<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                                    FORM 10-Q

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

                 For the quarterly period ended March 31, 2004
                           Commission File No. 0-20943

                               Intelligroup, Inc.
             ------------------------------------------------------
             (Exact Name of Registrant as Specified in Its Charter)

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

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

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

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

                        Yes:   X                    No:
                             -----                      -----

         Indicate by checkmark whether the Registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act).

                        Yes:                        No:   X
                             ------                     -----

         Indicate the number of shares outstanding of each of the Issuer's
classes of common stock, as of May 12, 2004

                 Class                        Number of Shares
                 -----                        ----------------
     Common Stock, $.01 par value              [ 17,419,857 ]

<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                   Page
                                                                                                                   ----
<S>                                                                                                                <C>
PART I.  FINANCIAL INFORMATION

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

               Consolidated Balance Sheets as of March 31, 2004 and December 31, 2003.....................           2

               Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three Months            3
                Ended March 31, 2004 and 2003.............................................................

               Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2004 and
                2003......................................................................................           4

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

     Item 2.   Management's Discussion and Analysis of
                 Financial Condition and Results of Operations............................................          17

     Item 3.   Quantitative and Qualitative Disclosures About Market Risk.................................          34

     Item 4.   Controls and Procedures....................................................................          34

PART II.  OTHER INFORMATION

     Item 1.   Legal Proceedings..........................................................................          35

     Item 5.   Other Information..........................................................................          35

     Item 6.   Exhibits and Reports on Form 8-K...........................................................          36

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

</TABLE>


                                      - i -
<PAGE>





                          PART I. FINANCIAL INFORMATION

              Item 1. Consolidated Financial Statements (unaudited)








                                - 1 -
<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                      March 31, 2004 and December 31, 2003
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                         March 31,         December 31,
                                                                                           2004               2003
                                                                                      ---------------    --------------
<S>                                                                                   <C>                <C>
                                     Assets
Current Assets:
   Cash and cash equivalents..................................................        $     2,938,000    $    1,873,000
   Accounts receivable, less allowance for doubtful accounts of $728,000 and
       $749,000 at March 31, 2004 and December 31, 2003, respectively.........             22,003,000        23,941,000
   Unbilled services..........................................................              6,796,000         7,298,000
   Prepaid income taxes.......................................................                243,000           230,000
   Deferred tax assets........................................................              1,041,000         1,041,000
   Other current assets.......................................................              2,769,000         3,441,000
                                                                                      ---------------    --------------
           Total current assets...............................................             35,790,000        37,824,000
   Property and equipment, net................................................              3,701,000         3,854,000
   Deferred tax assets........................................................                917,000           917,000
   Other assets...............................................................              2,477,000         1,893,000
                                                                                      ---------------    --------------
                                                                                      $    42,885,000    $   44,488,000
                                                                                      ===============    ==============

                      Liabilities and Shareholders' Equity
Current Liabilities:
   Accounts payable...........................................................        $     2,125,000    $    5,061,000
   Accrued payroll and related taxes..........................................              9,171,000         9,110,000
   Accrued expenses and other current liabilities.............................              3,575,000         3,876,000
   Deferred revenue...........................................................              2,138,000         1,920,000
   Income taxes payable.......................................................                809,000           459,000
   Current portion of long-term debt and obligations under capital leases.....              7,881,000         8,497,000
                                                                                      ---------------    --------------
            Total current liabilities.........................................             25,699,000        28,923,000
                                                                                      ---------------    --------------
Obligations under capital leases, less current portion........................                256,000           256,000
Other long-term liabilities...................................................                830,000           893,000
                                                                                      ---------------    --------------
            Total long-term liabilities.......................................              1,086,000         1,149,000
                                                                                      ---------------    --------------

Commitments and contingencies
Shareholders' Equity:
   Preferred stock, $.01 par value, 5,000,000 shares authorized, none issued or
       outstanding............................................................                     --                --
   Common stock, $.01 par value, 25,000,000 shares authorized, 17,379,000 and
       16,987,000 shares issued and outstanding at March 31, 2004 and December
       31, 2003, respectively.................................................                174,000           170,000
   Additional paid-in capital.................................................             43,350,000        42,190,000
   Accumulated deficit........................................................            (25,274,000)      (25,553,000)
   Accumulated other comprehensive loss.......................................             (2,150,000)       (2,391,000)
                                                                                      ---------------    --------------
         Total shareholders' equity ..........................................             16,100,000        14,416,000
                                                                                      ---------------    --------------
                                                                                      $    42,885,000    $   44,488,000
                                                                                      ===============    ==============
</TABLE>

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

                                      - 2 -
<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                         AND COMPREHENSIVE INCOME (LOSS)
               For the Three Months Ended March 31, 2004 and 2003
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                            Three Months Ended March 31,
                                                                                             2004                2003
                                                                                       -----------------    ----------------
<S>                                                                                    <C>                  <C>
  Revenue .......................................................................       $     30,848,000    $     27,235,000
  Cost of sales .................................................................             21,158,000          19,309,000
                                                                                        ----------------    ----------------
     Gross profit ...............................................................              9,690,000           7,926,000
                                                                                        ----------------    ----------------
  Selling, general and administrative expenses ..................................              8,181,000           6,868,000
  Depreciation and amortization..................................................                469,000             699,000
SeraNova receivable impairment and other charges ................................                     --           5,060,000
Proxy contest charges ...........................................................                     --             297,000
                                                                                        ----------------    ----------------
     Total operating expenses ...................................................              8,650,000          12,924,000
                                                                                        ----------------    ----------------
     Operating income (loss) ....................................................              1,040,000          (4,998,000)
  Interest income ...............................................................                 17,000              13,000
  Interest expense ..............................................................               (106,000)           (108,000)
  Other expense..................................................................               (405,000)            (49,000)
                                                                                        -----------------   ----------------
Income (loss) from continuing operations before income tax provision ............                546,000          (5,142,000)
Income tax provision ............................................................                267,000              75,000
                                                                                        ----------------    ----------------
Income (loss) from continuing operations ........................................                279,000          (5,217,000)
Loss from discontinued operations (including loss on sale of $0 and $1,706,000,
     respectively), net of tax provision of $0 and 15,000, respectively .........                     --          (2,134,000)
                                                                                        ----------------    ----------------
Net income (loss) ...............................................................       $        279,000    $     (7,351,000)
                                                                                        ================    ================

  Earnings (loss) per share:
  Basic income (loss) per share:
    Income (loss) per share from continuing operations ..........................       $          0.02     $         (0.31)
    Loss per share from discontinued operations .................................                    --               (0.13)
                                                                                        ----------------    ----------------
        Net income (loss) per share..............................................       $          0.02     $         (0.44)
                                                                                        ================    =================
    Weighted average number of common shares - basic ............................             17,184,000          16,630,000
                                                                                        ================    =================

  Diluted income (loss) per share:
    Income (loss) per share from continuing operations ..........................       $          0.01     $         (0.31)
    Loss per share from discontinued operations .................................                    --               (0.13)
                                                                                        ----------------    ----------------
        Net income (loss) per share..............................................       $          0.01     $         (0.44)
                                                                                        ================    =================
    Weighted average number of common shares - diluted ..........................             19,126,000          16,630,000
                                                                                        ================    =================

  Comprehensive Income (Loss)
  Net income (loss) .............................................................       $        279,000    $     (7,351,000)
  Other comprehensive income -
       Currency translation adjustments .........................................                241,000           1,466,000
                                                                                        ----------------    ----------------
  Comprehensive income (loss) ...................................................       $        520,000    $     (5,885,000)
                                                                                        ================    =================
</TABLE>


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

                                      - 3 -
<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

               For the Three Months Ended March 31, 2004 and 2003
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                        Three Months Ended March 31,
                                                                                        ----------------------------
                                                                                           2004                2003
                                                                                           ----                ----
<S>                                                                                <C>                 <C>
Cash flows from operating activities:
   Net income (loss).......................................................        $     279,000       $  (7,351,000)
   Less: loss from discontinued operations, net of tax.....................                   --          (2,134,000)
                                                                                   -------------       -------------
   Income (loss) from continuing operations................................              279,000          (5,217,000)
   Adjustments to reconcile net income (loss) to net cash provided by
     operating activities of continuing operations:
       Depreciation and amortization.......................................              583,000             880,000
       Provision for doubtful accounts.....................................              186,000               8,000
       SeraNova receivable impairment and other charges....................                   --           5,060,000
       Deferred income taxes...............................................                   --              (1,000)
   Changes in operating assets and liabilities:
     Accounts receivable...................................................            1,752,000            (280,000)
     Unbilled services.....................................................              502,000           1,091,000
     Prepaid income taxes..................................................              (13,000)            107,000
     Other current assets..................................................              672,000             (59,000)
     Other assets..........................................................             (584,000)            (27,000)
     Accounts payable......................................................           (2,936,000)         (1,178,000)
     Accrued payroll and related taxes.....................................               61,000           1,232,000
     Accrued expenses and other liabilities................................             (301,000)           (194,000)
     Accrued restructuring charges.........................................                   --             (55,000)
     Deferred revenue......................................................              218,000            (230,000)
     Income taxes payable..................................................              350,000              38,000
                                                                                   -------------       -------------
   Net cash provided by operating activities of continuing operations......              769,000           1,175,000
                                                                                   -------------       -------------

Cash flows from investing activities:
     Purchase of equipment ................................................             (430,000)           (384,000)
                                                                                   -------------       -------------
   Net cash used in investing activities of continuing operations..........             (430,000)           (384,000)
                                                                                   -------------       -------------

Cash flows from financing activities:
     Principal payments under capital leases...............................               (4,000)           (108,000)
     Proceeds from exercise of stock options...............................            1,164,000                  --
     Other repayments......................................................              (63,000)            (94,000)
     Net change in line of credit borrowings...............................             (612,000)           (216,000)
                                                                                   -------------       -------------
  Net cash provided by (used in) financing activities of continuing operations           485,000            (418,000)
                                                                                   -------------       -------------
  Effect of foreign currency exchange rate changes on cash.................              241,000           1,466,000
                                                                                   -------------       -------------
Net increase in cash and cash equivalents from continuing operations ......            1,065,000           1,839,000
Net decrease in cash and cash equivalents from discontinued operations ....                   --            (746,000)
                                                                                   -------------       -------------
Net increase in cash and cash equivalents .................................            1,065,000           1,093,000
Cash and cash equivalents at beginning of period...........................            1,873,000           1,163,000
                                                                                   -------------       -------------
Cash and cash equivalents at end of period.................................        $   2,938,000       $   2,256,000
                                                                                   =============       =============
Supplemental disclosures of cash flow information:
   Cash paid for income taxes..............................................        $      94,000       $          --
                                                                                   =============       =============
   Cash paid for interest..................................................        $     106,000       $     108,000
                                                                                   =============       =============
</TABLE>

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

                                      - 4 -
<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Basis of Presentation

         The consolidated financial statements and accompanying financial
information as of March 31, 2004 and for the three months ended March 31, 2004
and 2003 are unaudited and, in the opinion of management, include all
adjustments (consisting only of normal recurring adjustments) which the Company
considers necessary for a fair presentation of the financial position of the
Company at such dates and the operating results and cash flows for those
periods. The consolidated financial statements included herein have been
prepared in accordance with accounting principles generally accepted in the
United States of America and the instructions of Form 10-Q and Rule 10-01 of
Regulation S-X. Pursuant to accounting requirements of the Securities and
Exchange Commission applicable to quarterly reports on Form 10-Q, the
accompanying consolidated financial statements and these notes do not include
all disclosures required by accounting principles generally accepted in the
United States of America for audited financial statements. Accordingly, these
statements should be read in conjunction with the accounting policies and Notes
to Consolidated Financial Statements included in the Company's December 31, 2003
consolidated financial statements.

