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**SECURITIES AND EXCHANGE COMMISSION****Washington, DC 20549**

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**FORM 10-Q**

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

**For the quarterly period ended March 31, 2006 Commission file number 0-20943**

| **INTELLIGROUP,   INC.**                                             |
|----------------------------------------------------------------------|
|                                                                      |
| **(Exact   Name of Registrant as Specified In Its Charter)**         |
|                                                                 |   |   |
| **New Jersey**                                                       |   | **11-2880025** |
|                                                                      |   |  |
| **(State or   Other Jurisdiction of Incorporation or Organization)** |   | **(I.R.S.   Employer Identification No.)** |
|                                                                 |   |   |
| **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 check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

| Yes  x | No  o |
|------------------|-----------------|

          Indicate by check mark whether the registrant is a large accelerated filer, and accelerated filer, or a non-accelerated filer  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. 

| Large accelerated filer:   o | Acceleratedfiler:   o | Non-accelerated filer:   x |
|---------------------------------------------|--------------------------------------|-------------------------------------------|

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

| Yes  o | No  x |
|------------------|-----------------|

          Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of May 10, 2006:

| **Class**                    |   | **Number of   Shares** |
|------------------------------|--------|------------------------|
|                              |   |                        |
| Common Stock, $.01 par value |   | 41,769,107             |
|                         |   |                   |
|                              |

TABLE OF CONTENTS

|                                |                                                                                                                                               | **Page** |
|-------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------|----------|
|                                |                                                                                                                                               |          |
| PART I.  FINANCIAL INFORMATION |                                                                                                                                               |
|                                |                                                                                                                                               |
| Item 1.                             | Financial Statements                                                                                                                               |     |
|                                | Condensed Consolidated Balance   Sheets as of March 31, 2006 (unaudited) and December 31, 2005                                                     | 4        |
|                                | Condensed Consolidated Statements   of Operations and Comprehensive Income (Loss) for the Three Months Ended   March 31, 2006 and 2005 (unaudited) | 5        |
|                                | Condensed Consolidated Statements   of Cash Flows for the Three Months Ended March 31, 2006 and 2005 (unaudited)                                   | 6        |
|                                | Notes to Condensed Consolidated   Financial Statements                                                                                             | 7        |
| Item 2.                             | Management’s Discussion and   Analysis of Financial Condition and Results of Operations                                                       | 17       |
| Item 3.                             | Quantitative and Qualitative   Disclosures About Market Risk                                                                                       | 25       |
| Item 4.                             | Controls and Procedures                                                                                                                            | 25       |
|                                |                                                                                                                                               |
| PART II.  OTHER INFORMATION    |                                                                                                                                               |
|                                |                                                                                                                                               |
| Item 1.                             | Legal Proceedings                                                                                                                                  | 26       |
| Item 1a.                            | Risk Factors                                                                                                                                       | 27       |
| Item 5.                             | Other Information                                                                                                                                  | 29       |
| Item 6.                             | Exhibits                                                                                                                                           | 30       |
| Signatures                          |                                                                                                                                               | 35       |

2

**FORWARD-LOOKING STATEMENTS**

*          Thisquarterly report on Form 10-Q contains forward-looking statements within themeaning of Section 27A of the Securities Act of 1933 and Section 21E of theSecurities Exchange Act of 1934. Forward-looking statements include, among otherthings, business strategy and expectations concerning industry conditions,market position, future operations, margins, profitability, liquidity andcapital resources. Forward-looking statements generally can be identified by theuse of terminology such as “may,” “will,”“expect,” “intend,” “estimate,”“anticipate” or “believe” or similar expressions or thenegatives thereof. These expectations are based on management’s assumptionsand current beliefs based on currently available information. Although theCompany believes that the expectations reflected in such statements arereasonable, it can give no assurance that such expectations will be correct. Youare cautioned not to place undue reliance on these forward-looking statements,which speak only as of the date of this quarterly report on Form 10-Q. TheCompany’s operations are subject to a number of uncertainties, risks andother influences, many of which are outside its control, and any one of which,or a combination of which, could cause its actual results of operations todiffer materially from the forward-looking statements. Important factors thatcould cause actual results to differ materially from its expectations aredisclosed in Item 2. “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations,” Item 1A. “RiskFactors” and elsewhere in this quarterly report on Form 10-Q.*

3

| **PART I**    | **FINANCIAL   STATEMENTS** |
|---------------|----------------------------|
|          |                       |
| **ITEM   1.** |                       |

**INTELLIGROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands except par value)**

|                                                                                                                                                              |   | **March 31   2006** |               | **December   31,   2005** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|--------------------|---------------------------|--------|
|                                                                                                                                                              |   |                     |               |                           |   |
|                                                                                                                                                              |   | **(Unaudited)**     |               |                      |   |
| **ASSETS**                                                                                                                                                        |   |                |               |                      |   |   |   |
| **CURRENT ASSETS**                                                                                                                                                |   |                |               |                      |   |   |   |
| Cash and cash   equivalents                                                                                                                                       |   | $                   | 10,063             |                      | $      | 5,305 |   |
| Accounts receivable,   less allowance for doubtful accounts of $1,221 and $1,329 at March 31, 2006   and December 31, 2005, respectively                          |   |                | 18,029             |                      |   | 18,533 |   |
| Unbilled services                                                                                                                                                 |   |                | 9,250              |                      |   | 9,475 |   |
| Prepaid expenses and   other current assets                                                                                                                       |   |                | 2,830              |                      |   | 3,285 |   |
|                                                                                                                                                              |   |                     |                    |                      |        |  |   |
| Total current assets                                                                                                                                              |   |                | 40,172             |                      |   | 36,598 |   |
| Property and equipment, net                                                                                                                                       |   |                | 4,383              |                      |   | 4,098 |   |
| Deferred tax and other assets                                                                                                                                     |   |                | 3,051              |                      |   | 3,090 |   |
|                                                                                                                                                              |   |                     |                    |                      |        |  |   |
| Total assets                                                                                                                                                      |   | $                   | 47,606             |                      | $      | 43,786 |   |
|                                                                                                                                                              |   |                     |                    |                      |        |  |   |
| **LIABILITIES   AND SHAREHOLDERS’ EQUITY**                                                                                                                   |   |                |               |                      |   |   |   |
| **CURRENT LIABILITIES**                                                                                                                                           |   |                |               |                      |   |   |   |
| Line of credit   borrowings                                                                                                                                       |   | $                   | —   |                      | $      | 3,427 |   |
| Accounts payable                                                                                                                                                  |   |                | 3,142              |                      |   | 5,044 |   |
| Accrued payroll and   related taxes                                                                                                                               |   |                | 10,535             |                      |   | 10,690 |   |
| Accrued expenses and   other current liabilities                                                                                                                  |   |                | 3,621              |                      |   | 4,076 |   |
| Deferred revenue                                                                                                                                                  |   |                | 1,607              |                      |   | 847 |   |
| Income taxes payable                                                                                                                                              |   |                | 995                |                      |   | 955 |   |
| Current portion of   obligations under capital lease                                                                                                              |   |                | 412                |                      |   | 257 |   |
|                                                                                                                                                              |   |                     |                    |                      |        |  |   |
| Total current   liabilities                                                                                                                                       |   |                | 20,312             |                      |   | 25,296 |   |
| Obligations under capital lease, net of current   portion                                                                                                         |   |                | 522                |                      |   | 350 |   |
| Other long-term liabilities                                                                                                                                       |   |                | 250                |                      |   | 250 |   |
|                                                                                                                                                              |   |                     |                    |                      |        |  |   |
| Total liabilities                                                                                                                                                 |   |                | 21,084             |                      |   | 25,896 |   |
|                                                                                                                                                              |   |                     |                    |                      |        |  |   |
| Commitments and contingencies                                                                                                                                     |   |                |               |                      |   |   |   |
| **Shareholders’ Equity**                                                                                                                                     |   |                |               |                      |   |   |   |
| Preferred stock, $.01   par value, 5,000 shares authorized, none issued or outstanding                                                                            |   |                | —   |                      |   | —   |   |
| Common stock, $.01 par   value, 50,000 shares authorized, 41,769 and 35,103 shares issued and   outstanding at March 31, 2006 and December 31, 2005, respectively |   |                | 418                |                      |   | 351 |   |
| Additional paid-in   capital                                                                                                                                      |   |                | 68,458             |                      |   | 58,137 |   |
| Accumulated deficit                                                                                                                                               |   |                | (42,022            | )                         |   | (40,046 | ) |
| Accumulated other   comprehensive loss                                                                                                                            |   |                | (332               | )                         |   | (552 | ) |
|                                                                                                                                                              |   |                     |                    |                      |        |  |   |
| Total shareholders’   equity                                                                                                                                 |   |                | 26,522             |                      |   | 17,890 |   |
|                                                                                                                                                              |   |                     |                    |                      |        |  |   |
| Total liabilities and   shareholders’ equity                                                                                                                 |   | $                   | 47,606             |                      | $      | 43,786 |   |
|                                                                                                                                                              |   |                     |                    |                      |        |  |   |

See accompanying notes.

4

**INTELLIGROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED) (in thousands except per share data)**

|                                                             |   | **THREE   MONTHS ENDED MARCH 31,** |   |
|------------------------------------------------------------------|--------|------------------------------------|--------|
|                                                             |   |                                    |   |
|                                                             |   | **2006**                           |   | **2005** |   |
|                                                             |   |                                    |   |  |   |
| Revenue                                                          |   | $                                  | 29,171 |   | $ | 32,436 |   |
| Cost of revenue                                                  |   |                               | 21,247 |   |   | 24,303 |   |
|                                                             |   |                                    |        |   |  |  |   |
| Gross profit                                                     |   |                               | 7,924  |   |   | 8,133 |   |
|                                                             |   |                                    |        |   |  |  |   |
| Selling, general and administrative expenses                     |   |                               | 9,150  |   |   | 8,418 |   |
| Depreciation and amortization                                    |   |                               | 579    |   |   | 437 |   |
|                                                             |   |                                    |        |   |  |  |   |
| Total operating   expenses                                       |   |                               | 9,729  |   |   | 8,855 |   |
|                                                             |   |                                    |        |   |  |  |   |
| Operating loss                                                   |   |                               | (1,805 | ) |   | (722 | ) |
| Interest income                                                  |   |                               | 6      |   |   | 16 |   |
| Interest expense                                                 |   |                               | (110   | ) |   | (73 | ) |
| Other expense                                                    |   |                               | (24    | ) |   | (219 | ) |
|                                                             |   |                                    |        |   |  |  |   |
| Loss before income tax provision (benefit)                       |   |                               | (1,933 | ) |   | (998 | ) |
| Provision for (benefit of) income taxes                          |   |                               | 42     |   |   | (307 | ) |
|                                                             |   |                                    |        |   |  |  |   |
| Net loss                                                         |   | $                                  | (1,975 | ) | $ | (691 | ) |
|                                                             |   |                                    |        |   |  |  |   |
| Loss per share:                                                  |   |                               |   |   |   |   |   |
| Basic loss per share                                             |   | $                                  | (0.06  | ) | $ | (0.02 | ) |
|                                                             |   |                                    |        |   |  |  |   |
| Weighted average number   of common shares outstanding - basic   |   |                               | 35,176 |   |   | 35,103 |   |
|                                                             |   |                                    |        |   |  |  |   |
| Diluted loss per share                                           |   | $                                  | (0.06  | ) | $ | (0.02 | ) |
|                                                             |   |                                    |        |   |  |  |   |
| Weighted average number   of common shares outstanding - diluted |   |                               | 35,176 |   |   | 35,103 |   |
|                                                             |   |                                    |        |   |  |  |   |
| Comprehensive loss                                               |   |                               |   |   |   |   |   |
| Net loss                                                         |   | $                                  | (1,975 | ) | $ | (691 | ) |
| Other comprehensive   income - currency translation adjustments  |   |                               | 220    |   |   | 178 |   |
|                                                             |   |                                    |        |   |  |  |   |
| Comprehensive loss                                               |   | $                                  | (1,755 | ) | $ | (513 | ) |
|                                                             |   |                                    |        |   |  |  |   |

See accompanying notes.

