quarter of 2005, the Company re-engaged a nationally-recognized accounting and consulting firm to assist the Company in documenting, testing and remediating its internal control over financial reporting in preparation for year-end testing.  While the Company believes that it has made substantial progress in remediating the material weaknesses identified above, the Company cannot determine such weaknesses have been remediated until it completes its year-end testing and assessment of internal control over financial reporting for 2005 and its independent registered public accounting firm has audited such assessment.


Procedures Adopted

To remediate the aforementioned
material weaknesses in internal control over financial reporting, management
adopted new procedures to ensure that the Companys consolidated financial statements as of and for the nine months ended September 30, 2005 comply with accounting principles generally accepted in the United States of America and fairly present, in all material respects, the Companys
financial condition as of September 30, 2005, and results of operations and cash
flows for the nine months ended September 30, 2005.


To remediate these material weaknesses impacting revenue recognition and accrual, accounts receivable, deferred revenue and unbilled revenue, the Company performed the following activities:


| | • | Documented and validated with the respective project managers the progress on milestone-based contracts and manually reviewed each percentage of completion calculation to validate the appropriate revenue recognition and accruals;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                      
| | • | Manually reviewed and validated the accuracy of invoices generated by ERP system;                                                                                                                                                    
| |   |                                                                                                                                                                                                                                      
| | • | Manually reviewed, validated and approved all customer credits; and                                                                                                                                                                  
| |   |                                                                                                                                                                                                                                      
| | • | Collected,
    reviewed and validated the timesheets and performed monthly cut-off procedures
    to ensure that hours worked, and the corresponding revenue recognized, were
    recorded in the appropriate period.                

To address the material
weaknesses related to deficiencies in analyzing and reconciling the general ledger
accounts related to payroll, under the direction of the Companys Chief
Financial Officer, the Company performed a manual review, validation and reconciliation
of the postings to the payroll control account to ensure that the accounts balanced
at the end of each month.


To address the material weaknesses related to deficiencies in analyzing and reconciling intercompany account transactions, the Company performed intercompany reconciliations for all locations on a monthly basis and ensured that the intercompany balances are reflected correctly and eliminate upon consolidation.


In addition to further
strengthen and improve senior level oversight and review over key financial reporting
decisions, the Company also implemented a process whereby each team members
work is reviewed by a collective group of senior level finance personnel as at
the end of each accounting period.


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The
        Company continues its efforts to remediate control weaknesses and further
        improve and strengthen its internal control over financial reporting
        under the direction of the Chief Financial Officer


Changes in Internal Controls

During the nine months ended September 30, 2005, except for the steps taken in the ongoing efforts to remediate the material weaknesses discussed above, there was no change in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.


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PART II.   OTHER INFORMATION

Item 1. Legal
  Proceedings

India Tax Assessments

The
    Company's India subsidiary has received tax assessments dated February 12,
    2002, July 23, 2002, August 22, 2003, and December 31, 2003 from the India
    taxing authority denying tax exemptions claimed for certain revenue earned
    and disallowing certain expenses claimed during the Indian subsidiarys fiscal years ended March 31, 1998 through March 31, 2001. The revised tax assessments were for 14.6 million, 9.5 million, 2.8 million, and 5.6 million Indian rupees, respectively, or approximately $742,000 in total. An additional assessment for tax penalties and interest for the fiscal year ended March 31, 2001 of 1.7 million Indian rupees, or approximately $39,000, was also received. The Company has made payments of approximately $815,000 (consisting of $682,000 for taxes paid under protest, $39,000 for tax penalties and interest and $94,000 for other tax adjustments not in dispute) to the India tax authority. The Companys
    resulting overpayment of $34,000 has been refunded.


On
        March 29, 2005, the Companys India subsidiary received an additional
        revised assessment for 15.0 million Indian rupees, or approximately $345,000,
        for the fiscal year ended March 31, 2002. The assessment disallowed some
        of the export revenue claimed by the Company and also disallowed certain
        expenses claimed by the Company. The Company has paid approximately 6.0
        million Indian rupees, or approximately $137,000, under protest and has
        also paid an additional 5.1 million Indian rupees, or approximately $118,000,
        for agreed-to adjustments through August 2005. The Company is currently
        challenging the remaining unpaid assessment with the Commissioner of Tax
        Appeals but pending resolution of such appeal, the Company plans to pay
        the remaining $89,000 tax assessment in installments over the following
      12 to 18 months as permitted by the India tax authority.