         The Company's 2004 operating plan contains assumptions regarding
revenue and expenses. The achievement of the operating plan depends heavily on
the timing of work performed by the Company on existing projects and the ability
of the Company to gain and perform work on new projects. Project cancellations,
delays in the timing of work performed by the Company on existing projects or
the inability of the Company to gain and perform work on new projects could have
an adverse impact on the Company's ability to execute its operating plan and
maintain adequate cash flow. In the event actual results do not meet the
operating plan, management believes it could execute contingency plans to
mitigate such effects. Such plans include additional cost reductions or seeking
additional financing. In addition, the Company may seek additional financing
from time to time for general corporate purposes. Considering the cash on hand,
the credit facility and based on the achievement of the operating plan and
management's actions taken to date, management believes it has the ability to
continue to generate sufficient cash to satisfy its operating requirements in
the normal course of business.

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

         Certain prior period amounts have been reclassified to conform to the
2004 presentation.

                                      - 5 -
<PAGE>

Note 2 - Stock-Based Compensation

         Stock-based compensation issued to employees and directors is valued
using the intrinsic value method under Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees." Under this method,
compensation expense is recorded on the date of grant only if the current market
price of the underlying stock exceeded the exercise price. Financial Accounting
Standards Board ("FASB") Statement of Financial Accounting Standard ("SFAS")
No.123, "Accounting for Stock-Based Compensation," established accounting and
disclosure requirements using a fair-value-based method of accounting for
stock-based employee compensation plans. As allowed by SFAS No. 123, the Company
has elected to continue to apply the intrinsic-value-based method of accounting
described above. Stock-based compensation issued to non-employees is valued
using the fair value method.

         In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure." SFAS No. 148 amends SFAS
No. 123 to provide alternative methods of transition for a voluntary change to
the fair value-based-method of accounting for stock-based employee compensation
("Transition Provisions"). In addition, SFAS No. 148 amends the disclosure
requirements of APB Opinion No. 28, "Interim Financial Reporting," to require
pro forma disclosure in interim financial statements by companies that elect to
account for stock-based compensation using the intrinsic value method prescribed
in APB Opinion No. 25 ("Disclosure Provisions"). The Company continues to use
the intrinsic value method of accounting for stock-based compensation. As a
result, the Transition Provisions do not have an effect on the Company's
consolidated financial statements. The Company has adopted the Disclosure
Provisions of SFAS No. 148; however, the Company will continue to apply the
intrinsic value method under APB Opinion No. 25.

         For disclosure purposes, pro forma net loss and loss per share impacts
are provided as if the fair market value method under SFAS No. 123 had been
applied:

<TABLE>
<CAPTION>
                                                                              For the Three Months Ended March 31,
                                                                                  2004                   2003
                                                                              ------------          -------------
<S>                                                                           <C>                   <C>
Net income (loss), as reported......................................          $    279,000          $  (7,351,000)
Deduct: total stock-based employee compensation expense determined
under the fair-value-based method for all awards, net of related tax
effects.............................................................              (436,000)              (199,000)
                                                                              ------------          -------------
Pro forma net loss..................................................          $   (157,000)         $  (7,550,000)
                                                                              ============          =============

Basic earnings (loss) per share:
     as reported....................................................          $       0.02          $       (0.44)
                                                                              ============          =============
     pro forma......................................................          $      (0.01)         $       (0.45)
                                                                              ============          =============
Diluted earnings (loss) per share:
     as reported....................................................          $       0.01          $       (0.44)
                                                                              ============          =============
     pro forma......................................................          $      (0.01)         $       (0.45)
                                                                              ============          =============
</TABLE>

                                      - 6 -
<PAGE>

Note 2 - Stock-Based Compensation (Continued)

         The fair value of option grants for disclosure purposes is estimated on
the date of grant using the Black-Scholes option-pricing model using the
following weighted-average assumptions: expected volatility of 109% and 109%,
risk-free interest rate of 1.84% and 1.72% and expected lives of 2.5 years and
2.3 years, for the three months ended March 31, 2004 and 2003, respectively.

Note 3 - Earnings (Loss) Per Share

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

<TABLE>
<CAPTION>
                                                                             For the Three Months Ended March 31,
                                                                            -------------------------------------
                                                                                  2004                   2003
                                                                            ---------------        --------------
<S>                                                                         <C>                    <C>
Income (loss) from continuing operations............................        $       279,000        $   (5,217,000)
Loss from discontinued operations...................................                     --            (2,134,000)
                                                                            ---------------        --------------
Net income (loss)...................................................        $       279,000        $   (7,351,000)
                                                                            ===============        ==============
Basic earnings (loss) per share:
   Weighted average number of common shares - basic.................             17,184,000            16,630,000
                                                                            ---------------        --------------
   Basic income (loss) per share from continuing operations.........        $          0.02        $        (0.31)
   Basic loss per share from discontinued operations................                     --                 (0.13)
                                                                            ---------------        --------------
   Basic net income (loss) per share................................        $          0.02        $        (0.44)
                                                                            ===============        ==============

Diluted earnings (loss) per share:
   Weighted average number of common shares - diluted ..............             19,126,000            16,630,000
                                                                            ---------------        --------------
   Diluted income (loss) per share from continuing operations.......        $          0.01        $        (0.31)
   Diluted loss per share from discontinued operations..............                     --                 (0.13)
                                                                            ---------------        --------------
   Diluted net income (loss) per share..............................        $          0.01        $        (0.44)
                                                                            ===============        ==============
</TABLE>

         For the three months ended March 31, 2004, 252,000 options to purchase
shares of common stock were not included in the computation of diluted income
per share because the options' exercise price was greater than the average
market price. For the three months ended March 31, 2003, 1,917,000 options to
purchase shares of common stock were not included in the computation of diluted
net loss per share due to the net loss position and their antidilutive effect.

                                     - 7 -
<PAGE>

Note 4 - Lines 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 could borrow up to
$15,000,000 either at the Bank's prime rate per annum or the Euro Rate plus
1.75% to 2.5% based upon the Company's ratio of debt to earnings before
interest, taxes, depreciation and amortization ("EBITDA"). The credit facility
is collateralized by substantially all of the assets of the Company's United
States based operations. The maximum borrowing availability under the line of
credit is based upon a percentage of eligible billed and unbilled accounts
receivable, as defined.

         As of March 31, 2004, the Company had outstanding borrowings under the
credit facility of $7,676,000. The Company estimates undrawn availability under
the credit facility to be $6,808,000 as of March 31, 2004. As of December 31,
2003, the Company had outstanding borrowings under the credit facility of
$8,288,000. The Company was in compliance with all covenants as of March 31,
2004.

         As a result of the SeraNova receivable impairment and other related
charges and the Proxy Contest charges incurred during the quarter ended March
31, 2003, the Company was not in compliance with the consolidated net worth,
unconsolidated net worth and EBITDA covenants as of March 31, 2003. In July
2003, the Company executed with the Bank an amendment to the credit agreement.
The terms of the amendment included, among other things, (1) a 3-year extension
of the credit facility to May 31, 2006, (2) a reduction of the maximum revolving
advance amount under the credit facility to $15,000,000, and (3) a waiver of the
covenant defaults existing as of March 31, 2003.

         As a result of the charge incurred during the quarter ended June 30,
2003 related to the guarantee of SeraNova debt, the Company was not in
compliance with the EBITDA covenant as of June 30, 2003. In October 2003, the
Company executed with the Bank an amendment to the credit agreement. The terms
of the amendment included, among other things, a waiver of the covenant default
existing as of June 30, 2003.

         The Company was not in compliance with the unconsolidated net worth
covenant as of December 31, 2003. In March 2004, the Company finalized with the
Bank the terms of a waiver of such default.

         Interest expense on debt and obligations under capital leases was
$106,000 and $108,000 for the three months ended March 31, 2004 and 2003
respectively.

                                     - 8 -
<PAGE>

Note 5 - Discontinued Operations

         The Company did not report any discontinued operations for the
three-month period ended March 31, 2004.

         On April 2, 2003, the Company consummated the sale (the "Sale"),
effective as of March 1, 2003, of its Asia-Pacific group of subsidiary
companies, operating in Australia, New Zealand, Singapore, Hong Kong and
Indonesia (together, the "Former Subsidiaries"), to Soltius Global Solutions PTE
Ltd, a Singapore corporation ("Soltius"). As consideration, the Company received
a 5% minority shareholding in Soltius and a $650,000 note to be paid by Soltius
to the Company over a period of 12 months, commencing April 2003. In March 2004,
the Company agreed to renegotiate the original payment terms with Soltius. The
revised terms call for Soltius to make monthly payments through September 2004
of between $25,000 and $50,000, plus a final $9,000 payment in October 2004. The
Company has received a total of $375,000 from Soltius toward the note balance as
of March 31, 2004.

