SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                              --------------------
 
                                    FORM 10-Q
             
               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 1998
                           Commission File No. 0-20943

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

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


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

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

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

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

     Indicate  the  number of  shares  outstanding  of each of the  Registrant's
classes of common stock, as of November 9, 1998:

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

Common Stock, $.01 par value                               12,668,175

<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES

                                TABLE OF CONTENTS

                                                                         Page
PART I.  FINANCIAL INFORMATION

     Item 1.  Consolidated Financial Statements........................    1

               Consolidated Balance Sheets
               as of September 30, 1998 (unaudited)
               and December 31, 1997 ..................................    2

               Consolidated Statements of Income and Comprehensive
               Income for the Three Months and Nine Months Ended
               September 30, 1998 and 1997 (unaudited).................    3

               Consolidated Statements of Cash Flows
               for the Nine Months Ended
               September 30, 1998 and 1997 (unaudited).................    4

               Notes to Consolidated Financial Statements
               (unaudited).............................................    5

     Item 2.  Management's Discussion and Analysis of
               Financial Condition and Results of Operations...........    8

PART II.  OTHER INFORMATION

     Item 1. Legal Proceedings.........................................   16

     Item 2. Changes in Securities and Use of Proceeds.................   17

     Item 5. Other Information.........................................   19

     Item 6. Exhibits and Reports on Form 8-K..........................   20

SIGNATURES.............................................................   21


                                      - i -
<PAGE>


                          PART I. FINANCIAL INFORMATION

                    Item 1. Consolidated Financial Statements


                                      - 1 -
<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                    September 30, 1998 and December 31, 1997

                                                     September 30,  December 31,
                                                          1998           1997
                                                      (unaudited)
                     ASSETS
Current Assets:
   Cash and cash equivalents......................... $ 5,439,000   $ 8,391,000
   Accounts receivable, less allowance for doubtful
     accounts of  $1,800,000  at September 30, 1998
     and $799,000 at December 31, 1997 ..............  23,572,000    17,668,000
   Unbilled services.................................  14,115,000     7,834,000
   Deferred income taxes.............................     404,000       404,000
   Other current assets..............................   1,907,000       668,000
                                                      -----------   -----------
         Total current assets........................  45,437,000    34,965,000

Equipment, net ......................................   7,186,000     3,366,000
Cost in excess of fair value of net assets 
   acquired, net. ...................................   4,398,000            --
Other assets.........................................     947,000       337,000
                                                      -----------   -----------
                                                      $57,968,000   $38,668,000
                                                      ===========   ===========
      LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
   Accounts payable.................................. $ 3,662,000   $ 1,353,000
   Accrued payroll and related taxes.................   6,485,000     2,636,000
   Accrued expenses and other liabilities............   3,191,000     1,074,000
   Income taxes payable..............................   1,469,000       901,000
   Current portion of obligations under capital 
     leases..........................................      18,000        20,000
                                                      -----------   -----------
         Total current liabilities...................  14,825,000    5,984,000

Obligations under capital leases, less current
     portion... .....................................      54,000        51,000

Deferred income taxes ...............................     171,000       171,000

Commitments and contingencies

Shareholders' Equity
   Preferred stock, $.01 par value, 5,000,000
     shares authorized, none issued or outstanding...          --            --
   Common stock, $.01 par value, 25,000,000
     shares authorized; 12,667,875 and 11,987,981
     shares issued and outstanding at September 30,
     1998 and December 31, 1997, respectively .......     127,000       120,000
   Additional paid-in capital........................  34,634,000    30,175,000
   Retained earnings ................................   8,847,000     2,325,000
   Currency translation adjustment...................    (690,000)     (158,000)
                                                      -----------   -----------
        Total shareholders' equity ..................  42,918,000    32,462,000
                                                      -----------   ------------
                                                      $57,968,000   $38,668,000
                                                      ===========   ===========

            See accompanying notes to consolidated financial statements.

                                        - 2 -
<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

     For the Three Months and Nine Months Ended September 30, 1998 and 1997
                                   (unaudited)
<TABLE>
<CAPTION>

                                 Three Months Ended September 30,        Nine Months Ended September 30,
                                      1998           1997                      1998           1997
                                 ------------    ------------              ------------   ------------

<S>                              <C>             <C>                      <C>            <C>         
Revenue.......................   $ 35,769,000    $ 21,903,000             $ 95,890,000   $ 56,797,000
Cost of sales.................     22,899,000      14,338,000               61,374,000     38,631,000
                                 ------------    ------------             ------------   ------------
      Gross profit............     12,870,000       7,565,000               34,516,000     18,166,000

Selling, general and 
   administrative expenses....      9,284,000       5,197,000               24,902,000     12,670,000
Acquisition expenses..........             --              --                  434,000             --
                                 ------------    ------------             ------------   ------------
   Operating expenses.........      9,284,000       5,197,000               25,336,000     12,670,000
                                 ------------    ------------             ------------   ------------

   Operating income...........      3,586,000       2,368,000                9,180,000      5,496,000

Other income .................        181,000         143,000                  281,000        266,000
                                 ------------    ------------             ------------   ------------

Income before provision for 
   income taxes ..............      3,767,000       2,511,000                9,461,000      5,762,000

Provision for income taxes....      1,149,000         930,000                2,817,000      2,175,000
                                 ------------    ------------             ------------   ------------

Net income ...................   $  2,618,000    $  1,581,000             $  6,644,000   $  3,587,000
                                 ============    ============             ============   ============

Earnings per share:
   Basic earnings per share:
    Net income per share......   $       0.21    $       0.14             $       0.54   $       0.32
                                 ============    ============             ============   ============

    Weighted average number of
    common shares - Basic.....     12,647,000      11,658,000               12,289,000     11,106,000
                                 ============    ============             ============   ============

   Diluted earnings per share:
    Net income per share......   $       0.20    $       0.13             $       0.52   $       0.31
                                 ============    ============             ============   ============

    Weighted average number of
    common shares - Diluted...     13,157,000      12,327,000               12,786,000     11,555,000
                                 ============    ============             ============   ============

Comprehensive Income
--------------------

Net income.....................  $  2,618,000    $  1,581,000             $  6,644,000   $  3,587,000

Other comprehensive income -
    Currency translation 
    adjustments                      (171,000)             --                 (532,000)            --
                                 ------------    ------------             ------------   ------------