5

**INTELLIGROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands)**

|                                                                         |   | **THREE   MONTHS ENDED MARCH 31,** |   |
|------------------------------------------------------------------------------|--------|------------------------------------|--------|
|                                                                         |   |                                    |   |
|                                                                         |   | **2006**                           |   | **2005** |   |
|                                                                         |   |                                    |   |  |   |
| Cash flows from operating activities:                                        |   |                               |   |   |   |   |   |
| Net loss                                                                     |   | $                                  | (1,975 | ) | $ | (691 | ) |
| Adjustments to reconcile net loss to net cash used in   operating activities |   |                               | 892    |   |   | (1,604 | ) |
|                                                                         |   |                                    |        |   |  |  |   |
| Net cash used in operating activities                                        |   |                               | (1,083 | ) |   | (2,295 | ) |
|                                                                         |   |                                    |        |   |  |  |   |
| Cash flows from investing activities:                                        |   |                               |   |   |   |   |   |
| Purchase of property   and equipment                                         |   |                               | (331   | ) |   | (159 | ) |
|                                                                         |   |                                    |        |   |  |  |   |
| Net cash used in investing activities                                        |   |                               | (331   | ) |   | (159 | ) |
|                                                                         |   |                                    |        |   |  |  |   |
| Cash flows from financing activities:                                        |   |                               |   |   |   |   |   |
| Principal payments   under capital leases                                    |   |                               | (178   | ) |   | (213 | ) |
| Net proceeds from   private placement                                        |   |                               | 9,750  |   |   | —   |   |
| Net change in line of   credit borrowings                                    |   |                               | (3,427 | ) |   | 3,587 |   |
|                                                                         |   |                                    |        |   |  |  |   |
| Net cash provided by financing activities                                    |   |                               | 6,145  |   |   | 3,374 |   |
|                                                                         |   |                                    |        |   |  |  |   |
| Effect of foreign currency exchange rate changes on   cash                   |   |                               | 27     |   |   | (47 | ) |
|                                                                         |   |                                    |        |   |  |  |   |
| Net increase in cash and cash equivalents                                    |   |                               | 4,758  |   |   | 873 |   |
| Cash and cash equivalents - beginning of period                              |   |                               | 5,305  |   |   | 6,239 |   |
|                                                                         |   |                                    |        |   |  |  |   |
| Cash and cash equivalents - end of period                                    |   | $                                  | 10,063 |   | $ | 7,112 |   |
|                                                                         |   |                                    |        |   |  |  |   |

See accompanying notes.

6

**INTELLIGROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2006 AND 2005**

| **NOTE 1-** | **BASIS OF PRESENTATION**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|-------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|        | The condensed consolidated financial statements and   accompanying financial information as of March 31, 2006 and for the three   months ended March 31, 2006 and 2005 are unaudited and, in the opinion of   management, include all adjustments (consisting only of normal recurring   adjustments) which the Company considers necessary for a fair presentation of   the financial position of the Company at such dates and the operating results   and cash flows for those periods.  The   unaudited condensed consolidated financial statements included herein have   been prepared in accordance with accounting principles generally accepted in   the United States of America and the instructions of Form 10-Q and Rule 10-01   of Regulation S-X. Pursuant to accounting requirements of the Securities and   Exchange Commission applicable to quarterly reports on Form 10-Q, the   accompanying unaudited condensed consolidated financial statements and these   notes do not include alldisclosures required by accounting principles   generally accepted in the United States of America for audited financial   statements. Accordingly, these statements should be read in conjunction with   the accounting policies and Notes to Consolidated Financial Statements included   in the Company’s consolidated financial statements filed on Form 10-K for the   year ended December 31, 2005. |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |
|        | The amounts for the December 31, 2005 balance sheet   have been extracted from the audited consolidated financial statements   included in Form 10-K for the year ended December 31, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|        | The results of the Company’s operations for the   three months ended March 31, 2006 are not necessarily indicative of the   results of operations to be expected for the full year ending December 31,   2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| **NOTE 2-** | **SUMMARY OF SIGNIFICANT ACCOUNTING   POLICIES**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|        | ***Earnings (loss) per Common Share***                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|        | Basic net income (loss) per common share (“EPS”) is   computed using the weighted average number of common shares outstanding for   the period. Diluted earnings per share includes additional dilution from   potential common stock, such as stock issuable pursuant to the exercise of   stock options and warrants. Potential common stock are not included in the   computation of diluted earnings per share when the Company reports a loss   because to do so would be anti-dilutive for the periods presented.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|        | For the three months ended March 31, 2006 and 2005,   respectively, options to purchase 4,316,000 and 2,883,000 shares of common   stock were not included in the computation of diluted earnings (loss) per   share because inclusion would have been anti-dilutive.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|        | ***Share-Based Compensation Plans***                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|        | The Company’s share-based compensation plans are   described in Note 6.  The Company   adopted the provisions of Statement of Financial Accounting Standards No. 123   (Revised 2004), “Share-Based Payment,” (“SFAS No. 123R”) on January 1, 2006,   using the modified prospective transition method.  Under this method, share-based compensation expense recognized   in the condensed consolidated statement of operations and comprehensive loss   for the three months ended March 31, 2006 includes compensation expense for   all share-based payments granted prior to, but not yet vested, as of January   1, 2006, based on the grant date fair value originally estimated in accordance   with the provisions of Statement of Financial Accounting Standards No. 123,   “Accounting for Stock-Based Compensation”    (“SFAS No. 123”).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|        | There were two share-based payment awards granted in the first quarter of 2006, and   the Company recognizes compensation expense for all share-based payment   awards based on the grant date fair value estimated in accordance with the   provisions of SFAS No. 123R.  Because   the Company elected to use the modified prospective transition method,   results for prior periods have not been restated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |

7

**INTELLIGROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2006 AND 2005**

| **NOTE 2-** | **SUMMARY OF SIGNIFICANT ACCOUNTING   POLICIES (CONTINUED)**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|-------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |
|        | ***Share-Based Compensation Plans   (Continued)***                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|        | Prior to the adoption of   SFAS No. 123R, share-based employee compensation expense related to stock   options was not recognized in the condensed consolidated statement of   operations and comprehensive loss if the exercise price of the option was at   least equal to the market price of common stock on the grant date, in   accordance with the measurement and recognition provisions of Accounting   Principles Board Opinion No. 25, “Accounting for Stock Issued to   Employees,” as permitted by SFAS No. 123.    As a result, the recognition of share-based compensation expense was   generally limited to the expense attributed to modifications of granted   options.  In accordance, with SFAS No.   123 and Statement of Financial Accounting Standards No. 148, “Accounting for   Stock-Based Compensation – Transition and Disclosure,” (“SFAS No. 148”) the   Company provided pro forma net income or loss and net earnings or loss percommon share disclosures for each period prior to the adoption of SFAS No   123R as if it had applied the fair value-based method in measuring   compensation expense for all share-based compensation plans, including stock   options.  Had compensation costs for   stock-based compensation plans been accounted for using the fair value method   of accounting described by SFAS No. 123, net loss and basic and diluted loss   per common share for the three months ended March 31, 2005 would have been as   follows (in thousands, except per share data): |

| Net loss - as reported                                                                                                                      |   | $      | (691   | )      |
|---------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
| Deduct: Total stock-based   employee compensation expense determined under fair value based method for   awards, net of related tax effects |   |   | (723   | )      |
|                                                                                                                                        |   |        |        |   |
| Net loss - pro forma                                                                                                                        |   | $      | (1,414 | )      |
|                                                                                                                                        |   |        |        |   |
| Loss per common share -   basic and diluted:                                                                                                |   |   |   |   |
| As   reported                                                                                                                               |   | $      | (0.02  | )      |
|                                                                                                                                        |   |        |        |   |
| Pro   forma                                                                                                                                 |   | $      | (0.04  | )      |
|                                                                                                                                        |   |        |        |   |

|   | The fair value of each option award is estimated on   the date of grant using the Black-Scholes option valuation model.  The Company recognizes the fair value of   each option as compensation   expense ratably using the straight-line attribution method over the service   period (generally the vesting period).    The Black-Scholes model incorporates the following assumptions:                                                                                                                                                                                                     |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | •     Expected volatility –   the Company estimates the volatility of common stock at the date of grant   using a combination of unadjusted historical volatility, historical   volatility adjusted for periods of unusual stock price activity, and other   factors.                                                                                                                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | •     Expected term – the   Company estimates the expected term of options granted based on a combination   of vesting schedules, life of the option, historical experience and estimates   of future exercise behavior patterns.                                                                                                                                                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | •     Risk-free interest   rate – the Company estimates the risk-free interest rate using the U.S.   Treasury yield curve for periods equal to the expected life of the options in   effect at the time of grant.                                                                                                                                                                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | •     Dividends – the   Company uses an expected dividend yield of zero since it has never declared   or paid any dividends on its capital stock. The Company intends to retain any   earnings to fund future growth and the operation of its business, and,   therefore does not anticipate paying any cash dividends in the foreseeable   future.                                                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | Additionally, the Company estimates forfeitures at   the time of grant and revise those estimates in subsequent periods if actual   forfeitures differ from those estimates.    It uses a combination of historical data, demographic characteristics   and other factors to estimate pre-vesting option forfeitures and record   share-based compensation expense only for those awards that are expected to   vest.  For purposes of calculating pro   forma information under SFAS No. 123 for periods prior to January 1, 2006,   the Company accounted for forfeitures as they occurred. |

8

**INTELLIGROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2006 AND 2005**

| **NOTE 3-** | **LINE OF CREDIT**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|-------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|        |           On   May 31, 2000, the Company and PNC Bank, N.A. (the “Bank”) entered into a   three-year revolving credit facility (the “Credit Facility”). In July 2003,   the Credit Facility was extended until May 31, 2006. The Credit Facility is   currently comprised of a revolving line of credit pursuant to which the   Company could borrow up to $15,000,000 at the bank’s prime rate per annum.  The Credit Facility is collateralized by   substantially all of the assets of the Company’s United States-based   operations. The maximum borrowing availability under the line of credit is   based upon a percentage of eligible billed and unbilled accounts receivable,   as defined.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |
|        |           The   Company was in compliance with the loan agreement related to the Credit   Facility as of March 31, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|        |           As   of March 31, 2006, the Company had no outstanding borrowings under the Credit   Facility. The Company estimates undrawn availability under the Credit   Facility to be $12.9 million as of March 31, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| **NOTE 4-** | **RELATED PARTY TRANSACTIONS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|        |           Nagarjun   Valluripalli, the Company’s former Chairman of the Board, President, Chief   Executive Officer and a former Director of the Company is an owner (the   “Owner”) of real estate located at 5-9-22, Secretariat Road in Hyderabad,   India.  On October 2, 2003,   Intelligroup Asia Private Ltd.    (“IGA”) and the Owner executed a memorandum of understanding (the   “MOA”) relating to a proposed lease whereby the Owner would lease the 5th   and 6th floors of the property (“Premises”) to the Company for   certain of the Company’s India operations.    As contemplated in the MOA, on June 18, 2004, the Owner and IGA   executed leases for the Premises and the amenities, furnishings and fittings.   The leases provide for a minimum lease period of three years with a renewal   option for an additional three years.    Theleases provide for a three-month notice period for either party to   terminate the lease.  Under the terms   of the lease for the amenities, IGA paid a deposit of 5.8 million rupees   (approximately $133,000) and advance lease rentals of 11.6 million rupees   (approximately $266,000) upon the handing over of the amenities and shall pay   monthly rent of 1.2 million rupees (approximately $27,000).  Under the terms of the lease for the   Premises, IGA paid a deposit of 4.7 million rupees (approximately $106,000)   and advance lease rentals of 9.3 million rupees (approximately $213,000) upon   the handing over of the Premises and shall pay monthly rent of 0.9 million   rupees (approximately $21,000).  Rent   expense for the three months ended March 31, 2006 towards the said lease was   8.0 million rupees (approximately $180,000). There are no advance lease rentals   as of March 31, 2006.  As of April 16,   2005 following the termination of his employment with the Company and hisresignation from the Company’s Board of Directors, the Owner was no longer a   related party. |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|        |           Effective   August 1, 2005, IGA entered into an agreement to lease certain premises for   certain of the Company’s India operations from ILABS Hyderabad Technology   Center Pvt. Ltd. (“iLabs”), a party with which two members of the Company’s   Board of Directors, Srini Raju and Sandeep Reddy, are affiliated.  The terms of the lease agreement provide   for, among other things: (1) a minimum lease period of five years with an   option for two three-year renewal periods; (2) payment of a security deposit   equivalent to nine (9) months’ rent in the amount of 15.3 million Indian   rupees (approximately $352,000); (3) payment of monthly lease fees in the   amount of 1.7 million Indian rupees (approximately $40,000), subject to   yearly five percent (5%) escalation; and (4) monthly operations and   maintenance fees of 0.3 million Indian rupees (approximately $6,500).  Rentexpense for the three months ended   March 31, 2006 towards the said lease was 6.3 million rupees (approximately   $143,000). There are no advance lease rentals as of March 31, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |

9

**INTELLIGROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2006 AND 2005**

| **NOTE 5-** | **LITIGATION**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|-------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |
|        | ***India Tax   Assessmen****t*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |
|        |           The   Company’s India subsidiary has received tax assessments from the India taxing   authority denying tax exemptions claimed for certain revenue earned and   disallowing certain expenses claimed during the India subsidiary’s fiscal   years ended March 31, 1998 through March 31, 2003. The combined revised   additional tax demands were for 32.9 million Indian rupees (or approximately   $0.7 million) for those years. They include tax penalties and interest for   the fiscal years ended March 31, 2001 and 2002 of 1.7 million Indian rupees   (or approximately $38,000) and 0.7 million Indian rupees (or approximately   $15,000), respectively. Against the total additional tax demand of $0.7   million, the Company has made payments of approximately $0.8 million under   protest to the India tax authority. The resulting overpayment is refundable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |
|        |           The   Company is currently appealing at the Appellant Tribunal stage for the fiscal   years ended March 31, 1998 through March 31, 2002.  For the fiscal year ended March 31, 2003, the Company is   planning to file an appeal with the Commissioner of Income Tax (Appeals) against   the assessment order passed. In the event the Company’s appeal is not   successful, there will not be any additional future cash outlay.    However, in the event the Company is successful, an amount up to   approximately $0.8 million could be refunded to the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |
|        | ***Shareholder Class   Actions***                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |
|        |           On   or about October 12, 2004, the first of six class action lawsuits was filed,   on behalf of a purported class of investors who purchased the Company’s   common stock, against the Company and former officers Arjun Valluripalli,   Nicholas Visco, Edward Carr and David Distel (“Defendants”) in the United   States District Court, District of New Jersey (“District of New Jersey”). In   August 2005, the United States District Court, District of New Jersey consolidated   the six class actions (the “Shareholder Class Action”) and appointed a lead   plaintiff.  Plaintiffs subsequently   dropped Mr. Distel and Mr. Carr from the Shareholder Class Action, failing to   name either of them as a defendant in the amended consolidated complaint   filed on or about October 10, 2005.    The Shareholder Class Action generally alleges violations of federal   securities laws,including allegations that the Defendants made materially   false and misleading statements regarding the Company’s financial condition   and that the Defendants materially overstated financial results by engaging   in improper accounting practices.  The   Class Period alleged is May 1, 2001 through September 24, 2004.  The Shareholder Class Action generally   seeks relief in the form of unspecified compensatory damages and reasonable   costs, expenses and legal fees.  On   December 5, 2005, Defendants filed motions to dismiss the amended   consolidated complaint.  On February   10, 2006, prior to the hearing on Defendants’ motions to dismiss, Plaintiffs   filed a second amended consolidated complaint.  On March 27, 2006, Defendants filed motions to dismiss the   second amended consolidated complaint. |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |
|        |           There   is no other litigation pending to which the Company is a party or to which   any of its property is subject which would have a material impact on the   Company’s consolidated financial condition, results of operations or cash   flows in the event the Company was unsuccessful in such litigation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |
|        |           Legal   fees arising in connection with litigation are expensed as incurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |

10

**INTELLIGROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2006 AND 2005**

| **NOTE 6-** | **SHAREHOLDERS’ EQUITY**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|-------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |
|        | **2006   Private Placement**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|        |           On   March 31, 2006, the Company completed a $10 million private placement   transaction whereby SOFTBANK Asia Infrastructure Fund, L.P., an affiliate of   SOFTBANK Corporation, acquired an additional 3,333,333 shares of the   Company’s common stock and Venture Tech Assets Pvt. Ltd. acquired an   additional 3,333,334 shares of the Company’s common stock, at a share price   of $1.50 (the “2006 Private Placement”).    The 2006 Private Placement was approved by a special committee of   disinterested members of the Board of Directors and generated $9.7 million of   proceeds to the Company, net of transaction expenses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |
|        | **Share-Based   Compensation Plans**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|        |           The   Company has four share-based compensation plans that reserve common shares   for issuance to key employees, consultants and directors, as described   below.  The compensation cost that has   been charged against income for those plans was $0.6 and $0.7 million for the   three months ended March 31, 2006 and 2005, respectively.  The Company did not recognize income tax   benefit in the condensed consolidated statement of operations and   comprehensive income for the first three months of 2006 and 2005,   respectively, due to its history of net operating losses and current net   losses.  The Company received no cash   from option exercises under share-based compensation plans for each of the   three months ended March 31, 2006 and 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |
|        | *Stock Options:*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |
|        |           The   2004 Equity Incentive Award Plan (“2004 Plan”) was approved by the Company’s   Board of Directors on April 5, 2004 and adopted by the Company’s shareholders   on June 8, 2004. The maximum number of shares of Common Stock reserved for   issuance under the 2004 Plan shall be equal to 1,100,000, plus the number of   shares of Common Stock which are or become available for issuance under the   Company’s 1996 Stock Plan (the “Prior Plan”), and which are not issued under   such plan.  Those eligible to receive   stock option grants or stock purchase rights under the 2004 Plan include   employees, non employee Directors and consultants.  The Compensation Committee of the Board of Directors of the   Company administers the 2004 Plan.    Subject to the provisions of the 2004 Plan, the administrator of the   2004 Plan has the discretion to determine theoptionees and/or grantees, the   type of equity awards to be granted (incentive stock options and nonqualified   stock options, restricted stock, stock appreciation rights, performance   shares, performance stock units, stock payments, deferred stock, restricted   stock units, other stock-based awards, and performance-based awards), the   vesting provisions, the terms of the grants and such other related provisions   as are consistent with the 2004 Plan.    The exercise price of a stock option may not be less than the fair   market value per share of the Common Stock on the date of grant or, in the   case of an optionee receiving incentive stock option award who beneficially   owns 10% or more of the outstanding capital stock of the Company, not less   than 110% of the fair market value per share on the date of grant.  Notwithstanding the foregoing, the   Compensation Committee of the Board may in its discretion issue non-qualified   stock options to purchase up to 500,000 shares of CommonStock with an option   exercise price of less than 100% of the fair market value of the Common Stock   on the date of grant.  The options   terminate not more than ten years from the date of grant, subject to earlier   termination on the optionee’s death, disability or termination of employment   with the Company, provided however that the term of any incentive stock   options granted to a holder of more than 10% of the outstanding shares of   capital stock may be no longer than five years.  Options are not assignable or otherwise transferable except by   will or the laws of descent and distribution.  The Compensation Committee may provide that if a Change of   Control (as defined in the 2004 Plan) of the Company occurs and any awards   made pursuant to the 2004 Plan are not converted, assumed or replaced by a   successor, then all outstanding awards that are not converted, assumed or   replaced may become fully vested and exercisable.  The Compensation Committee, subject toapproval of the Board,   may terminate, amend, or modify the 2004 Plan at any time; provided, however,   that stockholder approval must be obtained for any amendment to the extent   necessary or desirable to comply with any applicable law, regulation or stock   exchange rule, to increase the number of shares available under the 2004   Plan, to permit the Compensation Committee to grant options with an exercise   price below fair market value on the date of grant, or to extend the exercise   period for an option beyond ten years from the date of grant. The 2004 Plan   terminates on June 8, 2014 unless terminated earlier by the Company’s Board   of Directors. |

11

**INTELLIGROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2006 AND 2005**

| **NOTE 6-** | **SHAREHOLDERS’ EQUITY  (CONTINUED)**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|-------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
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|        | **Share-Based   Compensation Plans (Continued)**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|        |           The   1996 Stock Plan (“1996 Plan”) was adopted by the Board of Directors and   approved by the shareholders of the Company on June 3, 1996, and became   effective on July 12, 1996.  Those   eligible to receive stock option grants or stock purchase rights under the   1996 Plan include employees, non employee Directors and consultants.  The Compensation Committee of the Board of   Directors of the Company administers the 1996 Plan.  Subject to the provisions of the 1996 Plan, the administrator   of the 1996 Plan has the discretion to determine the optionees and/or   grantees, the type of options to be granted (incentive stock options or   nonqualified stock options), the vesting provisions, the terms of the grants   and such other related provisions as are consistent with the 1996 Plan.  The exercise price of an incentive stock   option may not be less than the fair marketvalue per share of the Common   Stock on the date of grant or, in the case of an optionee who beneficially   owns 10% or more of the outstanding capital stock of the Company, not less   than 110% of the fair market value per share on the date of grant.  The exercise price of a nonqualified stock   options granted under the 1996 Plan may not be less than 85% of the fair   market value per share of the Common Stock on the date of grant or, in the   case of an optionee who beneficially owns 10% or more of the outstanding   capital stock of the Company, not less than 110% of the fair market value per   share on the date of grant.  The   purchase price of shares issued pursuant to stock purchase rights may not be   less than 50% of the fair market value of such shares as of the offer date of   such rights.  The options terminate   not more than ten years from the date of grant, subject to earlier   termination on the optionee’s death, disability or termination of employment with   theCompany, provided however that the term of any options granted to a   holder of more than 10% of the outstanding shares of capital stock may be no   longer than five years.  Options are   not assignable or otherwise transferable except by will or the laws of   descent and distribution.  In the   event of a merger or consolidation of the Company with or into another   corporation or the sale of all or substantially all of the Company’s assets   in which the successor corporation does not assume outstanding options or   issue equivalent options, the Board of Directors of the Company is required   to provide accelerated vesting of outstanding options.  As of June 8, 2004, the Company ceased   granting options under the 1996 Plan. |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|        |           The   1996 Non-Employee Director Plan was approved by the Board of Directors on   June 3, 1996. The shareholders adopted the Company’s 1996 Non-Employee   Director Stock Option Plan (the “Director Plan”) and it became effective on   July 12, 1996. The Director Plan provides for the grant of options to   purchase a maximum of 140,000 shares of Common Stock of the Company to   non-employee Directors of the Company.  The Board of Directors   administers the Director Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|        |           In   October and November 2000, the Company’s Board of Directors approved grants   of options for equity compensation plans not approved by security holders   (the “Out of Plan” options).  Each of   the Out of Plan options vest in four equal semiannual installments beginning   on the first six-month anniversary of the date of grant and expire on the   tenth anniversary of the date of grant. The price of the options granted   pursuant to the Out of Plan options is equal to the fair market value of the   shares on the date of grant.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|        |           A   summary of stock option activity as of March 31, 2006, and changes during the   three months then ended is presented below:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |

12

**INTELLIGROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2006 AND 2005**

| **NOTE 6-** | **SHAREHOLDERS’ EQUITY  (CONTINUED)**  |
|-------------|--------------------------------------------------|
|        |                                             |   |
|        | **Share-Based   Compensation Plans (Continued)** |

|                                  |   | **Shares(in thousands)** |               | **Weighted-AverageExercisePrice** |   | **Weighted-AverageRemainingContractualTerm(Years)** |   | **Aggregate   Intrinsic   Value   (in thousands)** |   |
|---------------------------------------|--------|--------------------------|--------------------|-----------------------------------|--------|-----------------------------------------------------|--------|----------------------------------------------------|--------|
|                                  |   |                          |               |                                   |   |                                                     |   |                                                    |   |
| Outstanding as of December   31, 2005 |   |                     | 4,001              |                              | $      | 2.32                                                |   |                                               |   |   |   |   |   |
| Granted                               |   |                     | 560                |                              |   | 1.57                                                |   |                                               |   |   |   |   |   |
| Exercised                             |   |                     | —   |                              |   | —                                    |   |                                               |   |   |   |   |   |
| Canceled, forfeited or   expired      |   |                     | (245               | )                                 |   | 1.55                                                |   |                                               |   |   |   |   |   |
|                                  |   |                          |                    |                              |        |                                                     |   |                                               |   |   |   |   |   |
| Outstanding as of March 31,   2006    |   |                     | 4,316              |                              | $      | 2.27                                                |   |                                               | 8.4    |   | $ | 206 |   |
|                                  |   |                          |                    |                              |        |                                                     |   |                                                    |        |   |  |  |   |
| Exercisable as of March 31,   2006    |   |                     | 1,346              |                              | $      | 2.79                                                |   |                                               | 6.5    |   | $ | 56 |   |
|                                  |   |                          |                    |                              |        |                                                     |   |                                                    |        |   |  |  |   |

|   |           The   fair value of option grants is estimated on the date of grant using the   Black-Scholes option-pricing model using the following weighted average   assumptions: |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                    |   | **Three Months Ended March 31,** |              |
|-------------------------|--------|----------------------------------|-------------------|
|                    |   |                                  |              |
|                    |   | **2006**                         |              | **2005** |   |
|                    |   |                                  |              |  |   |
| Expected Volatility     |   |                             | 104.2%            |   |   | 107.0% |   |
| Expected Lives          |   |                             | 1.00 - 3.23 years |   |   | 2.10 years |   |
| Risk free Interest Rate |   |                             | 4.79%             |   |   | 3.82% |   |
| Expected Dividends      |   |                             | 0%                |   |   | 0% |   |

|   |           The   weighted average grant date fair value of options granted during the three   months ended March 31, 2006 and 2005 was $0.95 and $4.24, respectively.  The Company calculated intrinsic value for   those options that had an exercise price lower than the market price of   common shares as of March 31, 2006.    The aggregate intrinsic value of options outstanding as of March 31,   2006 is calculated as the difference between the exercise price of the   underlying options and the market price of common shares for the shares that   were in-the-money at that date.  There   were no options exercised during the three months ended March 31, 2006 and,   therefore, no intrinsic value of exercised options. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |           The   Company estimates forfeitures at the time of grant and revises those   estimates in subsequent periods if actual forfeitures differ from those   estimates.  It uses a combination of   historical data, demographic characteristics and other factors to estimate   pre-vesting option forfeitures and record share-based compensation expense   only for those awards that are expected to vest.  The Company has calculated its forfeiture rate at 18.1% for the   three months ended March 31, 2006.    For purposes of calculating pro forma information under SFAS No. 123   for periods prior to January 1, 2006, the Company accounted for forfeitures   as they occurred.                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |           As   of March 31, 2006, there was $3.4 million of total unrecognized compensation   cost related to the stock options.    That cost is expected to be recognized over the next four years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |           In   November 2005, the FASB issued FASB Staff Position No. FAS 123(R)-3 (“FSP   123(R)-3”), “Transition Election Related to Accounting for the Tax Effects of   Share-Based Payment Awards”. FSP 123(R)-3 provides an elective alternative   transition method for calculating the pool of excess tax benefits available   to absorb tax deficiencies recognized subsequent to the adoption of FAS   123(R). Companies may take up to one year from the effective date of FSP   123(R)-3 to evaluate the available transition alternatives and make a   one-time election as to which method to adopt. The Company is currently in   the process of evaluating the alternative methods.                                       |