         The Consolidated Financial Statements of the Company have been
reclassified to reflect the Sale of the Former Subsidiaries to Soltius as of
March 31, 2003. Accordingly, the results of operations and cash flows of the
Former Subsidiaries prior to April 2, 2003 have been segregated in the
Consolidated Statements of Operations and Comprehensive Income (Loss) and
Consolidated Statements of Cash Flows. The net operating results and net cash
flows of the Former Subsidiaries have been reported as discontinued operations.

         Summarized financial information for the discontinued operations of the
Former Subsidiaries is as follows:

                                                                 For the Three
                                                                 Months Ended
                                                                   March 31,
                                                                     2003
                                                                 -------------
Revenue......................................................    $ 1,691,000
Pre-tax loss.................................................       (413,000)
Income tax provision.........................................         15,000
Loss from discontinued operations, excluding loss on sale....       (428,000)

         Additionally, the Company reported a loss on the sale of the Former
Subsidiaries of $1,706,000, net of tax provision of $0, for the three months
ended March 31, 2003.

Note 6 - SeraNova

         As noted in the table below, as of March 31, 2004, $912,000 of
liabilities remain on the consolidated balance sheet related to certain
obligations and guarantees of SeraNova, Inc. ("SeraNova"), a subsidiary the
Company spun off in a tax-free distribution to shareholders on July 5, 2000. Of
this liability, $580,000 was included in other long-term liabilities and is
expected to be paid out through 2008. The remaining $332,000 is included within
accrued expenses and other current liabilities. There were no charges to
earnings related to SeraNova for the three month period ended March 31, 2004,
and management believes that there are no remaining contingent obligations.

                                     - 9 -
<PAGE>

         On May 31, 2000, SeraNova and the Company formalized a $15,100,000
unsecured promissory note (the "Note") relating to net borrowings by SeraNova
from the Company through such date. The Note bears interest at the prime rate
plus 1/2%.

         SeraNova failed to make final payment of all amounts due under the Note
to the Company as of July 31, 2001. On August 16, 2001, the Company filed a
complaint against SeraNova, Silverline Technologies, Inc. and Silverline
Technologies Limited, which acquired SeraNova in March 2001 (collectively, the
"SeraNova Group"). As of such date, SeraNova was obligated to pay to the Company
the remaining amount of principal (approximately $9,140,000) and accrued
interest (approximately $940,000), or an aggregate of $10,080,000. On April 17,
2003, the Court granted partial summary judgment. On August 8, 2003, SeraNova
and Silverline Technologies, Inc. filed for Chapter 7 Bankruptcy, thereby
staying this action as to these defendants. There has been no notice that
Silverline Technologies Limited is insolvent. Shortly thereafter, counsel for
defendants asked the Court and was granted permission to be relieved as counsel.
In February 2004, the Company moved for entry of default judgment against
Silverline Technologies Limited.

         In addition, SeraNova failed to pay certain outstanding lease
obligations to the Company's landlords. Accordingly, on March 4, 2002, the
Company filed an arbitration demand with the American Arbitration Association
against the SeraNova Group. On August 9, 2002, an award was issued in the amount
of $616,905 (including attorney's fees) plus reimbursement of administrative
fees, in favor of the Company and against the SeraNova Group jointly and
severally. In an action filed in the Superior Court of New Jersey, the Court
confirmed the $624,000 award, jointly and severally as to the SeraNova Group,
and issued a writ of execution against the SeraNova Group's assets. The Sheriff
of Middlesex County levied this writ of execution on October 8, 2002 against a
bank account held by Silverline Technologies, Inc. On October 16, 2002, pursuant
to this writ, the bank turned over $626,247 to the Sheriff. On November 6, 2002
the Sheriff sent the funds to the Company's attorneys and the funds were
deposited into an attorney trust account on November 8, 2002. On December 13,
2002, the Company commenced an action in the Superior Court of New Jersey,
Chancery Division, to recover additional amounts due and owing from the SeraNova
Group under the Arbitration Award and to determine whether HSBC Bank USA
("HSBC"), a creditor of the SeraNova Group, has priority to the funds levied
upon by the Sheriff. On January 31, 2003, the Court entered judgment in the
Company's favor in the amount of $218,805, representing the SeraNova Group's
additional unpaid rent arrearages under the arbitration award. On February 28,
2003, the Court entered judgment in the Company's favor in the amount of
$220,415, representing the Company's attorney's fees in connection with the
Company's efforts to enforce the SeraNova Group's obligations under the
arbitration award. On March 10, 2003, the Court ordered HSBC to produce
discovery proving its priority to the $626,247 being held in trust. Thereafter,
the Company and HSBC entered into a settlement agreement only as to the $626,247
being held in trust whereby the Company remitted $570,228 to HSBC, and the
remaining funds were released to the Company. The Company does not believe that
the outcome of this claim will have a materially adverse effect on the Company's
business, financial condition or results of operations.

                                     - 10 -
<PAGE>

Note 6 - SeraNova (Continued)

         The Company had also been periodically engaged in discussions with
management of the SeraNova Group, with the objective of seeking an out of court
resolution to all outstanding matters involving the Note, and certain other
receivables and lease obligations. However, the Company believed that the
liquidity issues plaguing the SeraNova Group required a reassessment of the
realizability of these outstanding amounts as of June 30, 2002. Although no
final resolution had been reached, the Company believed that the substance of
these discussions provided a basis for determining the approximate realizable
value of the Note and other receivables, as well as an estimate of the costs
required to exit certain lease obligations.

         Accordingly, the Company recorded $8,362,000 of SeraNova receivable
impairment and other charges during the nine months ended September 30, 2002.
Specifically, the Company recorded a $5,140,000 charge to write-down the
carrying value of the Note to $4,000,000. Additionally, the Company recorded a
$1,257,000 charge to write-off the carrying value of other SeraNova receivables.
Also, the Company recorded a charge of $1,501,000 for certain lease exit costs.
Such charge represents primarily an accrued liability for certain obligated
space and equipment costs for which the Company currently believes it cannot use
or sublease and the differential between certain Company lease obligations and
sublease amounts to be received.

         The Company subsequently believed there had been an apparent
deterioration in the financial condition of the SeraNova Group. Accordingly, the
Company re-assessed, as of March 31, 2003, the likelihood of recovering amounts
owed by the SeraNova Group as well as the assumptions used in recording the
original lease obligation charge. Additionally, the Company was notified during
the first quarter of 2003 of its obligation to pay additional office space and
equipment rentals, which had been previously assigned to SeraNova by the
Company, because the SeraNova Group had failed to make the required payments.

         The Company recorded $5,060,000 of additional charges associated with
the Note and certain other related issues during the three months ended March
31, 2003. These charges included an additional impairment charge of $4,000,000
related to the Note, approximately $321,000 related to other assets,
approximately $474,000 in costs required to exit certain lease obligations and
$265,000 in legal fees. The Company has determined that due to the apparent
financial condition of the SeraNova Group that recovery of the SeraNova Note is
not probable.

                                     - 11 -
<PAGE>

Note 6 - SeraNova (Continued)


<TABLE>
<CAPTION>
                                                             Write-Off
                                           Write-Down of     of Other          Lease        Legal and
                                          Note Receivable   Receivables     Obligations       Other
                                            - SeraNova      - SeraNova    and Settlements    Charges        Total
                                          ---------------- -------------- ---------------- ------------- -------------
<S>                                       <C>              <C>            <C>              <C>           <C>
Charges to operations during 2002.....    $   5,140,000    $  1,257,000   $   1,501,000    $    464,000  $  8,362,000
Costs paid during 2002................               --              --        (361,000)       (318,000)     (679,000)
Non-cash items........................       (5,140,000)     (1,257,000)             --              --    (6,397,000)
                                          -------------    ------------   -------------    ------------  ------------
Accrued costs as of December 31, 2002.               --              --       1,140,000         146,000     1,286,000

Charges to operations during 2003.....        4,000,000              --         795,000         265,000     5,060,000
Costs paid during 2003................               --              --      (1,060,000)       (265,000)   (1,325,000)
Non-cash items........................       (4,000,000)             --              --              --    (4,000,000)
                                          -------------    ------------   -------------    ------------  ------------
Accrued costs as of December 31, 2003.               --              --         875,000         146,000     1,021,000
Costs paid during 2004................               --              --        (109,000)             --      (109,000)
                                          -------------    ------------   --------------   ------------  ------------

Accrued costs as of March 31, 2004....    $          --    $         --   $     766,000    $    146,000  $    912,000
                                          =============    ============   =============    ============  ============
</TABLE>

Note 7 - Restructuring and Other Special Charges

         There were no restructuring or special charges for the three-month
period ended March 31, 2004. Activity in accrued costs for restructuring and
other special charges is as follows:

<TABLE>
<CAPTION>
                                                 Severance and         Asset
                                                 Related Costs      Impairments        Exit Costs          Total
                                                --------------   --------------     -------------     ------------
<S>                                             <C>              <C>                <C>               <C>
Accrued costs as of December 31, 1999.....      $      865,000     $         --      $     84,000     $    949,000

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

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

Charges to operations during 2002.........              30,000               --                --           30,000
Costs paid during 2002....................            (326,000)              --          (384,000)        (710,000)
                                                --------------     ------------      ------------     ------------
Accrued costs as of December 31, 2002.....              89,000               --            83,000          172,000

Costs paid during 2003....................             (89,000)              --            (6,000)         (95,000)
                                                --------------     ------------      ------------     ------------
Accrued costs as of December 31, 2003.....                  --               --            77,000           77,000

Costs paid during 2004....................                  --               --                --               --
                                                --------------     ------------      ------------     ------------
Accrued costs as of March 31, 2004........      $           --     $         --      $     77,000     $     77,000
                                                ==============     ============      ============     ============
</TABLE>

                                     - 12 -
<PAGE>

Note 8 - Segment Data and Geographic Information

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

         On April 2, 2003, the Company consummated the sale, effective as of
March 1, 2003, of its Asia-Pacific group of subsidiary companies, operating in
Australia, New Zealand, Singapore, Hong Kong and Indonesia (See Note 5). The
operating results and financial position of the Asia-Pacific group of subsidiary
companies are reported as discontinued operations for all periods presented. The
Company now has four reportable operating segments from continuing operations,
which are organized and managed on a geographical basis, as follows:

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

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

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

         o        Japan - includes the operations of the Company in Japan. The
                  Japanese headquarters are located in Tokyo, Japan.

