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 June 30, 2001
                           Commission File No. 0-20943

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

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

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

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

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

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

     Indicate the number of shares  outstanding of each of the Issuer's  classes
of common stock, as of August 6, 2001:

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

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





<PAGE>

                             INTELLIGROUP, INC. AND SUBSIDIARIES

                                TABLE OF CONTENTS

                                                                           Page
PART I.  FINANCIAL INFORMATION

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

             Consolidated Balance Sheets as of June 30, 2001
             (unaudited) and December 31, 2000............................   2

             Consolidated Statements of Operations and Comprehensive
             Income (Loss) for the Three Months and Six Months Ended
             June 30, 2001 and 2000 (unaudited)...........................   3

             Consolidated Statements of Cash Flows for the Six Months
             Ended June 30, 2001 and 2000 (unaudited).....................   4

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

    Item 2.  Management's Discussion and Analysis of
             Financial Condition and Results of Operations................  12

    Item 3.  Quantitative and Qualitative Disclosures About Market Risk...  23

PART II. OTHER INFORMATION

    Item 1.  Legal Proceedings............................................  24

    Item 5.  Other Information............................................  24

    Item 6.  Exhibits and Reports on Form 8-K.............................  25

SIGNATURES................................................................  26



                                      - i -
<PAGE>


                          PART I. FINANCIAL INFORMATION

                    ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS




                                      - 1 -
<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                    AS OF JUNE 30, 2001 AND DECEMBER 31, 2000
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                JUNE 30, 2001    DECEMBER 31, 2000
                                                                -------------    -----------------
                          ASSETS
<S>                                                             <C>                <C>
Current Assets:
  Cash and cash equivalents.............................        $   1,524,000      $   1,327,000
  Accounts receivable, less allowance for doubtful
      accounts of $1,867,000 and $2,061,000 at June 30,
      2001 and December 31, 2000, respectively..........           18,405,000         22,438,000
  Unbilled services.....................................            5,987,000          5,933,000
  Income taxes receivable...............................              384,000            384,000
  Deferred tax asset....................................            1,348,000          1,348,000
  Other current assets..................................            5,447,000          5,530,000
  Note receivable - SeraNova............................            9,140,000         11,200,000
                                                                -------------      -------------

        Total current assets............................           42,235,000         48,160,000
  Property and equipment, net...........................           10,259,000          9,650,000
  Intangible assets, net................................            4,504,000          4,732,000
  Other assets..........................................            7,057,000          4,826,000
                                                                -------------      -------------
                                                                $  64,055,000      $  67,368,000
                                                                =============      =============

           LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
  Accounts payable......................................        $   4,680,000      $   6,849,000
  Accrued payroll and related taxes.....................            5,581,000          6,480,000
  Accrued expenses and other liabilities................            4,597,000          5,345,000
  Income taxes payable..................................              286,000            288,000
  Current portion of long term debt and obligations
      under capital leases..............................            7,089,000          5,623,000
                                                                -------------      -------------

         Total current liabilities......................           22,233,000         24,585,000
Deferred tax liability..................................              545,000            545,000
                                                                -------------      -------------
Obligations under capital leases, less current portion..              630,000          1,037,000
                                                                -------------      -------------

Commitments and contingencies
Shareholders' Equity
  Preferred stock, $.01 par value, 5,000,000 shares
      authorized, none issued or outstanding............                   --                 --
  Common stock, $.01 par value, 25,000,000 shares
      authorized, 16,630,125 shares issued and
      outstanding at June 30, 2001
      and December 31, 2000.............................              166,000            166,000
  Additional paid-in capital............................           41,366,000         41,366,000
  Retained earnings.....................................            2,275,000          1,908,000
  Currency translation adjustments......................           (3,160,000)        (2,239,000)
                                                                -------------      -------------
        Total shareholders' equity .....................           40,647,000         41,201,000
                                                                -------------      -------------
                                                                $  64,055,000      $  67,368,000
                                                                =============      =============
</TABLE>

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

                                     - 2 -
<PAGE>


                       INTELLIGROUP, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  AND COMPREHENSIVE INCOME (LOSS) FOR THE THREE
               MONTHS AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                    THREE MONTHS ENDED JUNE 30,      SIX MONTHS ENDED JUNE 30,
                                                   ----------------------------   ------------------------------
                                                       2001           2000            2001              2000
                                                   ------------   ------------    ------------      ------------
<S>                                                <C>            <C>             <C>               <C>
Revenue........................................    $ 28,027,000   $ 27,689,000    $ 58,064,000      $ 56,740,000
Cost of sales..................................      18,640,000     18,490,000      39,512,000        37,674,000
                                                   ------------   ------------    ------------      ------------
    Gross profit...............................       9,387,000      9,199,000      18,552,000        19,066,000
                                                   ------------   ------------    ------------      ------------
Selling, general and administrative expenses...       8,061,000     12,050,000      16,179,000        24,139,000
Depreciation and amortization..................         917,000        723,000       1,862,000         1,571,000
                                                   ------------   ------------    ------------      ------------
    Total operating expenses...................       8,978,000     12,773,000      18,041,000        25,710,000
                                                   ------------   ------------    ------------      ------------
    Operating income (loss)....................         409,000     (3,574,000)        511,000        (6,644,000)
Other income (expense), net....................        (132,000)       213,000         (11,000)          184,000
                                                   ------------   ------------    ------------      ------------
Income (loss) from continuing operations
  before income tax provision (benefit)........         277,000     (3,361,000)        500,000        (6,460,000)
Provision (benefit) for income taxes...........          98,000       (470,000)        133,000        (1,461,000)
                                                   ------------   ------------    ------------      ------------
Income (loss) from continuing operations                179,000     (2,891,000)        367,000        (4,999,000)
Loss from discontinued operations, net of
  income tax benefit of $0, $(985,000),
  $0 and $(2,095,000), respectively ...........              --     (1,812,000)             --        (4,891,000)
                                                   ------------   ------------    ------------      ------------
Net income (loss) .............................    $    179,000   $ (4,703,000)   $    367,000      $ (9,890,000)
                                                   ============   ============    ============      ============

Earnings per share:
    Basic earnings per share:
        Income (loss) from continuing
         operations............................    $       0.01   $      (0.17)   $       0.02      $      (0.31)
        Discontinued operations................              --          (0.11)             --             (0.30)
                                                   ------------   ------------    ------------      ------------
        Net income (loss) per share............    $       0.01   $      (0.28)   $       0.02      $      (0.61)
                                                   ============   ============    ============      ============
      Weighted average number of
      Common shares - Basic....................      16,630,000     16,575,000      16,630,000        16,360,000
                                                   ============   ============    ============      ============

    Diluted earnings per share:
        Income (loss) from continuing
         operations ...........................    $       0.01   $      (0.17)   $      0.02       $      (0.31)
        Discontinued operations ...............              --          (0.11)             --             (0.30)
                                                   ------------   ------------    ------------      ------------
        Net income (loss) per share............    $       0.01   $      (0.28)   $      0.02       $      (0.61)
                                                   ============   ============    ============      ============
      Weighted average number of
      Common shares - Diluted..................      16,631,000     16,575,000      16,649,000        16,360,000
                                                   ============   ============    ============      ============

