UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, DC 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION
13 OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended
September 30, 2007 Commission file number
0-20943 **INTELLIGROUP, INC.****(Exact Name of
      Registrant as Specified In Its
Charter)**  New Jersey
    
    11-2880025(State or Other Jurisdiction of
      Incorporation or Organization)
    
    (I.R.S. Employer
      Identification No.)499 Thornall Street, Edison,
      New Jersey
    
    08837(Address of
      Principal Executive Offices)
    
    (Zip
      Code)  (732)  590-1600(Registrants Telephone Number, Including Area
    Code)  Indicate by check
mark whether the registrant: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes x          
No o Indicate by check
mark whether the registrant is a large accelerated filer, and accelerated filer,
or a non-accelerated filer. See definition of accelerated filer and large
accelerated filer in Rule 12b-2 of the Exchange Act. Large accelerated
      filer:   o
    Accelerated
      filer:   o
    Non-accelerated
      filer:   x  Indicate by check mark whether the
registrant is a shell company (as defined in Exchange Act Rule
12b-2). Yes o          
No x Indicate the
number of shares outstanding of each of the registrants classes of common
stock, as of November 9, 2007: Class
    
    Number of
  SharesCommon Stock, $.01 par
      value
    
    42,016,190


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TABLE
OF CONTENTS

|                                    |                                                                                                              |  | Page
|----------------------------------- | ------------------------------------------------------------------------------------------------------------ |  | ----
|PART I. FINANCIAL
      INFORMATION |                                                                                                              | 
|                                    |                                                                                                              | 
|Item
    1.                         | Financial
      Statements                                                                                   |  |     
|                                    |                                                                                                              |  |     
|                                    | Condensed Consolidated Balance Sheets as of
      September 30, 2007 (unaudited) and December 31,
      2006 |  | 4   
|                                    |                                                                                                              |  |     
|                                    | Condensed Consolidated Statements of Operations
      and Comprehensive Income (Loss) for the Nine
      and |  | 5   
|                                    | Three Months Ended September 30, 2007 and 2006
      (unaudited)                                             |  |     
|                                    |                                                                                                              |  |     
|                                    | Condensed Consolidated Statements of Cash Flows
      for the Nine Months Ended September 30, 2007
      and |  | 6   
|                                    | 2006
      (unaudited)                                                                                       |  |     
|                                    |                                                                                                              |  |     
|                                    | Notes to Condensed
      Consolidated Financial Statements                                                   |  | 7   
|                                    |                                                                                                              |  |     
|Item
    2.                         | Managements Discussion and Analysis of
      Financial Condition and Results of
      Operations            |  | 17  
|                                    |                                                                                                              |  |     
|Item
    3.                         | Quantitative and Qualitative Disclosures About
      Market Risk                                             |  | 24  
|                                    |                                                                                                              |  |     
|Item
    4.                         | Controls and
      Procedures                                                                                |  | 24  
|                                    |                                                                                                              |  |     
|PART II. OTHER
      INFORMATION    |                                                                                                              | 
|                                    |                                                                                                              | 
|Item
    1.                         | Legal
      Proceedings                                                                                      |  | 25  
|                                    |                                                                                                              |  |     
|Item
      1a.                      | Risk
      Factors                                                                                           |  | 26  
|                                    |                                                                                                              |  |     
|Item
    2.                         | Unregistered Sales of Equity Securities and Use
      of Proceeds                                            |  | 29  
|                                    |                                                                                                              |  |     
|Item
    3.                         | Defaults Upon Senior
      Securities                                                                        |  | 29  
|                                    |                                                                                                              |  |     
|Item
    4.                         | Submission of matters to a vote of Security
      Holders                                                    |  | 29  
|                                    |                                                                                                              |  |     
|Item
    5.                         | Other
      Information                                                                                      |  | 29  
|                                    |                                                                                                              |  |     
|Item
    6.                         | Exhibits                                                                                                     |  | 30  
|                                    |                                                                                                              |  |     
|Signatures                          |                                                                                                              |  | 35  

2

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FORWARD-LOOKING STATEMENTS

This quarterly
report on Form 10-Q contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section21E of the Securities
Exchange Act of 1934. Forward-looking statements include, among other things,
business strategy and expectations concerning industry conditions, market
position, future operations, margins, profitability, liquidity and capital
resources. Forward-looking statements generally can be identified by the use of
terminology such as may, will, expect, intend, estimate, anticipate
or believe or similar expressions or the negatives thereof. These expectations
are based on managements assumptions and current beliefs based on currently
available information. Although the Company believes that the expectations
reflected in such statements are reasonable, it can give no assurance that such
expectations will be correct. You are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date of this
quarterly report on Form 10-Q. The Companys operations are subject to a number
of uncertainties, risks and other influences, many of which are outside its
control, and any one of which, or a combination of which, could cause its actual
results of operations to differ materially from the forward-looking statements.
Important factors that could cause actual results to differ materially from its
expectations are disclosed in Part I, Item 2, Managements Discussion and
Analysis of Financial Condition and Results of Operations, Part II, Item 1A,
Risk Factors and elsewhere in this quarterly report on Form
10-Q.

3

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PART I FINANCIAL STATEMENTS

ITEM 1.

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

|                                                                                                 |  | September 30, |         | December 31,
|------------------------------------------------------------------------------------------------ |  | ------------- | ------- | ------------
|                                                                                                 |  | 2007          |         | 2006        
|                                                                                                 |  | (unaudited)   |         |             
|ASSETS                                                                                           |  |               |         |             
|CURRENT
ASSETS                                                                                   |  |               |         |             
|Cash and cash equivalents                                                                        |  | $             | 7,912   |             
|Short-term Investments                                                                           |  |               | -       |             
|Accounts receivable, less allowance for
      doubtful accounts of $983 and $991                 |  |               |         |             
|at September 30,
      2007 and December 31, 2006, respectively                                  |  |               | 21,824  |             
|                                                                                                
|Unbilled services, less allowance for
      doubtful accounts of $891 at September               |  |               |         |             
|30, 2007 and
      December 31, 2006                                                             |  |               | 11,238  |             
|Prepaid expenses                                                                                 |  |               | 659     |             
|Prepaid Taxes                                                                                    |  |               | 412     |             
|Other current assets                                                                             |  |               | 5,882   |             
|Total current assets                                                                             |  |               | 47,927  |             
|Property and equipment,
      net                                                                |  |               | 6,582   |             
|Restricted Cash                                                                                  |  |               | 4,700   |             
|Deferred taxes and
      other assets                                                            |  |               | 2,369   |             
|                                                                                                 |  |               |         |             
|Total Assets                                                                                     |  | $             | 61,578  |             
|                                                                                                
|LIABILITIES AND SHAREHOLDERS EQUITY                                                             |  |               |         |             
|CURRENT
      LIABILITIES                                                                        |  |               |         |             
|Line of credit borrowings                                                                        |  | $             | 7,356   |             
|Accounts payable                                                                                 |  |               | 3,557   |             
|Accrued payroll and related taxes                                                                |  |               | 11,851  |             
|Accrued expenses and other current liabilities                                                   |  |               | 4,850   |             
|Deferred revenue                                                                                 |  |               | 2,152   |             
|Current portion of obligations under capital lease                                               |  |               | 518     |             
|Total current liabilities                                                                        |  |               | 30,284  |             
|Obligations under
      capital lease, net of current portion                                    |  |               | 395     |             
|Deferred revenue, net of current portion                                                         |  |               | 672     |             
|Other long-term
      liabilities                                                                |  |               | 695     |             
|                                                                                                 |  |               |         |             
|Total Liabilities                                                                                |  |               | 32,046  |             
|                                                                                                
|Commitments and contingencies                                                                    |  |               |         |             
|Shareholders
      Equity                                                                       |  |               |         |             
|Preferred stock, $.01 par value, 5,000 shares authorized, none
      issued oroutstanding        |  |               |        |             
|Common stock, $.01 par value, 65,000 shares authorized, 42,129 and
      41,933                  |  |               |         |             
|shares issued and
      outstanding at September 30, 2007 and December 31, 2006
    respectively |  |               | 421     |             
|Additional paid-in capital                                                                       |  |               | 70,798  |             
|                                                                                                
|Accumulated deficit                                                                              |  |               | (44,102 | )           
|Accumulated other comprehensive income                                                           |  |               | 2,415   |             
|                                                                                                 |  |               |         |             
|Total
      shareholders equity                                                                 |  |               | 29,532  |             
|                                                                                                 |  |               |         |             
|Total
      liabilities and shareholders equity                                                 |  | $             | 61,578  |             

See accompanying notes.

4

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

|                                                      |  | **Nine
      Months Ended** |         | **Three
      Months Ended**
|----------------------------------------------------- |  | --------------------------- | ------- | ----------------------------
|                                                      |  | September 30,               |         | September 30,               
|                                                      |  | 2007                        |         | 2006                        
|Revenue                                               |  | $                           | 106,745 |                             
|Cost of
    revenue                                   |  |                             | 78,817  |                             
|Gross profit                                          |  |                             | 27,928  |                             
|                                                     
|Selling, general and administrative expenses          |  |                             | 26,087  |                             
|Depreciation and
      amortization                   |  |                             | 1,799   |                             
|Total operating expenses                              |  |                             | 27,886  |                             
|Operating Income/(loss)                               |  |                             | 42      |                             
|Interest expense, net                                 |  |                             | (516    | )                           
|Other
      income                                    |  |                             | 756     |                             
|Income
      before income tax provision              |  |                             | 282     |                             
|Provision for income
      taxes                      |  |                             | 631     |                             
|Net
      (loss)/income                               |  | $                           | (349    | )                           
|                                                     
|(Loss)/Income per share:                              |  |                             |         |                             
|Basic net (loss)/income per share                     |  | $                           | (0.01   | )                           
|Weighted average number of common shares              |  |                             |         |                             
|outstanding - basic                                   |  |                             | 41,988  |                             
|                                                     
|Diluted net (loss)/income per share                   |  | $                           | (0.01   | )                           
|                                                     
|Weighted average number of common shares              |  |                             |         |                             
|outstanding - diluted                                 |  |                             | 41,988  |                             
|                                                     
|Comprehensive (loss)/income                           |  |                             |         |                             
|Net
      (loss)/income                               |  | $                           | (349    | )                           
|Other comprehensive income - currency
    translation |  |                             |         |                             
|adjustments                                           |  |                             | 2,389   |                             
|                                                     
|Comprehensive income/(loss)                           |  | $                           | 2,040   |                             

See accompanying notes.

5

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

|                                                                                 |  | **Nine Months
      Ended**
|-------------------------------------------------------------------------------- |  | ---------------------------
|                                                                                 |  | **September 30,**          
|                                                                                 |  | 2007                       
|Cash
      flows from operating activities:                                      |  |                            
|Net loss                                                                         |  | $                          
|Adjustments to reconcile net loss to net cash used in operating
      activities |  |                            
|Net cash provided by
      (used in) operating activities                        |  |                            
|                                                                                 |  |                            
|Cash
      flows from investing activities:                                      |  |                            
|Purchases of equipment                                                           |  |                            
|Proceeds from sale of equipment                                                  |  |                            
|Purchase of Investments                                                          |  |                            
|Proceeds from sale of Investments                                                |  |                            
|Acquisition of business                                                          |  |                            
|Net
      cash used in investing activities                                      |  |                            
|                                                                                 |  |                            
|Cash
      flows from financing activities:                                      |  |                            
|Principal payments under capital
      leases                                    |  |                            
|Net proceeds from private
placement                                              |  |                            
|Net proceeds from stock options
      exercised                                  |  |                            
|Net change in line of credit
      borrowings                                    |  |                            
|Net
      cash provided by financing activities                                  |  |                            
|                                                                                
|Effect
      of foreign currency exchange rate changes on cash                   |  |                            
|                                                                                
|Net
      (decrease) increase in cash and cash equivalents                       |  |                            
|Cash
      and cash equivalents - beginning of period                            |  |                            
|Cash
      and cash equivalents - end of period                                  |  | $                          

See accompanying notes.

6

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INTELLIGROUP,
INC.NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)SEPTEMBER 30, 2007 AND 2006

NOTE 1-BASIS OF PRESENTATION

The
condensed consolidated financial statements and accompanying financial
information as of September 30, 2007 and for the nine and three months ended
September 30, 2007 and 2006 are unaudited and, in the opinion of management,
include all adjustments (consisting only of normal recurring adjustments) which
the Company considers necessary for a fair presentation of the financial
position of the Company at such dates and the operating results and cash flows
for those periods. The unaudited condensed consolidated financial statements
included herein have been prepared in accordance with accounting principles
generally accepted in the United States of America and the instructions of Form
10-Q and Rule 10-01 of Regulation S-X. Pursuant to accounting requirements of
the Securities and Exchange Commission applicable to quarterly reports on Form
10-Q, the accompanying unaudited condensed consolidated financial statements and
these notes do not include all disclosures required by accounting principles
generally accepted in the United States of America for audited financial
statements. Accordingly, these statements should be read in conjunction with the
accounting policies and Notes to Consolidated Financial Statements included in
the Companys consolidated financial statements filed on Form 10-K for the year
ended December 31, 2006.

The amounts
for the December 31, 2006 balance sheet have been extracted from the audited
consolidated financial statements included in Form10-K for the year ended
December 31, 2006.

The results
of the Companys operations for the nine and three months ended September 30,
2007 are not necessarily indicative of the results of operations to be expected
for the full year ending December 31, 2007.

NOTE 2-SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES

***Earnings (loss) per
Common Share***

Basic net
income (loss) per share (EPS) is computed using the weighted average number of
common shares outstanding for the period. Diluted earnings per share includes
additional dilution from potential common stock, such as stock issuable pursuant
to the exercise of stock options and warrants. Potential common stock is not
included in the computation of diluted earnings per share when the Company
reports a loss because to do so would be anti-dilutive for the periods
presented.

For the
three months ended September 30, 2007 and 2006 respectively, options to purchase
1,404,198 and 4,003,000 shares of common stock were not included in the
computation of diluted earnings (loss) per share because inclusion would have
been anti-dilutive due to the related amount of unvested compensation cost. For
the nine months ended September 30, 2007 and 2006 respectively, options to
purchase 2,048,372 and 4,003,000 shares of common stock were not included in the
computation of diluted earnings (loss) per share because inclusion would have
been anti-dilutive.