Comprehensive income..........   $  2,447,000    $  1,581,000             $  6,112,000   $  3,587,000
                                 ============    ============             ============   ============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      - 3 -
<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                For the Nine Months Ended September 30, 1998 and
                               September 30, 1997
                                   (unaudited)
<TABLE>
<CAPTION>

                                                            September 30,       September 30,
                                                                 1998                1997
                                                            -------------       -------------
Cash flows from operating activities:
<S>                                                         <C>                 <C>         
   Net income ...........................................   $  6,644,000        $  3,587,000
   Adjustments to reconcile net income to net cash
     provided by (used in) operating activities:
     Depreciation and amortization.......................        848,000             287,000
     Provision for doubtful accounts.....................        923,000             340,000
   Changes in assets and liabilities:
     Accounts receivable.................................     (5,619,000)         (5,988,000)
     Unbilled services...................................     (6,260,000)         (5,111,000)
     Other current assets................................     (1,214,000)            (99,000)
     Other assets........................................       (610,000)            (68,000)
     Accounts payable....................................      2,017,000           1,207,000
     Accrued payroll and related taxes...................      3,849,000             782,000
     Accrued expenses and other liabilities..............        233,000            (161,000)
     Income taxes payable................................        262,000             374,000
                                                            ------------        ------------
      Net cash provided by (used in) operating activities      1,073,000          (4,850,000)
                                                            ------------        ------------

Cash flows from investing activities:
   Purchase of equipment.................................     (4,779,000)         (2,068,000)
                                                            ------------        ------------

Cash flows from financing activities:
   Proceeds from issuance of common stock, net of 
      issuance costs ....................................             --           9,900,000
   Proceeds from the exercise of stock options...........      1,319,000             721,000
   Principal payments under capital leases...............        (33,000)             (6,000)
                                                            ------------        ------------
      Net cash provided by financing activities..........      1,286,000          10,615,000
                                                            ------------        ------------

   Effect of foreign currency exchange rate changes
    on cash .............................................       (532,000)                 --
                                                            -------------       ------------
      Net increase (decrease) in cash and 
          cash equivalents ..............................     (2,952,000)          3,697,000
Cash and cash equivalents at beginning of period.........      8,391,000           7,479,000
                                                            ------------        ------------
Cash and cash equivalents at end of period...............   $  5,439,000        $ 11,176,000
                                                            ============        ============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      - 4 -
<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)


(1) BASIS OF PRESENTATION

     The   consolidated   financial   statements  and   accompanying   financial
information  as of  September  30, 1998 and for the three and nine months  ended
September  30, 1998 and 1997 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 financial  statements included herein have been prepared
in accordance with generally accepted accounting principles and the instructions
of Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly,  certain information
and footnote  disclosures  normally included in financial statements prepared in
accordance with generally accepted accounting  principles have been condensed or
omitted.  These  financial  statements  should be read in  conjunction  with the
Company's  audited  financial  statements  for the year ended December 31, 1997,
which were included as part of the Company's Form 10-KSB.

     Results for interim periods are not  necessarily  indicative of results for
the entire year.

(2) EARNINGS PER SHARE

     In 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial  Accounting  Standards  No. 128  "Earnings  per Share" ("SFAS 128")
which has  replaced  the  former  rules  for  earnings  per share  computations,
presentation and disclosure. Under the new standard, basic earnings per share is
computed by dividing  income  available to common  shareholders  by the weighted
average number of common stock outstanding for the period.  Diluted earnings per
share  reflects the  potential  dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock.

     The  Company has adopted  SFAS 128 and,  as required by the  standard,  has
restated all prior period  earnings per share data.  The  Company's new earnings
per share amounts as calculated under SFAS 128 are not materially different from
those computed under the former accounting standard.


                                     - 5 -
<PAGE>

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

                                        Three Months Ended            Nine Months Ended
                                           September 30,                 September 30,
                                        1998          1997            1998         1997
                                        ----          ----            ----         ----
<S>                                  <C>           <C>            <C>           <C>       
Weighted average number of common
shares                               12,647,000    11,658,000     12,289,000    11,106,000

Common share equivalents of
outstanding stock options               510,000       669,000        497,000       449,000
                                     ----------    ----------     ----------    ----------

Weighted average number of common
shares assuming dilution             13,157,000    12,327,000     12,786,000    11,555,000
                                     ==========    ==========     ==========    ==========
</TABLE>


     Certain stock options  outstanding  at September 30, 1998 were not included
in the computations of earnings per share assuming dilution because the options'
exercise  prices were greater than the average  trading  price of the  Company's
common shares.

(3) NEW ACCOUNTING PRONOUNCEMENTS

     Effective  January 1, 1998, the Company  adopted the provisions of SFAS No.
130, "Reporting Comprehensive Income," which establishes standards for reporting
comprehensive income and its components.  In June 1997, the FASB issued SFAS No.
131,  "Disclosures  about  Segments of an Enterprise  and Related  Information,"
which establishes  revised  reporting and disclosure  requirements for operating
segments.  These standards increase financial reporting  disclosures and have no
impact on the Company's financial position or results from operations.

(4) ACQUISITIONS

     On May 7, 1998,  the Company  acquired  thirty  percent of the  outstanding
share capital of CPI  Consulting  Limited.  The  acquisition  of CPI  Consulting
Limited was accounted for utilizing purchase accounting.  The consideration paid
by the Company  included the issuance of 165,696 shares of the Company's  Common
Stock with a fair market value of $3.1  million,  and a future  liability to the
sellers  predicated  upon  operating  results for the balance of 1998,  which is
currently estimated at $1.2 million.  The excess of purchase price over the fair
value of the net assets acquired was attributed to intangible assets,  amounting
in the  aggregate  to  $4.5  million,  which  was  recorded  at the  time of the
purchase.

     On May 21, 1998, the Company acquired all of the outstanding  share capital
of CPI Resources Limited. The acquisition of CPI Resources Limited was accounted
for as a pooling of interests.  Prior year results have not been restated due to
immateriality. As consideration for this acquisition, the Company issued 371,000
shares of the Company's Common Stock. At the time

                                     - 6 -
<PAGE>

of  the  acquisition,  CPI  Resources  Limited  owned  seventy  percent  of  the
outstanding  share capital of CPI Consulting  Limited.  In connection  with this
acquisition, the Company incurred one-time costs of $434,000.