Comprehensive Income (Loss)
Net income (loss)..............................    $    179,000   $ (4,703,000)   $    367,000      $ (9,890,000)
Other comprehensive income (loss) -
      Currency translation adjustments.........         565,000       (155,000)       (921,000)         (134,000)
                                                   ------------   ------------    ------------      ------------
Comprehensive income (loss)....................    $    744,000   $ (4,858,000)   $   (554,000)     $(10,024,000)
                                                   ============   ============    ============      ============
</TABLE>



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

                                     - 3 -
<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                     SIX MONTHS ENDED JUNE 30,
                                                                   ----------------------------
                                                                       2001             2000
                                                                   -----------      -----------
<S>                                                                <C>              <C>
Cash flows from operating activities:
  Net income (loss)............................................    $   367,000      $(9,890,000)
  Less: Loss from discontinued operations, net of tax..........             --       (4,891,000)
                                                                   -----------      -----------
  Income (loss) from continuing operations.....................        367,000       (4,999,000)
  Adjustments to reconcile income (loss) from continuing
    operations to net cash provided by operating
    activities of continuing operations:
      Depreciation and amortization............................      2,270,000        1,571,000
      Provision for doubtful accounts..........................      1,042,000        2,109,000
      Deferred income taxes....................................             --       (1,855,000)
  Changes in operating assets and liabilities:
    Accounts receivable........................................      2,991,000        6,749,000
    Unbilled services..........................................        (54,000)       1,530,000
    Other current assets.......................................         83,000         (231,000)
    Other assets...............................................        447,000         (257,000)
    Accounts payable...........................................     (2,169,000)        (942,000)
    Accrued payroll and related taxes..........................       (899,000)       3,625,000
    Accrued expenses and other liabilities.....................       (748,000)       3,183,000
    Income taxes payable.......................................         (2,000)      (3,304,000)
                                                                   -----------      -----------
  Net cash provided by operating activities of continuing
    operations.................................................      3,328,000        7,179,000
                                                                   -----------      -----------

Cash flows from investing activities:
    Purchase of equipment .....................................     (2,651,000)      (2,156,000)
    Purchase of software licenses..............................     (2,678,000)      (1,689,000)
                                                                   -----------      -----------
  Net cash used in investing activities of continuing
    operations.................................................     (5,329,000)      (3,845,000)
                                                                   -----------      -----------

Cash flows from financing activities:
  Principal payments under capital leases......................       (279,000)          (6,000)
  Proceeds from exercise of stock options......................             --        5,742,000
  Other borrowings (repayments)................................        (89,000)          10,000
  Net change in line of credit borrowings......................      1,427,000       (5,328,000)
  Net change in note receivable-SeraNova prior to
    spin-off date..............................................             --       (6,662,000)
  Repayment of note receivable-SeraNova subsequent to
   spin-off date...............................................      2,060,000               --
                                                                   -----------      -----------
    Net cash provided by (used in) financing activities
      of continuing operations.................................      3,119,000       (6,244,000)
                                                                   -----------      -----------
    Effect of foreign currency exchange rate changes on cash...      (921,000)        (176,000)
                                                                   -----------      -----------
Net cash provided by (used in) continuing operations ..........        197,000       (3,086,000)
Net cash used in discontinued operations ......................             --         (625,000)
                                                                   -----------      -----------
Net increase (decrease) in cash and cash equivalents ..........        197,000       (3,711,000)
Cash and cash equivalents at beginning of period...............      1,327,000        5,510,000
                                                                   -----------      -----------
Cash and cash equivalents at end of period.....................    $ 1,524,000      $ 1,799,000
                                                                   ===========      ===========
Supplemental disclosures of cash flow information:
  Cash paid for income taxes...................................    $   426,000      $ 2,432,000
                                                                   ===========      ===========
  Cash paid for interest.......................................    $   430,000      $   169,000
                                                                   ===========      ===========
</TABLE>


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

                                     - 4 -
<PAGE>


                       INTELLIGROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION

     The   consolidated   financial   statements  and   accompanying   financial
information  as of June 30, 2001 and for the three and six months ended June 30,
2001 and 2000 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, 2000,
which were included as part of the Company's Form 10-K.

     On July 5, 2000, the Company  spun-off its Internet  applications  services
and management consulting businesses ("SeraNova").  This transaction resulted in
the distribution of SeraNova common stock to each holder of the Company's common
stock of  record  as of May 12,  2000.  As a  result  of this  transaction,  the
Consolidated  Financial Statements and related notes present the results of this
business as discontinued operations (See Note 4).

     The Company's 2001 operating plan contains  assumptions  regarding  revenue
and  expenses.  The  achievement  of the operating  plan depends  heavily on the
timing of work performed by the Company on existing  projects and the ability of
the Company to gain and perform  work on new  projects.  Project  cancellations,
delays in the timing of work  performed  by the Company on existing  projects or
the inability of the Company to gain and perform work on new projects could have
an adverse  impact on the Company's  ability to execute its  operating  plan and
maintain  adequate  cash  flow.  In the  event  actual  results  do not meet the
operating  plan,  management  believes  it could  execute  contingency  plans to
mitigate such effects.  Such plans include additional cost reductions or seeking
additional  financing.  Considering  the cash on hand,  the credit  facility and
based on the achievement of the operating plan and management's actions taken to
date,  management believes it has the ability to continue to generate sufficient
cash to satisfy its  operating  requirements  in the normal  course of business.
However,  no assurance can be given that  sufficient cash will be generated from
operations.

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



                                     - 5 -
<PAGE>

NOTE 2 - EARNINGS PER SHARE

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

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

<TABLE>
<CAPTION>
                                         Three Months Ended June 30,     Six Months Ended June 30,
                                         ---------------------------     -------------------------
                                            2001            2000            2001           2000
                                            ----            ----            ----           ----
<S>                                      <C>             <C>             <C>            <C>
Weighted average number of
common shares.....................       16,630,000      16,575,000      16,630,000     16,360,000

Common share equivalents of
outstanding stock options.........            1,000              --          19,000             --
                                         ----------      ----------      ----------     ----------
Weighted average number of
common shares assuming dilution...       16,631,000      16,575,000      16,649,000     16,360,000
                                         ==========      ==========      ==========     ==========
</TABLE>

     Stock options, which would be antidilutive (2,929,000 as of June 30, 2001),
have been excluded  from the  calculations  of diluted  shares  outstanding  and
diluted earnings per share.

NOTE 3 - LINES OF CREDIT

     On May 31, 2000, the Company and PNC Bank,  N.A. (the "Bank")  entered into
an agreement  to replace the previous  credit  agreement  with a new  three-year
revolving credit facility. Such credit facility is comprised of a revolving line
of credit  pursuant to which the Company can borrow up to $20,000,000  either at
the  Bank's  prime rate per annum or the Euro Rate plus 1.75% to 2.5% based upon
the Company's ratio of debt to EBITDA.  The credit facility is collateralized by
substantially all of the assets of the Company's United States based operations.
The  maximum  borrowing  availability  under the line of credit is based  upon a
percentage of eligible billed and unbilled accounts  receivable,  as defined. As
of June 30,  2001,  the  Company  had  outstanding  borrowings  under the credit
facility of $6,440,000.  The Company  estimates undrawn  availability  under the
credit  facility to be  $4,167,000 as of June 30, 2001. As of December 31, 2000,
the Company had outstanding borrowings under the credit facility of $5,013,000.