***Derivative Instruments***

The Company
has entered into foreign currency derivative contracts to manage a portion of
foreign currency risk related to U.S. Dollar denominated asset balances of its
Indian subsidiary. The foreign currency derivative contract is marked-to-market
and recorded at fair value with unrealized gains and losses reported along with
foreign currency gains or losses in the caption other income (expense), in the
Companys consolidated statements of operations and comprehensive income (loss).
During the three months ended September 30, 2007, the Company entered into a
foreign currency forward contract totaling $4.5 million to sell the U.S. Dollars
for Indian Rupees. As of September 30, 2007, $35 million and $2.5 million of its
foreign currency European option contract and foreign currency forward contract
respectively remain which, are expected to be settled by May, 2010 and January,
2008 respectively. These contracts are expected to be settled monthly over the
period until the maturity date. Incase of option contracts the Company has an
option to settle incase the contracted rates are better than the spot rates
prevalent. Forward contracts however need to be settled irrespective of the
rates prevalent on the settlement rate or the Company incurs a cancellation
charge.

At September 30, 2007, summary
information about the foreign exchange forward contracts and options is as
follows:

|                     | Option Contracts           |  | **Forward
      Contracts**
|-------------------- | -------------------------- |  | ---------------------------
|Notional amount      | $ 35
      Million         |  | $ 2.5
      Million        
|Rates                | INR 43.45-
      44.96     |  | INR 41.39 -
      41.75    
|Effective Date       | 5/18/2007                  |  | 8/16/2007                  
|Maturity
      Dates | 10/26/07 to
      05/26/10 |  | 10/25/07 to
      01/25/08 
|Fair
      Value     | $
      1.41 Million       |  | $
      0.11 Million       

The fair value of the foreign
exchange option contracts at September 30, 2007 is reflected in other current
assets with a corresponding credit to other income.

***Income Taxes***

The Company
records income tax expense/benefit based upon an estimated annual effective tax
rate that considers the taxable income/ (loss) recorded in each tax
jurisdiction. The Company recorded an income tax provision of $0.2 million on a
pretax income of $2.8 million for the three months ended September 30, 2007 as
opposed to an income tax provision of $0.9 million on pretax income of $0.7
million for the three months ended September 30, 2006.

The
Companys India subsidiary has received tax assessments from the India tax
authority denying tax exemptions claimed for certain revenue earned and
disallowing certain expenses claimed during the India subsidiarys fiscal years
ended March 31, 1998 through March 31, 2003.The combined revised additional tax
demands were for 32.2 million Indian rupees (or approximately $0.8 million) for
those years. Such assessments include tax penalties for the fiscal years ended
March 31, 2001 of 1.4 million Indian rupees (or approximately $34,000). Against
the total additional tax demand of $0.8 million, the Company has made payments
of approximately $0.8 million under protest to the India tax authority.

During the
three months ending June 30, 2007, the Company received the judgment from
Appellate Tribunal with regard to the India tax assessments, for the fiscal
years ended March 31, 1998 through March 31, 2000 that allowed the tax
exemptions in the Companys favor to the extent of approximately $ 0.5 million.
The terms of the judgment required the India tax authority to refund the taxes
paid under protest for such fiscal periods along with interest. Based on the
above judgment, the company has recognized the benefit of $ 0.5 million related
to the tax exemptions and related interest. Further during the three months
ended September 30, 2007 the Company recognized $ 0.2 million for interest
receivable on the taxes paid under protest. The India tax authorities have the
right to appeal in the courts of law against such judgment issued by the
Appellate Tribunal. Please see Note 5 to the Consolidated Financial Statements
and the discussion of India Tax Assessments under Part II. Item 1 Legal
Proceedings for additional information on the tax assessments

Effective
January, 1 2007, the Company adopted the provisions of FIN 48, Accounting for
Uncertainty in Income Taxesan interpretation of FASB Statement No. 109. FIN 48
contains a two-step approach to recognizing and measuring uncertain tax
positions accounted for in accordance with Statement of FinancialAccounting Standards No. 109, Accounting for Income Taxes
(SFAS No. 109). The first step is to evaluate the tax position for recognition
by determining if the weight of available evidence indicates that it is more
likely than not that the position will be sustained on audit, including
resolution of related appeals or litigation processes, if any. The second step
is to measure the tax benefit as the largest amount that is more than 50% likely
of being realized upon ultimate settlement. The cumulative effect on adoption of
FIN 48 is to be recorded as an adjustment to the opening balance of accumulated
earnings/deficit.

The adoption
of FIN48 had no significant impact on the results of operations or financial
position as of and for the three and nine months periods ended September 30,
2007 and no adjustment had been recorded to the opening balance of accumulated
deficit. The total amount of gross unrecognized tax benefits as of the date of
adoption was $0.5 million.

The total
amount of gross unrecognized tax benefits was $0.3 million as of September 30,
2007 and June 30, 2007. Any recognition of these tax benefits in the future
would impact the Companys effective tax rate.

7

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INTELLIGROUP,
INC.NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)SEPTEMBER 30, 2007 AND
2006

The Companys policy to include
interest and penalties related to unrecognized tax benefits within the provision
for taxes on the consolidated condensed statements of income did not change as a
result of implementing FIN 48. The Company had accrued $.0.1 million for the
payment of interest and penalties relating to unrecognized tax benefits as of
September 30, 2007 and June 30, 2007. The amount of interest and penalties
expensed during the quarter ending September 30, 2007 and June 30, 2007 is not
significant.

The Company
files U.S. federal, U.S. state, and foreign tax returns. Apart from the U.S.,
the Companys major tax jurisdiction is India. For U.S. federal and state tax
returns the tax examinations are open for years after 2002, and with respect to
the matter described in note 8 under the heading Tax -Free Spin-off of
Seranova. For India, the tax assessments are open for the fiscal years after
March 31, 1997.

Although
timing of the resolution and closure is highly uncertain, the Company does not
believe it is reasonably possible that the unrecognized tax benefits would
materially change in the next 12 months.

***Pension Plan Liability***

The
Companys India subsidiary provides its employees with benefits under a defined
benefit pension plan, which is referred to as the Gratuity Plan. Pursuant to
applicable India law, the Gratuity Plan provides a lump sum payment to vested
employees on retirement or on termination of employment in an amount based on
the respective employees salary and years of employment with the Company. The
Company determines liability under the Gratuity Plan by actuarial valuation
using the projected unit credit method. Under this method, the Company
determines liability based upon the discounted value of salary increases until
the date of separation arising from retirement, death, resignation or other
termination of services. Critical assumptions used in measuring the plan expense
and projected liability under the projected unit credit method include the
discount rate, expected return on assets and the expected increase in the
compensation rates. The Company evaluates these critical assumptions at least
annually. The Company periodically evaluates and updates other assumptions used
in the projected unit credit method involving demographic factors, such as
retirement age and turnover rate, to reflect its experience. The mortality rates
used are consistent with those published by the Life Insurance Corporation of
India.

The discount rate enables us to
state expected future cash flows at a present value on the measurement date. The
discount rate used is equal to the yield on high quality fixed income
investments in India at the measurement date. The expected rate of return on
plan assets is estimated based on available market information, Indian law which
regulates such investments and historical returns.

***Share-Based Compensation
Plans***

The
Companys share-based compensation plans are described in Note 6. The Company
adopted the provisions of Statement of Financial Accounting Standards No. 123
(Revised 2004), Share-Based Payment, (SFAS No. 123R) on January 1, 2006,
using the modified prospective transition method.

There were
two share-based payment awards granted in the three months ended September 30,
2007. The Company recognizes compensation expense for all share-based payment
awards based on the grant date fair value estimated in accordance with the
provisions of SFAS No. 123R.

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

- Expected volatility  the Company estimates the
  volatility of common stock at the date of grant using a combination of
  unadjusted historical volatility, and
  historical volatility adjusted for periods of unusual stock price
  activity.
- Expected term  the Company estimates the expected
  term of options granted based on a combination of vesting schedules, life of
  the option, historical experience and in cases
  where the Company does not have significant historical experience, the
  simplified method of determining expected term
  outlined in Staff Accounting Bulletin 107 is used.
- Risk-free interest rate  the Company estimates
  the risk-free interest rate using the U.S. Treasury yield curve in effect at
  the time of grant for periods equal to the
  expected life of the options.
- Dividends  the Company uses an expected dividend
  yield of zero since it has never declared or paid any dividends on its capital
  stock. The Company intends to retain any
  earnings to fund future growth and the operation of its business, and,
  therefore does not anticipate paying any cash
  dividends in the foreseeable future.

Additionally, the Company estimates
forfeitures at the time of grant and revises those estimates in subsequent
periods if actual forfeitures differ from those estimates. It uses a combination
of historical data, demographic characteristics and other factors to estimate
pre-vesting option forfeitures and record share-based compensation expense only
for those awards that are expected to vest. SFAS No. 123R requires the cash
flows resulting from the tax benefits for tax deductions in excess of the
compensation expense recorded for those options to be classified as financing
cash flows. During the three months and nine months ended September 30, 2007,
112,500 and 195,750 options were exercised respectively.

8

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INTELLIGROUP, INC.NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)SEPTEMBER 30, 2007 AND 2006

NOTE 3-LINE OF CREDIT

On May 23,
2006, the Company and its wholly-owned subsidiary Empower, Inc. entered into a
second amended and restated revolving credit loan and security agreement and
second amended and restated revolving secured note (collectively Credit
Agreement) with Steel City Capital Funding, a division of PNC Bank, National
Association (the Bank). The Credit Agreement is comprised of a two year
revolving line of credit pursuant to which the Company can borrow up to $15.0
million at the Banks Base Rate (as defined in the Credit Agreement) of 7.75% as
of September 30, 2007, plus two (2%) percent. The credit facility is
collateralized by substantially all of the assets of the United States based
operations and all subsidiary stock (not to exceed 65% of the Equity Interests
of any Foreign Subsidiary). The maximum borrowing availability under the Credit
Agreement is based upon a percentage of eligible billed and unbilled accounts
receivable. The Credit Agreement provides for certain financial covenants that
shall only be tested as of the end of any fiscal quarter in which the average
undrawn availability has been less than five million dollars ($5.0 million) for
a period of thirty (30) consecutive days during such fiscal year.

The Company
was in compliance with the applicable financial covenants of the loan agreement
related to the Credit Agreement as of September 30, 2007.As of September 30,
2007, the Company had $4.3 million outstanding borrowings under the Credit
Agreement. The Company estimates undrawn availability under the Credit Facility
to be $11 million as of September 30, 2007.

In order to
finance a significant portion of the purchase price for Novasoft business as
discussed in Note 12 of Item 1, Intelligroup Europe Ltd (IGE) has received a
loan of £1,500,000 from Lloyds TBS Bank PLC (Lloyds TBS), during the three
months ended September 30, 2007. This loan is secured by a stand-by letter of
credit from Citibank N. A. (Citibank), for which Intelligroup Asia Pvt. Ltd
(IGA) has placed a hundred and ten percent margin money deposit with Citibank.
The loan is payable in three consecutive annual installments of £ 500,000, with
interest at the rate of 6.75% per annum. Interest is payable
monthly.

NOTE 4-RELATED PARTY TRANSACTIONS

Effective August 1, 2005,
Intelligroup Asia Pvt. Ltd. (IGA) entered into an agreement to lease certain
premises for certain of the Companys India operations from iLabs Hyderabad
Technology Center Pvt. Ltd. (iLabs), a party with which two members of the
Companys Board of Directors, Srini Raju and Sandeep Reddy, are affiliated. The
terms of the lease agreement provide for, among other things: (1) a minimum
lease period of five years with an option for two three-year renewal periods;
(2) payment of a security deposit equivalent to nine (9)months rent in the
amount of 15.3 million Indian rupees (approximately $384,000); (3) payment of
monthly lease fees in the amount of 1.7 million Indian rupees (approximately
$42,000), subject to yearly five percent (5%) escalation; and (4) monthly
operations and maintenance fees of 0.3 million Indian rupees (approximately
$6,000). Rent paid for the three months ended September 30, 2007 towards the
said lease was 6.8 million Indian rupees (approximately $167,000). There are no
advance lease rentals as of September 30, 2007.

IGA had entered into agreements for
executive search services with Adecco Peopleone India Limited (Adecco India) and
Cornell International, parties with which Ajit Isaac, a member of the Companys
Board of Directors is affiliated. The terms of the agreement provide for payment
of professional fees as per Industry terms and conditions. Professional fees
paid to Adecco India for the three months ended September 30, 2007 was 1.0
million rupees (approximately $ 24,500)

NOTE 5-LITIGATION

India Tax Assessments

The
Companys India subsidiary has received tax assessments from the India tax
authority denying tax exemptions claimed for certain revenue earned and
disallowing certain expenses claimed during the India subsidiarys fiscal years
ended March 31, 1998 through March 31, 2003.The combined revised additional tax
demands were for 32.2 million Indian rupees (or approximately $0.8 million) for
those years. They include tax penalties for the fiscal years ended March 31,
2001 of 1.4 million Indian rupees (or approximately $34,000). Against the total
additional tax demand of $0.8 million, the Company has made payments of
approximately $0.8 million under protest to the India tax authority.

During the
three months ending June 30, 2007, the Company received judgment from the
Appellate Tribunal in India with regard to the India tax assessments, for the
fiscal years ended March 31, 1998 through March 31, 2000 that allowed the tax
exemptions in the Companys favor to the extent of approximately $0.5 million.
The terms of the judgment required the India tax authority to refund the taxes
paid under protest for such fiscal periods along with interest. Based on the
above judgment, the Company recognized the tax benefit of $0.5 million related
to the tax exemptions. Further during the three months ended September 30, 2007
the Company recognized $ 0.2 million for interest receivable on the taxes paid
under protest The India tax authorities have the right to appeal in the courts
of law against such judgment issued by the Appellate Tribunal. Please see the
discussion of India Tax Assessments under Part II. Item 1 Legal Proceedings
for additional information on the tax assessments

The Company
is currently appealing at the Appellate Tribunal stage for the fiscal years
ended March 31, 2001 through March 31, 2003. In the event the Companys appeal
is not successful, there will not be any additional future cash outlay. However,
in the event the Company is successful, an amount up to approximately $0.3
million could be refunded to the Company.