The Company is currently at the Appellant Tribunal stage for the fiscal years ended March 31, 1998 through March 31, 2001 and at the Commissioner of Income Tax Appeals stage for fiscal year ended March 31, 2002. All applicable amounts noted above have been paid or accrued.


Shareholder Class Actions

On or about October 12,
  2004, the first of six class action lawsuits was filed, purportedly on behalf
  of plaintiffs who purchased the Companys securities, against the Company and former officers Arjun Valluri, Nicholas Visco, Edward Carr and David Distel (Defendants) in the United States District Court, District of New Jersey (District of New Jersey). In August 2005, the District of New Jersey consolidated the six class actions (the Shareholder Class Action) and appointed a lead plaintiff. Plaintiffs subsequently dropped Mr. Distel and Mr. Carr from the Shareholder Class Action, failing to name either of them as a defendant in the amended consolidated complaint filed on or about October 10, 2005. The Shareholder Class Action generally alleges violations of federal securities laws, including allegations that the Defendants made materially false and misleading statements regarding the Companys
  financial condition and that the Defendants materially overstated financial results
  by engaging in improper accounting practices. The Class Period alleged is May
  1, 2001 through September 24, 2004. The Shareholder Class Action generally seeks
  relief in the form of unspecified compensatory damages and reasonable costs,
  expenses and legal fees.


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SEC Investigation

On
    January 28, 2005, the Company received subpoenas in connection with a formal
    investigation by the Securities and Exchange Commission (the SEC) regarding whether federal securities laws were violated in connection with the issuance of the Companys
    financial statements for prior periods. The Company is cooperating with the
    SEC to produce documents in response to the subpoenas.


Broadview Claim

On or about March 23,
  2005, Jefferies & Company, Inc. initiated an arbitration proceeding to recover fees in the amount of $750,000 plus interest and reasonable attorneys fees and costs allegedly owed to Broadview International, a division of Jefferies & Company (Broadview) as a result of the private placement transaction that the Company closed on September 30, 2004 with SB Asia Infrastructure Fund, L.P. and Venture Tech Assets Pvt. Ltd.  The arbitration proceeding is in the discovery phase. In the event the Company does not prevail at the arbitration proceeding the Company will be liable for $750,000 plus interest and reimbursement of attorneys fees
  and costs.


There
        is no other litigation pending to which the Company is a party or to which
        any of its property is subject which would have a material impact on the
        Companys consolidated financial condition, results of operations
      or cash flows in the event the Company was unsuccessful in such litigation.


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Item 5. Other
  Information.

Nagarjun
    Valluripalli, the Companys former Chairman of the Board, President, Chief Executive Officer and a former Director of the Company is an owner (the Owner) of real estate located at 5-9-22, Secretariat Road in Hyderabad, India. On October 2, 2003, Intelligroup Asia Private, Ltd (IGA) and the Owner executed a memorandum of understanding (the MOA)
    relating to a proposed lease whereby the Owner would lease the 5th and 6th floors
    of the property (Premises) to the Company for certain of the Companys India operations. As contemplated in the MOA, on June 18, 2004, the Owner and IGA executed leases for the Premises and the amenities, furnishings and fittings.    The leases provide for a minimum lease period of three years with a renewal option for an additional three years. The leases provide for a three-month notice period for either party to terminate the lease.  Under the terms of the lease for the amenities, IGA paid a deposit of 5,820,000 Indian rupees (approximately $133,000) and advance lease rentals of 11,640,000 Indian rupees (approximately $266,000) upon the handing over of the amenities and shall pay monthly rent of 1,164,000 Indian rupees (approximately $27,000). Under the terms of the lease for the Premises, IGA paid a deposit of 4,656,000 Indian rupees (approximately $106,000) and advance lease rentals of 9,312,000 Indian rupees (approximately $213,000) upon the handing over of
 the Premises and shall pay monthly rent of 931,000 Indian rupees (approximately $21,000). Prior to entering into this transaction, the Companys
    Board of Directors determined that the terms and conditions were no less
    favorable to the Company than could be obtained from unrelated third parties.
    Rent expense for the nine months ended September 30, 2005 towards the said
    lease was 22,613,000 Indian rupees (approximately $518,000). The value of
    un-amortized rentals as of September 30, 2005 was 5,238,000 Indian rupees
    (approximately $119,000).