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

                                     - 13 -
<PAGE>

Note 8 - Segment Data and Geographic Information (Continued)

         Accordingly, the Company's operating results and financial position for
its continuing operations are presented in the following geographic segments for
the three months ended March 31, 2004 and 2003.

<TABLE>
<CAPTION>
                                    United States        India           Europe            Japan               Total
                                    -------------    ------------     ------------       ----------       -------------
<S>                                 <C>              <C>              <C>                <C>              <C>
Three Months Ended March 31, 2004
---------------------------------
Revenue.......................      $ 23,592,000     $  4,319,000     $  2,090,000       $  847,000       $  30,848,000
Depreciation & amortization...           295,000          145,000           25,000            4,000             469,000  (1)
Operating income..............           102,000          664,000          193,000           81,000           1,040,000
Total assets..................        30,962,000        7,254,000        3,370,000        1,299,000          42,885,000

Three Months Ended March 31, 2003
---------------------------------
Revenue.......................      $ 21,349,000     $  3,487,000     $  1,481,000       $  918,000       $  27,235,000
Depreciation & amortization...           451,000          204,000           36,000            8,000             699,000  (2)
Operating income (loss).......        (5,549,000)         493,000           (3,000)          61,000          (4,998,000) (3)
Total assets..................        25,453,000        7,556,000        2,032,000        1,767,000          36,808,000

</TABLE>

(1)      Excludes $114,000 of depreciation and amortization included in cost of
         sales for the three months ended March 31, 2004.
(2)      Excludes $181,000 of depreciation and amortization included in cost of
         sales for the three months ended March 31, 2003.
(3)      Includes $5,060,000 of SeraNova receivable impairment and other charges
         and $297,000 of proxy contest charges for the three months ended March
         31, 2003.

       Included above are application management and support revenues of
$12,872,000 and $6,765,000 for the three months ended March 31, 2004 and 2003,
respectively. The majority of the Company's corporate overhead costs have been
incurred and reported within the operating results of the United States for all
periods presented. Such corporate overhead costs have not been allocated to the
other geographic segments.

Note 9 - Contingencies

Guarantee of SeraNova Debt

         By letter dated May 12, 2003, Zions First National Bank ("Zions")
informed the Company that Network Publishing, Inc., a former wholly-owned
subsidiary of the Company, which became a wholly-owned subsidiary of SeraNova
upon the spin-off of SeraNova by the Company in 2000, was delinquent on a loan
made by Zions and guaranteed by the Company. Zions was demanding payment of
$535,608 from the Company, plus interest accrued from April 1, 2002. In the
third quarter 2003, the Company negotiated a settlement with Zions. Accordingly,
the Company recorded a $474,000 charge in the SeraNova receivable impairment and
other charges line item for the three months ended September 30, 2003 to cover
the settlement amount of $430,000 plus related legal costs of $44,000. The
settlement amount was paid out in installments through January 2004.

                                     - 14 -
<PAGE>

Note 9 - Contingencies (Continued)

Tax-Free Spin-off of SeraNova

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

         On October 27, 2000, SeraNova and Silverline announced that they had
entered into an agreement and plan of merger, under which Silverline would
acquire SeraNova in exchange for American depositary shares of Silverline and
the assumption by Silverline of SeraNova indebtedness. However, SeraNova
management has represented that the merger with Silverline was not contemplated
at the time of the spin-off and accordingly, the spin-off should be tax-free.
Should the spin-off ultimately be construed as taxable, the resultant tax
liability could be up to $65,000,000, plus interest and, depending on the facts
that ultimately are established, penalties. SeraNova and/or Silverline would be
obligated to indemnify the Company for these amounts under the Tax Sharing
Agreement. Should the spin-off be ultimately construed to be taxable, there is a
risk that if SeraNova and/or Silverline are unable or unwilling to pay the
resultant tax liability pursuant to SeraNova's indemnification obligations under
its Tax Sharing Agreement with the Company, the Company would bear the liability
to pay such resultant tax liability. SeraNova and Silverline Technologies, Inc.
filed for Chapter 7 Bankruptcy on August 8, 2003.

Tax Contingency in India

         The Company's Indian subsidiary has received assessments from the
Indian taxing authority denying tax exemptions claimed for certain revenue
earned during each of the fiscal years ended March 31, 1999 through March 31,
2002. The assessments total approximately 42 million rupees, or $950,000. The
Company has paid approximately 30 million rupees, or $675,000, to the Indian tax
authority under protest. Management, after consultation with its advisors,
believes the Company is entitled to the tax exemption claimed and thus has not
recorded a provision for taxes relating to these items as of March 31, 2004. If
the Company were not successful with its appeals, which were filed in 2001, 2002
and 2004, a future charge of approximately $950,000 would be recorded and
reflected in the Company's consolidated statement of operations.

                                     - 15 -
<PAGE>

Note 9 - Contingencies (Continued)

Proxy Contest

         During the three months ended March 31, 2003, the Company incurred
$297,000 of charges related to the contested 2002 Annual Meeting of Shareholders
("Proxy Contest"). The Proxy Contest resulted from a shareholder of the Company
("Mr. Pandey") launching a proxy contest to take control of the Company's Board
of Directors. However, on August 7, 2003, the Company and Mr. Pandey executed a
settlement agreement relating to, among other things, the litigation matters
including the Proxy Contest. As part of the settlement agreement the Company
agreed to pay to Mr. Pandey an aggregate amount of $750,000 in three equal
installments over two years, commencing October 2003.

Other Legal Matters

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

Note 10 - Related Party Transaction

         Nagarjun Valluripalli, the Chairman of the Board, President, Chief
Executive Officer and a 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., a 99.8% owned and wholly-controlled
subsidiary of the Company 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 to the Company for certain of the Company's India
operations. The MOA provides for, among other things, a minimum lease period of
three years with a renewal option for an additional three years and monthly
payments of approximately $45,500 per month. A deposit in the amount of
approximately $326,087 was paid to the Owner in October 2003, with an additional
deposit of approximately $371,629 to be paid to the Owner when the premises are
handed over to Intelligroup. Prior to the execution of the MOA, the Company's
Board of Directors determined that the terms and conditions set forth in the MOA
were no less favorable to the Company than could be obtained from unrelated
third parties.

Note 11 - New Accounting Pronouncements

         In January 2003, the FASB issued FASB Interpretation ("FIN") No. 46,
"Consolidation of Variable Interest Entities," an interpretation of Accounting
Research Bulletin No. 51, "Consolidated Financial Statements." FIN No. 46
establishes accounting guidance for consolidation of variable interest entities
that function to support the activities of the primary beneficiary. In December
2003, the FASB revised FIN No. 46 and issued FIN No. 46R (revised December
2003). In addition to conforming to previously issued FASB Staff Positions, FIN
No. 46R deferred the implementation date for certain variable interest entities.
This revised interpretation was effective for all entities no later than the end
of the first reporting period that ends after March 15, 2004. The Company does
not have any investments in or contractual relationship or other business
relationship with a variable interest entity and therefore the adoption of this
interpretation had no impact on the Company's consolidated results of
operations, consolidated financial position or consolidated cash flows.

                                     - 16 -
<PAGE>

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

         The following is Management's Discussion and Analysis of certain
significant factors that have affected the financial condition and results of
operations of the Company for the periods indicated below. This discussion and
analysis should be read in conjunction with the consolidated financial
statements included on this Quarterly Report on Form 10-Q and the Annual Report
on Form 10-K for the year ended December 31, 2003.

Overview

         In this Section, the Company will discuss the following: (1) a
comparison of consolidated results of operations period-to-period; (2) a
comparison of results of operations by business segment; (3) liquidity and
capital resources; (4) contractual and commercial obligations; and (5) recently
issued accounting standards.

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

         Revenues

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

         Fixed Price Projects

         The Company has provided services on certain projects in which it, at
the request of the clients, offered a fixed price for its services. For the
three months ended March 31, 2004 and 2003, revenues derived from projects under
fixed price contracts represented approximately 38% and 43%, respectively, of
the Company's total revenue. No single fixed price project was material to the
Company's business during the three months ended March 31, 2004 or 2003. The
Company believes that, as it pursues its strategy of providing application
management services to customers, the percentage of revenue associated with
fixed price projects may increase. The Company believes that there are certain
risks related to fixed price arrangements and thus the Company endeavors to
price 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.

                                     - 17 -
<PAGE>

         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 three months ended March 31, 2004 and 2003, the Company's ten
largest customers accounted for, in the aggregate, approximately 48% and 49%,
respectively, of total revenue. For the three months ended March 31, 2004 and
2003, no single customer accounted for more than 10% of revenue.

         For the three months ended March 31, 2004 and 2003, 15% and 18%,
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 information technology consulting firm. There can be no assurance
that such information technology consulting firms will continue to engage the
Company in the future at current levels of retention, if at all.

         Software Partners

         For the three months ended March 31, 2004 and 2003, 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
                                    -------------------------------------------
                                    Three Months Ended       Three Months Ended
                                      March 31, 2004           March 31, 2003
                                    ------------------       ------------------
          SAP..................            65%                        62%
          PeopleSoft...........            27%                        22%
          Oracle...............             2%                         7%

         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 other 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).

                                     - 18 -
<PAGE>

         Proxy Contest and SeraNova Charges

         The Company did not incur any additional charges related to the Proxy
Contest or SeraNova in the three-month period ending March 31, 2004.

         During the three months ended March 31, 2003, the Company incurred
charges related to the (a) Proxy Contest and (b) SeraNova Receivable. The
Company does not anticipate incurring any future charges related to either the
Proxy Contest or the SeraNova Receivable.

         (a) Proxy Contest. During the three months ended March 31, 2003, the
Company incurred $297,000 of charges related to a proxy contest launched by
Ashok Pandey to take control of the Company's Board of Directors (the "Proxy
Contest"). On August 7, 2003, the Company and Mr. Pandey executed a settlement
agreement resolving, among other things, certain litigation matters relating the
Proxy Contest. As part of the settlement agreement the Company agreed to pay to
Mr. Pandey an aggregate amount of $750,000 in three equal installments over two
years, commencing October 2003. The Company also incurred material costs related
to defending the Company in the Proxy Contest. Since the Proxy Contest has been
successfully resolved, the Company does not anticipate incurring material costs
related to the Proxy Contest going forward.