Shareholder Class Actions

On or about
October 12, 2004, the first of six class action lawsuits was filed, on behalf of
a purported class of investors who purchased the Companys common stock, against
the Company and former officers Arjun Valluripalli, Nicholas Visco, Edward Carr
and David Distel (Defendants) in the United States District Court, District of
New Jersey (District of New Jersey). In August 2005, the United States
District Court, District of New Jersey consolidated the six class actions (the
Shareholder Class Action) and appointed a lead plaintiff. Plaintiffs
subsequently dropped Mr. Distel and Mr. Carr from the Shareholder Class Action,
failing to name either of them as a defendant in the amended consolidated
complaint filed on or about October 10, 2005. The Shareholder Class Action
generally alleges violations of federal securities laws, including allegations
that the Defendants made materially false and misleading statements regarding
the Companys financial condition and that the Defendants materially overstated
financial results by engaging in improper accounting practices. The Class Period
alleged is May 1, 2001 through September 24, 2004. The Shareholder Class Action
generally seeks relief in the form of unspecified compensatory damages and
reasonable costs, expenses and legal fees. On December 5, 2005, Defendants filed
motions to dismiss the amended consolidated complaint. On February 10, 2006,
prior to the hearing on Defendants motions to dismiss, Plaintiffs filed a
second amended consolidated complaint. On or about December 20, 2006, the
District of New Jersey granted Defendants motion and dismissed the second
amended complaint without prejudice. On or about January 25, 2007, plaintiffs
filed the third consolidated amended complaint. On or about March 5, 2007,
Defendants filed a motion to dismiss the third consolidated amended complaint.
Defendants motions to dismiss the third amended consolidated complaint are
currently pending before the District of New Jersey. No trial date has been
scheduled and no discovery has taken place.

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

Legal fees
arising in connection with litigation are expensed as incurred.

9

---

INTELLIGROUP,
INC.NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)SEPTEMBER 30,
2007 AND 2006

NOTE 6-SHAREHOLDERS EQUITY

**Share-Based Compensation Plans**

The Company
has four share-based compensation plans that reserve common shares for issuance
to key employees, consultants and directors, as described below. The
compensation cost that has been charged against income for those plans was $0.3
million and $0.9 million respectively for the three and nine months ended
September 30, 2007. The Company did not recognize any related income tax benefit
in the condensed consolidated statement of operations and comprehensive loss for
the first nine months of 2007, due to its history of net operating losses. The
Company received net proceeds of approximately $239,603 and $245,000 from option
exercises under share-based compensation plans for each of the nine months ended
September 30, 2007 and 2006, respectively.

*Stock
Options:***

The 2004
Equity Incentive Award Plan (2004 Plan) was approved by the Companys Board of
Directors on April 5, 2004 and adopted by the Companys shareholders on June 8,
2004. The maximum number of shares of Common Stock reserved for issuance under
the 2004Plan shall be equal to 2,100,000, plus the number of shares of Common
Stock which are or become available for issuance under the Companys1996 Stock
Plan (the Prior Plan), and which are not issued under such plan and approved
by the stockholders of the Company on June 8, 2006. Those eligible to receive
stock option grants or stock purchase rights under the 2004 Plan include
employees, non employee Directors and consultants. The Compensation Committee of
the Board of Directors of the Company administers the 2004 Plan. Subject to the
provisions of the 2004Plan, the administrator of the 2004 Plan has the
discretion to determine the optionees and/or grantees, the type of equity awards
to be granted (incentive stock options and nonqualified stock options,
restricted stock, stock appreciation rights, performance shares, performance
stock units, stock payments, deferred stock, restricted stock units, other
stock-based awards, and performance-based awards), the vesting provisions, the
terms of the grants and such other related provisions as are consistent with the
2004 Plan.

The exercise
price of a stock option may not be less than the fair market value per share of
the Common Stock on the date of grant or, in the case of an optionee receiving
incentive stock option award who beneficially owns 10% or more of the
outstanding capital stock of the Company, not less than110% of the fair market
value per share on the date of grant. Notwithstanding the foregoing, the
Compensation Committee may in its discretion issue non-qualified stock options
to purchase up to 500,000 shares of Common Stock with an option exercise price
of less than 100% of the fair market value of the Common Stock on the date of
grant. The options terminate not more than ten years from the date of grant,
subject to earlier termination on the optionees death, disability or
termination of employment with the Company, provided however that the term of
any incentive stock options granted to a holder of more than 10% of the
outstanding shares of capital stock may be no longer than five years. Options
are not assignable or otherwise transferable except by will or the laws of
descent and distribution.

The
Compensation Committee may provide that if a Change of Control (as defined in
the 2004 Plan) of the Company occurs and any awards made pursuant to the 2004
Plan are not converted, assumed or replaced by a successor, then all outstanding
awards that are not converted, assumed or replaced may become fully vested and
exercisable. The Compensation Committee, subject to approval of the Board, may
terminate, amend, or modify the 2004Plan at any time; provided, however, that
stockholder approval must be obtained for any amendment to the extent necessary
or desirable to comply with any applicable law, regulation or stock exchange
rule, to increase the number of shares available under the 2004 Plan, to permit
the Compensation Committee to grant options with an exercise price below fair
market value on the date of grant, or to extend the exercise period for an
option beyond ten years from the date of grant. The 2004 Plan terminates on June
8, 2014 unless terminated earlier by the Companys Board of Directors.

10

---

INTELLIGROUP, INC.NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)SEPTEMBER 30, 2007 AND 2006

NOTE 6-SHAREHOLDERS EQUITY(CONTINUED)

**Share-Based Compensation
Plans (Continued)**

The 1996
Stock Plan (1996 Plan) was adopted by the Board of Directors and approved by
the shareholders of the Company on June 3, 1996, and became effective on July
12, 1996. Those eligible to receive stock option grants or stock purchase rights
under the 1996 Plan include employees, non employee Directors and consultants.
The Compensation Committee of the Board of Directors of the Company administers
the 1996 Plan. Subject to the provisions of the 1996 Plan, the administrator of
the 1996 Plan has the discretion to determine the optionees and/or grantees, the
type of options to be granted (incentive stock options or nonqualified stock
options), the vesting provisions, the terms of the grants and such other related
provisions as are consistent with the 1996 Plan. The exercise price of an
incentive stock option may not be less than the fair market value per share of
the Common Stock on the date of grant or, in the case of an optionee who
beneficially owns 10% or more of the outstanding capital stock of the Company,
not less than 110% of the fair market value per share on the date of grant. The
exercise price of nonqualified stock options granted under the1996 Plan may not
be less than 85% of the fair market value per share of the Common Stock on the
date of grant or, in the case of an optionee who beneficially owns 10% or more
of the outstanding capital stock of the Company, not less than 110% of the fair
market value per share on the date of grant. The purchase price of shares issued
pursuant to stock purchase rights may not be less than 50% of the fair market
value of such shares as of the offer date of such rights. The options terminate
not more than ten years from the date of grant, subject to earlier termination
on the optionees death, disability or termination of employment with the
Company, provided however that the term of any options granted to a holder of
more than 10% of the outstanding shares of capital stock may be no longer than
five years. Options are not assignable or otherwise transferable except by will
or the laws of descent and distribution. In the event of a merger or
consolidation of the Company with or into another corporation or the sale of all
or substantially all of the Companys assets in which the successor corporation
does not assume outstanding options or issue equivalent options, the Board of
Directors of the Company is required to provide accelerated vesting of
outstanding options. As of June 8, 2004, the Company ceased granting options
under the 1996 Plan.

The 1996
Non-Employee Director Plan was approved by the Board of Directors on June 3,
1996. The shareholders adopted the Companys1996 Non-Employee Director Stock
Option Plan (the Director Plan) and it became effective on July 12, 1996. The
Director Plan provides for the grant of options to purchase a maximum of 140,000
shares of Common Stock of the Company to non-employee Directors of the Company.
The Board of Directors administers the Director Plan.

In October
and November 2000, the Companys Board of Directors approved grants of options
for equity compensation plans not approved by security holders (the Out of
Plan options). Each of the Out of Plan options vest in four equal semiannual
installments beginning on the first six-month anniversary of the date of grant
and expire on the tenth anniversary of the date of grant. The price of the
options granted pursuant to the Out of Plan options is equal to the fair market
value of the shares on the date of grant.

11

---

INTELLIGROUP, INC.NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)SEPTEMBER 30, 2007 AND 2006

NOTE 6-SHAREHOLDERS EQUITY(CONTINUED)

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

|                         | Three MonthsEnded |  | Nine Months Ended
|------------------------ | ----------------- |  | -----------------
|                         | September 30,     |  | September 30,    
|                         | 2007              |  | 2006             
|Expected Volatility      | 85.81%            |  | 87.00%           
|Expected
      Lives     | 6.0625            |  | 6.06
      years 
|Risk free Interest Rate  | 4.34%             |  | 4.72 - 4.77%     
|Expected
      Dividends | 0%                |  | 0%               

The weighted
average grant date fair value of options granted during the three months ended
September 30, 2007 and 2006 was $1.46 and $1.16, respectively. The weighted
average grant date fair value of options granted during the nine months ended
September 30, 2007 and 2006 was $1.04 and $1.12, respectively.

As of
September 30, 2007, there was $2.1 million of total unrecognized compensation
cost related to the stock options. That cost is expected to be recognized over
the next four years.

12

---

INTELLIGROUP, INC.NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)SEPTEMBER 30, 2007 AND 2006

NOTE 6-SHAREHOLDERS EQUITY(CONTINUED)

**Share-Based Compensation
Plans (Continued)**

The
following table summarizes the share-based compensation expense for stock
options that were recorded in accordance with SFAS No. 123R for the three and
nine months ended September 30, 2007 (in thousands except per share
information):

|                                                   | Three Months Ended |       | Nine Months Ended
|-------------------------------------------------- | ------------------ | ----- | -----------------
|                                                   | September 30,      |       | September 30,    
|                                                   | 2007               |       | 2006             
|Cost of Revenue                                    | $                  | 100   |                  
|Selling, general
      and administrative expenses | $                  | 139   |                  
|Increase to net loss                               | $                  | 239   |                  
|                                                  
|Change in income (loss) per share:                 |                    |       |                  
|Basic                                              | $                  | (0.01 | )                
|Diluted                                            | $                  | (0.01 | )                

NOTE 7-SEGMENT DATA AND GEOGRAPHIC INFORMATION

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

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

- United States (US)  the largest segment of the
  Company, with operations in the US and Puerto Rico. Includes the operations of
  the Companys US subsidiary, Empower, Inc., and
  all corporate functions and activities. The US and corporate headquarters is
  located in Edison, New Jersey;
- India  includes the operations of the Company in
  India, including services provided on behalf of other group subsidiaries,
  primarily to the US. The India headquarters is
  located in Hyderabad, India. A majority of the total revenue generated in
  India is derived from providing offshore development and support services to
  customers sourced through the Companys affiliated entities in other parts of
  the world, but most predominantly with the United States.
- Europe  includes the operations of the Company in
  Denmark and the United Kingdom. The European headquarters is located in
  Milton Keynes, United Kingdom;
  and
- Japan  includes the operations of the Company in
  Japan. The Japanese headquarters is located in Tokyo, Japan.

The CEO has
been identified as the Chief Operating Decision Maker (CODM) because he has
final authority over resource allocation decisions and performance assessment.
The CODM regularly receives certain discrete financial information about the
geographical operating segments, including primarily revenue and operating
income, to evaluate segment performance.

Accordingly,
the Companys consolidated operating results for the three and nine months ended
September 30, 2007 and 2006 are presented in the following geographic segments
(in thousands):

13

---

INTELLIGROUP, INC.NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)SEPTEMBER 30, 2007 AND
2006

NOTE 7-SEGMENT DATA AND GEOGRAPHIC INFORMATION(CONTINUED)

|                                      | United |        |       |  |        |  |       |   |       |       |   |  |  
|------------------------------------- | ------ | ------ | ----- |  | ------ |  | ----- | - | ----- | ----- | - |  | -
|                                      | States |        | India |  | Europe |  | Japan |   | Total
|Three months ended September 30, 2007 |        |        |       |  |        |  |       |   |       |       |   |  |  
|Revenue                               | $      | 23,589 |       |  | 10,126 |  | 3,091 |   |       | 1,204 |   |  | $
|Operating income                      |        | 601    |       |  | 596    |  | 573   |   |       | 337   |   |  |  
|Income tax
      expense/(benefit)    |        | (211   | )     |  | 393    |  | -     |   |       | -     |   |  |  
|Net Income                            |        | 853    |       |  | 621    |  | 633   |   |       | 493   |   |  |  
|                                     
|Three months ended September 30, 2006 |        |        |       |  |        |  |       |   |       |       |   |  |  
|Revenue                               | $      | 20,663 |       |  | 8,649  |  | 2,211 |   |       | 1,007 |   |  | $
|Operating income/(loss)               |        | (937   | )     |  | 1,908  |  | (176  | ) |       | (250  | ) |  |  
|Income tax
      expense/(benefit)    |        | (80    | )     |  | 958    |  | -     |   |       | -     |   |  |  
|Net Income/(Loss)                     |        | (713   | )     |  | 895    |  | (117  | ) |       | (278  | ) |  |  
|                                     
|                                     
|                                      | United |        |       |  |        |  |       |   |       |       |   |  |  
|                                      | States |        | India |  | Europe |  | Japan |   | Total
|Nine months ended September 30, 2007  |        |        |       |  |        |  |       |   |       |       |   |  |  
|Revenue                               | $      | 66,036 |       |  | 29,333 |  | 8,672 |   |       | 2,704 |   |  | $
|Operating income/(loss)               |        | (3,469 | )     |  | 2,592  |  | 708   |   |       | 211   |   |  |  
|Income tax
      expense/(benefit)    |        | (653   | )     |  | 1,284  |  | -     |   |       | -     |   |  |  
|Net Income/(Loss)                     |        | (2,761 | )     |  | 1,316  |  | 781   |   |       | 315   |   |  |  
|Long-lived
      assets, net          |        | 807    |       |  | 10,284 |  | 2,423 |   |       | 138   |   |  |  
|Total assets                          |        | 32,664 |       |  | 19,252 |  | 7,971 |   |       | 1,691 |   |  |  
|                                     
|Nine months ended September 30, 2006  |        |        |       |  |        |  |       |   |       |       |   |  |  
|Revenue                               | $      | 59,286 |       |  | 24,540 |  | 6,009 |   |       | 3,442 |   |  | $
|Operating income/(loss)               |        | (5,200 | )     |  | 4,882  |  | 112   |   |       | (460  | ) |  |  
|Income tax
      expense/(benefit)    |        | (94    | )     |  | 2,156  |  | -     |   |       | (115  | ) |  |  
|Net Income/(Loss)                     |        | (4,561 | )     |  | 3,226  |  | 276   |   |       | (306  | ) |  |  
|Long-lived
      assets, net          |        | 1,109  |       |  | 3,343  |  | 2,088 |   |       | 49    |   |  |  
|Total assets                          |        | 30,566 |       |  | 18,307 |  | 4,529 |   |       | 1,982 |   |  |  

14

---

NOTE 8-COMMITMENTS AND CONTINGENCIES

***Tax-Free Spin-off of
SeraNova***

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

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

IRC Section
355(e) provides that the Company may be required to recognize a gain equal to
the excess of the fair market value of the SeraNova shares distributed over
their tax basis if the distribution is part of a plan pursuant to which one or
more persons acquire 50% or more of SeraNova common stock within two years of
the distribution date. Should the spin-off ultimately be construed as taxable,
the resultant tax liability could be up to $ 65.0 million, plus interest and
penalties, depending on the facts that ultimately are established. No future
benefits would inure to the Company as a result of imposition of a tax on the
SeraNova distribution, and no reserve has been recorded for this potential tax.
However, should such a tax liability be imposed, the Company may be able to
utilize some of its existing net operating losses to mitigate this tax
liability.