Effective
        August 1, 2005, IGA entered into an agreement to lease certain premises
        for certain of the Companys India operations from iLABS Hyderabad Technology Center Pvt. Ltd. (iLabs) a party with which two members of the Companys
        Board of Directors, Srini Raju and Sandeep Reddy, are affiliated. The terms
        of the lease agreement provide for, among other things: (i) a minimum lease
        period of five years with an option for two three-year renewal periods;
        (ii) payment of a security deposit in the amount of 15,282,000 Indian rupees
        (approximately $352,000); (iii) payment of monthly lease fees in the amount
        of 1,698,000 Indian rupees (approximately $40,000), subject to yearly five
        percent (5%) escalation; and (iv) monthly operations and maintenance fees
        of 283,000 Indian rupees (approximately $6,500). Rent expense for the nine
        months ended September 30, 2005 towards the said lease was 3,396,000 Indian
      rupees (approximately $78,000).


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Item 6. Exhibits.

|(a) | 31.1 |  | Certification
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.      
|--- | ---- |  | ----------------------------------------------------------------------------------
|    |      |  |                                                                                   
|    | 31.2 |  | Certification
          pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
|    |      |  |                                                                                   
|    | 32.1 |  | Certification
    pursuant to 18 U.S.C. Section 1350                              
|    |      |  |                                                                                   
|    | 32.2 |  | Certification
    pursuant to 18 U.S.C. Section 1350                              

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SIGNATURES

Pursuant
        to the requirements of Section 13 or 15(d) of the Securities Exchange
        Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized this 9th day of November 2005.


|                       | INTELLIGROUP, INC.
|---------------------- | ------------------
|                       |                   
|Date: November 9, 2005 | By:
    /s/       
|                       |                   
|                       |                   
|                       |                   
|                       |                   
|Date: November 9, 2005 | By: /s/           
|                       |                   
|                       |                   
|                       |                   

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EXHIBIT INDEX

|Exhibit
       No. |   | Description of Exhibit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|------------------ | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|2                  |   | Agreement
         and Plan of Merger of the Company and its wholly ownedsubsidiary
         Oxford Systems Inc. (Incorporated by reference to theCompany's
       Annual Report on Form 10-KSB for the year ended December31, 1996.)                                                                                                                                                                                                                                                                                        
|                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|3.1                |   | Amended
         and Restated Certificate of Incorporation. (Incorporated byreference
         to the Company's Registration Statement on Form SB-2(Registration
       Statement No. 333-5981) declared effective on September 26,1996.)                                                                                                                                                                                                                                                                                    
|                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|3.2                |   | Amended
         and Restated Bylaws. (Incorporated by reference to theCompany's
       Registration Statement on Form SB-2 (Registration StatementNo. 333-5981) declared effective on September 26, 1996.)                                                                                                                                                                                                                                                                                                                  
|                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|4.1                |   | Shareholder
         Protection Rights Agreement dated as of November 6, 1998,between
      the Company and American Stock Transfer & Trust Companywhich
      includes (I) the Form of Rights Certificate and (ii) the Certificate ofAmendment
      to the Amended and Restated Certificate of Incorporation ofIntelligroup,
      Inc. (Incorporated by reference to Exhibit No. 4.1 of theCompany's
    Report on Form 8-K dated November 9, 1998, filed with theSecurities and Exchange Commission on November 9, 1998.)
|                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|4.2                |   | Amendment
         dated September 29, 2004 to the Shareholder Protection RightsAgreement
         dated November 6, 2004. (Incorporated by reference to ExhibitNo.
      4.1 of the Companys Report on Form 8-K dated September 29, 2004,filed
    with the Securities and Exchange Commission on October 5, 2004.)                                                                                                                                                                                                        
|                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|10.1               | * | 1996 Stock Plan, as amended, of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|10.2               | * | 1996 Non-Employee
         Director Stock Option Plan. (Incorporated byreference
         to the Company's Registration Statement on Form SB-2(Registration
       Statement No. 333-5981) declared effective on September 26,1996.)                                                                                                                                                                                                                                                                                         
|                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|10.3               | * | Form of
         Indemnification Agreement entered into by the Company and eachof its
         Directors and officers. (Incorporated by reference to the Company'sRegistration
         Statement on Form SB-2 (Registration Statement No. 333-5981)
       declared effective on September 26, 1996.)                                                                                                                                                                                                                       
|                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|10.4               | * | Employment
         Agreement dated October 1, 1999 between the Company andNicholas
      Visco. (Incorporated by reference to the Companys AnnualReport
    on Form 10-K for the year ended December 31, 1999.) See Exhibit10.23.                                                                                                                                                                                                                                                                                          