(5) FOLLOW-ON PUBLIC OFFERING

     On July 2, 1997, the Company  consummated a follow-on  public offering (the
"Offering") of 1,000,000  shares of its Common Stock at a price to the public of
$9.50 per share.  On July 15, 1997 and as part of the  Offering,  an  additional
150,000  shares at a price to the public of $9.50 per share were issued and sold
by the Company to cover overallotments. The net proceeds to the Company from the
Offering, after underwriting discounts and commissions and other expenses of the
Offering, were approximately $9.9 million.

(6) STOCK RIGHTS

     In  October  1998 the  Company's  Board of  Directors  declared  a dividend
distribution of one Preferred Share Purchase Right for each outstanding share of
the Company's Common Stock.  These Rights will expire in November 2008 and trade
with the Company's Common Stock.  Such Rights are not presently  exercisable and
have no voting  power.  In the event a person or  affiliated  group of  persons,
acquires 20% or more, or makes a tender or exchange offer for 20% or more of the
Company's  Common  Stock,  the Rights  detach  from the Common  Stock and become
exercisable and entitle a holder to buy one one-hundredth  (1/100) of a share of
Preferred Stock at $100.00

     If, after the Rights become exercisable, the Company is acquired or merged,
each Right will  entitle  its holder to  purchase  $200.00  market  value of the
surviving company's stock for $100.00,  based upon the current exercise price of
the Rights.  The Company may redeem the Rights, at its option, at $.01 per Right
prior to a public announcement that any person has acquired beneficial ownership
of at  least  20% of the  Company's  Common  Stock.  These  Rights are  designed
primarily to encourage  anyone  interested in acquiring the Company to negotiate
with the Board of Directors.

                                      - 7 -
<PAGE>

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

OVERVIEW

     The  Company  provides a wide  range of  information  technology  services,
including  enterprise-wide  business process  solutions,  internet  applications
services,  systems integration and custom software  development based on leading
technologies.  The Company has grown rapidly since 1994 when it made a strategic
decision  to  diversify  its  customer  base  by  expanding  the  scope  of  its
integration  and  development  services and to utilize SAP software as a primary
tool to implement  enterprise-wide  business  process  solutions.  In 1995,  the
Company became an SAP National  Implementation Partner and also began to utilize
Oracle  products  to  diversify  its  service  offerings.  In 1997,  the Company
achieved  National  Logo  Partner  status  with SAP.  In July 1997,  the Company
achieved  AcceleratedSAP  Partner Status with SAP by meeting certain performance
criteria  established  by SAP.  Also,  in 1997,  the  Company  began to  provide
implementation  services to PeopleSoft and Baan  licensees to further  diversify
its service  offerings.  In July 1997, the Company was awarded an implementation
partnership status by PeopleSoft.  In September 1997, the Company was awarded an
international  consulting partnership status by Baan. In June, 1998, the Company
also expanded its Oracle applications implementation services practice and added
upgrade  services to meet market demand of mid-size to large  companies that are
implementing or upgrading Oracle applications.

     The  Company  generates  revenue  from  professional  services  rendered to
customers.  Revenue is  recognized  as services  are  performed.  The  Company's
services   range  from  providing   customers   with  a  single   consultant  to
multi-personnel  full-scale projects. The Company provides these services to its
customers  primarily  on a time and  materials  basis and  pursuant  to  written
contracts which can be terminated  with limited  advance  notice,  typically not
more than 30 days, and without  significant  penalty,  generally limited to fees
earned and expenses incurred by the Company through the date of termination. The
Company provides its services directly to end-user  organizations or as a member
of a consulting team assembled by another information technology consulting firm
to Fortune 1000 and other large and mid-sized  companies.  The Company generally
bills its customers semi-monthly for the services provided by its consultants at
contracted rates. Where contractual provisions permit, customers also are billed
for reimbursement of expenses incurred by the Company on the customers' behalf.

     The Company has provided  services on certain  projects in which it, at the
request of the clients, offered a fixed price for its services, however, none of
these  projects are  currently  material to the  Company's  business,  financial
condition and results of  operations.  The Company  believes that, as it pursues
its  strategy  of making  turnkey  project  management  a larger  portion of its
business,  it will likely be required to offer fixed price projects to a greater
degree.  The Company has had limited prior  experience in pricing and performing
under fixed price arrangements and believes that there are certain risks related
thereto, and thus prices such arrangements to reflect the associated risk. There
can be no  assurance  that the Company  will be able to complete  such  projects
within 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.

                                     - 8 -
<PAGE>

     The  Company has derived  and  believes  that it will  continue to derive a
significant  portion  of its  revenue  from a limited  number of  customers  and
projects.  For the nine  months  ended  September  30,  1998 and the year  ended
December 31, 1997,  the  Company's  ten largest  customers  accounted for in the
aggregate  approximately  42% and 54% of its revenue,  respectively.  During the
nine months ended September 30, 1998, no customer accounted for more than 10% of
revenue.  During the year ended  December 31, 1997,  PricewaterhouseCoopers  LLP
(formerly Price Waterhouse LLP) and Bristol-Myers Squibb each accounted for more
than 10% of revenue.  For both the nine months ended  September 30, 1998 and the
year ended  December 31, 1997,  38% of the  Company's  revenue was  generated by
serving  as  a  member  of  consulting  teams  assembled  by  other  information
technology  consulting  firms.  There can be no assurance that such  information
technology consulting firms will continue to engage the Company in the future at
current levels of retention,  if at all.  During the nine months ended September
30,  1998 and the year  ended  December  31,  1997,  approximately  65% and 68%,
respectively,  of the Company's total revenue was derived from projects in which
the  Company  implemented  software  developed  by SAP. Of the  Company's  total
revenue for each respective period,  approximately 14% was derived from projects
in which the Company implemented  software developed by Oracle.  During the nine
months ended September 30, 1998,  approximately 47% of the Company's revenue was
derived  from   engagements   in  which  the  Company  had  project   management
responsibilities, compared to 33% during the year ended December 31, 1997.