         (b) SeraNova Receivable. During the three months ended March 31, 2003,
the Company recorded $5.1 million of additional charges related to an unsecured
promissory note, project contract and a Space Sharing Agreement, under the terms
of which SeraNova owes the Company approximately $13.9 million, including
related legal costs. The Company has aggressively pursued its legal options to
obtain payment. However, based on SeraNova's liquidity issues and subsequent
filing of Chapter 7 Bankruptcy in August 2003, the Company does not anticipate
recovering payment from SeraNova. Thus, including the charges recorded in the
three months ended March 31, 2003, the Company has recorded $13.9 million in
cumulative charges related to this matter. For further detail please refer to
Note 6 in Part 1, Item 1above.

         Tax Assessment of Indian Subsidiary

         The Company may record future charges related to tax assessments
received by the Company's Indian Subsidiary. The Company is currently appealing
the tax assessments received by the Company's Indian 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 appeals are not successful, future
charges of approximately $950,000 would be recorded and reflected in the
Company's Consolidated Statement of Operations and Comprehensive Income (Loss).
For further detail please refer to Note 9 in Part 1, Item 1.

                                     - 19 -
<PAGE>

         Discontinued Operations

         On April 2, 2003, the Company consummated the sale (the "Sale"),
effective as of March 1, 2003, of its Asia-Pacific group of subsidiary
companies, operating in Australia, New Zealand, Singapore, Hong Kong and
Indonesia (together, the "Former Subsidiaries"), to Soltius Global Solutions PTE
Ltd., a Singapore corporation ("Soltius"). As consideration, the Company
received a 5% minority shareholding in Soltius and a $650,000 note to be paid by
Soltius to the Company over a period of 12 months, commencing April 2003. In
March 2004, the Company agreed to renegotiate the original payment terms with
Soltius. The revised terms call for Soltius to make monthly payments through
September 2004 of between $25,000 and $50,000, plus a final $9,000 payment in
October 2004. The Company has received a total of $375,000 from Soltius toward
the note balance as of March 31, 2004.

         The Consolidated Financial Statements of the Company have been
reclassified to reflect the Sale of the Former Subsidiaries to Soltius as of
March 31, 2003. Accordingly, the results of operations and cash flows of the
Former Subsidiaries prior to April 2, 2003 have been segregated in the
Consolidated Statements of Operations and Comprehensive Income (Loss) and
Consolidated Statements of Cash Flows. The net operating results and net cash
flows of the Former Subsidiaries have been reported as discontinued operations.


Application of Critical Accounting Policies

         The Company's critical accounting policies are set forth in its Annual
Report on Form 10-K for the year ended December 31, 2003. There has been no
change, update or revision to the Company's critical accounting policies
subsequent to the filing of the Company's Form 10-K for the year ended December
31, 2003.

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
applications. Such forward-looking statements include risks and uncertainties,
including, but not limited to:

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

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

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

     o   the uncertainty in attracting and retaining customers given the
         Company's historical financial condition;

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

                                     - 20 -
<PAGE>

     o   the uncertainty associated with the Company's liquidity condition and
         the ability for the Company to fund its ongoing operation and growth;

     o   the competition for employees in India causing increasing compensation
         for the Company's employees and prospective employees;

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

     o   increased competition in the industry may cause a decrease in the
         Company's billing and employee utilization rates for the Company;

     o   the 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;

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

     o   the potential for future legislation regulating or taxing outsourcing;

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

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

     o   the Company's ability to manage fixed price projects effectively and
         efficiently;

                                          - 21 -
<PAGE>

     o   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;

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

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

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

     o   the 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;

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

     o   the Company's ability to maintain certain criteria as required for
         continued listing by the Nasdaq National Market;

     o   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; and

     o   the potential that the Company may bear the tax liability if the
         SeraNova spin-off shall ultimately be construed as taxable and
         SeraNova/Silverline is unwilling or unable to pay the resulting tax
         liability in accordance with the terms of the Tax Sharing Agreement
         between SeraNova/Silverline and the Company. For more information
         please refer to Note 9 of the notes to the consolidated financial
         statements of the Company included in Part I, Item 1 of this Report.

         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.


                                     - 22 -
<PAGE>

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:

<TABLE>
<CAPTION>
                                                                                    Percentage of Revenue
                                                                            -----------------------------------
                                                                                Three Months Ended March 31,
                                                                            -----------------------------------
                                                                               2004                      2003
                                                                            ---------                 ---------
<S>                                                                         <C>                       <C>
Revenue..........................................................               100.0%                    100.0%
Cost of sales....................................................                68.6                      70.9
                                                                            ---------                 ---------
     Gross profit................................................                31.4                      29.1
Selling, general and administrative expenses.....................                26.5                      25.2
Depreciation and amortization....................................                 1.5                       2.6
SeraNova receivable impairment and other charges.................                  --                      18.6
Proxy contest charges............................................                  --                       1.1
                                                                            ---------                 ---------
     Total operating expenses....................................                28.0                      47.5
                                                                            ---------                 ---------
     Operating income (loss).....................................                 3.4                     (18.4)
Interest income..................................................                 0.0                       0.0
Interest expense.................................................                (0.3)                     (0.4)
Other expense....................................................                (1.3)                     (0.1)
                                                                            ---------                 ---------
Income (loss) from continuing operations before income tax provision
                                                                                  1.8                     (18.9)
Income tax provision.............................................                 0.9                       0.3
                                                                            ---------                 ---------
Income (loss) from continuing operations.........................                 0.9                     (19.2)
Loss from discontinued operations, net of tax expense
    (including loss on disposal in 2003).........................                  --                      (7.8)
                                                                            ---------                 ---------
Net income (loss)................................................                 0.9%                    (27.0)%
                                                                            =========                 =========
</TABLE>

         Three months ended March 31, 2004 Compared to Three Months Ended March
31, 2003

         The following discussion compares the consolidated results for the
three months ended March 31, 2004 and the three months ended March 31, 2003.

         Revenue. Total revenue increased by 13.3%, or $3.6 million, from $27.2
million for the three months ended March 31, 2003, to $30.8 million for the
three months ended March 31, 2004. The increase in revenues was attributable
primarily to increased demand for the Company's application management and
support services, as many Fortune 1000 companies continue to look to reduce
their total cost of ownership of supporting their enterprise resources
applications. First quarter 2004 application management revenues grew to $12.9
million, or 41.7% of total revenue, compared to $6.8 million, or 24.8% of total
revenue, for the comparable period of 2003. This improvement results from
efforts to focus sales and marketing activities around application management
services, which typically generate longer-term, more predictable revenue
streams. Accordingly, the Company's 12-month revenue backlog has increased to
$56.6 million as of March 31, 2004. Management expects revenues to grow over the
next couple of quarters as it capitalizes on some large projects that commenced
in the later part of the first quarter of 2004.

         In total, the change in revenue reflects revenue growth generated
throughout the United States ("US") (an increase of $2.2 million), India (an
increase of $833,000) and Europe (an increase of $609,000). The US and India
accounted for 76.5% and 14.0% of total first quarter 2004 revenues,
respectively, while Europe and Japan account for the remaining 9.5%. In the
first quarter of 2003, the US and India accounted for 78.4% and 12.8% of total
revenues, while Europe and Japan accounted for 8.8%.

                                     - 23 -
<PAGE>

         SAP revenues continue to be the most significant piece of the Company's
business, accounting for 65.3% of total first quarter 2004 revenues. Further SAP
revenues for the first quarter 2004 grew 19.9% over the corresponding quarter of
2003. First quarter 2004 PeopleSoft revenues grew 42.8% over the comparable
quarter in 2003 and now account for 27.4% of total revenues. The growth in SAP
and PeopleSoft revenue reflects stronger partnership relationships.

         Cost of sales and gross profit. The Company's cost of sales primarily
includes the cost of salaries to consultants and related employee benefits and
payroll taxes. The Company's cost of sales increased by 9.6%, or $1.9 million,
from $19.3 million for the three months ended March 31, 2003, to $21.2 million
for the three months ended March 31, 2004. The Company's gross profit increased
by 22.3%, or $1.8 million, from $7.9 million for the three months ended March
31, 2003, to $9.7 million for the three months ended March 31, 2004. The
increase in cost of sales and gross profit results from the increase in revenue.
Gross margin increased to 31.4% for the three months ended March 31, 2004, from
29.1% for the three months ended March 31, 2003. The improvement in gross margin
results from higher average billing rates in the US and stronger utilization
rates in India. Management expects there to be some incremental improvement in
gross margins over the balance of the year as a result of improved billing and
utilization rates. Billing and utilization rates are expected to improve with
the commencement of certain large projects towards the end of the first quarter.

         Selling, general and administrative expenses. Selling, general and
administrative expenses primarily consist of salaries, and related benefits
costs, occupancy costs, sales person compensation, travel and entertainment and
professional fees. Selling, general and administrative expenses increased by
19.1% or $1.3 million, to $8.2 million for the three months ended March 31,
2004, from $6.9 million for the three months ended March 31, 2003, and increased
as a percentage of revenue to 26.5% from 25.2%, respectively. The increase in
selling, general and administrative expenses, in absolute dollars, was related
primarily to discretionary sales and marketing expenditures, which vary in
proportion to changes in revenue, along with additions to the management team.
The Company continues to manage and aggressively curtail discretionary
expenditures.

         Depreciation and amortization. Depreciation and amortization expenses
decreased to $469,000 for the three months ended March 31, 2004, compared to
$699,000 for the three months ended March 31, 2003. The decrease was primarily
due to certain fixed assets becoming fully depreciated subsequent to March 31,
2003. Depreciation and amortization expenses are expected to increase over the
next couple of quarters as a result of purchasing furniture, fixtures and
computer-related equipment in conjunction with the expected increase in employee
headcount.

         SeraNova receivable impairment and other charges. During the three
months ended March 31, 2003, the Company incurred approximately $5.1 million of
charges associated with the note receivable from SeraNova and certain other
related issues. These charges included an impairment charge of $4.0 million
related to the note, approximately $321,000 related to other assets,
approximately $424,000 in costs required to exit certain lease obligations and
$315,000 in legal fees. The Company has determined that due to the apparent
financial condition of SeraNova, Silverline and Silverline Technologies, Inc.
(collectively, the "SeraNova Group"), and the Chapter 7 bankruptcy filings by
SeraNova and Silverline Technologies, Inc., that recovery of this asset is not
probable.