                                     - 6 -
<PAGE>

NOTE 3 - LINES OF CREDIT (CONTINUED)

     The credit facility provides for the following financial  covenants,  among
other things,  (1) the Company must maintain  consolidated net worth, as defined
("consolidated net worth") of (a) not less than 95% of consolidated net worth of
the immediately  preceding  fiscal year-end as at each such fiscal quarter after
December 31,  2000;  and (b) at least 105% of  consolidated  net worth as of the
immediately preceding fiscal year-end as at each such fiscal year-end subsequent
to December 31, 2000;  provided,  however,  the foregoing  covenant shall not be
tested for any quarter so long as the  Company  maintains,  at all times  during
such fiscal  quarter,  undrawn  availability of more than $5,000,000 and (2) the
Company must maintain unconsolidated net worth, as defined  ("unconsolidated net
worth") of (a) not less than 95% of unconsolidated  net worth of the immediately
preceding  fiscal  year-end as at each such fiscal  quarter  after  December 31,
2000; and (b) at least 105% of  unconsolidated  net worth as of the  immediately
preceding fiscal year-end as at each such fiscal year-end subsequent to December
31, 2000; provided,  however, the foregoing covenant shall not be tested for any
quarter  so long as the  Company  maintains,  at all times  during  such  fiscal
quarter, undrawn availability of more than $5,000,000.  Additionally, the credit
facility  contains material adverse change clauses with regards to the financial
condition of the assets,  liabilities and operations of the Company.  As of June
30, 2001, the Company was in compliance with all financial covenants.

     Interest expense on debt and obligations under capital leases  approximated
$430,000  and  $169,000  for the six  months  ended  June  30,  2001  and  2000,
respectively.

NOTE 4 - DISCONTINUED OPERATIONS

     In November  1999,  the Company  announced  its  intentions to spin off its
Internet  applications  services and management  consulting  business subject to
certain  approvals and conditions.  On January 1, 2000, the Company  transferred
its Internet  applications  services and  management  consulting  businesses  to
SeraNova, a wholly-owned subsidiary of the Company on such date.

     On July 5, 2000, the Company completed the tax-free spin-off of SeraNova by
distributing all of the outstanding  shares of the common stock of SeraNova then
held by the Company to holders of record of the Company's common stock as of the
close  of  business  on May 12,  2000 (or to their  subsequent  transferees)  in
accordance  with the terms of a  Distribution  Agreement  dated as of January 1,
2000  between the Company  and  SeraNova.  SeraNova  represented  a  significant
segment of the Company's business.

     Pursuant to APB  Opinion No. 30,  "Reporting  the Results of  Operations  -
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently  Occurring Events and  Transactions,"  the Consolidated
Financial  Statements  of the  Company  have been  reclassified  to reflect  the
spin-off of SeraNova.  Accordingly,  the results of operations and cash flows of
SeraNova have been segregated in the  Consolidated  Statements of Operations and
Consolidated  Statements of Cash Flows.  The net operating  results and net cash
flows  of  SeraNova  have  been  reported  as  "Discontinued   Operations."  The
historical  carrying  amount of the net assets of SeraNova on the spin-off  date
has been recorded as a stock dividend.


                                     - 7 -
<PAGE>

NOTE 4 - DISCONTINUED OPERATIONS (CONTINUED)

     The  following is summarized  financial  information  for the  discontinued
operations of SeraNova:

                                           APRIL 1, 2000 TO   JANUARY 1, 2000 TO
                                             JULY 5, 2000        JULY 5, 2000
                                           ----------------   -----------------

Revenue................................     $  19,843,000       $  36,019,000
Pre-tax loss...........................        (2,797,000)         (6,986,000)
Income tax benefit.....................          (985,000)         (2,095,000)
Loss from discontinued operations......        (1,812,000)         (4,891,000)

                                             JULY 5, 2000
                                            ---------------
Current assets.........................     $  25,319,000
Total assets...........................        36,874,000
Note payable to Intelligroup...........        15,059,000
Current liabilities....................         9,173,000
Total liabilities......................        26,170,000
Net assets of discontinued operations..        10,704,000


NOTE 5 - NOTE RECEIVABLE - SERANOVA

     On May  31,  2000,  SeraNova  and  the  Company  formalized  a  $15,100,000
unsecured  promissory  note (the "Note")  relating to net borrowings by SeraNova
from the Company  through such date.  The Note bears  interest at the prime rate
plus 1/2%.  The Company has recorded  total accrued  interest of $1,166,000  and
$803,000 as of June 30, 2001 and December 31, 2000,  respectively.  A payment of
$3,000,000 was made on September 29, 2000 with the balance being due on July 31,
2001.

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

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


                                     - 8 -
<PAGE>

NOTE 5 - NOTE RECEIVABLE - SERANOVA (CONTINUED)

     During the first six months of 2001, the Company received payments totaling
$2,060,000  from  SeraNova.  However,  the  Company  has  not yet  received  the
remaining interim principal payment of $440,000 that was due on July 31, 2001.

     SeraNova has failed to make final payment of all amounts due under the Note
to the Company as of July 31, 2001.  As of such date,  SeraNova was obligated to
pay to the  Company  the  remaining  principal  (approximately  $9,200,000)  and
accrued interest (approximately $1,200,000), or an aggregate of $10,400,000. The
Company  is  continuing  to  negotiate  with   Silverline   Technologies,   Ltd.
("Silverline"),  the company that  acquired  SeraNova  earlier  this year,  with
respect to the payment of the amount due  pursuant  to the Note.  The Company is
exploring all remedies against SeraNova and Silverline, including possible legal
action, in the event that terms acceptable to the Company cannot be reached.  In
the event the Company  accepts a payment in less than full  satisfaction  of the
$10,400,000  due,  the Company  will record a charge  against  earnings for such
difference.  Although  management  believes  they  are  entitled  to the  entire
$10,400,000  balance,  there can be no assurance  that  Silverline  will pay the
entire balance due the Company without litigation.

NOTE 6 - RESTRUCTURING AND OTHER SPECIAL CHARGES

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

        Activity in accrued costs for restructuring and other special charges is
as follows:
<TABLE>
<CAPTION>

                                                   COSTS        ACCRUED        COST         ACCRUED       COST       ACCRUED
                                  CHARGES TO       PAID          COSTS         PAID          COSTS        PAID        COSTS
                                  OPERATIONS       DURING     DECEMBER 31,    DURING      DECEMBER 31,   DURING      JUNE 30,
                                    IN 1999         1999          1999         2000          2000         2001         2001
                                  ----------       ------     ------------    ------      ------------   ------      --------
<S>                               <C>            <C>           <C>           <C>           <C>          <C>          <C>
Severance and related costs.....  $ 5,027,000    $4,162,000    $865,000      $608,000      $257,000     $117,000     $140,000
Other costs primarily to
   exit facilities, contracts,
   and certain activities.......      601,000       517,000      84,000            --        84,000           --       84,000
                                  -----------    --------      --------      --------      --------     --------     --------
                                  $ 5,628,000    $4,679,000    $949,000      $608,000      $341,000     $117,000     $224,000
                                  ===========    ==========    ========      ========      ========     ========     ========
</TABLE>



                                     - 9 -
<PAGE>


NOTE 7 - SEGMENT DATA AND GEOGRAPHIC INFORMATION

     The  Company  operates  in one  industry  segment,  information  technology
solutions and services.  Prior to the spin-off of SeraNova, the Company had been
reporting two business segments as follows:

     o    Enterprise  Applications Services group - the largest business segment
          of  the  Company's   operations,   which  provides  a  wide  range  of
          information   technology   solutions  and   services,   including  the
          development,  integration,  implementation,  hosting  and  application
          management and support of e-commerce and  enterprise  applications  to
          companies of all sizes.

     o    Internet  Applications  Services  group  - the  Internet  professional
          services to  businesses  segment of the  Company's  operations,  which
          provides  information  technology  services  that enable  customers to
          communicate and conduct commerce between its customers,  suppliers and
          partners over the Internet.