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|Exhibit No. |   | Description of Exhibit                                                                                                                                                                                                                                                                                                                                                       
|----------- | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |   |                                                                                                                                                                                                                                                                                                                                                                              
|10.5        | * | Employee's
         Invention Assignment and Confidentiality Agreement.(Incorporated
         by reference to the Company's Registration Statement onForm
       SB-2 (Registration Statement No. 333-5981) declared effective onSeptember 26, 1996.)                                                                                                                        
|            |   |                                                                                                                                                                                                                                                                                                                                                                              
|10.6        |   | Services
         Provider Agreement by and between Oracle Corporation and theCompany
       dated July 26, 1994. (Incorporated by reference to the Company'sRegistration Statement on Form SB-2 (Registration Statement No. 333-5981) declared effective on September 26, 1996.) See Exhibit 10.8.                                                                          
|            |   |                                                                                                                                                                                                                                                                                                                                                                              
|10.7        |   | Agreement
         by and between the Company and Intelligroup Asia PrivateLimited
      ("Intelligroup Asia") relating to operational control of IntelligroupAsia,
    with related agreements. (Incorporated by reference to the Company'sRegistration Statement on Form SB-2 (Registration Statement No. 333-5981) declared effective on September 26, 1996.)             
|            |   |                                                                                                                                                                                                                                                                                                                                                                              
|10.8        |   | Amendment
         No. 1 to Services Provider Agreement by and between OracleCorporation
         and the Company dated December 30, 1996. (Incorporated byreference
       to the Company's Annual Report on Form 10-KSB for the yearended December 31, 1996.) See Exhibit 10.6.                                                                                            
|            |   |                                                                                                                                                                                                                                                                                                                                                                              
|10.9        |   | R/3 National
         Logo Partner Agreement by and between SAP America, Inc.and the
         Company dated as of April 29, 1997. (Incorporated by reference tothe Company's
         Registration Statement on Form SB-2 (RegistrationStatement
       No. 333-29119) declared effective on June 26, 1997.) SeeExhibits 10.10, 10.14 and 10.24.                             
|            |   |                                                                                                                                                                                                                                                                                                                                                                              
|10.10       |   | ASAP Partner
         Addendum to R/3 National Logo Partner Agreement betweenSAP America,
         Inc. and the Company effective July 1, 1997 (amendsexisting
         R/3 National Logo Partner Agreement). (Incorporated by referenceto the
       Company's Quarterly Report on Form 10-QSB for the quarter endedSeptember 30, 1997.) See Exhibits 10.9, 10.14 and 10.24.
|            |   |                                                                                                                                                                                                                                                                                                                                                                              
|10.11       |   | Implementation
         Partner Agreement between PeopleSoft, Inc. and theCompany
         effective July 15, 1997. (Incorporated by reference to theCompany's
       Quarterly Report on Form 10-QSB for the quarter endedSeptember 30, 1997.) See Exhibit 10.13.                                                                                                           
|            |   |                                                                                                                                                                                                                                                                                                                                                                              
|10.12       |   | Lease
         Agreement between Alfieri-Parkway Associates, as Landlord, andIntelligroup,
         Inc., as Tenant, dated March 17, 1998. (Incorporated byreference
       to the Company's Quarterly Report on Form 10-Q for the quarterended March 31, 1998.)                                                                                                             
|            |   |                                                                                                                                                                                                                                                                                                                                                                              
|10.13       |   | Fifth
         Amendment to the Implementation Partner Agreement dated July 15,1998,
       between the Company and PeopleSoft, Inc. See Exhibit 10.11.                                                                                                                                                                                                                      
|            |   |                                                                                                                                                                                                                                                                                                                                                                              
|10.14       |   | Amendment
         to the National Implementation Partner Agreement dated as ofJanuary
       1, 1999, between SAP America and the Company. See Exhibits10.9, 10.10 and 10.24.                                                                                                                                                                                               