***Employment Agreements***

As of
September 30, 2007, the Company had employment agreements with certain of its
executive officers, which provide for minimum payments in the event of
termination for reasons other than just cause. The aggregate amount of
compensation commitment in the event of termination under such agreements is
approximately $0.9 million. In addition, Intelligroup Asia Pvt. Ltd. (IGA) had
entered into Severance Packages totaling approximately $0.6 million with certain
former members of the IGA management team. Pursuant to the terms of the
Agreement for Severance Package, the Severance Package is activated upon the
fulfillment of certain events, including a change in management of the Company
or IGA. In April 2005, following the termination of the Companys Chief
Executive Officer, three members of the IGA management team, each of whom had a
Severance Package, resigned. Except as set forth below, to date, the Company has
not received any claim for payment of the Severance Package. On or about
September 2005, two former members of the IGA management team sent IGA notices
under Section 433 and 434 of the Indian Companies Act, 1956 for payment of such
Severance Package. The Company does not believe that such severance amount is
owed. In the event the Company is unsuccessful in defending against such claim
for payment, the Company would owe approximately $0.6 million to such
individuals.

15

---

INTELLIGROUP, INC.NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)(CONTINUED)SEPTEMBER 30, 2007 & 2006

NOTE 9- RECENT ACCOUNTING
PRONOUNCEMENTS

In September 2006, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 157, Fair Value Measurements
(FAS 157), which defines fair value, establishes a framework for measuring
fair value in accounting principles generally accepted in the United States of
America, and expands disclosures about fair value measurements. The provisions
are effective for the Company beginning in the first quarter of 2008, with the
cumulative effect, if any, of the change in accounting principle recorded as an
adjustment to the opening balance of retained earnings. The Company is currently
evaluating the impact of adopting FAS 157 on its consolidated financial
statements.

In February, 2007, the FASB issued SFAS No. 159 The Fair Value Option
for Financial Assets and Financial Liabilities(SFAS No. 159). SFAS No. 159
permits entities to choose to measure financial assets and financial liabilities
at fair value. Unrealized gains and losses on items for which the fair value
option has been elected are reported in earnings. SFAS No. 159 is effective for
fiscal years beginning after November 15, 2007. The Company is currently
assessing the impact of SFAS No. 159 on its consolidated financial position and
results of operations.

NOTE 10- OTHER INCOME/
(EXPENSE)

Other
income/ (expense) results from transaction gains or losses associated with
changes in foreign currency exchange rates, sublease income, dividend income
from investments and other items.

For the
three months ended September 30, 2007 and 2006, the Company recorded transaction
gains of approximately $0.8 million and transaction losses of $35,000
respectively, as a result of currency translation, primarily as a result of
currency fluctuations in Asia and Europe. Additionally, for the three months
ended September 30, 2007 the Company recorded a net expense of six thousand two
hundred and six dollars ($6,206) pertaining to sublease income, dividend income
and other items compared with a net income of $0.4 million for the three months
ended September 30, 2006.

For the nine
months ended September 30, 2007 and 2006, the Company recorded transaction gains
of approximately $0.4 million and $0.6 million respectively, as a result of
currency translation, primarily as a result of currency fluctuations in Asia and
Europe. Additionally, for the nine months ended September 30, 2007 the Company
recorded sublease income, dividend income and other items of approximately $0.4
million compared with $1.0 million for the nine months ended September 30,
2006.

NOTE 11- EMPLOYEE BENEFIT
PLANS

The Gratuity
Plan provides a lump sum payment to vested employees on retirement or on
termination of employment in an amount based on the respective employees salary
and years of employment with the Company. Liabilities with regard to the
Gratuity Plan are determined by actuarial valuation. Current service costs for
the Gratuity Plan are accrued in the year to which they
relate.

Net gratuity cost includes the
following components:

|                          |  | **Nine Months**   |     | **Three Months** 
|------------------------- |  | ----------------- | --- | -----------------
|                          |  | Ended             |     | **Ended**        
|                          |  | **September 30,** |     | **September 30,**
|                          |  | **2007**          |     | **2007**         
|Service Cost              |  | $                 | 132 |                  
|Interest Cost             |  | $                 | 34  |                  
|Expected Return on Assets |  | $                 | (4  | )                
|Net
      Gratuity Cost   |  | $                 | 162 |                  

The amount of employers
contribution expected to be paid for the current fiscal year ending December 31,
2007 is $116,086. Contribution of $50,239 was paid during the nine months ended
September 30, 2007.

NOTE 12- SUBSEQUENT
EVENT

On October 1, 2007, Intelligroup
Europe Ltd. (IGE) and Intelligroup Asia Pvt. Ltd. (IGA), wholly owned
subsidiaries of Intelligroup, Inc. (the Company), completed the acquisition of
certain assets, including without limitation, customer contracts, fixed assets
and employees, from ISG Novasoft Technologies Limited (Novasoft India) and
Novasoft Information Technology (Europe) Ltd.(Novasoft Europe) pursuant to
their agreements dated June 8, 2007, as amended, with Novasoft India and
Novasoft Europe and their parent company, Novasoft Information Technology
Corporation (Novasoft), for an aggregate purchase price of three million one
hundred thousand dollars ($3,100,000)..The Company paid an advance of $ 3
million to Novasoft during the three months ended September 30, 2007 pending
completion of such acquisition.

In order to finance a significant
portion of the purchase price, IGE has received a loan of £1,500,000 from Lloyds
TBS Bank PLC (Lloyds TBS). This loan is secured by a stand-by letter of credit
from Citibank N. A. (Citibank), for which IGA has placed a hundred and ten
percent margin money deposit with Citibank. The Company is in the process of
valuing the tangible and intangible assets for the purpose of purchase price
allocation.

NOTE 13- RESTRICTED
CASH

Restricted cash of $ 4.7 million
includes, $ 3.4 million placed as margin money deposit with Citibank as
explained in Note 3, $ 1.0 million investments provided as security for the
foreign currency derivative contracts as explained in Note 2 under the heading
Derivative Instruments and $ 0.3 million placed as margin money deposits
against issue of Performance guarantees by the Banks.

The $1 million investments mentioned
in the above paragraph consist of investments in mutual funds, which are
considered to be available for sale. The carrying value of these investments as
on September 30, 2007 approximated their fair value. Unrealized and realized
gains or losses on these investments were insignificant for the quarter ended
September 30, 2007.

16

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

Overview

In this Section, the Company will discuss the following: (i) key factors
in evaluating the Companys financial performance; (ii) application of critical
accounting policies, which explains the accounting principles necessary to
understand how the Company records its financial information; (iii) results of
operations, in which the Companys consolidated results are compared period to
period to recognize trends; (iv) results of operations by business segment,
which allows the Company to compare the results of its different business units;
(v) liquidity and capital resources; and(vi) recent accounting pronouncements,
which identifies new accounting literature that may have an impact on the
Companys future results.

Key Factors in Evaluating
the Companys Financial Performance

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

Revenue

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

Fixed Price
Projects

The Company has provided services on certain projects in which it, at the
request of the customers, offers a fixed price for its services. For the nine
months ended September 30 2007 and 2006, revenue derived from projects under
fixed price contracts represented approximately 40% of the Companys total
revenue. No single fixed price project was material to the Companys business
during the three months ended September 30, 2007 or 2006. The Company believes
that, as it pursues its strategy of providing application management services to
customers, it will continue to offer fixed price projects. The Company believes
that there are certain risks related to fixed price arrangements and thus prices
such arrangements to reflect the associated risk. There can be no assurance that
the Company will be able to complete such projects within the fixed price
timeframes. The failure to perform within such fixed price contracts, if entered
into, could have a material adverse effect on the Companys business, financial
condition and results of operations.

Customer
Concentration

The Company has derived and believes that it will continue to derive a
significant portion of its revenue from a limited number of customers and
projects. For the nine months ended September 30, 2007 and 2006, the Companys
ten largest customers accounted for in the aggregate approximately 42% and 51%
of its revenue, respectively. During the nine months ended September 30, 2007 no
single customer accounted for 10% or more of revenues. For the nine months ended
September 30, 2006, one customer accounted for more than 10% of the revenues.
For the nine months ended September 30, 2007 and 2006, 17% and 20%,
respectively, of the Companys revenue was generated by providing supplemental
resources directly to the end-customer or as part of a consulting team assembled
by another IT consulting firm. There can be no assurance that such IT consulting
firms will continue to engage the Company in the future at current levels of
retention, if at all.

Software
Partners

For the nine months ended September 30, 2007 and 2006 the Company derived
the following percentages of total revenue from projects in which the Company
implemented, extended, maintained, managed or supported software developed by
SAP, PeopleSoft and Oracle.

|           |  | Percentage of
      Revenue          
|---------- |  | -------------------------------------
|           |  | Nine Months Ended September
      30,
|           |  | 2007                                 
|SAP        |  | 76                                   
|PeopleSoft |  | 9                                    
|Oracle     |  | 7                                    
|e-Business |  | 6                                    
|Others     |  | 3                                    
|Total      |  | 100                                  

Markets

The Company currently serves the United States market with its
headquarters in Edison (New Jersey), and branch offices in Atlanta
(Georgia),Warrenville (Illinois) and Milpitas (California). The Company also
maintains local offices to serve the markets in India, the United Kingdom,
Denmark and Japan. The Company leases its headquarters in Edison, New Jersey.
Such lease has an initial term of ten (10) years, which commenced in
September1998.

17

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Expenses

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

Application of Critical
Accounting Policies

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

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

There have been no material changes to our critical accounting policies
and estimates from the information provided in Item 7,Managements Discussion
and Analysis of Financial Condition and Results of Operations, included in our
10-K for the fiscal year ended December 31, 2006 except as
follows:

Income
Tax

Effective at the beginning of the first quarter of 2007, the Company
adopted the provision of FIN 48, Accounting for Uncertainty in Income Taxesan
interpretation of FASB Statement No. 109. FIN 48 contains a two-step approach
to recognizing and measuring uncertain tax positions accounted for in accordance
with SFAS No. 109, Accounting for Income Taxes. The first step is to evaluate
the tax position for recognition by determining if the weight of available
evidence indicates that it is more likely than not that the position will be
sustained on audit, including resolution of related appeals or litigation
processes, if any. The second step is to measure the tax benefit as the largest
amount that is more than50% likely of being realized upon ultimate settlement.
The cumulative effect on adoption of FIN 48, if any, is to be recorded as an
adjustment to the opening balance of accumulated earnings (deficit). See Note 2
to the Consolidated Financial Statements (Unaudited)  Summary of Significant
Accounting Policies, Income Tax for additional detail.

There was no significant impact on account of the adoption of FIN 48 as
of September 30, 2007 and no adjustment had been recorded to the opening balance
of accumulated deficit.

18

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Results of Operations 
Consolidated

Nine Months Ended
September 30, 2007 Compared to Nine Months Ended September 30,
2006

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

|                                                   | **Percentage** **of
      Revenue**
|-------------------------------------------------- | -----------------------------------
|                                                   | Nine Months Ended September 30,    
|                                                   | 2007                               
|Revenue                                            | 100.0                              
|Cost of revenue                                    | 73.8                               
|Gross
      profit                                 | 26.2                               
|                                                   |                                    
|Selling, general and administrative
      expenses | 24.4                               
|Depreciation and amortization                      | 1.7                                
|Total operating expenses                           | 26.1                               
|Operating profit/(loss)                            | 0.1                                
|Interest income (expense)                          | (0.5                               
|Other
      income                                 | 0.7                                
|Profit before income tax provision (benefit)       | 0.3                                
|Income tax provision                               | 0.6                                
|Net loss                                           | (0.3                               

The following discussion compares
the consolidated results of operations for the nine months ended September 30,
2007 and 2006.

Revenue. Total revenue increased by
14.4%, or $13.5 million, from $93.3 million for the nine months ended September
30, 2006 to $106.7 million for the nine months ended September 30, 2007. This
increase is due to an increase in US revenues of $6.8 million, an increase in
India revenues of $4.8 million, an increase in Europe revenues of $2.7 million
partly offset by a decrease in Japan revenues of $0.7 million. The increase in
US revenue results primarily from increased demand for the Companys consulting
services in the local ERP markets. The increase in India revenues was primarily
attributable to increased demand for offshore services from customers in the
United States, as a majority of the total revenue generated in India is derived
from providing offshore development and support services to customers sourced
through the Companys affiliated entities in other parts of the world, but most
predominantly with the United States. Also contributing to the increase in India
revenues is the increased demand for Companys consulting services in the Middle
East market. The increase in European revenue results primarily from increased
demand for the Companys consulting services in the local ERP market. The
decrease in Japan revenues results primarily from decreased demand for the
Companys consulting services within the local SAP market.