                                     - 24 -
<PAGE>

         Proxy contest charges. During the three months ended March 31, 2003,
the Company incurred $297,000 in legal fees and other charges related to the
Company's contested 2002 Annual Meeting of Shareholders ("Proxy Contest").
However, on August 7, 2003, the Company and Mr. Pandey executed a settlement
agreement relating to, among other things, the litigation matters including the
Proxy Contest. As part of the settlement agreement the Company agreed to pay to
Mr. Pandey an aggregate amount of $750,000 in three equal installments over two
years, commencing October 2003. The charge was taken in the third quarter of
2003. Since the Proxy Contest was successfully resolved, the Company does not
anticipate incurring any future material charges related to the Proxy Contest.

         Interest income. The Company earned $17,000 in interest income during
the three months ended March 31, 2004, compared with $13,000 during the three
months ended March 31, 2003. The increase in interest income is related
primarily to certain interest-bearing bank accounts.

         Interest expense. The Company incurred $106,000 and $108,000 in
interest expense during the three months ended March 31, 2004 and 2003,
respectively, related primarily to borrowings under its line of credit.
Borrowings under the line of credit were used primarily to fund operating
activities and the charges associated with the proxy contest.

         Other expense. Other expense results primarily from realized losses
associated with changes in foreign currency exchange rates. The Company reported
other expense of $405,000 during the three months ended March 31, 2004, compared
with other expense of $49,000 during the three months ended March 31, 2003. The
large amount of other expense incurred during the first quarter of 2004 was
related primarily to a foreign currency loss recognized by the Company's
subsidiary in India, as a result of the strengthening of the US dollar versus
the Indian rupee.

         Provision for income taxes. The Company's effective tax rate was 48.9%
for the three months ended March 31, 2004. For the three months ended March 31,
2003, the Company recorded a $75,000 tax provision despite a large operating
loss. The large provision for income taxes for these two periods results from
taxable income in certain jurisdictions (primarily Puerto Rico) combined with a
valuation allowance offsetting other loss benefits in other jurisdictions
(primarily the US). The Company's net deferred tax asset as of March 31, 2004
relates primarily to the US operations. Based on anticipated profitability in
the near future, management believes it is more likely than not, that the net
deferred tax asset of $2.0 million will be realized.

                                     - 25 -
<PAGE>

         In 1996, the Company elected a five year tax holiday in India, in
accordance with a local tax incentive program whereby no income tax will be due
in such period. Such tax holiday was extended an additional five years in 1999.
Effective April 1, 2000 pursuant to changes introduced by the Indian Finance
Act, 2000, the tax holiday previously granted is no longer available and has
been replaced in the form of a tax deduction incentive. The impact of this
change is not expected to be material to the consolidated financial statements
of the Company. Effective April 1, 2002, the tax deduction incentive for income
from the export of software and related services was restricted to 90% of such
income. Further, domestic revenue from software and related services is taxable
in India. Effective April 1, 2003, the 90% tax deduction incentive restriction
was repealed and the tax incentive is again available for the entire amount of
income from the export of software and related services. For the three months
ended March 31, 2004 and 2003, the tax holiday and tax deduction favorably
impacted the Company's effective tax rate.

         The Company's Indian subsidiary has received assessments from the
Indian taxing authority denying tax exemptions claimed for certain revenue
earned during each of the fiscal years ended March 31, 1999 through March 31,
2002. The assessments are for approximately 42 million rupees, or $950,000. The
Company has paid approximately 30 million rupees, or $675,000, to the Indian tax
authority under protest. After consultation with its advisors, management
believes the Company is entitled to the tax exemption claimed and thus has not
recorded a provision for taxes relating to these items as of March 31, 2004. If
the Company were not successful with its appeals, which were filed in 2001, 2002
and 2004, a future charge of approximately $950,000 would be recorded and
reflected in the Company's consolidated statement of operations.

Results of Operations by Business Segment

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

         On April 2, 2003, the Company consummated the sale, effective as of
March 1, 2003, of its Asia-Pacific group of subsidiary companies, operating in
Australia, New Zealand, Singapore, Hong Kong and Indonesia. The operating
results of the Asia-Pacific group of subsidiary companies are reported as
discontinued operations for all periods presented. The Company now has four
reportable operating segments from continuing operations, which are organized
and managed on a geographical basis, as follows:

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

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

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

                                     - 26 -
<PAGE>

         o        Japan - includes the operations of the Company in Japan. The
                  Japanese headquarters are located in Tokyo, Japan.

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

         Three months Ended March 31, 2004 Compared to Three months Ended March
31, 2003

         The following discussion compares the segment results for the three
months ended March 31, 2004 and the three months ended March 31, 2003.

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

<TABLE>
<CAPTION>
                                                            Three Months Ended March 31,
                                               --------------------------------------------------------
                                                           2004                            2003
                                               ----------------------------    ------------------------
                                                                 Percentage                  Percentage
                                                   Dollars        of Total        Dollars     of Total
                                               ------------      ----------    -----------   ----------
<S>                                            <C>               <C>           <C>           <C>
United States..............................    $    23,592         76.5%       $    21,349      78.4%
India......................................          4,319         14.0              3,487      12.8
Europe.....................................          2,090          6.8              1,481       5.4
Japan......................................            847          2.7                918       3.4
                                               ------------      ----------    -----------   ----------
Total......................................    $    30,848        100.0%       $    27,235     100.0%
                                               ============      ==========    ===========   ==========
</TABLE>

         US revenue increased by 10.5%, or $2.3 million, from $21.3 million for
the three months ended March 31, 2003, to $23.6 million for the three months
ended March 31, 2004. The increase was attributable primarily to increased
demand for the Company's application management service offerings. This
improvement results from the focused sales and marketing activities around
application management services.

         India revenue increased by 23.9%, or $832,000, from $3.5 million for
the three months ended March 31, 2003, to $4.3 million for the three months
ended March 31, 2004. The increase was attributable primarily to increased
demand for services in the United States, as a majority of the total revenue
generated in India is derived from providing offshore development and support
services to customers sourced through the Company's affiliated entities in other
parts of the world, but most predominantly with the United States.

         Europe revenue increased by 41.1%, or $609,000, from $1.5 million for
the three months ended March 31, 2003, to $2.1 million for the three months
ended March 31, 2004. The increase was attributable primarily to the Company's
operations in the Denmark (an increase of $572,000). The improvement in Denmark
was attributable primarily to a general increase in demand for local SAP
services, including a $2.0 million implementation contract with a large
agricultural-based company.

                                     - 27 -
<PAGE>

         Japan revenue decreased by 7.7% or $71,000, from $918,000 for the three
months ended March 31, 2003, to $847,000 for the three months ended March 31,
2004. The decrease was due primarily to slightly lower demand for the Company's
consulting services within the local SAP market.

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

<TABLE>
<CAPTION>
                                                                          Three Months Ended March 31,
                                                                      ------------------------------------
                                                                        2004                       2003
                                                                      ---------                  ---------
<S>                                                                   <C>                        <C>
United States...........................................              $     102                  $  (5,549)
India...................................................                    664                        493
Europe..................................................                    193                         (3)
Japan...................................................                     81                         61
                                                                      ---------                  ---------
Total...................................................              $   1,040                  $  (4,998)
                                                                      =========                  =========
</TABLE>

         US operating performance improved by $5.7 million, from an operating
loss of $5.5 million for the three months ended March 31, 2003, to operating
income of $102,000 for the three months ended March 31, 2004. The improvement in
operating performance was attributable primarily to higher revenue at improved
gross margin levels, partially offset by higher selling, general and
administrative costs. In addition, the 2003 first quarter results included
approximately $5.1 million of SeraNova receivable impairment and other charges
and $297,000 of charges associated with the proxy contest.

         India operating performance increased by $171,000, from $493,000 for
the three months ended March 31, 2003, to $664,000 for the three months ended
March 31, 2004. The increase was attributable primarily to an increase in
revenue, which was partially offset by a slight decrease in gross margins from
40.5% in the first quarter of 2003 to 39.9% in the same period of 2004.

         Europe operating performance improved by $196,000, from an operating
loss of $3,000 for the three months ended March 31, 2003, to operating income of
$193,000 for the three months ended March 31, 2004. The improvement was
attributable primarily to an improvement in the operating performance of Denmark
(an improvement of $121,000) and the UK (an improvement of $75,000). The
improvement in Denmark results from higher utilization rates, primarily
associated with the previously noted $2.0 million implementation project. The
improvement in the UK results from an increase gross margins from 29.1% to
40.9%.

         Japan operating performance improved by $20,000, from operating income
of $61,000 for the three months ended March 31, 2003, to operating income of
$81,000 for the three months ended March 31, 2004. The slight improvement was
attributable primarily an improvement in gross margin from 33.3% in the first
quarter of 2003 to 40.1% in the first quarter of 2004.

                                     - 28 -
<PAGE>

Liquidity and Capital Resources

         The Company had cash and cash equivalents of $2.9 million at March 31,
2004 and $1.9 million at December 31, 2003. The Company had working capital of
$10.1 million at March 31, 2004 and $8.9 million at December 31, 2003. The
increase in working capital resulted primarily from operating profitably during
the first three months of 2004.

         Cash provided by operating activities of continuing operations was
$769,000 for the three months ended March 31, 2004, resulting primarily from
operating income of $1,040,000 as noted above offset by foreign currency
transaction losses of $405,000. Cash provided by operating activities of
continuing operations for the three months ended March 31, 2003 was $1.2
million.

         The Company invested $430,000 and $384,000 in computer equipment,
internal-use computer software and office furniture and fixtures during the
three months ended March 31, 2004 and 2003, respectively. The slight increase
results primarily from the replacement of computer equipment and the development
of certain internal-use software.

         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 could borrow up to $15.0
million either at the Bank's prime rate per annum or the Euro Rate plus 1.75% to
2.5% based upon the Company's ratio of debt to earnings before interest, taxes,
depreciation and amortization ("EBITDA"). The credit facility is collateralized
by substantially all of the assets of the Company's United States based
operations. The maximum borrowing availability under the line of credit is based
upon a percentage of eligible billed and unbilled accounts receivable, as
defined.