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|Exhibit No. |   | Description of Exhibit                                                                                                                                                                                                                                                                                                       
|----------- | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |   |                                                                                                                                                                                                                                                                                                                              
|10.15       |   | Contribution
         Agreement by and between Intelligroup, Inc. and SeraNova,Inc. dated
         as of January 1, 2000. (Incorporated by reference to theCompany's
       Annual Report on Form 10-K for the year ended December 31,1999.)                                                                                 
|            |   |                                                                                                                                                                                                                                                                                                                              
|10.16       |   | Distribution
         Agreement by and between Intelligroup, Inc. and SeraNova,Inc. dated
         as of January 1, 2000. (Incorporated by reference to theCompany's
       Annual Report on Form 10-K for the year ended December 31,1999.)                                                                                 
|            |   |                                                                                                                                                                                                                                                                                                                              
|10.17       |   | Services
         Agreement by and between Intelligroup, Inc. and SeraNova, Inc.dated
         as of January 1, 2000. (Incorporated by reference to the Company'sAnnual
       Report on Form 10-K for the year ended December 31, 1999.)                                                                                    
|            |   |                                                                                                                                                                                                                                                                                                                              
|10.18       |   | Space
         Sharing Agreement by and among Intelligroup, Inc. and SeraNova,Inc. dated
         as of January 1, 2000. (Incorporated by reference to theCompany's
       Annual Report on Form 10-K for the year ended December 31,1999.)                                                                                  
|            |   |                                                                                                                                                                                                                                                                                                                              
|10.19       |   | Tax Sharing
         Agreement by and between Intelligroup, Inc. and SeraNova,Inc. dated
         as of January 1, 2000. (Incorporated by reference to theCompany's
       Annual Report on Form 10-K for the year ended December 31,1999.)                                                                                  
|            |   |                                                                                                                                                                                                                                                                                                                              
|10.20       |   | Amended
         and Restated Revolving Credit Loan and Security Agreementamong
       the Company, Empower, Inc. and PNC Bank, National Association.(Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000.)                                                         
|            |   |                                                                                                                                                                                                                                                                                                                              
|10.21       |   | Amended
         and Restated Promissory Note by and between the Company andSeraNova,
         Inc. dated as of May 31, 2000. (Incorporated by reference to theCompany's
       Report on Form 8-K/A filed September 14, 2000.) See Exhibit10.22.                                                                            
|            |   |                                                                                                                                                                                                                                                                                                                              
|10.22       |   | Agreement
         and Waiver with respect to Amended and Restated PromissoryNote by
         and between the Company and SeraNova, Inc. dated as ofSeptember
         29, 2000. (Incorporated by reference to the Company'sQuarterly
       Report on Form 10-Q for the quarter ended September 30, 2000.)See Exhibit 10.21.
|            |   |                                                                                                                                                                                                                                                                                                                              
|10.23       | * | First
         Amendment to Employment Agreement between the Company andNicholas
         Visco dated November 1, 2000. (Incorporated by reference to theCompanys
    Annual Report on Form 10-K for the year ended December 31,2000.) See Exhibit 10.4.                                                                    