Cost of revenue and gross profit. The
Companys cost of revenue increased by 18.5%, or $12.3 million, from $66.5
million for the nine months ended September 30, 2006 to $78.8 million for the
nine months ended September 30, 2007, primarily due to the increase in headcount
and related compensation and travel related costs for consultants, the salary
increases implemented effective July 2007 and the appreciation of the Rupee
against the US dollar. Since the compensation and related costs for our
India-based consulting staff, which represents a significant portion of our cost
of revenue is incurred in Indian rupees, the local currency, but is reported in
US dollars, the appreciation of the rupee results in higher cost of revenues as
reported in US dollars. The Company also continues to see its compensation costs
and related hiring and retention costs increase due to the enhanced demand for
ERP professionals in the US and India. We expect such demand to continue in the
future. The Companys gross profit increased by 4.4%, or $1.2 million, from
$26.8 million for the nine months ended September 30, 2006 to $27.9 million for
the nine months ended September 30, 2007, primarily due to the increase revenue
in the corresponding periods. Gross margin decreased from 28.7% for the nine
months ended September 30, 2006 to 26.2% for the nine months ended September 30,
2007, primarily due to the increase in headcount and related compensation and
travel related costs for consultants, the salary increases implemented effective
July 2007 and the appreciation of the Rupee against the US dollar. The rupee
appreciation against the US dollar places downward pressure on our gross margin
because the costs associated with our offshore revenue is incurred in Indian
rupees while the corresponding revenue is earned in US
dollars.

Selling, general and administrative expenses. Selling, general and administrative expenses primarily consist of
salaries and related benefits for sales and general administrative personnel,
occupancy costs, related travel and entertainment and professional fees.
Selling, general and administrative expenses increased by 2%, or $0.5 million,
from $25.6 million for the nine months ended September 30, 2006 to $26.1 million
for the nine months ended September 30, 2007,but decreased as a percentage of
revenue from 27.4% for the nine months ended September 30, 2006 to 24.4% for the
nine months ended September 30, 2007 reflecting the largely fixed nature of such
costs..

Income tax provision (benefit). The
Company recorded an income tax provision of $0.6 million on a pretax income of
$0.3million for the nine months ended September 30, 2007 as opposed to an income
tax provision of $1.9 million on pretax income of $0.6 million for the nine
months ended September 30, 2006. The decrease in tax expense by $1.3 million
from tax provision of $1.9 million for the nine months ended September 30, 2006
to tax provision of $0.6 million for the nine months ended September 30, 2007 is
primarily due to change in the transfer pricing methodology which was
implemented during the three months ended December 31, 2006 and the favorable
judgment with regard to India tax assessments.

19

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Three Months Ended
September 30, 2007 Compared to Three Months Ended September 30,
2006

|                                                   | **Percentage** **of Revenue**           
|-------------------------------------------------- | ----------------------------------------
|                                                   | **Three** **Months Ended September 30,**
|                                                   | 2007                                    
|Revenue                                            | 100.0                                   
|Cost of revenue                                    | 70.9                                    
|Gross profit                                       | 29.1                                    
|                                                   |                                         
|Selling, general and administrative
      expenses | 22.1                                    
|Depreciation and amortization                      | 1.5                                     
|Total
      operating expenses                     | 23.6                                    
|Operating profit                                   | 5.5                                     
|Interest expense                                   | (0.4                                    
|Other income                                       | 2.1                                     
|Profit before income tax
provision                 | 7.2                                     
|Income tax provision                               | 0.4                                     
|Net Profit/(loss)                                  | 6.8                                     

The following discussion compares the consolidated results
of operations for the three months ended September 30, 2007 and
2006.

Revenue. Total revenue increased by 16.8%, or $5.5 million, from $32.5 million for
the three months ended September 30, 2006 to $38.0 million for the three months
ended September 30, 2007. This increase is due to an increase in US revenues of
$2.9 million, an increase in India revenues of $1.5 million, an increase in
Europe revenues of $0.9 million and an increase in Japan revenues of $0.2
million. The increase in US revenue results primarily from increased demand for
the Companys consulting services in the local ERP markets. The increase in
India revenues was primarily attributable to increased demand for offshore
services from customers in the United States, as a majority of the total revenue
generated in India is derived from providing offshore development and support
services to customers sourced through the Companys affiliated entities in other
parts of the world, but most predominantly with the United States. The increase
in Europe and Japan revenues results primarily from increased demand for the
Companys consulting services in the local SAP market.

Cost of revenue and gross profit. The
Companys cost of revenue increased by 16.1%, or $3.7 million, from $23.2
million for the three months ended September 30, 2006, to $26.9 million for the
three months ended September 30, 2007, primarily due to the increase in
headcount and related compensation and travel related costs for consultants, the
salary increases implemented effective July 2007 and the appreciation of the
Rupee against the US dollar. Since the compensation and related costs for our
India-based consulting staff, which represents a significant portion of our cost
of revenue is incurred in Indian rupees, the local currency, but is reported in
US dollars, the appreciation of the rupee results in higher cost of revenues as
reported in US dollars. The Company also continues to see its compensation costs
and related hiring and retention costs increase due to the enhanced demand for
ERP professionals in the US and India. We expect such demand to continue in the
future. The Companys gross profit increased by 18.8%, or $1.7 million, from
$9.3 million for the three months ended September 30, 2006 to $11.0 million for
the three months ended September 30, 2007. Gross margin increased from 28.6% for
the three months ended September 30, 2006 to 29.1% for the three months ended
September 30, 2007. The increase in gross profit and gross margin is primarily
due to the increase in revenues and decrease in travel and related costs which
is the result of cost control measures initiated by the Company during the three
months ended June 30, 2007; the positive impact of such increased revenue and
cost control measures was partially offset by the salary increases implemented
effective July 2007 and the appreciation of the Indian rupee against the US
dollar. Since the compensation and related costs for our India-based consulting
staff, which represents a significant portion of our cost of revenue is incurred
in Indian rupees, the local currency, but is reported in US dollars and
corresponds to revenue earned in US dollars, the appreciation of the rupee
results in increases in our cost of revenues as reported in US dollars and
downward pressure on our gross margin.

Selling, general and administrative expenses. Selling, general and administrative expenses increased by 3.8% or $0.3
million from $8.1 million for the three months ended September 30, 2006 to $8.4
million for the three months ended September 30, 2007,but decreased as a
percentage of revenue from 24.9% to 22.1% respectively reflecting the largely
fixed nature of such costs.

Income tax provision (benefit). The
Company recorded an income tax provision/expense of $0.2 million on pretax
income of $2.8 million for the three months ended September 30, 2007 as opposed
to an income tax provision of $0.9 million on pretax income of $0.7 million for
the three months ended September 30, 2006.

The Income tax expense is primarily due to profitable operations of the
India subsidiary. The decrease in tax expense by $0.7 million from tax expense
of $0.9 million for the three months ended September 30, 2006 to tax expense of
$0.2 million for the three months ended September 30, 2007 is primarily due to
change in the transfer pricing methodology which was implemented during the
three months ended December 31, 2006 and the favorable judgment with regard to
India tax assessments.

20

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Results of Operations by Business
Segment

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

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

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

The revenues
are attributed to each segment on the basis of the location of the entity that
provides service to the customer. The CEO has been identified as the Chief
Operating Decision Maker (CODM) because he has final authority over resource
allocation decisions and performance assessment. The CODM regularly receives
certain discrete financial information about the geographical operating
segments, including primarily revenue and operating income, to evaluate segment
performance.

During the
fourth quarter of 2006, the Companys India subsidiary engaged an accounting
firm to evaluate and recommend changes, if any, to its existing transfer pricing
methodology. As a result of such transfer pricing study, the Company changed its
transfer pricing methodology and adopted a cost plus fixed margin methodology,
which applies a fixed margin to the total cost of services performed as opposed
to a net margin method in which revenues are allocated on a fixed percentage
without regard to cost of services. While the application of the new transfer
pricing methodology did not change the Companys revenue or operating
performance on a consolidated basis, it impacted the allocation of revenue
between the Company and its international subsidiaries. Revenues and operating
performance reported for the geographic segments for the three and nine months
ended September 30, 2007 are as per the new transfer pricing methodology cost
plus fixed margin; whereas revenue and operating performance reported for the
geographic segments for the three and nine months ended September 30, 2006
reflect the net margin method which the Company had previously used.

Nine Months Ended September 30, 2007
Compared to Nine Months Ended September 30, 2006

The following discussion compares the segment results of operations for
the nine months ended September 30, 2007 and 2006.

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

|              |  | **Nine**
      Months Ended September 30,
|------------- |  | -----------------------------------------
|              |  | 2007                                     
|              |  |                                          
|              |  | Dollars                                  
|United States |  | $                                        
|India         |  |                                          
|Europe        |  |                                          
|Japan         |  |                                          
|Total         |  | $                                        

US revenue
increased by 11.4%, or $6.8 million, from $59.3 million for the nine months
ended September 30, 2006 to $66.0 million for the nine months ended September
30, 2007. The increase is primarily on account of increased demand for the
Companys consulting services in the local ERP markets.

India revenue
increased by 19.5%, or $4.8 million, from $24.5 million for the nine months
ended September 30, 2006 to $29.3 million for the nine months ended September
30, 2007. The increase is attributable primarily to increased demand for
offshore services from customers in the United States, as a majority of the
total revenue generated in India is derived from providing offshore development
and support services to customers sourced through the Companys affiliated
entities in other parts of the world, but most predominantly with the United
States. The increased demand for Companys consulting services in the Middle
East market also contributed to the increase in India revenues.

Europe
revenue increased by 44.3%, or $2.7 million, from $6.0 million for the nine
months ended September 30, 2006 to $8.7 million for the nine months ended
September 30, 2007. The increase in European revenue results primarily from
increased demand for the Companys consulting services in the local ERP
market.

Japan
revenue decreased by 21.4% or $0.7 million, from $3.4 million for the nine
months ended September 30, 2006 to $2.7 million for the nine months ended
September 30, 2007. The decrease was due primarily to decreased demand for the
Companys consulting services within the local SAP market.

21

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

|              |  | Nine Months Ended September
      30,
|------------- |  | -------------------------------------
|              |  | 2007                                 
|United States |  | $                                    
|India         |  |                                      
|Europe        |  |                                      
|Japan         |  |                                      
|Total         |  | $                                    

US operating
performance improved by $1.7 million from an operating loss of $5.2 million for
the nine months ended September 30, 2006 to an operating loss of $3.5 million
for the nine months ended September 30, 2007. The decrease in the operating loss
was primarily related to improved resource utilization and reduced general and
administrative expenses and the change in transfer pricing methodology
implemented during the three months ended December 31,
2006.

India
operating income decreased by $2.3 million from an operating profit of $4.9
million for the nine months ended September 30, 2006 to an operating profit of
$2.6 million for the nine months ended September 30, 2007. The decrease in
operating profit is primarily related to an increase in consultant compensation
costs on account of increased head count and the compensation increase
implemented effective July 2007 as well as the change in transfer pricing
methodology implemented by the Company during the three months ended December
31, 2006. Also contributing to the decrease in operating performance is the
strengthening of Indian Rupee against US Dollar which resulted in higher cost of
revenues in India where the costs are incurred in Indian Rupees (Local Currency)
and reported in US Dollars (Reporting currency) during consolidation but the
corresponding revenue is primarily earned in US
dollars.

Europe
operating performance improved by $0.6 million from an operating income of $0.1
million for the nine months ended September 30, 2006 to an operating income of
$0.7 million for the nine months ended September 30, 2007. The increase is
primarily attributable to improved resource
utilization.

Japan
operating performance improved by $0.7 million from an operating loss of $0.5
million for the nine months ended September 30, 2006 to an operating income of
$0.2 million for the nine months ended September 30, 2007. The increase is
primarily attributable to improved resource utilization and reduced selling,
general and administrative expenses.

Three Months
Ended September 30, 2007 Compared to Three Months Ended September 30,
2006

The following discussion compares
the segment results of operations for the three months ended September 30, 2007
and 2006.

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

|              |  | Three Months Ended September
      30,
|------------- |  | --------------------------------------
|              |  | **2007**                              
|              |  |                                       
|              |  | Dollars                               
|United States |  | $                                     
|India         |  |                                       
|Europe        |  |                                       
|Japan         |  |                                       
|Total         |  | $                                     

US revenue increased by 14.2%, or $2.9 million, from $20.7 million for
the three months ended September 30, 2006 to $23.6 million for the three months
ended September 30, 2007. The increase is primarily on account of increased
demand for the Companys consulting services in the local ERP
markets.

India
revenue increased by 17.1%, or $1.5 million, from $8.6 million for the three
months ended September 30, 2006 to $10.1 million for the three months ended
September 30, 2007. The increase is attributable primarily to increased demand
for offshore services from customers in the United States, as a majority of the
total revenue generated in India is derived from providing offshore development
and support services to customers sourced through the Companys affiliated
entities in other parts of the world, but most predominantly with the United
States.

Europe
revenue increased by 39.8%, or $0.9 million, from $2.2 million for the three
months ended September 30, 2006 to $3.1 million for the three months ended
September 30, 2007. The increase in Europe revenue results primarily from
increased demand for the Companys consulting services in the local SAP
market.

Japan
revenue increased by 19.5% or $0.2 million, from $1.0 million for the three
months ended September 30, 2006 to $1.2 million for the three months ended
September 30, 2007. The increase was due primarily to decreased demand for the
Companys consulting services within the local SAP market.

22

---

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

|              |  | **Three Months Ended September
      30,**
|------------- |  | ------------------------------------------
|              |  | 2007                                      
|United States |  | $                                         
|India         |  |                                           
|Europe        |  |                                           
|Japan         |  |                                           
|Total         |  | $                                         

US operating performance improved by $1.5 million from an operating loss
of $0.9 million for the three months ended September 30, 2006 to an operating
income of $0.6 million for the three months ended September 30, 2007. The
improvement in the operating performance was primarily related to an improvement
in resource utilization, decrease in general and administration expenses and the
change in transfer pricing methodology implemented during the three months ended
December 31, 2006.