13

**INTELLIGROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2006 AND 2005**

| **NOTE 6-** | **SHAREHOLDERS’ EQUITY  (CONTINUED)**                                                                                                                                                                                                                                                                                                                                                                                                                |
|-------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|        | **Share-Based   Compensation Plans (Continued)**                                                                                                                                                                                                                                                                                                                                                                                                               |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |
|        | *Impact of the Adoption of SFAS No.   123R:*                                                                                                                                                                                                                                                                                                                                                                                                                   |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |
|        |           The   Company adopted the provisions of SFAS No. 123R on January 1, 2006.  See Note 2 for information regarding the   adoption of SFAS No. 123R.  The   following table summarizes the share-based compensation expense for stock   options that were recorded in accordance with SFAS No. 123R for the three   months ended March 31, 2006 (in thousands except per share information): |

| Cost of Revenue                                |   | $      | 224    |   |
|------------------------------------------------|--------|--------|--------|--------|
| Selling, general and   administrative expenses |   |   | 415    |   |
|                                           |   |        |        |   |
| Increase to net loss                           |   | $      | (639   | )      |
|                                           |   |        |        |   |
| Increase to loss per common   share:           |   |   |   |   |
| Basic and diluted                              |   | $      | (0.02  | )      |
|                                           |   |        |        |   |

|        |           Prior   to the adoption of SFAS No. 123R, all tax benefits for deductions resulting   from the exercise of stock options were reported as operating cash flows on   the statement of cash flows.  SFAS No.   123R requires the cash flows resulting from the tax benefits for tax   deductions in excess of the compensation expense recorded for those options   to be classified as financing cash flows.    There were no exercises of stock options during the three months ended   March 31, 2006 and, consequently, no tax benefits recorded. |
|-------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |
| **NOTE 7-** | **SEGMENT DATA AND GEOGRAPHIC   INFORMATION**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |
|        | The Company operates in one industry segment,   information technology solutions and services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|        | The Company has four reportable geographic operating   segments, which are organized and managed on a geographical basis, as   follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

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

|   | Each of the geographic segments has a Managing   Director, or equivalent position, who reports directly to the Chief Executive   Officer (“CEO”). Currently, the CEO and President is fulfilling the   requirements of this position in the US. The CEO has been identified as the   Chief Operating Decision Maker (“CODM”) because he has final authority over   resource allocation decisions and performance assessment. The CODM regularly   receives certain discrete financial information about the geographical   operating segments, including primarily revenue and operating income, to evaluate   segment performance. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | Accordingly, the Company’s consolidated operating   results for the three months ended March 31, 2006 and 2005 and financial   position as of March 31, 2006 and 2005 are presented in the following   geographic segments (in thousands):                                                                                                                                                                                                                                                                                                                                                                                                         |

14

**INTELLIGROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2006 AND 2005**

| **NOTE 7-** | **SEGMENT DATA AND GEOGRAPHIC   INFORMATION (CONTINUED)** |
|-------------|-----------------------------------------------------------|

|                                      |   | **United   States** |   | **India** |   | **Europe** |   | **Japan** |   | **Total** |   |
|-------------------------------------------|--------|---------------------|--------|-----------|--------|------------|--------|-----------|--------|-----------|--------|
|                                      |   |                     |   |           |   |            |   |           |   |           |   |
| ***Three months   ended March 31, 2006*** |   |                |   |      |   |       |   |      |   |      |   |   |   |   |   |   |
| Revenue                                   |   | $                   | 19,036 |      | $      | 7,408      |   | $         | 1,551  |      | $      | 1,176 |   | $ | 29,171 |   |
| Operating income (loss)                   |   |                | (2,787 | )         |   | 836        |   |      | (41    | )         |   | (84 | ) |   | (2,076 | ) |
| ***Three months   ended March 31, 2005*** |   |                |   |      |   |       |   |      |   |      |   |   |   |   |   |   |
| Revenue                                   |   | $                   | 22,893 |      | $      | 6,791      |   | $         | 1,950  |      | $      | 802 |   | $ | 32,436 |   |
| Operating income (loss)                   |   |                | (1,592 | )         |   | 1,205      |   |      | (148   | )         |   | (187 | ) |   | (722 | ) |

| **NOTE   8-** | **COMMITMENTS   AND CONTINGENCIES**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|---------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |
|          | ***Tax-Free Spin-off   of SeraNova***                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |
|          |           On   July 5, 2000, the Company distributed SeraNova common stock to its   shareholders in a transaction that was structured to be and reported as a   tax-free spin-off pursuant to Section 355 of the Internal Revenue Code (“IRC   Section 355”). For distributions of stock qualifying under IRC Section 355,   neither the Company nor the Company’s shareholders recognize any gain or   income in connection with the transaction. The Company and SeraNova executed   a Tax Sharing Agreement, dated January 1, 2000 (“Tax Sharing Agreement”),   whereby SeraNova 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. However, subsequently SeraNova and its parent company,   Silverline Technologies, Inc. filed for Chapter 7 Bankruptcy. Additionally,   as a condition to the distribution, SeraNovamanagement represented that   there was no present plan, nor intent to enter into a subsequent transaction   that would disturb the intended tax–free nature of the distribution. |
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |
|          |           On   October 27, 2000, SeraNova and Silverline Technologies, Inc. announced that   they had entered into an agreement and plan of merger, under which Silverline   Technologies, Inc. would acquire control of SeraNova in exchange for American   depository shares of Silverline.    Subsequently, SeraNova and Silverline Technologies, Inc. filed for   Chapter 7 Bankruptcy on August 8, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|          |           IRC   Section 355(e) provides that the Company may be required to recognize a gain   equal to the excess of the fair market value of the SeraNova shares   distributed over their tax basis if the distribution is part of a plan   pursuant to which one or more persons acquire 50% or more of SeraNova common   stock within two years of the distribution date. Should the spin-off ultimately   be construed as taxable, the resultant tax liability could be up to $65.0   million, plus interest and penalties, depending on the facts that ultimately   are established. No future benefits would inure to the Company as a result of   imposition of a tax on the SeraNova distribution, and no reserve has been   recorded for this potential tax.    However, should such a tax liability be imposed, the Company may be   able to utilize some of its existing net operating losses to mitigate this   tax liability, an issue thatis currently being analyzed.                                                                                                                                                         |

15

**INTELLIGROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 2006 AND 2005**

| **NOTE   8-** | **COMMITMENTS   AND CONTINGENCIES (CONTINUED)**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|---------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |
|          | ***Employment   Agreements***                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|          |           As   of March 31, 2006, the Company had employment agreements with certain of its   executive officers, which provide for minimum payments in the event of   termination for reasons other than just cause.  The aggregate amount of compensation commitment in the event of   termination under such agreements is approximately $1.3 million.  In addition, Intelligroup Asia Pvt. Ltd.   (“IGA”) had entered into Severance Packages totaling approximately $0.6   million with certain former members of the IGA management team.  Pursuant to the terms of the Agreement for   Severance Package, the Severance Package is activated upon the fulfillment of   certain events, including a change in management of the Company or IGA.  In April 2005, following the termination   of the Company’s Chief Executive Officer, three members of the IGA management   team, each of whom had a Severance Package,resigned.  Except as set forth below, to date, the   Company has not received any claim for payment of the Severance Package.  In or about September 2005, two former   members of the IGA management team sent IGA notices under Section 433 and 434   of the Companies Act, 1956 for payment of such Severance Package. The Company   does not believe that such severance amount is owed. In the event the Company   is unsuccessful in defending against such claim for payment, the Company   would owe approximately $0.5 million to such individuals. |

16

| **Item 2** | **Management’s   Discussion and Analysis of Financial Condition and Results of Operations** |
|------------|--------------------------------------------------------------------------------------------------|

**Overview**

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

**Key Factors in Evaluating the Company’s Financial Performance**

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

*Revenue*

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

*Fixed Price Projects*

          The Company has provided services on certain projects in which it, at the request of the clients, offers a fixed price for its services. For three months ended March 31, 2006 and 2005, revenue derived from projects under fixed price contracts represented approximately 39% and 42% of the Company’s total revenue. No single fixed price project was material to the Company’s business during 2006 or 2005. The Company believes that, as it pursues its strategy of providing application management services to customers, it will continue to offer fixed price projects. The Company believes that there are certain risks related to fixed price arrangements and thus prices such arrangements to reflect the associated risk. There can be no assurance that the Company will be able to complete such projects within the fixed price timeframes. The failure to perform within such fixed price contracts, if entered into,could have a material adverse effect on the Company’s business, financial condition and results of operations. 

17

*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, 2006 and 2005, the Company’s ten largest customers accounted for in the aggregate approximately 55% and 49% of its revenue, respectively. During both of the three months ended March 31, 2006 and 2005, one customer accounted for 10% or more of revenue.  For the three months ended March 31, 2006 and 2005, 20% and 12%, respectively, of the Company’s revenue was generated by providing supplemental resources directly to the end-customer or as part of a consulting team assembled by another IT consulting firm. The increase in supplemental resources revenue was primarily the result of increased resources required by a few customers.  There can be no assurance that such IT consulting firms will continue toengage the Company in the future at current levels of retention, if at all. 

*Software Partners*

          For the three months ended March 31, 2006 and 2005, 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    March 31, 2006** |   | **Three   Months Ended    March 31, 2005** |   |
|       |   |                                            |        |   |  |  |   |
|       |   |                                       |   |   |   |   |   |
| SAP        |   |                                       | 75     | % |   | 74 | % |
| PeopleSoft |   |                                       | 14     | % |   | 19 | % |
| Oracle     |   |                                       | 5      | % |   | 2 | % |
| e-Business |   |                                       | 6      | % |   | 5 | % |

*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 Santa Clara (California). The Company also maintains local offices to serve the markets in India, the United Kingdom, Denmark and Japan.  The Company leases its headquarters in Edison, New Jersey. Such lease has an initial term of ten (10) years, which commenced in September 1998.

*Expenses*

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

**Application of Critical Accounting Policies**

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

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

          There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, included in our 10-K for the fiscal year ended December 31, 2005, except as follows:

18

*Share-Based Compensation Plans*

          The Company has share-based compensation plans that reserve common shares for issuance to key employees and directors.  Prior to January 1, 2006, it accounted for such share-based employee compensation plans under the measurement and recognition provisions of APB No. 25, “Accounting for Stock Issued to Employees,” as permitted by SFAS No.  123, “Accounting for Stock-Based Compensation.”  Accordingly, the Company used the intrinsic value method of accounting for stock option awards and did not recognize compensation expense for stock options that were granted at an exercise price equal to or greater than the market price of common stock on the date of grant.  In accordance, with SFAS No. 123 and SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure,” the Company provided pro forma net income or loss and net earnings or lossper common share disclosures for each period prior to January 1, 2006, as if it had applied the fair value-based method in measuring compensation expense for share-based compensation plans.  

          Effective January 1, 2006, the Company adopted the fair value provisions of SFAS No. 123R, “Share-Based Payment,” using the modified prospective transition method.  Under this method, it will recognize share-based compensation expense for (i) all share-based payments granted prior to, but not yet vested as of, January 1, 2006, based on the grant date fair value originally estimated in accordance with the provisions of SFAS No. 123, and (ii) all future share-based payment awards based on the grant date fair value estimated in accordance with the provisions of SFAS No. 123R.  Because the Company elected to use the modified prospective transition method, results for prior periods have not been restated. 

          The compensation cost that has been charged against income for share-based compensation plans was $0.9 million for the three months ended March 31, 2006.  Due to the Company’s net operating losses carried forward, and current net losses, there was no income tax benefit recognized in the condensed consolidated statement of operations and comprehensive income for the three months ended March 31, 2006.  The Company received no cash from option exercises under share-based compensation plans for the three months ended March 31, 2006.

          As of March 31, 2006, there was $3.4 million of total unrecognized compensation cost related to stock options.  Those costs are expected to be recognized the next four years.    