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|Exhibit No. |   | Description of Exhibit                                                                                                                                                                                                                                                                                                                     
|----------- | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |   |                                                                                                                                                                                                                                                                                                                                            
|10.24       |   | mySap.com
         Partner-Services Addendum effective June 7, 2000 to R/3National
         Logo Partner Agreement between SAP America, Inc. and theCompany.
      (Incorporated by reference to the Companys Annual Report onForm 10-K
    for the year ended December 31, 2000.) See Exhibits 10.9,10.10 and 10.14.                     
|            |   |                                                                                                                                                                                                                                                                                                                                            
|10.25       |   | Service
         Alliance Master Agreement and Addendums dated May 5, 2000between
         PeopleSoft, Inc. and the Company. (Incorporated by reference tothe
    Companys Annual Report on Form 10-K for the year ended December31, 2000.)                                                                                               
|            |   |                                                                                                                                                                                                                                                                                                                                            
|10.26       |   | First
         Amendment to Loan Documents and Waiver Agreement datedMarch
         27, 2002 between the Company, Empower, Inc. and PNC Bank,National
       Association. (Incorporated by reference to the Company's AnnualReport on Form 10-K for the year ended December 31, 2001.)                                                     
|            |   |                                                                                                                                                                                                                                                                                                                                            
|10.27       | * | Amended
         and Restated Employment Agreement dated September 20, 2002between
         the Company and Nagarjun Valluripalli. (Incorporated byreference
    to the Companys Quarterly Report on Form 10-Q for the quarterended September 30, 2002.)                                                                                  
|            |   |                                                                                                                                                                                                                                                                                                                                            
|10.28       |   | Second
         Amendment to Loan Documents and Waiver Agreement datedJanuary
         6, 2003 between the Company, Empower, Inc. and PNC Bank,National
       Association. (Incorporated by reference to the Company's AnnualReport on Form 10-K for the year ended December 31, 2002.)                                                   
|            |   |                                                                                                                                                                                                                                                                                                                                            
|10.29       |   | Third
         Amendment to Loan Documents and Waiver Agreement dated July31, 2003
         between the Company, Empower, Inc. and PNC Bank, NationalAssociation.
      (Incorporated by reference to the Companys Current Reporton Form
    8-K dated July 31, 2003, filed with the Securities and ExchangeCommission on August 5, 2003.)
|            |   |                                                                                                                                                                                                                                                                                                                                            
|10.30       |   | Agreement
         dated August 7, 2003, by and between Intelligroup, Inc. andAshok
      Pandey. (Incorporated by reference to the Companys Current Reporton Form
    8-K dated August 7, 2003, filed with the Securities and ExchangeCommission on August 12, 2003.)                                                                    
|            |   |                                                                                                                                                                                                                                                                                                                                            
|10.31       | * | Employment
         Agreement dated March 25, 2004 between the Company andChristian
    Misvaer. (Incorporated by reference to the Companys AnnualReport filed on Form 10-K for the year ended December 31, 2003.                                                                                                                         
|            |   |                                                                                                                                                                                                                                                                                                                                            
|10.32       |   | Fourth
         Amendment to Loan Documents and Waiver Agreement datedOctober
         22, 2003 between the Company, Empower, Inc. and PNC Bank,National
    Association. (Incorporated by reference to the CompanysQuarterly Report on Form 10-Q for the quarter ended September 30, 2003.)                                              