India
operating income decreased by $1.3 million from an operating profit of $1.9
million for the three months ended September 30, 2006 to an operating profit of
$0.6 million for the three months ended September 30, 2007. The decrease in
operating profit is primarily related to an increase in consultant compensation
costs on account of increased head count and compensation increase implemented
effective July 2007 as well as the change in transfer pricing methodology
implemented during the three months ended December 31, 2006. Also contributing
to the decrease in operating performance is the strengthening of Indian Rupee
against US Dollar which resulted in higher cost of revenues in India where the
costs are incurred in Indian Rupees (Local Currency) and reported in US Dollars
(Reporting currency) during consolidation but the corresponding revenue was
earned primarily in US dollars.

Europe
operating performance improved $0.7 million from an operating loss of $0.2
million for the three months ended September 30, 2006 to an operating income of
$0.6 million for the three months ended September 30, 2007. The increase is
primarily attributable to improved resource utilization.

Japan
operating performance improved $0.6 million from an operating loss of $0.3
million for the three months ended September 30, 2006 to an operating income of
$0.3 million for the three months ended September 30, 2007. The increase is
primarily attributable to improved resource utilization and reduced selling,
general and administrative expenses.

Liquidity and Capital
Resources

Cash Position and Cash
Flows

The Company
had cash and cash equivalents of $7.9 million at September 30, 2007 and $12.3
million at December 31, 2006. The Company had working capital of $17.6 million
at September 30, 2007 and $20.1 million at December 31, 2006. The decrease in
working capital resulted primarily from an increase in cash used in operating
activities. The Company had short-term investments of $2.2 million at December
31, 2006 while there are no short-term investments at September 30,
2007.

Cash
provided by operating activities was $1.0 million for the nine months ended
September 30, 2007 as compared with the cash used in operating activities of
$0.8 million, for the nine months ended September 30, 2006. The change in cash
flow was primarily due to improved operating performance.

The Company
invested $2.3 million and $1.7 million in computer equipment, internal-use
computer software and office furniture, fixtures and leasehold improvements
during the nine months ended September 30, 2007 and 2006,
respectively.

Credit
Facility

On May 23,
2006, the Company and its wholly-owned subsidiary Empower, Inc. entered into a
second amended and restated revolving credit loan and security agreement and
second amended and restated revolving secured note (collectively Credit
Agreement) with Steel City Capital Funding, a division of PNC Bank, National
Association (the Bank.) The Credit Agreement is comprised of a two year
revolving line of credit pursuant to which the Company can borrow up to $15.0
million at the Banks Base Rate (as defined in the Credit Agreement) plus two
(2%)percent. The credit facility is collateralized by substantially all of the
assets of the United States based operations and all subsidiary stock (not to
exceed 65% of the Equity Interests of any Foreign Subsidiary). The maximum
borrowing availability under the Credit Agreement is based upon a percentage of
eligible billed and unbilled accounts receivable.

The Company
was in compliance with the loan agreement related to the credit facility as of
September 30, 2007. The Company estimates undrawn availability under the credit
facility to be $11 million as of September 30, 2007.

In order to
finance the major part of the purchase price for Novasoft business as discussed
in note 12 of Item 1, Intelligroup Europe Ltd (IGE) has received a loan of
£1,500,000 from Lloyds TSB Bank PLC (Lloyds TSB), during the three months
ended September 30, 2007. This loan is secured by a stand-by letter of credit
from Citibank N. A. (Citibank), for which Intelligroup Asia Pvt. Ltd (IGA)
has placed a hundred and ten percent margin money deposit with Citibank. The
loan is payable in three consecutive annual installments of £ 500,000, with
interest at the rate of 6.75% per annum. Interest is payable
monthly.

Cash to Fund Operating
Activities

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

The Companys 2007 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, or
ability to timely collect cash from its customers could have an adverse impact
on the Companys ability to execute its operating plan and maintain adequate
cash flow. In the event actual results do not meet the operating plan,
management believes it could execute contingency plans to mitigate such effects.
Such plans include reductions in capital expenditures and operating costs,
and/or seeking additional financing. In addition, the Company may seek
additional financing from time to time to fund its cash requirements for
operating expenses and capital expenses; however, the availability of financing
may be limited because, among other things, the Company is not currently listed
on a national stock exchange. Assuming that the Company achieves the revenue and
expense targets included in the Companys operating plan, management believes
that the Companys cash on hand and cash generated by operations and borrowings
under its credit facility will be sufficient to fund the Companys current and
planned operations through at least the next twelve months.

23

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Item 3. Quantitative and Qualitative
Disclosures about Market Risk.

Although the
Company cannot accurately determine the precise effect thereof on its
operations, it does not believe inflation or interest rate changes have
historically had a material effect on its revenues or results of operations.
Significant effects of inflation, currency fluctuations and changes in interest
rates on the economies of the United States, Asia and Europe could favorably or
adversely impact the Companys revenues and results of operations in the future.
If there is a material change in the relationship between European currencies
and/or Asian currencies and the United States Dollar, such change could
materially affect the result of the Companys European and/or Asian operations
as reflected in the Companys consolidated financial statements.

The Company
is exposed to foreign currency exchange rate risk in the ordinary course of
doing business as it transacts or holds a portion of funds in foreign
currencies, particularly the Indian Rupee. Accordingly, management periodically
evaluates the need for hedging strategies to mitigate the effect of foreign
currency fluctuations. During the three months ended September 30, 2007, the
Company entered into a foreign currency Forward contract totaling $4.5 million
to sell the U.S. Dollars for Indian Rupees. As of September 30, 2007, $37.5
million of the foreign currency derivative contract remains, which are expected
to be settled by May 2010 The details of such derivative contracts are given
below:

|                      | Option Contracts           |  | Forward Contracts         
|--------------------- | -------------------------- |  | --------------------------
|Notional
      amount | $ 35
      Million         |  | $ 2.5
      Million       
|Rates                 | INR 43.45 -
    44.96      |  | INR 41.39 -
    41.75     
|Effective
      Date  | 5/18/2007                  |  | 8/16/2007                 
|Maturity
    Dates    | 10/26/07 to
      05/26/10 |  | 10/25/07 to
      01/25/08
|Fair
      Value      | $ 1.41
      Million       |  | $ 0.11
      Million      

Management may continue to enter
into such contracts in the future to reduce foreign currency exposure to
appreciation or depreciation in the value of certain foreign currencies. Other
than the aforementioned derivative contracts, the Company has not engaged in
hedging activities nor entered into off-balance sheet transactions, arrangements
or other relationships with unconsolidated entities or other persons that are
likely to affect liquidity or the availability of or requirements for capital
resources.

Item 4. Controls and
Procedures.

Disclosure Controls and
Procedures

The Company
is responsible for maintaining disclosure controls and procedures designed to
ensure that information required to be disclosed in its Exchange Act reports is
recorded, processed, summarized and reported within the time periods specified
in the Securities Exchange Commissions rules and regulations, and that such
information is accumulated and communicated to its management, including its
chief executive officer and chief financial officer, as appropriate, to allow
for timely decisions regarding required disclosure. The Companys management,
with the participation of the Companys Chief Executive Officer and Chief
Financial Officer, evaluated the effectiveness of the Companys disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act) as of the end of the period covered by this report. In designing
and evaluating the Companys disclosure controls and procedures, management
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving their objectives
and management necessarily is required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures and implementing
controls and procedures based upon the application of managements judgment.
Based on its evaluation, the Companys principal executive officer and principal
financial officer have concluded that, as of September 30, 2007, our disclosure
controls and procedures were not effective as defined in Rules 13a-15(e) and
15d-15(e) under the Exchange Act, because management determined that the
following material weaknesses in internal control over financial reporting as
disclosed in the Companys annual report on Form 10-K for the period ended
December 31, 2006, have not been remediated.

- The Company did not have sufficient
  review of the selection and application of US GAAP to significant non-routine
  and complex matters such as expected term and vesting period calculations in
  accordance with FAS123R. Also there was inadequate review and application of
  FAS 52 to the realization of the cumulative translation adjustments resulting
  from the liquidation of the Swedish subsidiary and inadequate review of the
  calculation of the fair value of equipment acquired in connection with an
  outsourcing agreement.
- The Company did not have personnel with
  sufficient accounting and financial reporting expertise resulting in
  insufficient oversight review of account analyses, transactions and
  preparation of the financial statements in accordance with US GAAP and SEC
  rules, specifically with regard to the classification of account balances such
  as short-term investments, allowance for doubtful accounts, foreign income
  taxes, and fixed assets.

The Company
disclosed the following remediation efforts in its annual report on Form 10-K
for the period ended December 31, 2006:

- Hire an additional US GAAP expert in the finance and
  accounting team with the objective to provide overview and guidance for
  dealing with non-routine or complex
  transactions.
- Increase focus on proactively training existing members of
  the finance and accounting team on new accounting pronouncements and rules and
  provide additional training on accounting treatment for non-routine or complex
  transactions to the current members of finance and accounting team through a
  series of external seminars and training programs or workshops.
- Thoroughly evaluate the experience, qualifications and
  expertise of the external accounting firm engaged during 2006 and any other
  external accounting firms before engaging such firms to provide advice and
  assistance in connection with non-routine or complex transactions and engage
  in substantive discussions with such external firms on the procedures used by
  such firms in rendering such assistance.

Below is the progress made on the above proposed
remedial measures to address the material weaknesses identified:

- The Company has engaged an internationally reputed accounting
  firm as US GAAP advisors on a retainer basis during the three months
  ended June 30, 2007.
- The Company has determined that hiring an external
  internationally reputed accounting firm is preferable to hiring an additional
  in-house US GAAP expert and has discontinued its efforts to hire internally.
  The Company engaged such external firm provide US GAAP advisory services as
  needed and is working with the external firm to evaluate and analyze complex
  transactions from a GAAP reporting perspective. At this point, this consulting
  relationship is still evolving and the Company is in the process of
  establishing appropriate controls surrounding its processes for consulting
  with such external firm and as a result does not believe that this engagement
  constitutes a material change in its internal control over financial
  reporting.

Section 404 of the Sarbanes-Oxley
Act of 2002 requires a company that is not an accelerated filer, such as the
Company, to report on the effectiveness of their internal control over financial
reporting beginning with their 2007 Annual Report on Form 10-K, which we are
required to file with the SEC no later than March 31, 2008. Our independent
registered public accounting firm will be required to attest to the Companys
effectiveness of internal controls over financial reporting beginning with the
Companys 2008 Annual Report. Our management has been and is continuing to work
to remediate the material weaknesses identified as of December 31, 2006 and to
ensure that our internal control over financial reporting provides reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external reporting purposes in accordance with US
GAAP.

24

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Changes in Internal Controls

There were no changes
in our internal control over financial reporting during the quarter ended
September 30, 2007, that materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

India Tax Assessments

The Companys India
subsidiary has received tax assessments from the India tax authority denying tax
exemptions claimed for certain revenue earned and disallowing certain expenses
claimed during the India subsidiarys fiscal years ended March 31, 1998 through
March 31, 2003.The combined revised additional tax demands were for 32.1 million
Indian rupees (or approximately $0.8 million) for those years. They include tax
penalties for the fiscal years ended March 31, 2001 of 1.4 million Indian rupees
(or approximately $34,000). Against the total additional tax demand of$0.8
million, the Company has made payments of approximately $0.8 million under
protest to the India tax authority.

During the three months
ending June 30, 2007, the Company received judgment from Appellate Tribunal with
regard to the India tax assessments, for the fiscal years ended March 31, 1998
through March 31, 2000 that allowed the tax exemptions in Companys favor to the
extent of approximately $0.5 million and the terms of the judgment required the
India tax authority to refund the taxes paid under protest for such fiscal
periods along with interest. Based on above judgment, the company has recognized
the tax benefit of $0.5 million related to the tax exemptions. Please see Note 5
to the Consolidated Financial Statements for additional information on the tax
assessments

The Company is
currently appealing at the Appellant Tribunal stage for the fiscal years ended
March 31, 2001 through March 31, 2003. In the event the Companys appeal is not
successful, there will not be any additional future cash outlay. However, in the
event the Company is successful, an amount up to approximately $0.3 million
could be refunded to the Company.

Shareholder Class Actions

On or about October 12,
2004, the first of three class action lawsuits was filed, purportedly on behalf
of plaintiffs who purchased our securities, against the Company and former
officers Arjun Valluri, Nicholas Visco, Edward Carr and David Distel
(Defendants) in the United States District Court, District of New Jersey
(District of New Jersey). In August 2005, the District of New Jersey
consolidated the three class actions (the Shareholder Class Action) and
appointed a lead plaintiff. Plaintiffs subsequently dropped Mr. Distel and Mr.
Carr from the Shareholder Class Action, failing to name either of them as a
defendant in the amended consolidated complaint filed on or about October 10,
2005. The Shareholder Class Action generally alleges violations of federal
securities laws, including allegations that the Defendants made materially false
and misleading statements regarding our financial condition and that the
Defendants materially overstated financial results by engaging in improper
accounting practices. The Class Period alleged is May 1, 2001 through September
24, 2004. The Shareholder Class Action generally seeks relief in the form of
unspecified compensatory damages and reasonable costs, expenses and legal fees.
The Defendants filed a Motion to Dismiss on or about November 30,2005.
Thereafter in February 2006, the lead plaintiff filed its second consolidated
amended complaint. On or about March 27, 2006, the Defendants filed a motion to
dismiss the second amended complaint. On or about December 20, 2006, the
District of New Jersey granted Defendants motion and dismissed the second
amended complaint without prejudice. On or about January 25, 2007, plaintiffs
filed the third consolidated amended complaint. On or about March 5, 2007,
Defendants filed a motion to dismiss the third consolidated amended complaint.
No trial date has been scheduled and no discovery has taken place.

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

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Item 1a. Risk Factors

There have been no material changes
to our risk factors previously disclosed in our annual report on Form 10-K for
the period ended December 31, 2006.