     The  Internet   Applications   Services  group   represented   the  assets,
liabilities  and results of operations  of SeraNova,  which has been reported as
discontinued  operations for all periods presented.  Accordingly,  the Company's
Enterprise  Applications  Services group is presented as one business segment in
the following  geographic areas for the three and six months ended June 30, 2001
and 2000.

<TABLE>
<CAPTION>
                                    UNITED STATES    ASIA-PACIFIC        EUROPE            INDIA              TOTAL
                                    -------------    ------------        ------            -----              -----
<S>                                 <C>              <C>              <C>                <C>              <C>
THREE MONTHS ENDED
------------------
JUNE 30, 2001
-------------
Revenue.......................      $ 18,420,000     $  3,298,000     $  2,712,000       $3,597,000       $  28,027,000
Depreciation & amortization...           536,000           85,000          182,000          114,000             917,000 (1)
Operating income (loss).......            30,000          375,000       (1,173,000)       1,177,000             409,000
Total assets..................        45,799,000        6,282,000        7,663,000        4,311,000          64,055,000

THREE MONTHS ENDED
------------------
JUNE 30, 2000
-------------
Revenue.......................      $ 19,626,000     $  2,447,000     $  4,481,000       $1,135,000       $  27,689,000
Depreciation & amortization...           401,000           28,000          169,000          125,000             723,000
Operating income (loss).......        (2,590,000)           6,000         (305,000)        (685,000)         (3,574,000)
Total assets..................        47,623,000        4,337,000       10,243,000        6,750,000          68,953,000 (2)

SIX MONTHS ENDED
----------------
JUNE 30, 2001
-------------
Revenue.......................      $ 37,942,000     $  6,743,000     $  6,577,000       $6,802,000       $  58,064,000
Depreciation & amortization...         1,074,000          169,000          365,000          254,000           1,862,000 (1)
Operating income (loss).......            20,000          106,000       (1,906,000)       2,291,000             511,000

SIX MONTHS ENDED
----------------
JUNE 30, 2000
-------------
Revenue.......................      $ 40,632,000     $  4,567,000     $  9,293,000       $2,248,000       $  56,740,000
Depreciation & amortization...           973,000           56,000          343,000          199,000           1,571,000
Operating income (loss).......        (5,043,000)        (280,000)        (730,000)        (591,000)         (6,644,000)
</TABLE>

-------------
     (1)  Excludes  $215,000  and  $408,000  of  depreciation  and  amortization
          included in cost of sales for the three and six months  ended June 30,
          2001, respectively.
     (2)  Excludes  $10,704,000 of net assets of  discontinued  operations as of
          June 30, 2000.



                                     - 10 -
<PAGE>

NOTE 7 - SEGMENT DATA AND GEOGRAPHIC INFORMATION (CONTINUED)

     Included above are hosting and application  management and support revenues
of $6,107,000  and $6,014,000 for the three months ended June 30, 2001 and 2000,
respectively.  The hosting and application  management and support  revenues for
the six months ended June 30, 2001 and 2000, are  $11,210,000  and  $10,883,000,
respectively.   Other  information   related  to  the  hosting  and  application
management and support business is not available and the Company determined that
it would be impractical to calculate such data.

NOTE 8 - PENDING ACCOUNTING PRONOUNCEMENTS

     In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting  Standards No. 141, Business  Combinations ("SFAS No. 141")
and No. 142, Goodwill and Other Intangible Assets ("SFAS No. 142"). SFAS No. 141
changes the  accounting for business  combinations,  requiring that all business
combinations  be  accounted  for using the purchase  method and that  intangible
assets  be  recognized  as  assets  apart  from  goodwill  if  they  arise  from
contractual or other legal rights,  or if they are separable or capable of being
separated from the acquired entity and sold,  transferred,  licensed,  rented or
exchanged.  SFAS No. 141 is effective  for all business  combinations  initiated
after June 30,  2001.  SFAS No.  142  specifies  the  financial  accounting  and
reporting  for  acquired  goodwill  and other  intangible  assets.  Goodwill and
intangible  assets that have  indefinite  useful lives will not be amortized but
rather will be tested at least annual for impairment.  SFAS No. 142 is effective
for fiscal years beginning after December 15, 2001.

     SFAS No. 142 requires that the useful lives of intangible  assets  acquired
on or before June 30, 2001 be reassessed and the remaining  amortization periods
adjusted  accordingly.  Previously  recognized  intangible assets deemed to have
indefinite  lives  shall be tested for  impairment.  Goodwill  recognized  on or
before June 30, 2001, shall be assigned to one or more reporting units and shall
be tested for  impairment  as of the  beginning of the fiscal year in which SFAS
No. 142 is initially applied in its entirety.

     The Company has not fully assessed the potential  impact of the adoption of
SFAS No. 142,  which is  effective  for the  Company as of January 1, 2002.  The
reassessment of intangible  assets must be completed during the first quarter of
2002 and the assignment of goodwill to reporting units, along with completion of
the first step of the transitional  goodwill impairment tests, must be completed
during the first six months of 2002. The Company  anticipates  that the majority
of the intangible  assets and goodwill  recognized prior to July 1, 2001 will no
longer be amortized  effective January 1, 2002. Total amortization of intangible
assets and  goodwill  for the six months  ended June 30, 2001 and for year ended
December 31, 2000, was $228,000 and $456,000, respectively.




                                     - 11 -
<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  solutions and
services including the development, integration,  implementation and application
management and support of integrated  industry-specific  enterprise,  e-commerce
and m-commerce software applications. The Company's high quality onsite/offshore
delivery model combined with a  comprehensive  suite of tools provide  customers
with a faster  time-to-market  and lower total cost of  ownership  in  deploying
their mission-critical applications.

     Since the Company's  inception in 1987, it has built its  reputation on the
design, development,  implementation and support of complex technology solutions
based  primarily  on SAP,  Oracle and  PeopleSoft  products.  In late 1999,  the
Company  made the  strategic  decision to leverage its  traditional  application
implementation and consulting experience and reposition  Intelligroup for future
growth by focusing on the emerging  Application Service Provider ("ASP") market.
At the same time,  the Company  made the  strategic  decision  to  spin-off  its
Internet services business to the shareholders of the Company.  Accordingly,  on
January 1, 2000, the Company transferred its Internet  applications services and
management consulting businesses to SeraNova, Inc. ("SeraNova"),  a wholly-owned
subsidiary of the Company on such date.

     On July 5, 2000, the Company  distributed all of the outstanding  shares of
the common  stock of  SeraNova  then held by the Company to holders of record of
the  Company's  common  stock as of the close of business on May 12, 2000 (or to
their  subsequent  transferees)  in accordance  with the terms of a Distribution
Agreement  dated as of  January  1,  2000  between  the  Company  and  SeraNova.
Accordingly,   results  of   operations   of  SeraNova  have  been  reported  as
discontinued   operations  for  all  periods   presented.   (See   "Discontinued
Operations").