          The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model.  The Company recognizes the fair value of each option as compensation expense ratably using the straight-line attribution method over the service period (generally the vesting period).  The Black-Scholes model incorporates the following assumptions: 

|   | • | Expected volatility – the Company estimates the   volatility of common stock at the date of grant using a combination of   unadjusted historical volatility, historical volatility adjusted for periods   of unusual stock price activity, and other factors.                                                                               |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                             |
|   | • | Expected term – the Company estimates the expected   term of options granted based on a combination of vesting schedules, life of   the option, historical experience and estimates of future exercise behavior   patterns.                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
|   | • | Risk-free interest rate – the Company estimates the   risk-free interest rate using the U.S. Treasury yield curve for periods equal   to the expected life of the options in effect at the time of grant.                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                             |
|   | • | Dividends – the Company uses an expected dividend   yield of zero since it has never declared or paid any dividends on its   capital stock. The Company intends to retain any earnings to fund future   growth and the operation of its business and, therefore, does not anticipate   paying any cash dividends in the foreseeable future. |

Additionally, the Company estimates forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates.  It uses a combination of historical data, demographic characteristics and other factors to estimate pre-vesting option forfeitures and record share-based compensation expense only for those awards that are expected to vest.  For purposes of calculating pro forma information under SFAS No. 123 for periods prior to January 1, 2006, the Company accounted for forfeitures as they occurred.

          If factors change and the Company employs different assumptions in the application of SFAS No. 123R in future periods, the compensation expense that the Company records under SFAS No. 123R for future awards may differ significantly from what it has recorded in the current period.  There is a high degree of subjectivity involved in selecting the option pricing model assumptions used to estimate share-based compensation expense under SFAS No. 123R.

19

Option pricing models were developed for use in estimating the value of traded options that have no vesting or hedging restrictions, are fully transferable and do not cause dilution.  Because share-based payments have characteristics significantly different from those of freely traded options, and because changes in the subjective input assumptions can materially affect estimates of fair values, existing valuation models may not provide reliable measures of the fair values of share-based compensation.  Consequently, there is a risk that the Company’s estimates of the fair values of share-based compensation awards on the grant dates may bear little resemblance to the actual values realized upon the exercise, expiration or forfeiture of those share-based payments in the future.  Stock options may expire worthless or otherwise result in zero intrinsic value as compared to the fair values originally estimated on the grant date and reported in theCompany’s financial statements.  Alternatively, value may be realized from these instruments significantly in excess of the fair values originally estimated on the grant date and reported in the Company’s financial statements.  

          There are significant differences among valuation models.  This may result in a lack of comparability with other companies that use different models, methods and assumptions.  There is also a possibility that the Company will adopt different valuation models in the future.  This may result in a lack of consistency in future periods and may materially affect the fair value estimate of share-based payments.

**Results of Operations - Consolidated**

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

|                                           |   | **Percentage   of Revenue**        |               |
|------------------------------------------------|--------|------------------------------------|--------------------|
|                                           |   |                                    |               |
|                                           |   | **Three   Months Ended March 31,** |               |
|                                           |   |                                    |               |
|                                           |   |                               | **2006**           |   |   | **2005** |   |
|                                           |   |                                    |                    |   |  |  |   |
| Revenue                                        |   |                               | 100.0              | % |   | 100.0 | % |
| Cost of revenue                                |   |                               | 72.8               |   |   | 74.9 |   |
|                                           |   |                                    |                    |   |  |  |   |
| Gross   profit                                 |   |                               | 27.2               |   |   | 25.1 |   |
|                                           |   |                                    |                    |   |  |  |   |
| Selling, general and   administrative expenses |   |                               | 31.4               |   |   | 26.0 |   |
| Depreciation and   amortization                |   |                               | 2.0                |   |   | 1.3 |   |
|                                           |   |                                    |                    |   |  |  |   |
| Total   operating expenses                     |   |                               | 33.4               |   |   | 27.3 |   |
|                                           |   |                                    |                    |   |  |  |   |
| Operating   loss                               |   |                               | (6.2               | ) |   | (2.2 | ) |
| Interest income                                |   |                               | —   |   |   | 0.1 |   |
| Interest expense                               |   |                               | (0.4               | ) |   | (0.2 | ) |
| Other expense                                  |   |                               | (0.1               | ) |   | (0.7 | ) |
|                                           |   |                                    |                    |   |  |  |   |
| Loss before income tax   provision (benefit)   |   |                               | (6.7               | ) |   | (3.0 | ) |
| Income tax provision   (benefit)               |   |                               | 0.1                |   |   | (0.9 | ) |
|                                           |   |                                    |                    |   |  |  |   |
| Net loss                                       |   |                               | (6.8               | )% |   | (2.1 | )% |
|                                           |   |                                    |                    |   |  |  |   |

*Three Months Ended March 31, 2006 Compared to Three Months Ended March 31, 2005*

          The following discussion compares the consolidated results of operations for the three months ended March 31, 2006 and 2005.

*          Revenue*.  Total revenue decreased by 10.1%, or $3.2 million, from $32.4 million for the three months ended March 31, 2005 to $29.2 million for the three months ended March 31, 2006.  While total revenue decreased for the three months ended March 31, 2005, the Company’s India subsidiary (an increase of $0.6 million) and Japan subsidiary (an increase of $0.4 million) experienced revenue growth.  The revenue growth in India results directly from increased demand in the US from both new and existing customers for the majority of the Company’s offshore services, including traditional consulting service offerings, application management and support services, and offshore development services. The increase in Japan revenue results primarily from increased demand for the Company’s consulting services within the local SAP market.  Meanwhile, the revenue for the UnitedStates decreased by $3.9 million, which is primarily attributable to the completion of several major implementation projects during 2005 coupled with the lack of new projects to replace the revenue as these major implementation projects ramped down and the decline in the Company’s PeopleSoft business which decreased $2.1 million from $6.2 million for the three months ended March 31, 2005 to $4.1 million for the three months ended March 31, 2006 as a result of the uncertainty generated by Oracle’s acquisition of PeopleSoft.  Revenue in Europe (a decrease of $0.4 million) also decreased.    

20

*          Cost of revenue and gross profit*.  The Company’s cost of revenue decreased by 12.6%, or $3.1 million, from $24.3 million for the three months ended March 31, 2005, to $21.2 million for the three months ended March 31, 2006, due primarily to the decrease in headcount and related compensation and travel related costs for consultants.  The Company’s gross profit decreased by 2.6%, or $0.2 million, from $8.1 million for the three months ended March 31, 2005, to $7.9 million for the three months ended March 31, 2006. Gross margin increased to 27.2% for the three months ended March 31, 2006, from 25.1% for the three months ended March 31, 2005. The decrease in gross profit results from a reduction in revenue as  compensation costs and certain project related expenses increased.  The increase in gross margin is primarily attributable to reduced non-projectexpenses.  Due to increasing compensation costs beginning in the second quarter of 2006, the Company expects lower gross margin through the full year 2006.  However, the Company is pursuing cost optimization measures that may lead to marginally improved gross margin.

*          Selling,general and administrative expenses*.  Selling, general andadministrative expenses primarily consist of salaries, and related benefitscosts for sales and general administrative personnel, occupancy costs, salesperson compensation, travel and entertainment and professional fees. Selling,general and administrative expenses increased by 8.7% or $0.7 million to $9.1million for the three months ended March 31, 2006, from $8.4 million for thethree months ended March 31, 2005, and increased as a percentage of revenue to31.4% from 26.0%, respectively.  The increase in selling, general andadministrative expenses was related primarily to costs associated withcompensation cost for sales personnel and related travel and marketingexpenses.

*          Income tax provision (benefit)*.  The Company recorded an income tax provision of $0.1 million on a pretax loss of $1.9 million for the three months ended March 31, 2006 as opposed to a benefit for income taxes of $0.3 million on pretax loss of $1.0 million for the three months ended March 31, 2005 due to taxable income in certain jurisdictions combined with a valuation allowance offsetting other loss benefits in other jurisdictions. 

21

**Results of Operations by Business Segment**

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

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

|   | • | United States (“US”) – the largest segment of the   Company, with operations in the US and Puerto Rico. Includes the operations   of the Company’s US subsidiary, Empower, Inc., and all corporate functions   and activities. The US and corporate headquarters is located in Edison, New   Jersey; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                     |
|   | • | India – includes the operations of the Company in   India, including services provided on behalf of the Company and other Company   subsidiaries. The Indian headquarters is located in Hyderabad, India;                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                     |
|   | • | Europe – includes the operations of the Company in   Denmark, Sweden and the United Kingdom.    However, the Company transitioned its operations in Sweden to Denmark   as of January 1, 2003.  The European   headquarters is located in Milton Keynes, United Kingdom; and                              |
|   |   |                                                                                                                                                                                                                                                                                                                     |
|   | • | Japan – includes the operations of the Company in   Japan. The Japanese headquarters is located in Tokyo, Japan.                                                                                                                                                                                                    |

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

*Three Months Ended March 31, 2006 Compared to Three Months Ended March 31, 2005*

          The following discussion compares the segment results of operations for the three months ended March 31, 2006 and 2005.

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

|          |   | **Three   Months Ended March 31,** |   |
|---------------|--------|------------------------------------|--------|
|          |   |                                    |   |
|          |   | **2006**                           |   | **2005** |   |
|          |   |                                    |   |  |   |
|          |   | **Dollars**                        |   | **Percentage   of    Total** |   | **Dollars** |   | **Percentage   of   Total** |   |
|          |   |                                    |        |   |  |  |   |  |  |   |  |  |   |
| United States |   | $                                  | 19,036 |   |   | 65.3 | % | $ | 22,893 |   |   | 70.6 | % |
| India         |   |                               | 7,408  |   |   | 25.4 |   |   | 6,791 |   |   | 20.9 |   |
| Europe        |   |                               | 1,551  |   |   | 5.3 |   |   | 1,950 |   |   | 6.0 |   |
| Japan         |   |                               | 1,176  |   |   | 4.0 |   |   | 802 |   |   | 2.5 |   |
|          |   |                                    |        |   |  |  |   |  |  |   |  |  |   |
| Total         |   | $                                  | 29,171 |   |   | 100.0 | % | $ | 32,436 |   |   | 100.0 | % |
|          |   |                                    |        |   |  |  |   |  |  |   |  |  |   |

          US revenue decreased by 16.8%, or $3.9 million, from $22.9 million for the three months ended March 31, 2005 to $19.0 million for the three months ended March 31, 2006. The decrease in the United States revenue results primarily from the completion of several major implementation projects during 2005 coupled with the lack of new customer engagements to replace the revenue as these major implementation projects ramped down and the decline in the Company’s PeopleSoft business.

22

          India revenue increased by 9.1%, or $0.6 million, from $6.8 million for the three months ended March 31, 2005, to $7.4 million for the three months ended March 31, 2006. The increase was attributable primarily to increased demand for offshore services from customers in the United States, as a majority of the total revenue generated in India is derived from providing offshore development and support services to customers sourced through the Company’s affiliated entities in other parts of the world, but most predominantly with the United States. 

          Europe revenue decreased by 20.5%, or $0.4 million, from $1.9 million for the three months ended March 31, 2005, to $1.5 million for the three months ended March 31, 2006.  The decrease was attributable to the completion of a major government contract in 2005.

          Japan revenue increased by 46.6% or $0.4 million, from $0.8 million for the three months ended March 31, 2005, to $1.2 million for the three months ended March 31, 2006.  The increase was due primarily to increased 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).

|          |   | **Three Months Ended   March 31,** |   |
|---------------|--------|------------------------------------|--------|
|          |   |                                    |   |
|          |   | **2006**                           |   | **2005** |   |
|          |   |                                    |        |   |  |  |   |
| United States |   | $                                  | (2,516 | ) | $ | (1,592 | ) |
| India         |   |                               | 836    |   |   | 1,205 |   |
| Europe        |   |                               | (41    | ) |   | (148 | ) |
| Japan         |   |                               | (84    | ) |   | (187 | ) |
|          |   |                                    |        |   |  |  |   |
| Total         |   | $                                  | (1,805 | ) | $ | (722 | ) |
|          |   |                                    |        |   |  |  |   |

          US operating performance decreased from an operating loss of $1.6 million for the three months ended March 31, 2005 to an operating loss of $2.5 million for the three months ended March 31, 2006.  The increase in the operating loss was primarily related to decreased revenue and increased selling, general and administrative costs associated with compensation cost for sales personnel and related travel and marketing expenses.

          India operating income decreased by $0.4 million, from $1.2 million for the three months ended March 31, 2005, to $0.8 million for the three months ended March 31, 2006. The decrease in operating income was primarily related to increased compensation costs and additional infrastructure costs as a result of increased headcount and newly leased premises.

          Europe operating performance improved by $0.1 million from an operating loss of $0.2 million for the three months ended March 31, 2005, to an operating loss of $0.1 million for the three months ended March 31, 2006. The improvement was attributable primarily to decreased project related costs.

          Japan operating performance improved by $0.1 million from operating loss of $0.2 million for the three months ended March 31, 2005, to an operating loss of $0.1 million for the three months ended March 31, 2006.  The improvement was attributable primarily to an increase in revenues.

**Liquidity and Capital Resources**

*2006 Cash Position and Cash Flows*

          The Company had cash and cash equivalents of $10.1 million at March 31, 2006 and $5.3 million at December 31, 2005.  The Company had working capital of $19.9 million at March 31, 2006 and $11.3 million at December 31, 2005.  The increase in working capital resulted primarily from the 2006 Private Placement completed on March 31, 2006.

          Cash used in operating activities was $1.1 million for the three months ended March 31, 2006, resulting primarily from the net loss of $2.0 million.