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

**If we are unable to generate
new sales and attain profitability, our business and financial condition and
results of operations may be adversely impacted.**

Our lack of
profitability over recent periods may impact our ability to attract customers,
employees, investors and creditors. Our ability to achieve profitability in
future periods will depend in large part on our ability to generate new sales,
particularly annuity-based engagements, to improve our rate of employee
utilization, and to manage selling, general and administrative expenses in
proportion to our top line. We cannot assure you that we will be able to
generate profits or that a failure to do so would not have a material adverse
effect on our financial condition and results of operations.

**The departure of one or more
key employees may have a material adverse effect on our ability to operate our
business.**

Our future performance
depends to a significant degree upon the continued service of the key members of
our management team, as well as marketing and sales personnel, and our ability
to attract retain new management and other personnel. In addition, our future
performance depends on the ability to effectively transition key management,
sales and operational roles, including adequate knowledge transfer, in the event
any turnover in our key personnel. The loss of any one or more of our key
personnel or the failure to attract and retain key personnel or the ability to
effectively manage changes in key personnel could have a material adverse effect
on our business, results of operations and financial condition.

If we are unable to
remediate the material weaknesses in our internal control over financial
reporting identified in this report or to improve our control environment, it
could result in adverse consequences to us, including, but not limited to, a
loss of investor confidence in the reliability of our financial statements,
which could cause the market price of our stock to decline; increased costs and
efforts to comply with Section 404 of the Sarbanes-Oxley Act of 2002; and
further disclosures that could be viewed negatively by our
stakeholders.

We have reported
material weaknesses in our internal controls over financial reporting. If we are
unable to remediate such material weaknesses, to continue to improve our control
environment and to prevent future material weaknesses, or to remediate any
weaknesses that may arise, such failure will adversely impact our ability to:
(i) effectively manage the business; (ii) timely record, process, summarize and
report financial statements that fairly present, in all material aspects, our
financial condition, statements of operations and cash flows; and (iii) comply
with applicable law, including the Sarbanes-Oxley Act of 2002. Furthermore, it
could result in additional adverse consequences to us, including, but not
limited to, a loss of investor confidence in the reliability of our financial
statements, which could cause the market price of our stock to decline and
further disclosures that could be viewed negatively by our stakeholders. In
addition, we will be required to comply with the internal control reporting
requirements of Section 404 of the Sarbanes-Oxley Act of 2002 beginning in 2007.
If we are unable to maintain effective internal control over financial
reporting, complying with Section404 of the Sarbanes-Oxley Act of 2002 may be
costly, require a significant portion of our senior managements time and result
in disclosures that could be viewed negatively by the our
stakeholders.

**If we are unable to attract
and retain a sufficient number of highly skilled employees it may adversely
affect our profitability.**

Our business is labor
intensive and, therefore, our success depends in large part on our ability to
recruit, retain, train and motivate highly skilled employees, particularly
project managers and other senior level technical personnel. Our ability to
attract and retain a sufficient number of highly skilled employees is impacted
by a number of factors including, but not limited to, concerns regarding our
financial condition and competition for employees in India which may cause
increasing compensation for existing and prospective employees, and the
continued ability to use stock options to compensate such highly skilled
employees in light of recent changes in accounting rules related to stock
options. We cannot assure you that we will be able to attract and retain a
sufficient number of highly skilled employees or that a failure to do so would
not have a material adverse effect on our financial condition and results of
operations.

**We may not be able to
compete effectively for technical personnel in India.**

The market for
technical personnel in India, which represents the primary recruiting market for
our technical personnel, is extremely competitive resulting in increased
compensation costs. These increasing compensation costs have contributed to the
deterioration of our gross margins. We cannot assure you that we will be able to
effectively compete for technical personnel in India or that a failure to
compete would not have a material adverse effect on our financial condition and
results of operations.

Our performance
could be materially adversely affected by a general economic downturn or
lessening demand in the information technology services industry.

Our business and
financial condition depends on the health of the general economy, as well as the
information technology services industry. Our revenue and profits are driven by
demand for our products and services. A lessening demand in either the overall
economy or the software sector could lead to a material decrease in our future
revenues and earnings. Other factors, that are beyond our control, that can also
impact our performance include:(i) patterns of software and hardware capital
spending by customers, (ii) information technology outsourcing trends, (iii) the
timing, size and stage of projects, (iv) new service introductions by us or our
competitors and the timing of new product introductions by our ERP partners, (v)
levels of market acceptance for our services, (vi) general economic conditions,
and (vii) the hiring of additional staff. We cannot assure you that there will
not be a general economic downturn or that such a downturn would not have a
material adverse effect on our business and financial condition.

**Currency fluctuations may
negatively impact our financial results, and this may in turn discourage
investment.**

Uncertainty relating to
worldwide currency exchange rates, particularly in regard to the Indian rupee,
the Euro, British Pound, Danish Krone and Japanese Yen, and the fluctuations in
such exchange rates may impact our quarterly and/or annual financial results. We
cannot assure you that such a fluctuation in currency would not have a material
adverse effect on our financial condition and results of operations.

26

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**If we are unable to maintain
access to external funding, we may be unable to continue our ongoing business or
fund future growth.**

In addition to cash
generated by our on-going operations, we rely on access to external sources of
funding and our ability to timely collect cash from our customers to manage our
business. Our ability to continue our ongoing business operations and fund
future growth depends on our ability to maintain compliance with the financial
and other covenants in our credit facility or to secure alternate sources of
financing. However, such alternate financing may not be available or if
available may not be on terms favorable to us.

**The information technology
services industry is highly competitive and we may not be able to compete
effectively.**

The markets for our
services are highly competitive. Many of our competitors have greater financial,
technical and marketing resources than we do. The increased competition in the
industry, among other negative effects, may cause a decrease in our billing and
employee utilization rates. We cannot assure you that we will be able to compete
effectively or that our inability to compete effectively would not have a
material adverse effect on our financial condition and results of operations.

**Business and financial risks
to important business partners may negatively impact our financial condition.**

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

**If we lose any large
customer, our financial condition could be materially, negatively impacted.**

We derive a significant
portion of our revenue from a limited number of customers and projects. Our
ability to grow our business depends in large part on maintaining such customer
relationships and the continuing purchasing power of such customers. The loss of
any large customer could have a material adverse effect on our business,
financial condition and results of operations. There can be no assurance that we
will not lose a large customer or that losing a large customer would not have a
material adverse effect on our financial condition and results of operations.

The fact that our
common stock is not listed on a national exchange may negatively impact our
ability to attract investors and to use our common stock to fund future growth.

Our common stock trades
on the Pink Sheets. In order to maintain liquidity in our common stock, we
depend upon the continuing availability of a market on which our securities may
be traded. The fact that our common stock is not listed on a national exchange
may impact our ability to attract investors and to use our common stock to fund
future growth.

**We are unable to predict the
outcomes of various lawsuits and legal claims or the potential losses related to
those lawsuits and claims.**

We and certain former
officers are defendants in a shareholder class action suit relating to the
restatement of historical financial statements. If we are unable to defend
ourselves and resolve the ongoing shareholder litigation related to our
restatement of prior periods consolidated financial statements within the
limits of our director and officer liability insurance policy such failure will
adversely affect our financial condition.

In addition, there is
the potential for significant claims against us relating to our professional
services from customers or otherwise and our ability to adequately mitigate the
risk of such potential claims may impact our future financial condition. Our
ability to comply with existing and future immigration regulations may impact
our ability to engage and deploy consultants on billable engagements.
Uncertainties resulting from pending litigation matters and from potential
administrative and regulatory issues may adversely affect our business,
including, but not limited to, accounting, corporate governance, immigration and
taxation matters.

We can not predict
shifts in policy or political changes in governments which can regulate or
impact our business operations, specifically in the United States and India.

There is the potential
for future legislation by the U.S. government regulating or taxing outsourcing
which may adversely affect our business model. In addition, there is continued
uncertainty relating to the current geopolitical climate, particularly relative
to internal India politics and their relation to Indias continuing efforts to
liberalize its economy and be receptive to economic conditions and policies
favorable to our business model. Changes in Indias economic policies or
additional legislation regarding information technology services businesses may
adversely affect our business model.

27

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**If our measures to protect
our intellectual property rights are inadequate, our financial condition could
be negatively impacted.**

We rely upon a
combination of trade secrets, nondisclosure and other contractual arrangements,
and copyright and trademark laws to protect our proprietary rights. Our future
success is dependent, in part, upon our proprietary methodologies and toolsets,
development tools and other intellectual property rights. We enter into
confidentiality agreements with our employees, generally require that our
consultants and customers enter into such agreements, and limit access to and
distribution of our proprietary information. We also require that substantially
all of our employees and consultants assign to us their rights in intellectual
property developed while employed or engaged by us. There can be no assurance
that the steps taken by us in this regard will be adequate to deter
misappropriation of our proprietary information or that we will be able to
detect unauthorized use of and take appropriate steps to enforce our
intellectual property rights.

We may be subject to
increased tax liabilities, including if the spin-off of our former subsidiary,
SeraNova, is determined to be taxable, we would be liable for up to
approximately $65 million, which would negatively impact our financial
condition.

We were previously
entitled to a tax holiday for certain revenue earned and expenses incurred by
our existing Software Technology Parks of India Unit (STPI Unit) of our
Hyderabad operations. Such tax holiday expired effective March 31, 2006 and
therefore our ax liability for periods subsequent to March 31, 2006 will be
greater than it would have been had the tax holiday remained in place. In
addition, in July 2000, we completed the tax-free spin-off of SeraNova, our
former subsidiary. In March 2001, Sera Nova and Silverline Technologies Limited
(Silverline) consummated the acquisition of SeraNova by Silverline. Had the
acquisition of SeraNova by Silverline been planned at the time of the spin-off,
the spin-off would have been a taxable transaction. SeraNovas management has
represented that such acquisition was not planned at the time of the spin-off of
SeraNova by Intelligroup, and accordingly should not impact the tax-free nature
of the spin-off. Although we and SeraNova are parties to a tax sharing agreement
pursuant to which SeraNova agreed to indemnify Intelligroup with respect to any
possible tax liability related to the spin-off, SeraNova has filed for
bankruptcy protection under Chapter 7 of the United States Bankruptcy Code and
would be unable to pay the resultant tax liability pursuant to SeraNovas
indemnification obligations under its tax sharing agreement with Intelligroup.
If it were determined that the spin-off was taxable, Intelligroup would have to
pay the tax liability, which would be material. Please refer to Note 8 to the
unaudited consolidated statements of the Company included elsewhere in this
report for further information.

**Third parties may claim that
our services or deliverables infringe upon their intellectual property rights,
which could result in material costs.**

Third parties may
assert infringement claims against us in the future, especially in light of
recent developments in patent law expanding the scope of patents on software and
business methods. These assertions, regardless of their validity, could result
in costly and time-consuming litigation, including damage awards and
indemnification payments to customers, or could require costly redesign of
products or present the need to enter into royalty arrangements which could
decrease margins and could adversely affect our results of operations. Any such
litigation or redesign of products could also negatively impact customer
confidence in our services or deliverables and could result in damage to our
reputation and reduced licensing revenue.

If accounting
interpretations relating to revenue recognition change, our reported revenues
could decline or we could be forced to make changes in our business practices.

There are several
accounting standards and interpretations covering revenue recognition for the
software industry. These pronouncements include Statement of Position (SOP)
81-1 Accounting for Performance of Construction Type and Certain Contracts,
and EITF00-21, Accounting for Revenue Arrangements with Multiple Deliverables,
and the Securities and Exchange Commission Staff Accounting Bulletin No. 101 and
104, Revenue Recognition in Financial Statements. These standards address
revenue recognition for Milestone contracts and contracts with multiple
deliverables, primarily from a conceptual level and do not include specific
implementation guidance. We believe that our revenue has been recognized in
compliance with pronouncements.

The accounting
profession and regulatory agencies continue to discuss various provisions of
these pronouncements with the objective of providing additional guidance on
their application. These discussions and the issuance of new interpretations,
once finalized, could lead to unanticipated reductions in recognized revenue.
They could also drive significant adjustments to our business practices which
could result in increased administrative costs, lengthened sales cycles and
other changes which could adversely affect our reported revenues and results of
operations.

**Some of our clients may
experience unique economic conditions that are specific to their particular
industry.**

We provide services to
clients in a wide variety of industries. Many of the industries are subject to
factors and economic conditions that are unique to the particular industry and
may not be reflected in the overall health of the economy in general. Our
revenue growth and the realizability of our accounts receivable could be
adversely affected if our clients in these particular industries encounter
economic difficulties. Such difficulties could include: (1) inability of
participants in the industry to access the capital or credit markets; (2)
business slowdowns due to excess inventory; and (3) shortfalls in demand for the
product or service produced by a particular industry.

**We frequently need to
negotiate customer contract renewals on comparable terms to maintain our
profitability.**

Contracts continually
expire and must be renegotiated or rebid. Due to the competitive nature of our
industry and variable economic status of our clients, we may experience
difficulty in negotiating terms comparable to current or recently expired
contracts. There can be no assurance that difficulty in renegotiating or
renewing contracts would not have a material adverse effect on our financial
condition and results of operations.

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**Our stock price may be
extremely volatile, and you may not be able to resell your shares of common
stock at or above your purchase price.**

There has been
significant volatility in the market price and trading volume of equity
securities, which is unrelated to the financial performance of the companies
issuing the securities. These broad market fluctuations may negatively affect
the market price of our common stock. You may not be able to resell your shares
at or above the price you pay for your shares due to fluctuations in the market
price of our common stock caused by changes in our operating performance or
prospects and other factors.

Some specific factors that may have
a significant effect on our common stock market price include:

- actual or anticipated fluctuations in our operating results
  or future prospects;
- the publics reaction to our press releases, our other public
  announcements and our filings with the SEC;
- strategic actions by us or our competitors, such as
  acquisitions or restructurings;
- new laws or regulations or new interpretations of existing
  laws or regulations applicable to our business;
- changes in accounting standards, policies, guidance,
  interpretations or principles;
- changes in the information technology services industry as a
  result of changes in financial markets or general economic conditions,
  including those resulting from war, incidents of terrorism
  and responses to such events;
- sales of common stock by us or members of our management
  team; and
- changes in stock market analyst recommendations or earnings
  estimates regarding our common stock, other comparable companies or the
  information technology services industry generally.