     The Company's most significant cost is project  personnel  expenses,  which
consists of consultant salaries,  benefits and payroll-related  expenses.  Thus,
the Company's  financial  performance  is based  primarily  upon billing  margin
(billable  hourly rate less the cost to the Company of a consultant on an hourly
basis) and personnel  utilization  rates (billable hours divided by paid hours).
The Company believes that turnkey project management assignments typically carry
higher  margins.  The Company has been  shifting to such  higher-margin  turnkey
management  assignments and more complex  projects by leveraging its reputation,
existing capabilities, proprietary implementation methodology, development tools
and offshore development  capabilities with expanded sales and marketing efforts
and new service  offerings to develop turnkey project sales  opportunities  with
both new and existing  customers.  The Company's inability to continue towards a
shift to higher-margin turnkey management  assignments and more complex projects
may adversely impact the Company's future growth.

     Since  late 1994,  the  Company  has made  substantial  investments  in its
infrastructure in order to support its rapid growth.  For example,  in 1994, the
Company  established  and funded an Advanced  Development  Center (the "ADC") in
India,  and in 1995,  established  a sales  office in  Northern  California.  In
addition,  from 1994 to date,  the  Company  has  incurred  expenses  to develop
proprietary  development  tools and its proprietary  accelerated  implementation
methodology  and toolset.  Since 1995, the Company has also been  increasing its
sales force and its marketing,  finance, accounting and administrative staff, in
order to effectively manage its growth.

     The Company  currently  maintains sales and operations  offices in Chicago,
Detroit,  Foster City  (California),  Reston  (Virginia),  Edison (New  Jersey),
Dallas, Atlanta, Phoenix, Boston, Miami and Washington,  D.C. In addition to the
ADC and sales  offices in India,  the  Company  also has  offices in  Australia,
Denmark,  Japan,  New Zealand,  Singapore  and the United  Kingdom.  The Company
leases its headquarters in Edison, New Jersey, totaling approximately 48,475

                                     - 9 -
<PAGE>

square  feet.  Such lease has an initial term of ten (10) years,  commencing  in
September  1998.  The Company is in the process of  finalizing  an  agreement to
sublet the space used for its prior  headquarters  for the remainder of the term
of its sublease, which expires November 15, 1999.

     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 to
higher margin turnkey  management  assignments and more complex  projects and to
utilize its proprietary  implementation  methodology in an increasing  number of
projects.  Such  forward-looking  statements  include  risks and  uncertainties,
including,  but not limited to: (i) the substantial variability of the Company's
quarterly  operating  results caused by a variety of factors,  many of which are
not within the Company's  control,  including (a) seasonal  patterns of hardware
and  software  capital  spending  by  customers,   (b)  information   technology
outsourcing trends, (c) the timing, size and stage of projects,  (d) new service
introductions  by the Company or its  competitors  and the timing of new product
introductions by the Company's ERP partners, (e) levels of market acceptance for
the  Company's  services,  (f) general  economic  conditions,  (g) the hiring of
additional  staff and (h) fixed price  contracts;  (ii) changes in the Company's
billing and employee  utilization  rates;  (iii) the Company's ability to manage
its  growth  effectively,  which  will  require  the  Company  (a)  to  continue
developing and improving its operational,  financial and other internal systems,
as well as its business development capabilities, (b) to attract, train, retain,
motivate  and manage its  employees,  (c) to continue to maintain  high rates of
employee  utilization at profitable  billing rates and, (d) to maintain  project
quality,  particularly if the size and scope of the Company's projects increase;
(iv) the Company's ability to maintain an effective  internal control structure;
(v) the Company's limited operating history within its current line of business;
(vi) the Company's reliance on a continued relationship with SAP America and the
Company's  present  status as a SAP National Logo  Partner;  (vii) the Company's
substantial  reliance on key  customers  and large  projects;  (viii) the highly
competitive nature of the markets for the Company's services; (ix) the Company's
ability  to   successfully   address  the  continuing   changes  in  information
technology,  evolving industry  standards and changing  customer  objectives and
preferences;  (x) the Company's  reliance on the  continued  services of its key
executive officers and leading technical  personnel;  (xi) the Company's ability
to attract and retain a  sufficient  number of highly  skilled  employees in the
future;  (xii) the progress the Company may have at  continuing to diversify its
offerings,  including growth in its Oracle, Baan and PeopleSoft services; (xiii)
uncertainties  resulting  from  pending  litigation  matters and from  potential
administrative  and  regulatory  immigration  and tax  law  matters;  (xiv)  the
Company's  ability to protect its intellectual  property  rights;  and (xv) Year
2000 compliance of vendors' products and related issues, including impact of the
Year 2000 problem on customer buying patterns.  The Company's actual results may
differ materially from the results disclosed in such forward-looking statements.


                                     - 10 -
<PAGE>

RESULTS OF OPERATIONS

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

                                                    PERCENTAGE OF REVENUE
                                       -----------------------------------------
                                       THREE MONTHS ENDED      NINE MONTHS ENDED
                                          SEPTEMBER 30,            SEPTEMBER 30,
                                       -------------------     -----------------
                                       1998         1997       1998       1997
                                       ----         ----       ----       ----
Revenue............................    100.0%       100.0%     100.0%     100.0%
Cost of sales......................     64.0         65.5       64.0       68.0
                                       -----        -----      -----      -----
   Gross profit....................     36.0         34.5       36.0       32.0
Selling, general and                     
administrative expenses............     26.0         23.7       26.0       22.3
Acquisition expenses...............       --           --        0.4         --
                                       -----        -----      -----      -----
   Operating income................     10.0         10.8        9.6        9.7
Other income.......................      0.5          0.7        0.3        0.4
                                       -----        -----      -----      -----
Income before provision for income       
   taxes..........................      10.5         11.5        9.9       10.1
Provision for income taxes.........      3.2          4.3        2.9        3.8
                                       -----        -----      -----      -----
Net income.........................      7.3%         7.2%       7.0%       6.3%
                                       ======       =====      =====      =====

               THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO
                     THREE MONTHS ENDED SEPTEMBER 30, 1997

     Revenue.  Revenue  increased by 63%, or $13.9  million,  from $21.9 million
during the three months ended  September 30, 1997,  to $35.8 million  during the
three months ended September 30, 1998.  This increase is attributable  primarily
to increased  demand for the  Company's  SAP and  Oracle-related  Implementation
Consulting  Services,  as well as the Company's  systems  integration and custom
software  development  services.  Additionally,  revenue for the current quarter
included  approximately  $2.6 million  related to CPI, which was acquired in May
1998.