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|Exhibit No. |   | Description of Exhibit                                                                                                                                                                                                                                                                                                        
|----------- | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |   |                                                                                                                                                                                                                                                                                                                               
|10.33       | * | Separation Agreement between Nicholas Visco and Intelligroup, Inc. dated November
    24, 2003. (Incorporated by reference to the Companys Current Report on Form 8-K dated November 24, 2003, filed with the Securities and Exchange Commission on November 24, 2003.)                                                      
|            |  
|            |   |                                                                                                                                                                                                                                                                                                                               
|10.34       |   | Waiver Agreement dated March 22, 2004 between the Company, Empower, Inc. and PNC Bank, National Association. (Incorporated by reference to the Companys Annual Report on Form 10-K for the year ended December 31, 2003.)                                                                                                    
|            |  
|            |   |                                                                                                                                                                                                                                                                                                                               
|10.35       | * | Employment Agreement effective as of April 5, 2004 between the Company and David J. Distel. (Incorporated by reference to the Companys Current Report on Form 8-K dated March 31, 2004, filed with the Securities and Exchange Commission on April 5, 2004.)                                                                 
|            |  
|            |   |                                                                                                                                                                                                                                                                                                                               
|10.36       | * | Separation Agreement between the Company and Ed Carr. (Incorporated by reference to the Companys Current Report on Form 8-K dated March 31, 2004, filed with the Securities and Exchange Commission on April 5, 2004.)                                                                                                       
|            |  
|            |   |                                                                                                                                                                                                                                                                                                                               
|10.37       | * | 2004 Equity Incentive Award Plan.                                                                                                                                                                                                                                                                                             
|            |   |                                                                                                                                                                                                                                                                                                                               
|10.38       | * | Employment Agreement dated July 26, 2004 between the Company and Douglas Berto. (Incorporated by reference to the Companys Current Report on Form 8-K dated August 23, 2004, filed with the Securities and Exchange Commission on August 23, 2004.)                                                                          
|            |  
|            |   |                                                                                                                                                                                                                                                                                                                               
|10.39       | * | First Amendment to the 2004 Equity Incentive Award Plan. (Incorporated by reference to the Companys Current Report on Form 8-K dated September 29, 2004, filed with the Securities and Exchange Commission on October 5, 2004.)                                                                                              
|            |  
|            |   |                                                                                                                                                                                                                                                                                                                               
|10.40       |   | Common Stock Purchase Agreement dated September 29, 2004 by and between the Company, SB Asia Infrastructure Fund LP and Venture Tech Assets Ltd. (Incorporated by reference to the Companys Current Report on Form 8-K dated September 29, 2004, filed with the Securities and Exchange Commission on October 5, 2004.)      
|            |  
|           
|            |   |                                                                                                                                                                                                                                                                                                                               
|10.41       |   | Fifth Amendment to Loan Documents and Waiver Agreement dated September 29, 2004 between the Company, Empower, Inc. and PNC Bank, National Association. (Incorporated by reference to the Companys Current Report on Form 8-K dated September 29, 2004, filed with the Securities and Exchange Commission on October 5, 2004.)
|            |  
|            |  
|            |   |                                                                                                                                                                                                                                                                                                                               
|10.42       | * | Separation Agreement between the Company and David J. Distel dated October 15, 2004. (Incorporated by reference to the Companys Current Report on Form 8-K dated October 15, 2004, filed with the Securities and Exchange Commission on October 15, 2004.)                                                                   
|            |  