         As of March 31, 2004, the Company had outstanding borrowings under the
credit facility of $7.7 million. The Company estimates undrawn availability
under the credit facility to be $6.8 million as of March 31, 2004. As of
December 31, 2003, the Company had outstanding borrowings under the credit
facility of $8.3 million.

         As a result of the SeraNova receivable impairment and other related
charges and the Proxy Contest charges incurred during the quarter ended March
31, 2003, the Company was not in compliance with the consolidated net worth,
unconsolidated net worth and EBITDA covenants as of March 31, 2003. In July
2003, the Company executed with the Bank an amendment to the credit agreement.
The terms of the amendment included, among other things, (1) a 3-year extension
of the credit facility to May 31, 2006, (2) a reduction of the maximum revolving
advance amount under the credit facility to $15.0 million, and (3) a waiver of
the covenant defaults existing as of March 31, 2003.

         As a result of the charge incurred during the quarter ended June 30,
2003 related to the guarantee of SeraNova debt, the Company was not in
compliance with the EBITDA covenant as of June 30, 2003. In November 2003, the
Company executed with the Bank an amendment to the credit agreement. The terms
of the amendment included, among other things, a waiver of the covenant default
existing as of June 30, 2003.

                                     - 29 -
<PAGE>

         The Company was not in compliance with the unconsolidated net worth
covenant as of December 31, 2003. In March 2004, the Company finalized with the
Bank the terms of a waiver of such default. The Company was in compliance with
all covenants as of March 31, 2004.

         On May 31, 2000, SeraNova and the Company formalized a $15.1 million
unsecured promissory note (the "Note") relating to net borrowings by SeraNova
from the Company through such date. The Note bears interest at the prime rate
plus 1/2%.

         SeraNova failed to make final payment of all amounts due under the Note
to the Company as of July 31, 2001. On August 16, 2001, the Company filed a
complaint against SeraNova and Silverline. As of such date, SeraNova was
obligated to pay to the Company the remaining amount of principal (approximately
$9.1 million) and accrued interest (approximately $1.0 million), or an aggregate
of $10.1 million. On April 17, 2003, the Court granted partial summary judgment.
On July 11, 2003, the Court dismissed the defendant's counterclaims seeking
compensatory and punitive damages. On August 8, 2003, SeraNova and Silverline
Technologies, Inc. filed for Chapter 7 Bankruptcy, thereby staying this action
as to these defendants. There has been no notice that Silverline Technologies
Limited is insolvent. Shortly thereafter, counsel for defendants asked the Court
and was granted permission to be relieved as counsel. In February 2004, the
Company moved for entry of default judgment against Silverline.

         In addition, SeraNova failed to pay certain outstanding lease
obligations to the Company's landlords. Accordingly, on March 4, 2002, the
Company filed an arbitration demand with the American Arbitration Association
against the SeraNova Group. The demand for arbitration, which sought damages,
alleged among other things that the SeraNova Group failed to pay outstanding
lease obligations to the Company's landlords and to reimburse the Company for
all rent payments made by the Company on their behalf. An arbitration hearing
was held on June 25, 2002 and June 28, 2002 seeking $525,000 in outstanding
lease obligations. On August 9, 2002, an award was issued in the amount of
$616,905 (including attorney's fees) plus reimbursement of administrative fees,
in favor of the Company and against the SeraNova Group jointly and severally. In
an action filed in the Superior Court of New Jersey, the Court confirmed the
$624,000 award, jointly and severally as to the SeraNova Group, and issued a
writ of execution against the SeraNova Group's assets. The Sheriff of Middlesex
County levied this writ of execution on October 8, 2002 against a bank account
held by Silverline Technologies, Inc. On October 16, 2002, pursuant to this
writ, the bank turned over $626,247 to the Sheriff. On November 6, 2002 the
Sheriff sent the funds to the Company's attorneys and the funds were deposited
into an attorney trust account on November 8, 2002. On December 13, 2002, the
Company commenced an action in the Superior Court of New Jersey, Chancery
Division, to recover additional amounts due and owing from the SeraNova Group
under the Arbitration Award and to determine whether HSBC Bank USA ("HSBC"), a
creditor of the SeraNova Group, has priority to the funds levied upon by the
Sheriff. On January 31, 2003, the Court entered judgment in the Company's favor
in the amount of $218,805, representing the SeraNova Group's additional unpaid
rent arrearages under the arbitration award. On February 28, 2003, the Court
entered judgment in the Company's favor in the amount of $220,415, representing
the Company's attorney's fees in connection with the Company's efforts to
enforce the SeraNova Group's obligations under the arbitration award. On March
10, 2003, the Court ordered HSBC to produce discovery proving its priority to
the $626,247 being held in trust. Thereafter, the Company and HSBC entered into
a settlement agreement only as to the $626,247 being held in trust whereby the
Company remitted $570,228 to HSBC, and the remaining funds were released to the
Company. The Company does not believe that the outcome of this claim will have a
materially adverse effect on the Company's business, financial condition or
results of operations.

                                     - 30 -
<PAGE>

         The Company had also been periodically engaged in discussions with
management of the SeraNova Group, with the objective of seeking an out of court
resolution to all outstanding matters involving the Note, and certain other
receivables and lease obligations. However, the Company believed that the
liquidity issues plaguing the SeraNova Group required a reassessment of the
realizability of these outstanding amounts as of June 30, 2002. Although no
final resolution had been reached, the Company believed that the substance of
these discussions provided a basis for determining the approximate realizable
value of the Note and other receivables, as well as an estimate of the costs
required to exit certain lease obligations.

         Accordingly, the Company recorded $8.4 million of SeraNova receivable
impairment and other charges as of June 30, 2002. Specifically, the Company
recorded a $5.1 million charge to write-down the carrying value of the Note to
$4.0 million. Additionally, the Company recorded a $1.3 million charge to
write-off the carrying value of other SeraNova receivables (primarily, accrued
interest on the Note and a receivable for a system implementation project).
Also, the Company recorded a charge of $1.5 million for certain lease exit
costs. Such charge represents primarily an accrued liability for obligated space
and equipment costs for which the Company currently believes it cannot use or
sublease and the differential between certain Company lease obligations and
sublease amounts to be received.

         The Company subsequently believed there had been an apparent
deterioration in the financial condition of the SeraNova Group. Accordingly, the
Company re-assessed, as of March 31, 2003, the likelihood of recovering amounts
owed by the SeraNova Group as well as the assumptions used in recording the
original lease obligation charge. Additionally, the Company was notified during
the first quarter of 2003 of its obligation to pay additional office space and
equipment rentals, which had been previously assigned to SeraNova by the
Company, because the SeraNova Group had failed to make the required payments.

         The Company recorded $5.1 million of additional charges associated with
the Note and certain other related issues during the three months ended March
31, 2003. These charges included an additional impairment charge of $4.0 million
related to the Note, approximately $321,000 related to other assets,
approximately $474,000 in costs required to exit certain lease obligations and
$265,000 in legal fees. The Company has determined that due to the apparent
financial condition of the SeraNova Group that recovery of the SeraNova Note is
not probable.

                                     - 31 -
<PAGE>

The following table illustrates the charges related to SeraNova during 2002 and
2003, as well as cash payments, non-cash charges and remaining liability as of
December 31, 2002 and 2003:


<TABLE>
<CAPTION>
                                                             Write-Off
                                           Write-Down of     of Other          Lease        Legal and
                                          Note Receivable   Receivables     Obligations       Other
                                            - SeraNova      - SeraNova    and Settlements    Charges        Total
                                          ---------------- -------------- ---------------- ------------- -------------
<S>                                       <C>              <C>            <C>              <C>           <C>
Charges to operations during 2002.....    $   5,140,000    $  1,257,000   $   1,501,000    $    464,000  $  8,362,000
Costs paid during 2002................               --              --        (361,000)       (318,000)     (679,000)
Non-cash items........................       (5,140,000)     (1,257,000)             --              --    (6,397,000)
                                          -------------    ------------   -------------    ------------  ------------
Accrued costs as of December 31, 2002.
                                                     --              --       1,140,000         146,000     1,286,000

Charges to operations during 2003.....        4,000,000              --         795,000         265,000     5,060,000
Costs paid during 2003................               --              --      (1,060,000)       (265,000)   (1,325,000)
Non-cash items........................       (4,000,000)             --              --              --    (4,000,000)
                                          -------------    ------------   -------------    ------------  ------------
Accrued costs as of December 31, 2003.
                                                     --              --         875,000         146,000     1,021,000
Costs paid during 2004................               --              --        (109,000)             --      (109,000)
                                          -------------    ------------   --------------   ------------  ------------

Accrued costs as of March 31, 2004....    $          --    $         --   $     766,000    $    146,000  $    912,000
                                          =============    ============   =============    ============  ============
</TABLE>

         As of March 31, 2004, $912,000 of the liability remained outstanding,
of which $580,000 was included in other long-term liabilities. The Company
expects to pay out this liability through 2008.

Contractual Obligations and Other Commercial Commitments

         The following tables summarize the Company's contractual obligations
and other commercial commitments as of March 31, 2004:

<TABLE>
<CAPTION>
                                                                 Payments Due by Period
Description of                                         Less than           1 - 3           3 - 5         More than
Contractual Obligation                  Total            1 year            years           years           5 years
----------------------             -------------    ---------------   --------------   ------------    -------------
<S>                                <C>              <C>               <C>              <C>             <C>
Revolving Credit Facility          $   7,676,000    $     7,676,000   $           --   $         --    $          --
Capital Lease Obligations                461,000            273,000          188,000                              --
                                                                                                 --
Operating Lease Obligations            6,378,000          1,905,000        3,974,000        499,000               --
Other Liabilities                      1,189,000            359,000          736,000         94,000
                                   -------------    ---------------   --------------   ------------    -------------
Total Contractual Obligations      $  15,704,000    $    10,213,000   $    4,898,000   $    593,000    $          --
                                   =============    ===============   ==============   ============    =============
</TABLE>


         The Company uses its $15.0 million revolving credit facility with PNC
Bank to fund the working capital needs of the business; therefore, the
outstanding borrowings under the credit facility fluctuate accordingly. The
credit facility is collateralized by substantially all of the assets of the
United States based operations. The maximum borrowing availability under the
line of credit is based upon a percentage of eligible billed and unbilled
accounts receivable, as defined. As of March 31, 2004, the Company had
outstanding borrowings under the credit facility of $7.7 million. The Company
estimates undrawn availability under the credit facility to be $6.8 million as
of March 31, 2004. As of December 31, 2003, the Company had outstanding
borrowings under the credit facility of $8.3 million.