23

          The Company invested $0.3 million and $0.2 million in computer equipment, internal-use computer software and office furniture and fixtures and leasehold improvements during the three months ended March 31, 2006 and 2005, respectively. 

*          Credit Facility*

          On May 31, 2000, the Company and PNC Bank, N.A. (the “Bank”) entered into a three-year revolving credit facility (the “credit facility”). In July 2003, the credit facility was extended until May 31, 2006.   The credit facility is currently comprised of a revolving line of credit pursuant to which the Company could borrow up to $15.0 million at the Bank’s prime rate per annum. The credit facility is collateralized by substantially all of the assets of the Company’s United States-based operations. The maximum borrowing availability under the line of credit is based upon a percentage of eligible billed and unbilled accounts receivable, as defined.  

          The Company was in compliance with the loan agreement related to the credit facility as of March 31, 2006.  The Company estimates undrawn availability under the credit facility to be $12.9 million as of March 31, 2006.

*          Cash to Fund Operating Activities*

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

          The Company’s credit facility will expire on May 31, 2006.  The Company is currently in the process of securing a credit facility with another division of PNC Bank, NA; however, there can be no assurances that the Company will be able to secure such credit facility or that such credit facility shall be available on terms advantageous to the Company.  In the event the Company is unable to secure such credit facility, the Company will pursue alternate sources of financing; however, there can be no assurances that the Company will be able to secure alternate sources of financing to fund its operations or that if available such financing will be on terms that are advantageous to the Company. 

          The Company’s 2006 operating plan contains assumptions regarding revenue and expenses. The Company’s significant cash requirements for 2006 include operating expenses and capital investments in infrastructure for its India operations amounting to approximately $3.0 million.  The achievement of the operating plan depends heavily on the timing of work performed by the Company on existing projects and the ability of the Company to gain and perform work on new projects.  Project cancellations, delays in the timing of work performed by the Company on existing projects or the inability of the Company to gain and perform work on new projects, or ability to timely collect cash from its customers could have an adverse impact on the Company’s ability to execute its operating plan and maintain adequate cash flow.  In the event actual results do not meet the operating plan, managementbelieves it could execute contingency plans to mitigate such effects.  Such plans include reductions in capital expenditures and operating costs, and/or seeking additional financing.  In addition, the Company may seek additional financing from time to time for general corporate purposes, provided however that the availability of financing may be limited because the Company is not currently listed on a national stock exchange.  Assuming that the Company succeeds in obtaining an alternate credit facility and achieving the revenue and expense targets included in the Company’s operating plan, management believes that the Company’s cash on hand and cash generated by operations and borrowings under such a credit facility will be sufficient to fund the Company’s current and planned operations through at least December 31, 2006.   In the event the Company is unable to secure an alternate credit facility, management believes that the Company’s cash on hand will besufficient to fund the Company’s current and planned operations through at least December 31, 2006, provided that the Company reduces planned capital expenditures and achieves the revenue and expense targets included in the operating plan.

24

| **Item   3.** | **Quantitative   and Qualitative Disclosures about Market Risk.** |
|---------------|-------------------------------------------------------------------|

          Although the Company cannot accurately determine the precise effect thereof on its operations, it does not believe inflation, currency fluctuations or interest rate changes have historically had a material effect on its revenues or results of operations. Any significant effects of inflation, currency fluctuations and changes in interest rates on the economies of the United States, Asia and Europe could adversely impact the Company’s revenues and results of operations in the future. If there is a material adverse change in the relationship between European currencies and/or Asian currencies and the United States Dollar, such change would adversely affect the result of the Company’s European and/or Asian operations as reflected in the Company’s consolidated financial statements. The Company has not hedged its exposure with respect to this currency risk as on March 31, 2006, but intends toreview its exposure on a quarterly basis using a cost-benefit analysis determine whether it should enter into arrangements that mitigate the risk.  

| **Item 4** | **Controls   and Procedures.** |
|------------|--------------------------------|

**Disclosure Controls and Procedures**

          The Company is responsible for maintaining disclosure controls and procedures designed to ensure that information required to be disclosed in its Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities Exchange Commission’s rules and regulations, and that such information is accumulated and communicated to its management, including its chief executive officer and chief financial officer, as appropriate, to allow for timely decisions regarding required disclosure.  The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report.   In designing and evaluatingthe Company’s disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures and implementing controls and procedures based upon the application of management’s judgment.  Based its most recent evaluation, the Company’s principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in this quarterly report on Form 10-Q was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and instructions for Form 10-Q.

**Changes in Internal Controls**

          Except for the steps taken in the ongoing remediation efforts discussed in “Item 7  Management’s Discussion and Analysis of Financial Condition and Results of Operations – Management’s Discussion of its Internal Control Over Financial Reporting,” of the Company’s annual report on Form 10-K for the year ended December 31, 2005, there was no change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting during the three months ended March 31, 2006.

25

| **PART II.**  | **OTHER INFORMATION**   |
|---------------|-------------------------|
|          |                    |
| **Item   1.** | **Legal   Proceedings** |

*India Tax Assessments*

          The Company’s India subsidiary has received tax assessments from the India taxing authority denying tax exemptions claimed for certain revenue earned and disallowing certain expenses claimed during the India subsidiary’s fiscal years ended March 31, 1998 through March 31, 2003. The combined revised additional tax demands were for 32.9 million Indian rupees (or approximately $737,000) for those years. They include tax penalties and interest for the fiscal years ended March 31, 2001 and 2002 of 1.7 million Indian rupees (or approximately $38,000) and 0.7 million Indian rupees (or approximately $15,000), respectively. Against the total additional tax demand of $737,000, the Company has made payments of approximately $798,000 under protest to the India tax authority. The resulting overpayment of $61,000 is refundable. The Company has reserved the full amount of additional tax demand against thispotential liability.

          The Company is currently appealing at the Appellant Tribunal stage for the fiscal years ended March 31, 1998 through March 31, 2002.  For the fiscal year ended March 31, 2003, the Company is planning to file an appeal with the Commissioner of Income Tax (Appeals) against the assessment order passed. In the event the Company’s appeal is not successful, there will not be any future cash outlay.  However, in the event the Company is successful, an amount up to approximately $0.8 million could be refunded to the Company.

*Shareholder Class Actions*

          On or about October 12, 2004, the first of six class action lawsuits was filed, on behalf of a purported class of investors who purchased the Company’s common stock, against the Company and former officers Arjun Valluripalli, Nicholas Visco, Edward Carr and David Distel (“Defendants”) in the United States District Court, District of New Jersey (“District of New Jersey”). In August 2005, the United States District Court, District of New Jersey consolidated the six class actions (the “Shareholder Class Action”) and appointed a lead plaintiff.   Plaintiffs subsequently dropped Mr. Distel and Mr. Carr from the Shareholder Class Action, failing to name either of them as a defendant in the amended consolidated complaint filed on or about October 10, 2005.  The Shareholder Class Action generally alleges violations of federal securities laws, including allegationsthat the Defendants made materially false and misleading statements regarding the Company’s financial condition and that the Defendants materially overstated financial results by engaging in improper accounting practices.  The Class Period alleged is May 1, 2001 through September 24, 2004.  The Shareholder Class Action generally seeks relief in the form of unspecified compensatory damages and reasonable costs, expenses and legal fees.  On December 5, 2005, Defendants filed motions to dismiss the amended consolidated complaint.  On February 10, 2006, prior to the hearing on Defendants’ motions to dismiss, Plaintiffs filed a second amended consolidated complaint.  On March 27, 2006, Defendants filed motions to dismiss the second amended consolidated complaint.

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

26

| ***Item 1A.*** | ***Risk Factors*** |
|----------------|--------------------|

          This Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, including, without limitation, statements regarding the Company’s intention to shift more of its focus towards the management and support of customers’ enterprise, e-commerce and m-commerce applications. The factors discussed below could cause actual results and developments to be materially different from those expressed in or implied by such statements.   

          •     Lack of Profitability.  The Company’s lack of profitability over recent periods may impact its ability to attract customers, employees, investors and creditors.  The Company’s ability to achieve profitability in future periods will depend in large part on its ability to generate new sales, particularly annuity-based engagements, to improve its rate of employee utilization, and to manage selling, general and administrative expenses in proportion to its top line.

          •     Ability to Retain Key Executive and Sales Leadership Personnel.   The Company experienced significant executive and board level turnover in 2004 and through mid 2005.  The Company also experienced significant turnover in its sales managers and personnel in 2004 through 2005.  Such turnover has resulted in a lack of historical knowledge and experience and has impacted the Company’s ability to maintain consistent relationships with its existing and prospective customers, to build and convert pipeline opportunities and to generate new business.  There can be no assurance that the departure of one or more of such key personnel would not have a material adverse effect on the Company’s financial condition and results of operations.

          •     Ability to Secure and Maintain Access to External Sources of Funding.  In addition to cash generated by on-going operations, the Company relies on access to external sources of funding and its ability to timely collect cash from its customers to manage its business.  The Company’s existing credit facility, which represents its sole source of external funding, expires on May 31, 2006.  The Company’s ability to continue its ongoing business operations and fund future growth depends on its ability to secure a new credit facility and to maintain compliance with the financial and other covenants in such credit facility or to secure alternate sources of financing.  However, such credit facility or alternate financing may not be available or if available may not be on terms favorable to the Company.

          •     Ability to Attract and Retain Technical Key Personnel.  The Company’s business is labor intensive and, therefore, the Company’s success depends in large part on its ability to recruit, retain, train and motivate highly skilled employees, particularly project managers and other senior level technical personnel.  The Company’s ability to attract and retain a sufficient number of highly skilled employees is impacted by a number of factors including, but not limited to, concerns regarding the Company’s financial condition, competition from departing executives and competition for employees in India which may cause increasing compensation for existing and prospective employees, and the continued ability to use stock options to compensate such highly skilled employees in light of recent changes in accounting rules related to stock options.

          •     Highly Competitive Market for Technical Personnel in India.   The market for technical personnel in India, which represents the primary recruiting market for the Company’s technical personnel, is extremely competitive resulting in increased compensation costs.  Such increasing compensation costs are contributing to the deterioration of the Company’s gross margins.  

          •     Substantial Variability of Quarterly Operating Results.  The Company has experienced, and expects to continue to experience, inconsistent quarterly operating results. The substantial variability of the Company’s quarterly operating results are caused by a variety of factors, many of which are not within the Company’s control, including (i) patterns of software and hardware capital spending by customers, (ii) information technology outsourcing trends, (iii) the timing, size and stage of projects, (iv)  new service introductions by the Company or its competitors and the timing of new product introductions by the Company’s ERP partners, (v) levels of market acceptance for the Company’s services, (vi) general economic conditions, and (vii) the hiring of additional staff.

          •     Highly Competitive Information Technology Services Industry.  The markets for the Company’s services are highly competitive.  Many of the Company’s competitors have greater financial, technical and marketing resources than the Company.  The increased competition in the industry, among other negative effects, may cause a decrease in the Company’s billing and employee utilization rates

          •     Reliance on Key Partners.   The Company relies on continued relationships and business associated with SAP America and Oracle.  The continued uncertainty relating to Oracle’s integration of PeopleSoft into its product offerings and the affect that this may have on general market acceptance of PeopleSoft’s products, could adversely impact the Company’s ability to sell professional consulting services related to such enterprise resource applications.   

          •     Concentration Risks.  The Company derives a significant portion of its revenue from a limited number of customers and projects.  The Company’s ability to grow its business depends in large part on maintaining such customer relationships and continuing purchasing power of such customers.  The loss of any large customer could have a material adverse effect on the Company’s business, financial condition and results of operations.

          •     Ability to Maintain Effective Internal Controls.  The Company has previously experienced material weaknesses in its internal control over financial reporting.  If the Company is unable to continue to improve its control environment and to prevent material weaknesses, or to remediate any weaknesses that may arise, such failure will adversely impact its ability: (i) to effectively manage the business; 

27

(ii) to timely record, process, summarize and report financial statements that fairly present, in all material aspects, the Company’s financial condition, statements of operations and cash flows; and (iii)  to comply with applicable law, including the Sarbanes-Oxley Act of 2002.  In addition the Company will be required to comply with the internal control reporting requirements of Section 404 of the Sarbanes Oxley Act of 2002 beginning in 2007 (if the Company is not an “accelerated filer” as defined in Exchange Act Rule 12b-2 for 2006), or beginning in 2006 (if the Company is an “accelerated filer” for 2006).  If the Company is unable to maintain effective internal control over financial reporting, such inability will adversely affect the Company’s ability to comply with Section 404.  The Company will be an “accelerated filer” if the aggregate market value of the Company’s common stock held bynon-affiliates is $75 million or more as of June 30, 2006.  As of May 3, 2006, there were 15,370,821 shares of common stock held by non-affiliates with an aggregate market value of approximately $30,434,000. 

          •     Continued Availability of a Market for the Company’s Common Stock.  The Company’s common stock trades on the Pink Sheets.  In order to maintain liquidity in its common stock, the Company depends upon the continuing availability of a market on which its securities may be traded.  The Company’s ability to cause its stock to be listed on a national exchange and to maintain compliance with on-going listing requirements may impact the Company’s ability to attract investors and to use its common stock to fund future growth.