     Gross profit.  The Company's cost of sales  includes  primarily the cost of
salaries to consultants  and related  employee  benefits and payroll taxes.  The
Company's  cost of sales  increased by 60%, or $8.6 million,  from $14.3 million
during the three months ended  September  30, 1997 to $22.9  million  during the
three  months  ended  September  30,  1998.  The  increase  was due to increased
personnel costs  resulting from the hiring of additional  consultants to support
the increase in demand for the Company's  services.  The Company's  gross profit
increased by 70%, or $5.3  million,  from $7.6  million  during the three months
ended  September  30,  1997 to $12.9  million  during  the  three  months  ended
September 30, 1998.  Gross profit margin  increased from 34.5% of revenue during
the three months ended  September 30, 1997 to 36.0% of revenue  during the three
months ended  September  30, 1998.  The increase in such gross profit margin was
primarily  attributable  to  both  the  expanded  utilization  of the  Company's
offshore  development  facility in India,  and the  increase  in  implementation
service  projects  where the Company has  project  management  responsibilities,
which  typically  carry  higher  gross  margins  than those in which the Company
provides supplemental staffing for client managed projects.

     Selling,   general  and  administrative   expenses  Selling,   general  and
administrative  expenses  increased by 79%, or $4.1  million,  from $5.2 million
during the three months ended

                                     - 11 -
<PAGE>
September 30, 1997 to $9.3 million  during the three months ended  September 30,
1998,  and  increased  as a  percentage  of  revenue  from  23.7% to 26.0%.  The
increases in such  expenses in absolute  dollars and as a percentage  of revenue
were due primarily to the increase in salaries and related benefits,  reflecting
headcount  increases in the Company's  sales force and its  marketing,  finance,
accounting and administrative staff, in order to manage its growth. In addition,
the Company  experienced  increases in sales and  management  recruiting  costs,
occupancy costs as additional offices were opened in the United States,  support
services and the provision for doubtful accounts.

     Other  income.  Interest  income has been earned on interest  bearing  cash
accounts and short-term  investments.  In accordance with investment  guidelines
approved by the Company's  Board of Directors,  cash balances in excess of those
required to fund  operations  have been  invested in  short-term  U.S.  Treasury
securities and commercial paper with a credit rating no lower than A1/P1.

     Provision for income taxes. The Company's  effective tax rate was 30.5% and
37% for the three months ended  September  30, 1998 and 1997,  respectively.  In
1996, the Company elected a five year tax holiday in India, in accordance with a
local tax  incentive  program  whereby no income tax will be due in such period.
For the three  months  ended  September  30,  1998,  the tax  holiday  favorably
impacted the Company's  effective tax rate by approximately 9%, while the effect
was not significant in the three months ended September 30, 1997.


                NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO
                      NINE MONTHS ENDED SEPTEMBER 30, 1997

     Revenue.  Revenue  increased by 69%, or $39.1  million,  from $56.8 million
during the nine months ended September 30, 1997 to $95.9 million during the nine
months ended  September 30, 1998.  This increase was  attributable  primarily to
increased demand for the Company's implementation  consulting services and, to a
lesser extent,  to increased  demand for the Company's  systems  integration and
custom software development services. Additionally,  revenue for the nine months
ended  September 30, 1998 included  approximately  $3.9 million  related to CPI,
which was acquired in May 1998.

     Gross  profit.  The  Company's  cost of sales  increased  by 59%,  or $22.8
million,  from $38.6 million during the nine months ended  September 30, 1997 to
$61.4 million during the nine months ended  September 30, 1998. The increase was
due to  increased  personnel  costs  resulting  from the  hiring  of  additional
consultants  to support the increase in demand for the Company's  services.  The
Company's  gross profit  increased by 90%, or $16.3 million,  from $18.2 million
during the nine months ended September 30, 1997 to $34.5 million during the nine
months ended  September 30, 1998.  Gross profit margin  increased  from 32.0% of
revenue  during the nine  months  ended  September  30, 1997 to 36.0% of revenue
during the nine months  ended  September  30,  1998.  The increase in such gross
profit margin was primarily attributable to both the expanded utilization of the
Company's  offshore   development   facility  in  India,  and  the  increase  in
implementation  service  projects  where  the  Company  has  project  management
responsibilities, which typically carry higher gross margins than those in which
the Company provides supplemental staffing for client managed projects.

                                     - 12 -
<PAGE>
     Selling,  general  and  administrative   expenses.   Selling,  general  and
administrative  expenses increased by 97%, or $12.2 million,  from $12.7 million
during the nine months ended September 30, 1997 to $24.9 million during the nine
months ended  September 30, 1998,  and increased as a percentage of revenue from
22.3% to 26.0% of revenue.  The increases in such  expenses in absolute  dollars
and as a percentage  of revenue  were due  primarily to the increase in salaries
and related  benefits,  reflecting  headcount  increases in the Company's  sales
force and its marketing,  finance, accounting and administrative staff, in order
to manage its growth. In addition,  the Company  experienced  increases in sales
and management  recruiting  costs,  occupancy  costs as additional  offices were
opened in the United  States,  support  services and the  provision for doubtful
accounts.

     Acquisition  expense.  During the nine months ended September 30, 1998, the
Company  incurred  costs of $434,000 in connection  with the  acquisition of CPI
Resources  Limited,  which was accounted  for as a pooling of  interests.  These
costs primarily consisted of professional fees associated with the acquisition.

     Other  income.  Interest  income has been earned on interest  bearing  cash
accounts and short-term  investments.  In accordance with investment  guidelines
approved by the Company's  Board of Directors,  cash balances in excess of those
required to fund  operations  have been  invested in  short-term  U.S.  Treasury
securities and commercial paper with a credit rating no lower than A1/P1.

     Provision for income taxes.  The  Company's  effective  income tax rate was
29.8%  and  37.7%  for the  nine  months  ended  September  30,  1998  and  1997
respectively.  In 1996, the Company elected a five year tax holiday in India, in
accordance with a local tax incentive  program whereby no income tax will be due
in such period.  For the nine months ended  September 30, 1998,  the tax holiday
favorably  impacted the Company's  effective tax rate by approximately 9%, while
the effect was not significant in the nine months ended September 30, 1997.