     As  a  global  ASP  of  customized,   scalable  enterprise  and  e-commerce
solutions,  the Company has focused its development and marketing efforts on the
vertical  industries  in which it has built  expertise and which it believes are
ready for adoption of the ASP model. These specific industries include:  process
and discrete  manufacturing,  professional services, and the public sector. As a
full-service,  single-source  ASP,  Intelligroup's  ASPPlus(SM)  Hosting service
bundles  the  key  ASP  components  and  core  competencies,  combining  leading
e-commerce and enterprise software and a global technology infrastructure,  with
the Company's application  implementation,  management and support resources and
capabilities.  Utilizing  the ASP  model,  the  Company's  "software-to-service"
solutions are  contracted on a predictable  subscription  basis and delivered to
its  customers   over  a  secure  global   network.   As  the  single  point  of
accountability to the customer, the Company supports and manages every component
of the ASP - from servers to software,  data centers to data storage.  By taking
responsibility  for the Service Level Agreements  associated with the ASP model,
the Company can help assure the  on-going  reliability,  security,  performance,
service and long-term support for the customer.

     The Company's  ASPPlus Hosting service  provides  customers with e-commerce
and enterprise  software  selected by Intelligroup to closely match the business
needs of specific

                                     - 12 -
<PAGE>

market segments, such as pharmaceutical manufacturers,  IT professional services
organizations,  high tech and educational institutions.  Its strategic alliances
with such software  leaders as SAP,  PeopleSoft,  Oracle,  Niku,  MicroStrategy,
Onyx,  Vignette,  Crossworlds and Ariba give its customers  access to the latest
developments  in  technology-based  business  solutions,   including  enterprise
resources planning,  customer relationship  management,  business  intelligence,
content  management,   and  supply  chain  management.  To  provide  the  global
infrastructure  on which to deliver  and  support  solutions  for its  customers
worldwide,  Intelligroup  became a founding  Platinum member of AT&T's Ecosystem
for ASPs. As its strategic partner and  infrastructure  provider,  AT&T provides
the data center,  hardware and operating  systems,  and requisite  bandwidth and
communications capabilities.  These strategic alliances and hosting partnerships
not only support the ASP model, they present strong cross-selling  opportunities
and multiple points of entry into a customer's enterprise.

     By customizing,  configuring and integrating  core business systems such as
human    resources    and    financials    with     business-to-business     and
business-to-customer  applications,  the Company  creates for its  customers  an
end-to-end  technology  value  chain that  delivers  e-commerce  and  enterprise
solutions across the entire enterprise.

     Key to the Company's strategy is the Advanced Development Center ("ADC") in
Hyderabad,  India,  which  provides 24 x 365  development  and support using the
technical  expertise of its  developers  and technical  staff.  In May 2000, the
center was awarded  Level 2 of the People  Capability  Maturity  Model(R) by the
Carnegie  Mellon Software  Engineering  Institute  ("CMM-SEI").  The achievement
recognizes Intelligroup for its ability to attract, develop, motivate,  organize
and retain the talent needed to  continuously  improve its software  development
capability.  Intelligroup  is among the first in the IT  industry  to  integrate
CMM-SEI workforce  improvement with software process  improvement,  for which it
has achieved Software CMM-SEI Level 5 certification  for continuous  improvement
of its software  engineering.  In addition,  the ADC is ISO  9001-certified  for
software development, support and optimization.

     Intelligroup's  ASPPlus Application Management services deliver and support
outsourced enterprise  application and e-commerce software.  ASPPlus Application
Management  services  provide full life cycle support of enterprise  application
and e-commerce applications through offshore facilities and resources.

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


                                     - 13 -
<PAGE>

     The Company has provided  services on certain  projects in which it, at the
request of the  clients,  offered a fixed price for its  services.  For the year
ended  December  31, 2000,  revenues  derived  from  projects  under fixed price
contracts  represented  approximately 10% of the Company's total revenue.  Fixed
price  contracts,  in the  aggregate,  represented  12% of the  Company's  total
revenue during the six months ended June 30, 2001. No single fixed price project
was  material  to the  Company's  business  during 2000 or during the six months
ended June 30, 2001.  The Company  believes  that, as it pursues its strategy of
providing hosting and application  management and support services to customers,
it will continue to offer fixed price projects.  The Company believes that there
are  certain  risks  related to fixed price  arrangements,  and thus prices such
arrangements to reflect the associated  risk. There can be no assurance that the
Company  will  be  able  to  complete  such  projects  within  the  fixed  price
timeframes. The failure to perform within such fixed price contracts, if entered
into, could have a material adverse effect on the Company's business,  financial
condition and results of operations.

     The  Company has derived  and  believes  that it will  continue to derive a
significant  portion  of its  revenue  from a limited  number of  customers  and
projects. For the six months ended June 30, 2001 and the year ended December 31,
2000,  the  Company's  ten  largest  customers  accounted  for in the  aggregate
approximately  29% and 34% of revenue,  respectively.  For the six months  ended
June 30, 2001, no single customer  accounted for more than 10% of revenues.  For
the year ended  December 31, 2000,  one customer  accounted for more than 10% of
revenue.  For the six months ended June 30, 2001 and the year ended December 31,
2000,  48% and 36%,  respectively,  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 six months  ended June 30, 2001 and the year ended  December 31,
2000,  approximately 70% and 63%,  respectively,  of the Company's total revenue
was derived from projects in which the Company implemented,  extended, hosted or
maintained software developed by SAP. For the six months ended June 30, 2001 and
the year ended December 31, 2000,  approximately 16% and 24%,  respectively,  of
the  Company's  total  revenue  was derived  from  projects in which the Company
implemented,  extended,  hosted or maintained  software developed by PeopleSoft.
For each of the six months  ended June 30, 2001 and the year ended  December 31,
2000,  approximately 9% of the Company's total revenue was derived from projects
in which  the  Company  implemented,  extended,  hosted or  maintained  software
developed by Oracle.

     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).

     The Company  currently  maintains its  headquarters in Edison (New Jersey),
with branch offices in Atlanta (Georgia),  Rosemont (Illinois),  and Foster City
(California).  The Company also maintains offices in Europe (Denmark, the United
Kingdom,  and Sweden),  and Asia Pacific (Australia,  India, Japan, New Zealand,
Singapore and Hong Kong). The Company leases its


                                     - 14 -
<PAGE>

headquarters in Edison,  New Jersey.  Such lease has an initial term of ten (10)
years, which commenced in September 1998.

DISCONTINUED OPERATIONS

     On July 5, 2000, the Company completed the tax-free spin-off of SeraNova by
distributing all of the outstanding  shares of the common stock of SeraNova then
held by the Company to holders of record of the Company's common stock as of the
close of business on May 12, 2000 (or to their subsequent transferees).

     SeraNova  represented  a  significant  segment of the  Company's  business.
Pursuant to Accounting  Principles Board ("APB") Opinion No. 30,  "Reporting the
Results of  Operations  -  Reporting  the  Effects of Disposal of a Segment of a
Business,  and  Extraordinary,  Unusual and  Infrequently  Occurring  Events and
Transactions,"  the Consolidated  Financial  Statements of the Company have been
reclassified  to reflect the spin-off of SeraNova.  Accordingly,  the results of
operations and cash flows of SeraNova have been  segregated in the  Consolidated
Statements  of Operations  and  Consolidated  Statements of Cash Flows.  The net
operating  results  and net  cash  flows  of  SeraNova  have  been  reported  as
"Discontinued  Operations." The historical  carrying amount of the net assets of
SeraNova on the spin-off date has been recorded as a dividend.