                                     - 32 -
<PAGE>

         The Company was not in compliance with the unconsolidated net worth
covenant as of December 31, 2003. In March 2004, the Company finalized with the
Bank the terms of a waiver of such default. The Company was in compliance with
all covenants as of March 31, 2004.

         The Company has also entered into various contractual arrangements to
obtain certain office space, office equipment and vehicles under capital and
operating leases.

         The Company's 2004 operating plan contains assumptions regarding
revenue and expenses. The achievement of the operating plan depends heavily on
the timing of work performed by the Company on existing projects and the ability
of the Company to gain and perform work on new projects. Project cancellations,
delays in the timing of work performed by the Company on existing projects or
the inability of the Company to gain and perform work on new projects could have
an adverse impact on the Company's ability to execute its operating plan and
maintain adequate cash flow. In the event actual results do not meet the
operating plan, management believes it could execute contingency plans to
mitigate such effects. Such plans include additional cost reductions or seeking
additional financing. In addition, the Company may seek additional financings
from time to time for general corporate purposes. Considering the cash on hand,
the remaining availability under the credit facility and based on the
achievement of the operating plan and management's actions taken to date,
management believes it has the ability to continue to generate sufficient cash
to satisfy its operating requirements in the normal course of business. However,
no assurance can be given that sufficient cash will be generated from
operations.

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

Commitments

         Beginning in late 2001, SeraNova failed to pay certain outstanding
lease obligations to the Company's landlords. Accordingly, on March 4, 2002, the
Company filed an arbitration demand with the American Arbitration Association
against the SeraNova Group. The demand for arbitration, which sought damages,
alleged among other things that the SeraNova Group failed to pay outstanding
lease obligations to the Company's landlords and to reimburse the Company for
all rent payments made by the Company on their behalf. An arbitration hearing
was held on June 25, 2002 and June 28, 2002 seeking $525,000 in outstanding
lease obligations. On August 9, 2002, an award was issued in the amount of
$616,905 (including attorney's fees) plus reimbursement of administrative fees,
in favor of the Company and against the SeraNova Group jointly and severally. In
an action filed in the Superior Court of New Jersey, the Court confirmed the
$624,000 award, jointly and severally as to the SeraNova Group, and issued a
writ of execution against the SeraNova Group's assets. The Sheriff of Middlesex
County levied this writ of execution on October 8, 2002 against a bank account
held by Silverline Technologies, Inc. On October 16, 2002, pursuant to this
writ, the bank turned over $626,247 to the Sheriff. On November 6, 2002 the
Sheriff sent the funds to the Company's attorneys and the funds were deposited
into an attorney trust account on November 8, 2002. On December 13, 2002, the
Company commenced an action in the Superior Court of New Jersey, Chancery
Division, to recover additional amounts due and owing from the SeraNova Group
under the Arbitration Award and to determine whether HSBC, a creditor of the
SeraNova Group, has priority to the funds levied upon by the Sheriff. On January
31, 2003, the Court entered judgment in the Company's favor in the amount of
$218,805, representing the SeraNova Group's additional unpaid rent arrearages
under the arbitration award. On February 28, 2003, the Court entered judgment in
the Company's favor in the amount of $220,415, representing the Company's
attorney's fees in connection with the Company's efforts to enforce the SeraNova
Group's obligations under the arbitration award. On March 10, 2003, the Court
ordered HSBC to produce discovery proving its priority to the $626,247 being
held in trust. Thereafter, the Company and HSBC entered into a settlement
agreement only as to the $626,247 being held in trust whereby the Company
remitted $570,228 to HSBC, and the remaining funds were released to the Company.
The Company does not believe that the outcome of this claim will have a
materially adverse effect on the Company's business, financial condition or
results of operations.

                                     - 33 -
<PAGE>

         On October 4, 2002, the Company filed a complaint in the Superior Court
of New Jersey, Middlesex County against the SeraNova Group and HSBC seeking
compensatory, consequential and punitive damages arising out of SeraNova's and
Silverline's failure to pay certain amounts due and owing the Company,
SeraNova's fraudulent conveyance of assets and customer accounts to Silverline,
and HSBC's allegedly knowing acceptance of a fraudulent guarantee of
Silverline's debt to HSBC from SeraNova. All defendants have answered the
complaint and discovery has commenced. On August 8, 2003, SeraNova and
Silverline Technologies, Inc. filed for Chapter 7 Bankruptcy, thereby staying
this action as to these defendants. There has been no notice that Silverline
Technologies Limited is insolvent. Court-ordered mediation is in the process of
being scheduled.

New Accounting Pronouncements

         In January 2003, the Financial Accounting Standards Board ("FASB")
issued FASB Interpretation ("FIN") No. 46, "Consolidation of Variable Interest
Entities," an interpretation of Accounting Research Bulletin No. 51,
"Consolidated Financial Statements." FIN No. 46 establishes accounting guidance
for consolidation of variable interest entities that function to support the
activities of the primary beneficiary. In December 2003, the FASB revised FIN
No. 46 and issued FIN No. 46R (revised December 2003). In addition to conforming
to previously issued FASB Staff Positions, FIN No. 46R deferred the
implementation date for certain variable interest entities. This revised
interpretation was effective for all entities no later than the end of the first
reporting period that ends after March 15, 2004. The Company does not have any
investments in or contractual relationship or other business relationship with a
variable interest entity and therefore the adoption of this interpretation had
no impact on the Company's consolidated results of operations, consolidated
financial position or consolidated cash flows.


                                     - 34 -
<PAGE>

European Monetary Union (EMU)

         The Company currently only operates in certain European countries that
do not participate in the EMU. Therefore, the Company believes that the
conversion to the euro did not have a material financial impact on its
operations in Europe. However, the Company would re-evaluate the financial
impact of the conversion to the euro on its operations should those countries in
which the Company operates decide to join the EMU.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

         The Company cannot accurately determine the effect of inflation,
currency fluctuations or interest rate changes on its revenue, sales or results
of operations. Any significant effects of inflation, currency fluctuations and
changes in interest rates on the economies of the United States, Asia and Europe
could adversely impact the Company's revenues, sales and results of operations
in the future. If there were a material adverse change in the relationship
between European currencies and/or Asian currencies, particularly the Indian
Rupee, and the United States Dollar, such change would adversely affect the
results of the Company's European and/or Asian operations as reflected in the
Company's financial statements. Accordingly, the significant fluctuation in the
exchange rate between the Indian Rupee and the United States Dollar materially
affected the results of operations in the first quarter of 2004. The Company has
not previously entered into forward foreign exchange agreements to hedge its
exposure with respect to its currency risk, or any other market risk sensitive
instruments, but will continue to evaluate the merits of doing so in the future.

Item 4.  Controls and Procedures

         The Company's management, with the participation of the Company's
President and 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 March 31, 2004. 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 applied its judgment in evaluating the
cost-benefit relationship of possible controls and procedures. Based on this
evaluation, the Company's President and Chief Executive Officer and Chief
Financial Officer concluded that, as of March 31, 2004, the Company's disclosure
controls and procedures were (1) designed to ensure that material information
relating to the Company, including its consolidated subsidiaries, is made known
to the Company's President and Chief Executive Officer and Chief Financial
Officer by others within those entities, particularly during the period in which
this report was being prepared and (2) effective, in that they provide
reasonable assurance that information required to be disclosed by the Company in
the reports that it files or submits under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
SEC's rules and forms.

         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) occurred
during the fiscal quarter ended March 31, 2004 that has materially affected, or
is reasonably likely to materially affect, the Company's internal control over
financial reporting.


                                     - 35 -
<PAGE>

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

         The Company's Indian subsidiary has received assessments from the
Indian taxing authority denying tax exemptions claimed for certain revenue
earned during each of the fiscal years ended March 31, 1999 through March 31,
2002. The assessments are for approximately 42 million rupees, or $950,000. The
Company has paid approximately 30 million rupees, or $675,000, to the Indian tax
authority under protest. After consultation with its advisors, management
believes the Company is entitled to the tax exemption claimed and thus has not
recorded a provision for taxes relating to these items as of March 31, 2004. If
the Company were not successful with its appeals, which were filed in 2001, 2002
and 2004, a future charge of approximately $950,000 would be recorded and
reflected in the Company's consolidated statement of operations.

         From time to time, the Company may be party to legal or administrative
proceedings arising in the ordinary course of business. Currently, there are no
other pending legal or administrative proceedings, which could have a material
adverse impact on the Company.

Item 5.  Other Information

         Nagarjun Valluripalli, the Chairman of the Board, President, Chief
Executive Officer and a 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., a 99.8% owned and wholly-controlled
subsidiary of the Company 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 to the Company for certain of the Company's India
operations. The MOA provides for, among other things, a minimum lease period of
three years with a renewal option for an additional three years and monthly
payments of approximately $45,500 per month. A deposit in the amount of
approximately $326,087 was paid to the Owner in October 2003, with an additional
deposit of approximately $371,629 to be paid to the Owner when the premises are
handed over to Intelligroup. Prior to the execution of the MOA, the Company's
Board of Directors determined that the terms and conditions set forth in the MOA
were no less favorable to the Company than could be obtained from unrelated
third parties.

                                     - 36 -
<PAGE>

Item 6.           Exhibits and Reports on Form 8-K

         (a)      Exhibits.

                  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.

         (b)      Reports on Form 8-K.

                  On February 12, 2004, the Company furnished a Form 8-K under
                  Items 7 and 12, containing a copy of its earnings release for
                  the period ending December 31, 2003 (including financial
                  statements).

                                     - 37 -
<PAGE>

                                   SIGNATURES


         Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                               Intelligroup, Inc.


DATE: May 14, 2004             By: /s/ Nagarjun Valluripalli
                                  ----------------------------------------------
                                    Nagarjun Valluripalli,
                                    Chairman of the Board, President and Chief
                                    Executive Officer
                                    (Principal Executive Officer)


DATE: May 14, 2004             By: /s/ David J. Distel
                                  ----------------------------------------------
                                    David J. Distel
                                    Chief Financial Officer
                                    (Principal Financial and Accounting Officer)




                                     - 38 -