BACKLOG

     The Company  normally  enters into written  contracts with its customers at
the time it commences work on a project. These written contracts contain varying
terms  and  conditions  and  the  Company  does  not  generally  believe  it  is
appropriate  to  characterize  such written  contracts as creating  backlog.  In
addition, because these written contracts often provide that the arrangement can
be terminated with limited advance notice and without significant  penalty,  the
Company does not believe that projects in process at any one time are a reliable
indicator or measure of expected  future  revenue.  In the event that a customer
terminates  a project,  the  customer  remains  obligated to pay the Company for
services performed by it through the date of termination.

LIQUIDITY AND CAPITAL RESOURCES

     The Company funds its  operations  primarily  from cash flow generated from
operations,  and to a lesser  extent,  from  cash  balances  generated  from the
Company's initial and follow-on public offerings consummated in October 1996 and
July 1997, respectively.

                                     - 13 -
<PAGE>
     The Company had cash and cash  equivalents of $5.4 million at September 30,
1998, and $8.4 million at December 31, 1997. The Company had working  capital of
$30.6 million at September 30, 1998 and $29.0 million at December 31, 1997.

     Cash  provided by operating  activities  was $1.1  million  during the nine
months ended  September 30, 1998,  resulting  primarily  from net income of $6.6
million  for the nine  months  ended  September  30,  1998,  an increase of $5.9
million in accounts payable and accrued payroll,  offset by an increase of $11.9
million in accounts  receivable  and unbilled  services.  Cash used in operating
activities for the nine months ended September 30, 1997 was $4.9 million.

     The Company  invested  $4.8 million and $2.1 million in computer  equipment
and office  furniture  and fixtures  during the nine months ended  September 30,
1998 and 1997,  respectively.  The increase  reflects  purchases of computer and
telecommunication  equipment for consultants and administrative staff and office
furniture and fixtures related to the Company's new headquarters in Edison,  New
Jersey, and other new offices opened during 1998.

     In January  1997,  and as later  amended on August 18,  1997,  the  Company
entered into a two-year  credit  agreement with a bank (the "Bank").  The credit
facility with the Bank has two  components  comprised of (i) a revolving line of
credit pursuant to which the Company may borrow up to $7.5 million either at the
Bank's prime rate per annum or the EuroRate plus 2% (at the  Company's  option),
and (ii)  equipment term loans pursuant to which the Company may borrow up to an
aggregate  of  $350,000  (at the Bank's  prime rate plus 1/4 of 1% per annum) to
purchase  equipment.  The credit agreement  contains covenants which require the
Company to (i) maintain its working  capital during the year at no less than 90%
of the working capital at the end of the immediately  preceding  fiscal year and
at the end of each fiscal  year at no less than 105% of its  working  capital at
the end of the immediately preceding fiscal year; and (ii) maintain its tangible
net worth  during the year at no less than 95% of its  tangible net worth at the
end of the immediately  preceding fiscal year and at the end of each fiscal year
at no less  than  108%  of  tangible  net  worth  at the end of the  immediately
preceding  fiscal year. As of September  30, 1998,  the Company is in compliance
with all debt covenants.  The Company's  obligations  under the credit agreement
are  collateralized by substantially all of the Company's assets,  including its
accounts receivable and intellectual  property.  The Company's obligations under
the credit  facility are payable at the  expiration  of such facility on January
22, 1999. These terms are subject to the Company  maintaining an  unsubordinated
debt to tangible  net worth ratio of no greater  than one to one and an earnings
before  interest  and taxes to interest  expense  ratio of no less than three to
one.

     As of  September  30,  1998,  there were no amounts  outstanding  under the
revolving line of credit and no equipment term loans outstanding.

     On  October  22,  1998,  the  Company  announced  that  it had  executed  a
commitment  letter with PNC Bank for a three-year $30 million  revolving  credit
facility.  When  finalized,  such facility  will replace the  Company's  current
two-year  $7.5  million  credit  facility.  The  Company  expects  to close this
facility  in  November  1998.  There  can be no  assurance,  however,  that such
facility will be finalized in 1998, if at all.

                                     - 14 -
<PAGE>
     The Company believes that its available funds, together with current credit
arrangements and the cash flows expected to be generated from  operations,  will
be adequate to satisfy its current and planned  operations  through at least the
next twelve months.

YEAR 2000 COMPLIANCE

     Historically,  certain computer programs have been written using two digits
rather  than four to define  the  applicable  year,  which  could  result in the
computer  recognizing a date using "00" as the year 1900 rather than 2000.  This
in turn,  could  result in major  system  failures  or  miscalculations,  and is
generally  referred to as the "Year 2000 Problem".  The Company believes that it
has  sufficiently  assessed its state of readiness with respect to its Year 2000
compliance. Based on its assessment, the Company does not believe that Year 2000
compliance  will result in material  investments  by the  Company,  nor does the
Company  anticipate  that the Year 2000 Problem will have any adverse effects on
the business  operations or financial  performance  of the Company.  The Company
does not believe that it has any material exposure to the Year 2000 Problem with
respect to its own information systems.

     The  purchasing  patterns  of  customers  and  potential  customers  may be
affected by issues  associated with the Year 2000 Problem.  As companies  expend
significant  resources to correct  their current data storage  solutions,  these
expenditures  may result in reduced  funds to  purchase  products  or  undertake
projects  such as those offered by the Company.  There can be no assurance  that
the Year 2000 Problem, as it relates to customers, potential customers and other
third-parties,  will not  adversely  affect the  Company's  business,  operating
results and  financial  condition.  Conversely,  the Year 2000 Problem may cause
other  companies  to  accelerate  purchases,  thereby  causing  an  increase  in
short-term  demand  and a  consequent  decrease  in  long-term  demand  for  the
Company's products.

EUROPEAN MONETARY UNION (EMU)

     The euro is scheduled to be  introduced  on January 1, 1999,  at which time
the eleven  participating  EMU member  countries will establish fixed conversion
rates between their existing  currencies  (legacy  currencies) and the euro. The
legacy  currencies  will continue to be used as legal tender through  January 1,
2002;  thereafter,  the legacy  currencies  will be canceled  and euro bills and
coins will be used for cash  transactions in the  participating  countries.  The
Company's  European sales and operations offices affected by the euro conversion
have established plans to address the systems issues raised by the euro currency
conversion  and  are  cognizant  of  the  potential  business   implications  of
converting to a common currency. The Company is unable to determine the ultimate
financial  impact of the  conversion on its  operations,  if any, given that the
impact will be  dependent  upon the  competitive  situations  which exist in the
various  regional  markets in which the Company  participates  and the potential
actions  which  may or may  not  be  taken  by  the  Company's  competitors  and
suppliers.