     The  Company  has  reported  a loss from  discontinued  operations  of $1.8
million and $4.9 million for the three and six months ended June 30, 2000.

FORWARD-LOOKING STATEMENTS

     This Form 10-Q contains  forward-looking  statements  within the meaning of
Section 21E of the  Securities  Exchange  Act of 1934,  as  amended,  including,
without  limitation,  statements  regarding the Company's intention to shift its
focus  to  comprehensive  ASPPlus  solutions.  Such  forward-looking  statements
include risks and uncertainties, including, but not limited to:

     o    the continued  uncertainty of the Application Service Provider ("ASP")
          market  and  revenues   derived  from   anticipated  ASP  hosting  and
          application management and support business;

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

     o    changes in the Company's billing and employee utilization rates;


                                     - 15 -
<PAGE>

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

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

     o    the Company's  reliance on a continued  relationship  with SAP America
          and the Company's  present status as a mySAP.com Partner - Services or
          SAP Services Partner;

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

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

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

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

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

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

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

     o    in  addition,  in March 2001,  SeraNova  and  Silverline  Technologies
          Limited  ("Silverline")  consummated  the  acquisition  of SeraNova by
          Silverline.   SeraNova's   management   has   represented   that  such
          acquisition  was  not  contemplated  at the  time of the  spin-off  of
          SeraNova  by the  Company,  and  accordingly  should  not  impact  the
          tax-free  nature of the  spin-off.  Should the spin-off be  ultimately
          construed  to be  taxable,  there is a risk  that if  SeraNova  and/or
          Silverline  are unable or unwilling to pay the resultant tax liability
          pursuant  to  SeraNova's  indemnification  obligations  under  its Tax
          Sharing  Agreement  with  the  Company,  the  Company  would  bear the
          liability to pay such resultant tax liability.



                                     - 16 -
<PAGE>

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

RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
                                                                      PERCENTAGE OF REVENUE
                                                                      ---------------------
                                                  THREE MONTHS ENDED JUNE 30,       SIX MONTHS ENDED JUNE 30,
                                                  ---------------------------       -------------------------
                                                     2001            2000             2001            2000
                                                     ----            ----             ----            ----
<S>                                                  <C>             <C>              <C>             <C>
Revenue....................................          100.0%          100.0%           100.0%          100.0%
Cost of sales..............................           66.5            66.8             68.0            66.4
                                                   -------         -------          -------         -------
     Gross profit..........................           33.5            33.2             32.0            33.6
Selling, general and administrative
   expenses................................           28.8            43.5             27.9            42.5
Depreciation and amortization expenses.....            3.2             2.6              3.2             2.8
                                                   -------         -------          -------         -------
     Total operating expenses..............           32.0            46.1             31.1            45.3
                                                   -------         -------          -------         -------
     Operating income (loss)...............            1.5           (12.9)             0.9           (11.7)
Other income (expense), net................           (0.5)            0.8             (0.0)            0.3
                                                   -------         -------          -------         -------
Income (loss) from continuing operations
    before income taxes....................            1.0           (12.1)             0.9           (11.4)
Provision (benefit) for income taxes.......            0.4            (1.7)             0.3            (2.6)
                                                   -------         -------          -------         -------
Income (loss) from continuing operations...            0.6%          (10.4)%            0.6%           (8.8)%
                                                   =======         =======          =======         =======
</TABLE>


THREE MONTHS ENDED JUNE 30, 2001 COMPARED TO THREE MONTHS ENDED JUNE 30, 2000

     The following  discussion compares the three months ended June 30, 2001 and
the three months ended June 30, 2000, for continuing operations.

     Revenue.  Total revenue increased by 1.2%, or $338,000,  from $27.7 million
during the three months ended June 30, 2000, to $28.0  million  during the three
months ended June 30, 2001.  The increase in revenue was primarily  attributable
to increased demand for application management and support services and offshore
development services. The Company has experienced  challenging market conditions
for traditional  professional consulting services, which includes enterprise and
e-commerce  application  implementations  and  extensions,  in  both  the US and
Europe, while Asia-Pacific has remained relatively stable.

     Gross  profit.  Cost of sales  primarily  includes  the cost of salaries to
consultants  and related  employee  benefits  and payroll  taxes.  Cost of sales
increased by 0.8%, or $150,000, from $18.5 million during the three months ended
June 30, 2000 to $18.6 million  during the three months ended June 30, 2001. The
increase in cost of sales was primarily due to additional salary, payroll taxes,
benefits,  travel and  training  costs for  consultants,  as billable  headcount
increased  during the three months ended June 30, 2001. The increase in billable
headcount resulted from efforts to adapt and capitalize on changes in the global
marketplace.  Gross  profit  increased by 2.0%,  or $188,000,  from $9.2 million
during the three months ended June 30, 2000 to $9.4 million during


                                     - 17 -
<PAGE>

the three months ended June 30, 2001.  Gross profit margin increased to 33.5% of
revenue during the three months ended June 30, 2001 from 33.2% of revenue during
the three months ended June 30, 2000. The improvement in gross margins  reflects
a combination of aggressive management of non-billable consultant time and other
related costs.

     Selling,  general  and  administrative   expenses.   Selling,  general  and
administrative  expenses  consist  primarily  of  administrative  salaries,  and
related benefits costs,  occupancy costs, sales person compensation,  travel and
entertainment,  costs  associated  with  the  Advanced  Development  Center  and
professional fees.  Selling,  general and  administrative  expenses decreased by
33.1%,  or $4.0 million,  from $12.1 million  during the three months ended June
30,  2000 to $8.1  million  during the three  months  ended June 30,  2001,  and
decreased as a  percentage  of revenue  from 43.5% to 28.8%,  respectively.  The
decrease in such expenses,  in absolute  dollars and as a percentage of revenue,
was primarily related to the significant investments in marketing and developing
the hosting and  application  management  business during the three months ended
June 30, 2000. Subsequently, the Company has been focused on improving operating
efficiencies   and  controlling   discretionary   expenditures   throughout  the
organization to maintain an alignment with current and projected revenues.

     Depreciation  and  amortization.  Depreciation  and  amortization  expenses
increased 26.8% to $917,000 (excluding $215,000 of depreciation and amortization
included in cost of sales) during the three months ended June 30, 2001, compared
to $723,000  during the three  months  ended June 30,  2000.  The  increase  was
primarily due to  depreciation on additional  computers,  equipment and software
placed in service since June 30, 2000.

     Other  income  (expense).  The Company  earned  $74,000 in interest  income
during the three months ended June 30, 2001,  compared with $357,000  during the
three  months ended June 30, 2000.  The  decrease  was  primarily  related to an
adjustment of the interest  accrued on the balance of the note  receivable  with
SeraNova  during the three  months  ended June 30,  2001.  The Company  incurred
$206,000 and $144,000 in interest expense during the three months ended June 30,
2001 and 2000,  respectively,  primarily related to borrowings under its line of
credit.  Borrowings  under  the  line of  credit  were  used  to fund  operating
activities.

     Provision  (benefit) for income taxes. The Company's effective tax rate was
35.4%  and  (14.0)%  for  the  three  months  ended  June  30,  2001  and  2000,
respectively.  Based on anticipated profitability in the near future, management
believes  it is more likely than not,  that the net  deferred  tax asset of $1.3
million will be realized.