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|Exhibit No. |   | Description of Exhibit                                                                                                                                                                                                                                                                                                        
|----------- | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |   |                                                                                                                                                                                                                                                                                                                               
|10.43       | * | Separation Agreement between the Company and Douglas Berto dated December 6, 2004. (Incorporated by reference to the Companys Current Report on Form 8-K dated December 6, 2004, filed with the Securities and Exchange Commission on December 10, 2004.)                                                                    
|            |  
|            |   |                                                                                                                                                                                                                                                                                                                               
|10.44       |   | Amendment No. 1 to the Common Stock Purchase Agreement dated September 29, 2004. (Incorporated by reference to the Companys Current Report on Form 8-K dated March 25, 2005, filed with the Securities and Exchange Commission on March 25, 2005.)                                                                           
|            |  
|            |   |                                                                                                                                                                                                                                                                                                                               
|10.45       | * | Employment Agreement effective June 1, 2005 between the Company and Madhu Poomalil. (Incorporated by reference to the Companys Current Report on Form 8-K dated June 2, 2005, filed with the Securities and Exchange Commission on June 7, 2005.)                                                                            
|            |  
|            |   |                                                                                                                                                                                                                                                                                                                               
|10.46       | * | Second Amended and Restated Employment Agreement effective June 21, 2005 between the Company and Shirley Spoors. (Incorporated by reference to the Companys Current Report on Form 8-K dated June 21, 2005, filed with the Securities and Exchange Commission on June 27, 2005.)                                             
|            |  
|            |   |                                                                                                                                                                                                                                                                                                                               
|10.47       | * | Employment Agreement effective July 1, 2005 between the Company and Ranjit Prithviraj. (Incorporated by reference to the Companys Current Report on Form 8-K dated June 29, 2005, filed with the Securities and Exchange Commission on July 5, 2005.)                                                                        
|            |  
|            |   |                                                                                                                                                                                                                                                                                                                               
|10.48       | * | Separation Agreement dated June 29, 2005 between the Company and Christian Misvaer. (Incorporated by reference to the Companys Current Report on Form 8-K dated June 29, 2005, filed with the Securities and Exchange Commission on July 5, 2005.)                                                                           
|            |  
|            |   |                                                                                                                                                                                                                                                                                                                               
|10.49       | * | Independent Contractor Agreement dated July 1, 2005 between the Company and Pontus, Inc. (Incorporated by reference to the Companys Current Report on Form 8-K dated June 29, 2005, filed with the Securities and Exchange Commission on July 5, 2005.)                                                                      
|            |  
|            |   |                                                                                                                                                                                                                                                                                                                               
|10.50       | * | Employment Agreement effective June 30, 2005 between the Company and Vikram Gulati. (Incorporated by reference to the Companys Current Report on Form 8-K dated June 30, 2005, filed with the Securities and Exchange Commission on July 7, 2005.)                                                                           
|            |  
|            |   |                                                                                                                                                                                                                                                                                                                               
|10.51       |   | Sixth Amendment to Loan Documents and Waiver Agreement dated September 30, 2005 between the Company, Empower, Inc. and PNC Bank, National Association. (Incorporated by reference to the Companys Current Report on Form 8-K dated September 30, 2005, filed with the Securities and Exchange Commission on October 6, 2005.)
|            |  
|            |   |                                                                                                                                                                                                                                                                                                                               
|            |  
|14          |   | Code of Business Conduct and Ethics. (Incorporated by reference to the Companys Annual Report on Form 10-K for the year ended December 31, 2003.)                                                                                                                                                                            

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|Exhibit No. |   | Description of Exhibit                                                                                                                                                                                                                                                    
|----------- | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |   |                                                                                                                                                                                                                                                                           
|21          |   | Subsidiaries of the Registrant.                                                                                                                                                                                                                                           
|            |   |                                                                                                                                                                                                                                                                           
|16.1        |   | Letter dated August 11, 2004 to the Securities and Exchange Commission from Deloitte & Touche LLP. (Incorporated by reference to the Companys Current Report on Form 8-K dated August 5, 2004, filed with the Securities and Exchange Commission on August 11, 2004.)    
|            |   |                                                                                                                                                                                                                                                                           
|16.2        |   | Letter dated November 1, 2004 to the Securities and Exchange Commission from Deloitte & Touche LLP. (Incorporated by reference to the Companys Current Report on Form 8-K dated October 26, 2004, filed with the Securities and Exchange Commission on November 1, 2004.)
|            |   |                                                                                                                                                                                                                                                                           
|31.1        |  | Certifications of Chief Executive Officer Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 301 of the Sarbanes-Oxley Act of 2002                                                                                                                                
|            |   |                                                                                                                                                                                                                                                                           
|31.2        |  | Certifications of Chief Financial Officer Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 301 of the Sarbanes-Oxley Act of 2002                                                                                                                                
|            |   |                                                                                                                                                                                                                                                                           
|32.1        |  | Certifications of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                        
|            |   |                                                                                                                                                                                                                                                                           
|32.2        |  | Certifications of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                        
|            |   |                                                                                                                                                                                                                                                                           
|           

|* | A
            management contract or compensatory plan or arrangement required
    to be filed as an exhibit pursuant to Item 15(c) of Form 10-K.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                  
| | Filed
    herewith. All other exhibits previously filed.                                                                                         

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