                                     - 15 -
<PAGE>

PART II.    OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS.

     On February 16, 1996, the Company,  as plaintiff,  filed a complaint in the
Superior Court of New Jersey,  Chancery  Division,  Middlesex County,  against a
former  consultant  to the Company,  seven  former  employees of the Company and
Pegasus Systems, Inc. ("Pegasus"), a corporation which currently employs certain
of such individuals (collectively, the "Defendants"). The complaint, which seeks
damages and  injunctive  relief  against the  Defendants,  alleges,  among other
things,   misappropriation  of  proprietary  information,   unfair  competition,
tortious interference,  breach of employment agreements,  breach of a consulting
agreement between the Company and Pegasus,  and breach of duty of loyalty,  good
faith and fair dealing. Upon the filing of its complaint, the Company obtained a
temporary  restraining  order and in May 1996 obtained a preliminary  injunction
prohibiting  the Defendants  from using or disclosing the Company's  proprietary
information, prohibiting the Defendants from contacting or soliciting certain of
the Company's  customers  and  prohibiting  the  Defendants  from  recruiting or
attempting  to recruit  the  Company's  employees,  agents or  contractors.  The
preliminary  injunction  remains  in effect  and the  Company  intends to pursue
vigorously enforcement of the injunction against the Defendants.  The Defendants
have filed an answer and counterclaim. Pegasus has asserted a breach of contract
counterclaim  against the Company alleging that the Company owes it $129,000 for
consulting services.  Pegasus and two of the individual Defendants also asserted
claims against the Company and two of its officers for tortious interference and
defamation.  In addition, one of the individual Defendants has asserted that the
Company  owes him $70,000 in  commissions.  In addition to monetary  damages the
Defendants  seek  injunctive  relief.  The  Defendants  unsuccessfully  sought a
temporary  restraining  order  against the  Company.  On October 13,  1998,  the
parties  negotiated  a  settlement  to dispose of all  claims  asserted  in this
lawsuit  as well as  those  asserted  in the  claim  against  Sophien  Bennaceur
(discussed  below).  The Company is in the process of drafting and  finalizing a
settlement agreement with respect to both lawsuits. The settlement agreement, if
executed, will dispose of both lawsuits for a nominal payment by the Company and
by Sophien  Bennaceur.  The Company  does not believe  that the outcome of these
claims  and  counterclaims  will  have a  material  effect  upon  the  Company's
business, financial condition or results of operations.

     Oxford Systems Inc.  ("Oxford"),  a New Jersey  corporation  and formerly a
wholly-owned  subsidiary  of the  Company  which was merged  into the Company in
December 1996,  was named as a defendant in a civil  complaint that was filed on
June 8, 1995, by Design Strategy Corp.  ("Design  Strategy"),  in New York State
Supreme Court in the County of New York.  Design  Strategy  alleges that another
named defendant, Citibank N.A. ("Citibank"), contracted with Design Strategy for
database  administration  services.  Design  Strategy  claims that  Citibank and
Oxford  conspired  to  deprive it of  commissions,  tortiously  interfered  with
contract,   engaged  in  unfair   competition,   damaged  its   reputation   and
misappropriated  services.  Design Strategy settled its claims against Citibank.
Design  Strategy then moved to amend its complaint to substitute the Company for
Oxford  and  to  join  Nagarjun   Valluripalli,   the  Company's   President  of
International  Operations,  as defendants.  At the same time, Oxford and another
defendant  cross-moved for summary judgment.  Thereafter,  on September 9, 1997,
the New York State  Supreme Court granted  Design  Strategy's  motion to add the
Company and Mr. Valluripalli as defendants while

                                     - 16 -
<PAGE>
simultaneously  granting the Company's  cross-motion  for summary  judgment.  On
September  18, 1997,  the Court entered a decision and order  dismissing  Design
Strategy's complaint in its entirety.  Subsequently, on October 17, 1997, Design
Strategy  filed a notice of motion of reargument of the Decision and a notice of
appeal.  On July 2, 1998,  the  Appellate  Division  affirmed the lower  court's
decision dismissing Design Strategy's complaint in its entirety.

     On February 13, 1998,  Russell  Schultz,  a former employee of the Company,
filed a complaint in the Superior  Court of New Jersey,  Law Division,  Monmouth
County, naming the Company as a defendant.  The complaint,  which seeks damages,
alleges,  among other things,  that the Company  misrepresented  plaintiff's job
description in order to induce plaintiff to leave his prior employer,  failed to
provide  stock  options  to  the  plaintiff  and  violated  plaintiff's  written
employment  contract.  The Company was served  with the  complaint  on March 16,
1998.  Subsequently,  on July 10,  1998,  upon the  Company's  Motion  to Compel
Arbitration,  the court dismissed the plaintiff's  complaint without  prejudice.
Subsequently,  the  plaintiff's  motion to reconsider  the dismissal was denied.
Although plaintiff's claim has been dismissed by the court,  plaintiff may still
submit such claims to arbitration.  It is too early in the litigation process to
determine the impact,  if any, that such litigation will have upon the Company's
business, financial condition or results of operations.

     On May 28, 1998, the Company and Rajkumar  Koneru,  as plaintiffs,  filed a
complaint in the United  States  District  Court for the District of New Jersey,
against Sophien  Bennaceur,  a former  employee and officer of the Company.  The
complaint,  which seeks damages and  injunctive  relief  against the  defendant,
alleges among other things,  misappropriation of proprietary information, breach
of employment  agreement,  breach of fiduciary duty and duty of loyalty,  unfair
competition  and  tortious  interference.  The  defendant  was  served  with the
complaint and filed an answer on July 9, 1998. On October 13, 1998,  the parties
negotiated  a  settlement  to dispose of all claims  asserted in this lawsuit as
well as those asserted in the Pegasus litigation  (discussed above). The Company
is in the process of drafting and finalizing a settlement agreement with respect
to both lawsuits.  The settlement agreement,  if executed,  will dispose of both
lawsuits for a nominal payment by the Company and by Sophien Bennaceur.

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

ITEM 2.     CHANGES IN SECURITIES AND USE OF PROCEEDS.