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


                                     - 18 -
<PAGE>

SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO SIX MONTHS ENDED JUNE 30, 2000

     The  following  discussion  compares the six months ended June 30, 2001 and
the six months ended June 30, 2000, for continuing operations.

     Revenue.  Total  revenue  increased by 2.3%,  or $1.3  million,  from $56.7
million  during the six months ended June 30, 2000, to $58.1 million  during the
six  months  ended  June  30,  2001.  The  increase  in  revenue  was  primarily
attributable to increased demand for application management and support services
and  offshore  development  services.  The Company has  experienced  challenging
market  conditions  for  traditional  professional  consulting  services,  which
includes enterprise and e-commerce  application  implementations and extensions,
in both the US and Europe, while Asia-Pacific has remained relatively stable.

     Gross profit. Cost of sales increased by 4.9%, or $1.8 million,  from $37.7
million  during the six months ended June 30, 2000 to $39.5  million  during the
six months ended June 30, 2001.  The increase in cost of sales was primarily due
to additional  salary,  payroll taxes,  benefits,  travel and training costs for
consultants,  as billable  headcount  increased during the six months ended June
30, 2001. The increase in billable  headcount resulted from efforts to adapt and
capitalize on changes in the global marketplace. Gross profit decreased by 2.7%,
or  $514,000,  from $19.1  million  during the six months ended June 30, 2000 to
$18.6  million  during the six months ended June 30, 2001.  Gross profit  margin
decreased  from 33.6% of revenue  during the six months  ended June 30,  2000 to
32.0% of revenue  during the six months  ended June 30,  2001.  The  decrease in
gross  profit and margins  reflects a  combination  of  competitive  pressure on
consultant  billing  rates in the current  market,  and growth in the  long-term
application management and support business, which typically has lower margins.

     Selling,  general  and  administrative   expenses.   Selling,  general  and
administrative  expenses decreased by 33.0%, or $8.0 million, from $24.1 million
during the six months ended June 30, 2000 to $16.2 million during the six months
ended June 30, 2001,  and  decreased  as a  percentage  of revenue from 42.5% to
27.9%, respectively. The decrease in such expenses, in absolute dollars and as a
percentage of revenue,  was primarily related to the significant  investments in
marketing and developing the hosting and application  management business during
the six months ended June 30, 2000.  Subsequently,  the Company has been focused
on improving operating efficiencies and controlling  discretionary  expenditures
throughout the  organization to maintain an alignment with current and projected
revenues.

     Depreciation  and  amortization.  Depreciation  and  amortization  expenses
increased  18.6%  to  $1.9  million  (excluding  $408,000  of  depreciation  and
amortization  included  in cost of sales)  during the six months  ended June 30,
2001,  compared to $1.6 million  during the six months ended June 30, 2000.  The
increase was primarily due to  depreciation on additional  computers,  equipment
and software placed in service since June 30, 2000.

     Other income  (expense).  The Company  earned  $419,000 in interest  income
during the six months ended June 30, 2001, compared with $353,000 during the six
months ended June 30, 2000.  The interest  income was  primarily  related to the
interest earned on the balance of the note receivable with SeraNova. The Company
incurred $430,000 and $169,000 in interest expense


                                     - 19 -
<PAGE>

during the six  months  ended June 30,  2001 and 2000,  respectively,  primarily
related to  borrowings  under its line of credit.  Borrowings  under the line of
credit were used to fund operating activities.

     Provision  (benefit) for income taxes. The Company's effective tax rate was
26.6% and (22.6)% for the six months ended June 30, 2001 and 2000, respectively.
Based on anticipated profitability in the near future, management believes it is
more likely than not,  that the net  deferred  tax asset of $1.3 million will be
realized.

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

LIQUIDITY AND CAPITAL RESOURCES

     The Company had cash and cash  equivalents of $1.5 million at June 30, 2001
and $1.3 million at December 31, 2000. The Company had working  capital of $20.0
million at June 30, 2001 and $23.6 million at December 31, 2000.

     Cash provided by continuing  operating  activities  was $3.3 million during
the six  months  ended June 30,  2001,  primarily  resulting  from  income  from
continuing  operations,  depreciation and  amortization,  provision for doubtful
accounts and a decrease in accounts  receivable.  These  amounts were  partially
offset by decreases in accounts  payable,  accrued payroll and related taxes and
accrued expenses and other  liabilities.  Cash provided by continuing  operating
activities during the six months ended June 30, 2000 was $7.2 million.

     The Company  invested  $2.7 million and $2.2 million in computer  equipment
and office  furniture and fixtures during the six months ended June 30, 2001 and
2000,   respectively.   The   increase   reflects   purchases  of  computer  and
telecommunications  equipment and office  furniture and fixtures for consultants
and administrative  staff.  Additionally,  the Company invested $2.7 million and
$1.7 million in purchased software during the six months ended June 30, 2001 and
2000,  respectively.  The  purchased  software is an integral  component  of the
overall ASPPlus solution provided to customers.

     On May 31, 2000, the Company and PNC Bank,  N.A. (the "Bank")  entered into
an agreement  to replace the previous  credit  agreement  with a new  three-year
revolving credit facility. Such credit facility is comprised of a revolving line
of credit pursuant to which the Company can borrow up to $20.0 million either at
the  Bank's  prime rate per annum or the Euro Rate plus 1.75% to 2.5% based upon
the Company's ratio of debt to EBITDA.  The credit facility is collateralized by
substantially all of the assets of the Company's United States based operations.
The maximum borrowing availability under the line of credit is based upon a



                                     - 20 -
<PAGE>

percentage of eligible billed and unbilled accounts  receivable,  as defined. As
of June 30,  2001,  the  Company  had  outstanding  borrowings  under the credit
facility of $6.4 million.  The Company estimates undrawn  availability under the
credit facility to be $4.2 million as of June 30, 2001. As of December 31, 2000,
the  Company  had  outstanding  borrowings  under the  credit  facility  of $5.0
million.

     The credit facility provides for the following financial  covenants,  among
other things,  (1) the Company must maintain  consolidated net worth, as defined
("consolidated net worth") of (a) not less than 95% of consolidated net worth of
the immediately  preceding  fiscal year-end as at each such fiscal quarter after
December 31,  2000;  and (b) at least 105% of  consolidated  net worth as of the
immediately preceding fiscal year-end as at each such fiscal year-end subsequent
to December 31, 2000;  provided,  however,  the foregoing  covenant shall not be
tested for any quarter so long as the  Company  maintains,  at all times  during
such fiscal quarter,  undrawn availability of more than $5.0 million and (2) the
Company must maintain unconsolidated net worth, as defined  ("unconsolidated net
worth") of (a) not less than 95% of unconsolidated  net worth of the immediately
preceding  fiscal  year-end as at each such fiscal  quarter  after  December 31,
2000; and (b) at least 105% of  unconsolidated  net worth as of the  immediately
preceding fiscal year-end as at each such fiscal year-end subsequent to December
31, 2000; provided,  however, the foregoing covenant shall not be tested for any
quarter  so long as the  Company  maintains,  at all times  during  such  fiscal
quarter,  undrawn  availability  of more than $5.0  million.  Additionally,  the
credit  facility  contains  material  adverse  change clauses with regard to the
financial condition of the assets, liabilities and operations of the Company. As
of June 30, 2001, the Company was in compliance with all financial covenants.