          •     Litigation and Compliance Risks.  The Company and certain former officers are defendants in a shareholder class action suit, as described under “Part II. Item 1 – Legal Proceedings – Shareholder Class Actions.”  If the Company is unable to defend itself and resolve the ongoing shareholder litigation related to the Company’s restatement of prior periods’ consolidated financial statements within the limits of the Company’s director and officer liability insurance policy such failure will adversely affect its financial condition.   In addition, there is the potential for significant claims against the Company relating to its professional services from customers or otherwise and the ability of the Company to adequately mitigate the risk of such potential claims may impact its future financial condition.  TheCompany’s ability to comply with existing and future immigration regulations may impact its ability to engage and deploy consultants on billable engagements.  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.

          •     Currency Fluctuation Risks.  Uncertainty relating to worldwide currency exchange rates, particularly in regard to the Indian rupee, U.S. Dollar, the Euro, British Pound, Danish Krone and Japanese Yen, and the fluctuations in such exchange rates may impact the Company’s quarterly and/or annual financial results.

          •     Geopolitical Risks.  There is the potential for future legislation by the United States government regulating or taxing outsourcing which may adversely affect the Company’s business model.  In addition, there is 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.  Changes in India’s economic policies or additional legislation regarding information technology services businesses may adversely affect the Company’s business model.

          •     Reliance on Intellectual Property Rights.  The Company relies upon a combination of trade secrets, nondisclosure and other contractual arrangements, and copyright and trademark laws to protect its proprietary rights.  The Company’s future success is dependent, in part, upon its proprietary methodologies and toolsets, development tools and other intellectual property rights.  The Company enters into confidentiality agreements with its employees, generally requires that its consultants and customers enter into such agreements, and limits access to and distribution of its proprietary information.  The Company also requires that substantially all of its employees and consultants assign to the Company their rights in intellectual property developed while employed or engaged by the Company.  There can be no assurance that the steps taken bythe Company in this regard will be adequate to deter misappropriation of its proprietary information or that the Company will be able to detect unauthorized use of and take appropriate steps to enforce its intellectual property rights.

          •     Risks Associated with Potential Tax Liabilities.  The Company was previously entitled to a tax holiday for certain revenue earned and expenses incurred by its existing Software Technology parks of India unit (“STPI Unit”) of its Hyderabad operations.  Such tax holiday expired effective April 1, 2006 and therefore the Company’s tax liability will increase.  In addition, in July 2000, the Company completed the tax-free spin-off of SeraNova, its former subsidiary.  In March 2001, SeraNova and Silverline Technologies Limited (“Silverline”) consummated the acquisition of SeraNova by Silverline. Had the acquisition of SeraNova by Silverline been contemplated at the time of the spin-off, the spin-off would have been a taxable transaction.  SeraNova’s management has represented that such acquisition was not contemplated atthe time of the spin-off of SeraNova by the Company, and accordingly should not impact the tax-free nature of the spin-off.  Although the Company and SeraNova are parties to a tax sharing agreement pursuant to which SeraNova agreed to indemnify the Company with respect to any possible tax liability related to the spin-off, SeraNova has filed for bankruptcy protection under Chapter 7 of the United States Bankruptcy Code and would be unable to pay the resultant tax liability pursuant to SeraNova’s indemnification obligations under its tax sharing agreement with the Company.  If it were determined that the spin-off was taxable, the Company would bear the liability to pay such the tax liability, which would be material.  Please refer to Note 7 to the unaudited consolidated financial statements of the Company included elsewhere in this report for further information.

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

28

| **Item   5.** | **Other   Information.** |
|---------------|--------------------------|

          Effective August 1, 2005, IGA entered into an agreement to lease certain premises for certain of the Company’s India operations from iLABS Hyderabad Technology Center Pvt. Ltd. (“iLabs”) a party with which two members of the Company’s Board of Directors, Srini Raju and Sandeep Reddy, are affiliated.  The terms of the lease agreement provide for, among other things:  (i) a minimum lease period of five years with an option for two three-year renewal periods; (ii) payment of a security deposit in the amount of 15,282,000 Indian rupees (approximately $352,000); (iii) payment of monthly lease fees in the amount of 1,698,000 Indian rupees (approximately $40,000), subject to yearly five percent (5%) escalation; and (iv) monthly operations and maintenance fees of 283,000 Indian rupees (approximately $6,500).  Rent expense for the three months ended March 31, 2006 towards thesaid lease was 6.3 million Indian rupees (approximately $143,000).

29

| **Item   6.** | **Exhibits.** |
|---------------|---------------|

| **Exhibit   No.** |   | **Description   of Exhibit**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|-------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 2                 |   | Agreement and Plan of Merger of the Company and its   wholly owned subsidiary Oxford Systems Inc. (Incorporated by reference to the   Company’s Annual Report on Form 10-KSB for the year ended December 31, 1996.)                                                                                                                                                                                                                                                                                            |
|              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 3.1               |   | Amended and Restated Certificate of Incorporation.   (Incorporated by reference to the Company’s Annual Report on Form 10-K for   the year ended December 31, 2005, filed with the Securities and Exchange   Commission on March 31, 2006.)                                                                                                                                                                                                                                                                    |
|              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 3.2               |   | Amended and Restated Bylaws. (Incorporated by   reference to the Company’s Registration Statement on Form SB-2 (Registration   Statement No. 333-5981) declared effective on September 26, 1996.)                                                                                                                                                                                                                                                                                                              |
|              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 4.1               |   | Shareholder Protection Rights Agreement dated as of   November 6, 1998, between the Company and American Stock Transfer & Trust   Company which includes (I) the Form of Rights Certificate and (ii) the   Certificate of Amendment to the Amended and Restated Certificate of   Incorporation of Intelligroup, Inc. (Incorporated by reference to Exhibit No.   4.1 of the Company’s Report on Form 8-K dated November 9, 1998, filed with   the Securities and Exchange Commission on November 9, 1998.) |
|              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 4.2               |   | Amendment dated September 29, 2004 to the   Shareholder Protection Rights Agreement dated November 6, 2004.  (Incorporated by reference to Exhibit No.   4.1 of the Company’s Report on Form 8-K dated September 29, 2004, filed with   the Securities and Exchange Commission on October 5, 2004.)                                                                                                                                                                                                       |
|              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.1*             |   | 1996 Stock Plan, as amended, of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.2*             |   | 1996 Non-Employee Director Stock Option Plan.   (Incorporated by reference to the Company’s Registration Statement on Form   SB-2 (Registration Statement No. 333-5981) declared effective on September   26, 1996.)                                                                                                                                                                                                                                                                                           |
|              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.3*             |   | Form of Indemnification Agreement entered into by   the Company and each of its Directors and officers. (Incorporated by   reference to the Company’s Registration Statement on Form SB-2 (Registration   Statement No. 333-5981) declared effective on September 26, 1996.)                                                                                                                                                                                                                                   |
|              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.4*             |   | Employment Agreement dated October 1, 1999 between   the Company and Nicholas Visco.    (Incorporated by reference to the Company’s Annual Report on Form 10-K   for the year ended December 31, 1999.) See Exhibit 10.23.                                                                                                                                                                                                                                                                                |
|              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.5*             |   | Employee’s Invention Assignment and Confidentiality   Agreement. (Incorporated by reference to the Company’s Registration Statement   on Form SB-2 (Registration Statement No. 333-5981) declared effective on   September 26, 1996.)                                                                                                                                                                                                                                                                     |
|              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.6              |   | Services Provider Agreement by and between Oracle   Corporation and the Company dated July 26, 1994. (Incorporated by reference   to the Company’s Registration Statement on Form SB-2 (Registration Statement   No. 333-5981) declared effective on September 26, 1996.) See Exhibit 10.8.                                                                                                                                                                                                                    |
|              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.7              |   | Agreement by and between the Company and   Intelligroup Asia Private Limited (“Intelligroup Asia”) relating to   operational control of Intelligroup Asia, with related agreements.   (Incorporated by reference to the Company’s Registration Statement on Form   SB-2 (Registration Statement No. 333-5981) declared effective on September   26, 1996.)                                                                                                                                           |
|              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 10.8              |   | Amendment No. 1 to Services Provider Agreement by   and between Oracle Corporation and the Company dated December 30, 1996.   (Incorporated by reference to the Company’s Annual Report on Form 10-KSB for   the year ended December 31, 1996.)    See Exhibit 10.6.                                                                                                                                                                                                                                      |

30

| **Exhibit   No.** |   | **Description   of Exhibit**                                                                                                                                                                                                                                                                                                                                         |
|-------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                   |   |                                                                                                                                                                                                                                                                                                                                                                      |
| 10.9              |   | R/3 National Logo Partner Agreement by and between   SAP America, Inc. and the Company dated as of April 29, 1997. (Incorporated   by reference to the Company’s Registration Statement on Form SB-2   (Registration Statement No. 333-29119) declared effective on June 26, 1997.)   See Exhibits 10.10, 10.14 and 10.24.                                      |
|              |   |                                                                                                                                                                                                                                                                                                                                                                 |
| 10.10             |   | ASAP Partner Addendum to R/3 National Logo Partner   Agreement between SAP America, Inc. and the Company effective July 1, 1997   (amends existing R/3 National Logo Partner Agreement). (Incorporated by   reference to the Company’s Quarterly Report on Form 10-QSB for the quarter   ended September 30, 1997.)  See   Exhibits 10.9, 10.14 and 10.24. |
|              |   |                                                                                                                                                                                                                                                                                                                                                                 |
| 10.11             |   | Implementation Partner Agreement between PeopleSoft,   Inc. and the Company effective July 15, 1997. (Incorporated by reference to   the Company’s Quarterly Report on Form 10-QSB for the quarter ended September   30, 1997.)  See Exhibit 10.13.                                                                                                        |
|              |   |                                                                                                                                                                                                                                                                                                                                                                 |
| 10.12             |   | Lease Agreement between Alfieri-Parkway Associates,   as Landlord, and Intelligroup, Inc., as Tenant, dated March 17, 1998.   (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for   the quarter ended March 31, 1998.)                                                                                                                |
|              |   |                                                                                                                                                                                                                                                                                                                                                                 |
| 10.13             |   | Fifth Amendment to the Implementation Partner   Agreement dated July 15, 1998, between the Company and PeopleSoft, Inc.  See Exhibit 10.11.                                                                                                                                                                                                                     |
|              |   |                                                                                                                                                                                                                                                                                                                                                                 |
| 10.14             |   | Amendment to the National Implementation Partner   Agreement dated as of January 1, 1999, between SAP America and the   Company.  See Exhibits 10.9, 10.10 and   10.24.                                                                                                                                                                                         |
|              |   |                                                                                                                                                                                                                                                                                                                                                                 |
| 10.15             |   | Contribution Agreement by and between Intelligroup,   Inc. and SeraNova, Inc. dated as of January 1, 2000. (Incorporated by   reference to the Company’s Annual Report on Form 10-K for the year ended   December 31, 1999.)                                                                                                                                    |
|              |   |                                                                                                                                                                                                                                                                                                                                                                 |
| 10.16             |   | Distribution Agreement by and between Intelligroup,   Inc. and SeraNova, Inc. dated as of January 1, 2000. (Incorporated by   reference to the Company’s Annual Report on Form 10-K for the year ended   December 31, 1999.)                                                                                                                                    |
|              |   |                                                                                                                                                                                                                                                                                                                                                                 |
| 10.17             |   | Services Agreement by and between Intelligroup, Inc.   and SeraNova, Inc. dated as of January 1, 2000. (Incorporated by reference to   the Company’s Annual Report on Form 10-K for the year ended December 31,   1999.)                                                                                                                                        |
|              |   |                                                                                                                                                                                                                                                                                                                                                                 |
| 10.18             |   | Space Sharing Agreement by and among Intelligroup,   Inc. and SeraNova, Inc. dated as of January 1, 2000. (Incorporated by   reference to the Company’s Annual Report on Form 10-K for the year ended December   31, 1999.)                                                                                                                                     |
|              |   |                                                                                                                                                                                                                                                                                                                                                                 |
| 10.19             |   | Tax Sharing Agreement by and between Intelligroup,   Inc. and SeraNova, Inc. dated as of January 1, 2000. (Incorporated by   reference to the Company’s Annual Report on Form 10-K for the year ended   December 31, 1999.)                                                                                                                                     |
|              |   |                                                                                                                                                                                                                                                                                                                                                                 |
| 10.20             |   | Amended and Restated Revolving Credit Loan and   Security Agreement among the Company, Empower, Inc. and PNC Bank, National   Association.  (Incorporated by   reference to the Company’s Quarterly Report on Form 10-Q for the quarter   ended June 30, 2000.)                                                                                            |
|              |   |                                                                                                                                                                                                                                                                                                                                                                 |
| 10.21             |   | Amended and Restated Promissory Note by and between   the Company and SeraNova, Inc. dated as of May 31, 2000.  (Incorporated by reference to the   Company’s Report on Form 8-K/A filed September 14, 2000.)  See Exhibit 10.22.                                                                                                                     |
|              |   |                                                                                                                                                                                                                                                                                                                                                                 |
| 10.22             |   | Agreement and Waiver with respect to Amended and   Restated Promissory Note by and between the Company and SeraNova, Inc. dated   as of September 29, 2000.    (Incorporated by reference to the Company’s Quarterly Report on Form   10-Q for the quarter ended September 30, 2000.)  See Exhibit 10.21.                                             |