     In October 1998, the Company's Board of Directors (the "Board")  declared a
distribution  of one  preferred  stock  purchase  right  (a  "Right")  for  each
outstanding common share, par value $0.01 per share (the "Common Stock"), of the
Company.  The distribution  will be payable at the close of business on November
17, 1998 to shareholders  of record on November 17, 1998 (the "Record Date").  A
Right will  automatically  attach to shares of the Company's Common Stock issued
after the Record Date. The  description and terms of the Rights are set forth in
a  Shareholder  Protection  Rights  Agreement  dated as of November 6, 1998 (the
"Rights  Agreement")  between the Company and  American  Stock  Transfer & Trust
Company, as rights agent.

                                     - 17 -
<PAGE>

     The Rights Agreement provides,  among other things, for the issuance of one
Right to buy one  one-hundredth  (1/100)  of a share of the  Company's  Series A
Participating Preferred Stock, no par value, to stockholders of the Common Stock
as of the Record Date and to stockholders of Common Stock issued thereafter. The
Series A Participating  Preferred Stock is a series of the Company's  authorized
preferred stock (each share, a "Preferred Share").

     The Rights  will remain  attached to and trade with the Common  Stock until
the  earlier  to  occur  of (i)  ten  (10)  business  days  following  a  public
announcement  that a person or group of  affiliated  or  associated  persons (an
"Acquiring Person") has acquired,  or obtained the right to acquire,  beneficial
ownership of shares of the Company's  Common Stock  representing  twenty percent
(20%) or more of the voting power of all  outstanding  shares of Common Stock of
the Company, or such later date as the Board may determine by resolution adopted
prior to the Separation Date (as defined below),  or (ii) ten (10) business days
following the commencement of a tender offer or exchange offer that would result
in a person or group  beneficially  owning  outstanding  shares of the Company's
Common Stock  representing  twenty  percent (20%) or more of the voting power of
all outstanding shares of Common Stock of the Company, or such later date as the
Board may determine by  resolution  adopted prior to the  Separation  Date.  The
earlier of (i) and (ii) is referred to as the "Separation  Date."  Following the
Separation  Date,  the Rights  will  detach  from the  Common  Stock and will be
tradable separately from the Common Stock and Rights holders will be entitled to
purchase one one-hundredth (1/100) of a Preferred Share for $100.00.

     In the event that a person or group of  affiliated  or  associated  persons
becomes an Acquiring  Person,  on the Separation  Date,  each Right,  other than
Rights held by the Acquiring Person, shall become exercisable for that number of
shares of Common  Stock as shall have a market value equal to two times the then
applicable  exercise  price of the Right  (or,  at the  option  of the  Company,
Preferred  Shares at a ratio of one  one-hundredth  (1/100) of a Preferred Share
for each share of Common Stock required to be issued).  If the Company shall not
have  sufficient  treasury  shares or authorized  but unissued  shares of Common
Stock or Preferred Shares to permit the full exercise of the Rights, the Company
may issue a combination of stock,  cash and debt in respect  thereof.  Following
the time at which a person  shall  become an  Acquiring  Person but prior to the
acquisition by such Acquiring  Person of more than 50% of the Common Stock,  the
Board may also,  at its  option,  exchange  all of the then  outstanding  Rights
(other than Rights held by the Acquiring Person) for shares of Common Stock (or,
at the option of the Board,  Preferred Shares) at an exchange ratio of one share
of Common  Stock (or one  one-hundredth  (1/100) of a Preferred  Share) for each
Right.

     In the event that the  Company is  acquired  in a merger or other  business
combination  transaction  or 50% or more of its  consolidated  assets or earning
power are sold to an Acquiring  Person,  its associates or affiliates or certain
other  persons in which such persons  have an  interest,  each holder of a Right
will thereafter have the right to receive, upon the exercise thereof at the then
current  exercise  price of any Right,  that number of shares of common stock of
the acquiring  company which at the time of such transaction have a market value
equal to two times the exercise price of the Right.

                                     - 18 -
<PAGE>

     The Rights are not exercisable  until the Separation  Date. The Rights will
expire on November 17, 2008 (the "Expiration Date"),  unless the Expiration Date
is  extended  or unless the Rights are  earlier  redeemed  or  exchanged  by the
Company.

     The  foregoing  description  of the Rights is  qualified in its entirety by
reference  to the  Rights  Agreement,  which was filed with the  Securities  and
Exchange  Commission on November 9, 1998 as Exhibit 4.1 to the Company's Current
Report on Form 8-K, and which is incorporated herein by reference.



ITEM 5.     OTHER INFORMATION.

     On July 22,  1998,  Stephen A. Carns,  the  Company's  President  and Chief
Executive Officer, was named a director of the Company.

     On August 31, 1998, John E. Steuri was named a director of the Company.

     On  October  22,  1998,  the  Company  announced  that  it had  executed  a
commitment  letter with PNC Bank for a three-year $30 million  revolving  credit
facility.  When  finalized,  such facility  will replace the  Company's  current
two-year $7.5 million credit facility which expires January 22, 1999.  There are
no outstanding borrowings under the current credit facility. The Company expects
to close this facility in November  1998.  There can be no  assurance,  however,
that such facility will be finalized in 1998, if at all.

                                     - 19 -
<PAGE>

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K.

      (a)   Exhibits.

               27   Financial Data Schedule for the period ended
                    September 30, 1998.


      (b)    Reports on Form 8-K.

               No reports on Form 8-K were filed  during the  quarter  for which
               this report on Form 10-Q is filed.

               Subsequent to the quarter ended  September 30, 1998,  the Company
               filed, on November 9, 1998, a Current Report on Form 8-K with the
               Securities  and  Exchange  Commission  relating to the  Company's
               adoption of a  Shareholder  Rights  Plan.  See Item 2, Changes in
               Securities and Use of Proceeds.


                                     - 20 -
<PAGE>

                                   SIGNATURES


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


                                          Intelligroup, Inc.




DATE: November 12, 1998             By:   /s/ Stephen A. Carns
                                       ---------------------------------
                                          Stephen A. Carns,
                                          President and Chief Executive
                                          Officer
                                          (Principal Executive Officer)


DATE: November 12, 1998             By:   /s/ Gerard E. Dorsey
                                       ---------------------------------
                                          Gerard E. Dorsey,
                                          Senior Vice President-Finance and
                                          Chief Financial Officer
                                          (Principal Financial and Accounting
                                          Officer)


                                     - 21 -