     On May 31,  2000,  SeraNova  and the  Company  formalized  a $15.1  million
unsecured  promissory  note (the "Note")  relating to net borrowings by SeraNova
from the Company  through such date.  The Note bears  interest at the prime rate
plus 1/2%. The Company has recorded  total accrued  interest of $1.2 million and
$803,000 as of June 30, 2001 and December 31, 2000,  respectively.  A payment of
$3.0 million was made on September  29, 2000 with the balance  being due on July
31, 2001. The Note has certain mandatory  prepayment  provisions based on future
debt or equity financings by SeraNova.

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


                                     - 21 -
<PAGE>

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

     During the first six months of 2001, the Company received payments totaling
$2.1  million  from  SeraNova.  However,  the Company has not yet  received  the
remaining  interim  principal  payment of  $440,000  that was due as of July 31,
2001.

     SeraNova has failed to make final payment of all amounts due under the Note
to the Company as of July 31, 2001.  As of such date,  SeraNova was obligated to
pay to the Company the  remaining  principal  (approximately  $9.2  million) and
accrued interest (approximately $1.2 million), or an aggregate of $10.4 million.
The Company is  continuing  to  negotiate  with  Silverline  Technologies,  Ltd.
("Silverline"),  the company that  acquired  SeraNova  earlier  this year,  with
respect to the payment of the amount due  pursuant  to the Note.  The Company is
exploring all remedies against SeraNova and Silverline, including possible legal
action, in the event that terms acceptable to the Company cannot be reached.  In
the event the Company  accepts a payment in less than full  satisfaction  of the
$10.4  million due, the Company will record a charge  against  earnings for such
difference.  Although  management believes they are entitled to the entire $10.4
million  balance,  there can be no assurance that Silverline will pay the entire
balance due the Company without litigation.

     The Company's 2001 operating plan contains  assumptions  regarding  revenue
and  expenses.  The  achievement  of the operating  plan depends  heavily on the
timing of work performed by the Company on existing  projects and the ability of
the Company to gain and perform  work on new  projects.  Project  cancellations,
delays in the timing of work  performed  by the Company on existing  projects or
the inability of the Company to gain and perform work on new projects could have
an adverse  impact on the Company's  ability to execute its  operating  plan and
maintain  adequate  cash  flow.  In the  event  actual  results  do not meet the
operating  plan,  management  believes  it could  execute  contingency  plans to
mitigate such effects.  Such plans include additional cost reductions or seeking
additional  financing.  Considering  the cash on hand,  the credit  facility and
based on the achievement of the operating plan and management's actions taken to
date,  management believes it has the ability to continue to generate sufficient
cash to satisfy its  operating  requirements  in the normal  course of business.
However,  no assurance can be given that  sufficient cash will be generated from
operations.

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

EUROPEAN MONETARY UNION (EMU)

     The euro was  introduced  on  January  1,  1999,  at which  time the eleven
participating  EMU member countries  established  fixed conversion rates between
their  existing   currencies  (legacy  currencies)  and  the  euro.  The  legacy
currencies will continue to be used as legal tender through


                                     - 22 -
<PAGE>

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
that exist in the various regional markets in which the Company participates and
the potential actions that may or may not be taken by the Company's  competitors
and suppliers.

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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




                                     - 23 -
<PAGE>

PART II.  OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

     On February 7, 2001, NSA Investments II LLC filed a complaint in the United
States District Court for the District of  Massachusetts  naming,  among others,
SeraNova,  the Company  and  Rajkumar  Koneru,  a director  of the  Company,  as
defendants.  The plaintiff alleges that it invested money in SeraNova as part of
a private  placement of SeraNova  stock in March 2000,  prior to the spin-off of
SeraNova by the Company.  The complaint,  which seeks damages,  alleges that the
Company, as a "controlling person" vis-a-vis SeraNova,  is jointly and severally
liable with and to the extent as SeraNova  for false and  misleading  statements
constituting securities laws violations.  After being served with the complaint,
the Company made a request for  indemnification  from  SeraNova  pursuant to the
various  inter-company  agreements  in connection  with the spin-off.  By letter
dated April 13, 2001,  SeraNova's  counsel,  advised the Company  that  SeraNova
acknowledged liability for such indemnification claims and has elected to assume
the defense of the plaintiff's  claims. On May 14, 2001, a motion to dismiss was
filed  on  behalf  of the  Company;  however,  a  hearing  date has not yet been
scheduled by the court.  The Company denies the allegations  made and intends to
defend  vigorously  the  claims  made by the  plaintiff.  It is too early in the
dispute  process to determine  the impact,  if any,  that such dispute will have
upon the Company's business, financial condition or results of operations.

     On May 21, 2001, Fe-Ri  Construction,  Inc. filed a complaint in the United
States  District  Court for the  District  of Puerto  Rico naming the Company as
defendant. The complaint,  which seeks damages, alleges among other things, that
the  Company  has  failed to pay  plaintiff  amounts  due  under a  construction
contract  totaling  $558,852  together  with  interest  and  costs,   damage  to
plaintiff's  reputation  and  impairment of plaintiff's  bonding  capacity.  The
Company was served with the  complaint and has filed a motion to extend the time
in which to file an answer.  The  Company  is  currently  engaged in  settlement
discussions with the plaintiff with respect to plaintiff's  claims. In addition,
the Company is exploring  potential  third party claims it may have  relating to
the claims  asserted by  plaintiff.  It is too early in the  dispute  process to
determine  the impact,  if any,  that such dispute will have upon the  Company's
business, financial condition or results of operations.

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

ITEM 5.   OTHER INFORMATION

     On June 6,  2001,  the  Company  filed a Form 8-K with the  Securities  and
Exchange  Commission and issued a press release  announcing that the Company had
scheduled  its  Annual  Meeting  of  Shareholders  (the  "Annual  Meeting")  for
Thursday,  August 16, 2001.  Shareholders  of the Company were  instructed  that
shareholder  proposals  must be  submitted  to the Company at its offices at 499
Thornall Street,  Edison, New Jersey 08837,  within a reasonable time before the
Company  began to print and mail its proxy  materials in order to be  considered
for inclusion in the Company's  proxy  materials for  presentation at the Annual
Meeting.  Shareholders were



                                     - 24 -
<PAGE>

further advised that the Company  anticipated  mailing its proxy materials on or
about Friday, July 13, 2001.

ITEM 6.        EXHIBITS AND REPORTS ON FORM 8-K

        (a)    Exhibits.

               None.

        (b)    Reports on Form 8-K.

               On June 6, 2001,  the Company filed a Current  Report on Form 8-K
               with the  Securities  and  Exchange  Commission  relating  to the
               scheduling on the Company's  Annual  Meeting of  Shareholders  on
               Thursday, August 16, 2001. See Item 5, Other Information.

               Subsequent to the quarter ended June 30, 2001,  the Company filed
               a Current  Report on Form 8-K with the  Securities  and  Exchange
               Commission  relating  to the  failure by  SeraNova  to make final
               payment  under the  promissory  note  issued by  SeraNova  to the
               Company. See "Liquidity and Capital Resources".




                                     - 25 -
<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: August 9, 2001            By: /s/ Nagarjun Valluripalli
                                ------------------------------------------------
                                    Nagarjun Valluripalli,
                                    Chairman and Chief Executive Officer
                                    (Principal Executive Officer)


DATE: August 9, 2001            By: /s/ Nicholas Visco
                                 -----------------------------------------------
                                    Nicholas Visco,
                                    Senior Vice President-Finance and
                                    Administration and Chief Financial Officer
                                    (Principal Financial and Accounting Officer)




                                     - 26 -