31

| **Exhibit   No.** |   | **Description   of Exhibit**                                                                                                                                                                                                                                                                                                     |
|-------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                   |   |                                                                                                                                                                                                                                                                                                                                  |
| 10.23*            |   | First Amendment to Employment Agreement between the   Company and Nicholas Visco dated November 1, 2000.  (Incorporated by reference to the Company’s Annual Report on Form   10-K for the year ended December 31, 2000.)    See Exhibit 10.4.                                                                    |
|              |   |                                                                                                                                                                                                                                                                                                                             |
| 10.24             |   | mySap.com Partner-Services Addendum effective June   7, 2000 to R/3 National Logo Partner Agreement between SAP America, Inc. and   the Company.  (Incorporated by   reference to the Company’s Annual Report on Form 10-K for the year ended   December 31, 2000.) See Exhibits 10.9, 10.10 and 10.14.                |
|              |   |                                                                                                                                                                                                                                                                                                                             |
| 10.25             |   | Service Alliance Master Agreement and Addendums   dated May 5, 2000 between PeopleSoft, Inc. and the Company. (Incorporated by   reference to the Company’s Annual Report on Form 10-K for the year ended   December 31, 2000.)                                                                                             |
|              |   |                                                                                                                                                                                                                                                                                                                             |
| 10.26             |   | First Amendment to Loan Documents and Waiver   Agreement dated March 27, 2002 between the Company, Empower, Inc. and   PNC Bank, National Association. (Incorporated by reference to the Company’s   Annual Report on Form 10-K for the year ended December 31, 2001.)                                                 |
|              |   |                                                                                                                                                                                                                                                                                                                             |
| 10.27*            |   | Amended and Restated Employment Agreement dated   September 20, 2002 between the Company and Nagarjun Valluripalli.  (Incorporated by reference to the   Company’s Quarterly Report on Form 10-Q for the quarter ended September 30,   2002.)                                                                          |
|              |   |                                                                                                                                                                                                                                                                                                                             |
| 10.28             |   | Second Amendment to Loan Documents and Waiver   Agreement dated January 6, 2003 between the Company, Empower, Inc. and PNC   Bank, National Association. (Incorporated by reference to the Company’s   Annual Report on Form 10-K for the year ended December 31, 2002.)                                                    |
|              |   |                                                                                                                                                                                                                                                                                                                             |
| 10.29             |   | Third Amendment to Loan Documents and Waiver   Agreement dated July 31, 2003 between the Company, Empower, Inc. and PNC   Bank, National Association. (Incorporated by reference to the Company’s   Current Report on Form 8-K dated July 31, 2003, filed with the Securities and   Exchange Commission on August 5, 2003.) |
|              |   |                                                                                                                                                                                                                                                                                                                             |
| 10.30             |   | Agreement dated August 7, 2003, by and between   Intelligroup, Inc. and Ashok Pandey. (Incorporated by reference to the   Company’s Current Report on Form 8-K dated August 7, 2003, filed with the   Securities and Exchange Commission on August 12, 2003.)                                                               |
|              |   |                                                                                                                                                                                                                                                                                                                             |
| 10.31*            |   | Employment Agreement dated March 25, 2004 between   the Company and Christian Misvaer.    (Incorporated by reference to the Company’s Annual Report filed on   Form 10-K for the year ended December 31, 2003.                                                                                                         |
|              |   |                                                                                                                                                                                                                                                                                                                             |
| 10.32             |   | Fourth Amendment to Loan Documents and Waiver   Agreement dated October 22, 2003 between the Company, Empower, Inc. and PNC   Bank, National Association.    (Incorporated by reference to the Company’s Quarterly Report on Form   10-Q for the quarter ended September 30, 2003.)                                    |
|              |   |                                                                                                                                                                                                                                                                                                                             |
| 10.33*            |   | Separation Agreement between Nicholas Visco and   Intelligroup, Inc. dated November 24, 2003.  (Incorporated by reference to the Company’s Current Report on   Form 8-K dated November 24, 2003, filed with the Securities and Exchange   Commission on November 24, 2003.)                                            |
|              |   |                                                                                                                                                                                                                                                                                                                             |
| 10.34             |   | Waiver Agreement dated March 22, 2004 between the   Company, Empower, Inc. and PNC Bank, National Association.  (Incorporated by reference to the   Company’s Annual Report on Form 10-K for the year ended December 31, 2003.)                                                                                        |
|              |   |                                                                                                                                                                                                                                                                                                                             |
| 10.35*            |   | Employment Agreement effective as of April 5, 2004   between the Company and David J. Distel.    (Incorporated by reference to the Company’s Current Report on Form 8-K   dated March 31, 2004, filed with the Securities and Exchange Commission on   April 5, 2004.)                                                 |
|              |   |                                                                                                                                                                                                                                                                                                                             |
| 10.36*            |   | Separation Agreement between the Company and Ed   Carr.  (Incorporated by reference to the   Company’s Current Report on Form 8-K dated March 31, 2004, filed with the   Securities and Exchange Commission on April 5, 2004.)                                                                                         |

32

| **Exhibit   No.** |   | **Description   of Exhibit**                                                                                                                                                                                                                                                                                                                |
|-------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                   |   |                                                                                                                                                                                                                                                                                                                                             |
| 10.37             |   | 2004 Equity Incentive Award Plan. (Incorporated by reference   to the Company’s Definitive Proxy Statement for the 2004 Annual Meeting of   Shareholders, included within Form 14A as filed on April 29, 2004.)                                                                                                                        |
|              |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.38*            |   | Employment Agreement dated July 26, 2004 between the   Company and Douglas Berto.  (Incorporated   by reference to the Company’s Current Report on Form 8-K dated August 23,   2004, filed with the Securities and Exchange Commission on August 23, 2004.)                                                                       |
|              |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.39*            |   | First Amendment to the 2004 Equity Incentive Award   Plan.  (Incorporated by reference to   the Company’s Current Report on Form 8-K dated September 29, 2004, filed with   the Securities and Exchange Commission on October 5, 2004.)                                                                                           |
|              |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.40             |   | Common Stock Purchase Agreement dated September 29,   2004 by and between the Company, SB Asia Infrastructure Fund LP and Venture   Tech Assets Ltd. (Incorporated by reference to the Company’s Current Report   on Form 8-K dated September 29, 2004, filed with the Securities and Exchange   Commission on October 5, 2004.)       |
|              |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.41             |   | Fifth Amendment to Loan Documents and Waiver   Agreement dated September 29, 2004 between the Company, Empower, Inc. and PNC   Bank, National Association. (Incorporated by reference to the Company’s   Current Report on Form 8-K dated September 29, 2004, filed with the   Securities and Exchange Commission on October 5, 2004.) |
|              |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.42*            |   | Separation Agreement between the Company and David   J. Distel dated October 15, 2004.    (Incorporated by reference to the Company’s Current Report on Form 8-K   dated October 15, 2004, filed with the Securities and Exchange Commission on   October 15, 2004.)                                                              |
|              |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.43*            |   | Separation Agreement between the Company and Douglas   Berto dated December 6, 2004.    (Incorporated by reference to the Company’s Current Report on Form 8-K   dated December 6, 2004, filed with the Securities and Exchange Commission on   December 10, 2004.)                                                               |
|              |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.44             |   | Amendment No. 1 to the Common Stock Purchase   Agreement dated September 29, 2004.    (Incorporated by reference to the Company’s Current Report on Form 8-K   dated March 25, 2005, filed with the Securities and Exchange Commission on   March 25, 2005.)                                                                      |
|              |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.45*            |   | Employment Agreement effective June 1, 2005 between   the Company and Madhu Poomalil.    (Incorporated by reference to the Company’s Current Report on Form 8-K   dated June 2, 2005, filed with the Securities and Exchange Commission on June   7, 2005.)                                                                       |
|              |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.46*            |   | Second Amended and Restated Employment Agreement   effective June 21, 2005 between the Company and Shirley Spoors.  (Incorporated by reference to the   Company’s Current Report on Form 8-K dated June 21, 2005, filed with the   Securities and Exchange Commission on June 27, 2005.)                                          |
|              |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.47*            |   | Employment Agreement effective July 1, 2005 between   the Company and Ranjit Prithviraj.    (Incorporated by reference to the Company’s Current Report on Form 8-K   dated June 29, 2005, filed with the Securities and Exchange Commission on   July 5, 2005.)                                                                   |
|              |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.48*            |   | Separation Agreement dated June 29, 2005 between the   Company and Christian Misvaer.    (Incorporated by reference to the Company’s Current Report on Form 8-K   dated June 29, 2005, filed with the Securities and Exchange Commission on   July 5, 2005.)                                                                      |
|              |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.49*            |   | Independent Contractor Agreement dated July 1, 2005   between the Company and Pontus, Inc.    (Incorporated by reference to the Company’s Current Report on Form 8-K   dated June 29, 2005, filed with the Securities and Exchange Commission on   July 5, 2005.)                                                                 |

33

| **Exhibit   No.** |   | **Description   of Exhibit**                                                                                                                                                                                                                                                                                                                |
|-------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                   |   |                                                                                                                                                                                                                                                                                                                                             |
| 10.50*            |   | Employment Agreement effective June 30, 2005 between   the Company and Vikram Gulati.  (Incorporated   by reference to the Company’s Current Report on Form 8-K dated June 30, 2005,   filed with the Securities and Exchange Commission on July 7, 2005.)                                                                        |
|              |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.51             |   | Sixth Amendment to Loan Documents and Waiver   Agreement dated September 30, 2005 between the Company, Empower, Inc. and PNC   Bank, National Association. (Incorporated by reference to the Company’s   Current Report on Form 8-K dated September 30, 2005, filed with the   Securities and Exchange Commission on October 6, 2005.) |
|              |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.52             |   | Second Amendment to the 2004 Equity Incentive Award   Plan. (Incorporated by reference to the Company’s Annual Report on Form 10-K   for the year ended December 31, 2005, filed with the Securities and Exchange   Commission on March 31, 2006.)                                                                                     |
|              |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.53*            |   | Common Stock Purchase Agreement dated March 30, 2006   by and between Intelligroup Inc., SB Asia Infrastructure Fund LP and Venture   Tech Assets, Ltd. (Incorporated by reference to the Company’s current report   on Form 8-K dated March 30, 2006 filed with the Securities and Exchange   Commission on April 5, 2006.)           |
|              |   |                                                                                                                                                                                                                                                                                                                                        |
| 10.54*            |   | First Amendment to the Employment Agreement dated   June 30, 2005 between Intelligroup Inc. and Vikram Gulati. (Incorporated by   reference to the Company’s current report on Form 8-K dated April 6, 2006,   filed with the Securities and Exchange Commission on April 13, 2006.)                                                   |
|              |   |                                                                                                                                                                                                                                                                                                                                        |
| 31.1†        |   | Certifications of Chief Executive Officer Pursuant   to Rule 13a-14(a), as Adopted Pursuant to Section 301 of the Sarbanes-Oxley   Act of 2002                                                                                                                                                                                              |
|              |   |                                                                                                                                                                                                                                                                                                                                        |
| 31.2†        |   | Certifications of Chief Financial Officer Pursuant   to Rule 13a-14(a), as Adopted Pursuant to Section 301 of the Sarbanes-Oxley   Act of 2002                                                                                                                                                                                              |
|              |   |                                                                                                                                                                                                                                                                                                                                        |
| 32.1†        |   | Certifications of Chief Executive Officer Pursuant   to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the   Sarbanes-Oxley Act of 2002                                                                                                                                                                                      |
|              |   |                                                                                                                                                                                                                                                                                                                                        |
| 32.2†        |   | Certifications of Chief Financial Officer Pursuant   to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the   Sarbanes-Oxley Act of 2002                                                                                                                                                                                      |
|              |   |                                                                                                                                                                                                                                                                                                                                        |

|        |
|--------|
| *      | A management contract or compensatory plan or   arrangement required to be filed as an exhibit pursuant to Item 6 of Form   10-Q. |
|   |   |
| † | Filed herewith. All other exhibits previously filed. |

34

**SIGNATURES**

          Pursuant tothe requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,the Registrant has duly caused this report to be signed on its behalf by theundersigned, thereunto duly authorized this 12th day of May 2006.

|               |               |                    |
|--------------------|--------------------|-------------------------|
|               | INTELLIGROUP, INC. |
|               |               |                    |
|               |               |                    |
| Date: May 12, 2006 | By:                | /s/ Vikram Gulati       |
|               |               |                         |
|               |               | Vikram Gulati           |
|               |               | Chief Executive Officer |
|               |               |                    |
|               |               |                    |
| Date: May 12, 2006 | By:                | /s/ Madhu Poomalil      |
|               |               |                         |
|               |               | Madhu Poomalil          |
|               |               | Chief Financial Officer |
|               |               |                    |

35