**There may be circumstances
in which the interests of our major shareholders could be in conflict with your
interests as a shareholder.**

Our major shareholders
collectively own approximately 62% of our common stock on a consolidated basis
as of the date of this report and control our board of directors. So long as our
majority shareholders continue to own a majority to controlling interest of our
common stock and control our board of directors, circumstances may occur in
which the major shareholders (or other major investors) may have an interest in
pursuing acquisitions, divestitures or other transactions, including among other
things, taking advantage of certain corporate opportunities that, in their
judgment, could enhance their investment in us or another company in which they
invest. These transactions might invoke risks to our other holders of common
stock or adversely affect us or other investors, including investors who
purchase common stock.

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

Item 2. Unregistered Sales of Equity Securities
and Use of Proceeds

There are no matters to report
subject to this Item for the period ended September 30, 2007.

Item 3. Defaults Upon Senior Securities

There are no matters to report
subject to this Item for the period ended September 30, 2007.

Item 4. Submission of Matters to a Vote of
Security Holders

There are no matters to report
subject to this Item for the three months ended September 30, 2007.

Item 5. Other Information

There are no matters to report
subject to this Item for the period ended September 30, 2007.

29

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Item 6. Exhibits.

|**Exhibit
      No.** |   | **Description of
      Exhibit**
|--------------------- | - | --------------------------------
|2                     |   |                                 
|                     
|3.1                   |   |                                 
|                     
|3.2                   |   |                                 
|                     
|4.1                   |   |                                 
|                     
|4.2                   |   |                                 
|                     
|10.1                  | * |                                 
|                     
|10.2                  | * |                                 
|                     
|10.3                  | * |                                 
|                     
|10.4                  | * |                                 
|                     
|10.5                  | * |                                 
|                     
|10.6                  |   |                                 
|                     
|10.7                  |   |                                 
|                     
|10.8                  |   |                                 

30

---

|**Exhibit No.** |  | **Description of Exhibit**                                                                                                                                                                                                                                                                                                                                           
|--------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.9            |  | R/3 National Logo Partner Agreement by and between SAP America,
      Inc. and the Company dated as of April 29, 1997. (Incorporated by
      reference to the Companys Registration Statement on Form SB-2
      (Registration Statement No. 333-29119) declared effective on June 26,
      1997.) See Exhibits 10.10, 10.14 and 10.24.                           
|               
|10.10           |  | ASAP Partner Addendum to R/3 National Logo Partner Agreement
      between SAP America, Inc. and the Company effective July 1, 1997(amends
      existing R/3 National Logo Partner Agreement). (Incorporated by reference
      to the Companys Quarterly Report on Form10-QSB for the quarter ended
      September 30, 1997.) See Exhibits 10.9, 10.14 and 10.24.
|               
|10.11           |  | Implementation Partner Agreement between PeopleSoft, Inc. and the
      Company effective July 15, 1997. (Incorporated by reference to the
      Companys Quarterly Report on Form 10-QSB for the quarter ended September
      30, 1997.) See Exhibit 10.13.                                                                                                       
|               
|10.12           |  | Lease Agreement between Alfieri-Parkway Associates, as Landlord,
      and Intelligroup, Inc., as Tenant, dated March 17, 1998. (Incorporated by
      reference to the Companys Quarterly Report on Form 10-Q for the quarter
      ended March 31, 1998.)                                                                                                         
|               
|10.13           |  | Fifth Amendment to the Implementation Partner Agreement dated July
      15, 1998, between the Company and PeopleSoft, Inc. See Exhibit
      10.11.                                                                                                                                                                                                                 
|               
|10.14           |  | Amendment to the National Implementation Partner Agreement dated as
      of January 1, 1999, between SAP America and the Company. See Exhibits
      10.9, 10.10 and 10.24.                                                                                                                                                                                         
|               
|10.15           |  | Contribution Agreement by and between Intelligroup, Inc. and
      SeraNova, Inc. dated as of January 1, 2000. (Incorporated by reference to
      the Companys Annual Report on Form 10-K for the year ended December 31,
      1999.)                                                                                                                             
|               
|10.16           |  | Distribution Agreement by and between Intelligroup, Inc. and
      SeraNova, Inc. dated as of January 1, 2000. (Incorporated by reference to
      the Companys Annual Report on Form 10-K for the year ended December 31,
      1999.)                                                                                                                             
|               
|10.17           |  | Services Agreement by and between Intelligroup, Inc. and SeraNova,
      Inc. dated as of January 1, 2000. (Incorporated by reference to the
      Companys Annual Report on Form 10-K for the year ended December 31,
      1999.)                                                                                                                                 
|               
|10.18           |  | Space Sharing Agreement by and among Intelligroup, Inc. and
      SeraNova, Inc. dated as of January 1, 2000. (Incorporated by reference to
      the Companys Annual Report on Form 10-K for the year ended December 31,
      1999.)                                                                                                                              
|               
|10.19           |  | Tax Sharing Agreement by and between Intelligroup, Inc. and
      SeraNova, Inc. dated as of January 1, 2000. (Incorporated by reference to
      the Companys Annual Report on Form 10-K for the year ended December 31,
      1999.)                                                                                                                              
|               
|10.20           |  | Amended and Restated Revolving Credit Loan and Security Agreement
      among the Company, Empower, Inc. and PNC Bank, National Association.
      (Incorporated by reference to the Companys Quarterly Report on Form 10-Q
      for the quarter ended June 30, 2000.)                                                                                             
|               
|10.21           |  | Amended and Restated Promissory Note by and between the Company and
      SeraNova, Inc. dated as of May 31, 2000. (Incorporated by reference to the
      Companys Report on Form 8-K/A filed September 14, 2000.) See Exhibit
      10.22.                                                                                                                        
|               
|10.22           |  | Agreement and Waiver with respect to Amended and Restated
      Promissory Note by and between the Company and SeraNova, Inc. dated as of
      September 29, 2000. (Incorporated by reference to the Companys Quarterly
      Report on Form 10-Q for the quarter ended September 30, 2000.) See Exhibit
      10.21.                                              

31

---

|**Exhibit No.** |  | **Description of Exhibit**                                                                                                                                                                                                                                                                                                                
|--------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.23*          |  | First Amendment to Employment Agreement between the Company and
      Nicholas Visco dated November 1, 2000. (Incorporated by reference to the
      Companys Annual Report on Form 10-K for the year ended December 31,
      2000.) See Exhibit 10.4.                                                                                  
|               
|10.24           |  | mySap.com Partner-Services Addendum effective June 7, 2000 to R/3
      National Logo Partner Agreement between SAP America, Inc.and the Company.
      (Incorporated by reference to the Companys Annual Report on Form 10-K for
      the year ended December 31, 2000.) See Exhibits 10.9, 10.10 and
      10.14.                     
|               
|10.25           |  | Service Alliance Master Agreement and Addendums dated May 5, 2000
      between PeopleSoft, Inc. and the Company. (Incorporated by reference to
      the Companys Annual Report on Form 10-K for the year ended December 31,
      2000.)                                                                                               
|               
|10.26           |  | First Amendment to Loan Documents and Waiver Agreement dated March
      27, 2002 between the Company, Empower, Inc. and PNCBank, National
      Association. (Incorporated by reference to the Companys Annual Report on
      Form 10-K for the year ended December 31, 2001.)                                                         
|               
|10.27*          |  | Amended and Restated Employment Agreement dated September 20, 2002
      between the Company and Nagarjun Valluripalli. (Incorporated by reference
      to the Companys Quarterly Report on Form 10-Q for the quarter ended
      September 30, 2002.)                                                                                  
|               
|10.28           |  | Second Amendment to Loan Documents and Waiver Agreement dated
      January 6, 2003 between the Company, Empower, Inc. and PNCBank, National
      Association. (Incorporated by reference to the Companys Annual Report on
      Form 10-K for the year ended December 31, 2002.)                                                       
|               
|10.29           |  | Third Amendment to Loan Documents and Waiver Agreement dated July
      31, 2003 between the Company, Empower, Inc. and PNCBank, National
      Association. (Incorporated by reference to the Companys Current Report on
      Form 8-K dated July 31, 2003, filed with the Securities and Exchange
      Commission on August 5, 2003.)
|               
|10.30           |  | Agreement dated August 7, 2003, by and between Intelligroup, Inc.
      and Ashok Pandey. (Incorporated by reference to the Companys Current
      Report on Form 8-K dated August 7, 2003, filed with the Securities and
      Exchange Commission on August12, 2003.)                                                                  
|               
|10.31*          |  | Employment Agreement dated March 25, 2004 between the Company and
      Christian Misvaer. (Incorporated by reference to the Companys Annual
      Report filed on Form 10-K for the year ended December 31,
  2003.                                                                                                                     
|               
|10.32           |  | Fourth Amendment to Loan Documents and Waiver Agreement dated
      October 22, 2003 between the Company, Empower, Inc. and PNCBank, National
      Association. (Incorporated by reference to the Companys Quarterly Report
      on Form 10-Q for the quarter ended September 30, 2003.)                                               
|               
|10.33*          |  | Separation Agreement between Nicholas Visco and Intelligroup, Inc.
      dated November 24, 2003. (Incorporated by reference to the Companys
      Current Report on Form 8-K dated November 24, 2003, filed with the
      Securities and Exchange Commission on November 24, 2003.)                                                    
|               
|10.34           |  | Waiver Agreement dated March 22, 2004 between the Company, Empower,
      Inc. and PNC Bank, National Association. (Incorporated by reference to the
      Companys Annual Report on Form 10-K for the year ended December 31,
      2003.)                                                                                              
|               
|10.35*          |  | Employment Agreement effective as of April 5, 2004 between the
      Company and David J. Distel. (Incorporated by reference to the Companys
      Current Report on Form 8-K dated March 31, 2004, filed with the Securities
      and Exchange Commission on April 5, 2004.)                                                           
|               
|10.36*          |  | Separation Agreement between the Company and Ed Carr. (Incorporated
      by reference to the Companys Current Report on Form8-K dated March 31,
      2004, filed with the Securities and Exchange Commission on April 5,
      2004.)                                                                                                  

32

---

|**Exhibit No.** |  | **Description of Exhibit**                                                                                                                                                                                                                                                                                                                          
|--------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.37           |  | 2004 Equity Incentive Award Plan. (Incorporated by reference to the
      Companys Definitive Proxy Statement for the 2004 Annual Meeting of
      Shareholders, included within Form 14A as filed on April 29,
    2004.)                                                                                                                         
|               
|10.38*          |  | Employment Agreement dated July 26, 2004 between the Company and
      Douglas Berto. (Incorporated by reference to the Companys Current Report
      on Form 8-K dated August 23, 2004, filed with the Securities and Exchange
      Commission on August23, 2004.)                                                                               
|               
|10.39*          |  | First Amendment to the 2004 Equity Incentive Award Plan.
      (Incorporated by reference to the Companys Current Report on Form 8-K
      dated September 29, 2004, filed with the Securities and Exchange
      Commission on October 5, 2004.)                                                                                                  
|               
|10.40           |  | Common Stock Purchase Agreement dated September 29, 2004 by and
      between the Company, SB Asia Infrastructure Fund LP and Venture Tech
      Assets Ltd. (Incorporated by reference to the Companys Current Report on
      Form 8-K dated September 29, 2004,filed with the Securities and Exchange
      Commission on October 5, 2004.)     
|               
|10.41           |  | Fifth Amendment to Loan Documents and Waiver Agreement dated
      September 29, 2004 between the Company, Empower, Inc. andPNC Bank,
      National Association. (Incorporated by reference to the Companys Current
      Report on Form 8-K dated September29, 2004, filed with the Securities and
      Exchange Commission on October 5, 2004.)
|               
|10.42*          |  | Separation Agreement between the Company and David J. Distel dated
      October 15, 2004. (Incorporated by reference to the Companys Current
      Report on Form 8-K dated October 15, 2004, filed with the Securities and
      Exchange Commission on October 15, 2004.)                                                                       
|               
|10.43*          |  | Separation Agreement between the Company and Douglas Berto dated
      December 6, 2004. (Incorporated by reference to the Companys Current
      Report on Form 8-K dated December 6, 2004, filed with the Securities and
      Exchange Commission on December 10, 2004.)                                                                        
|               
|10.44           |  | Amendment No. 1 to the Common Stock Purchase Agreement dated
      September 29, 2004. (Incorporated by reference to the Companys Current
      Report on Form 8-K dated March 25, 2005, filed with the Securities and
      Exchange Commission on March25, 2005.)                                                                                
|               
|10.45*          |  | Employment Agreement effective June 1, 2005 between the Company and
      Madhu Poomalil. (Incorporated by reference to the Companys Current Report
      on Form 8-K dated June 2, 2005, filed with the Securities and Exchange
      Commission on June 7, 2005.)                                                                                
|               
|10.46*          |  | Second Amended and Restated Employment Agreement effective June 21,
      2005 between the Company and Shirley Spoors. (Incorporated by reference to
      the Companys Current Report on Form 8-K dated June 21, 2005, filed with
      the Securities and Exchange Commission on June 27, 2005.)                                                 
|               
|10.47*          |  | Employment Agreement effective July 1, 2005 between the Company and
      Ranjit Prithviraj. (Incorporated by reference to the Companys Current
      Report on Form 8-K dated June 29, 2005, filed with the Securities and
      Exchange Commission on July 5, 2005.)                                                                            
|               
|10.48*          |  | Separation Agreement dated June 29, 2005 between the Company and
      Christian Misvaer. (Incorporated by reference to the Companys Current
      Report on Form 8-K dated June 29, 2005, filed with the Securities and
      Exchange Commission on July 5, 2005.)                                                                               
|               
|10.49*          |  | Independent Contractor Agreement dated July 1, 2005 between the
      Company and Pontus, Inc. (Incorporated by reference to the Companys
      Current Report on Form 8-K dated June 29, 2005, filed with the Securities
      and Exchange Commission on July 5, 2005.)                                                                          

33

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|**Exhibit No.** |  | **Description of Exhibit**                                                                                                                                                                                                                                                                                                                                                                                          
|--------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.50*          |  | Employment Agreement effective June 30, 2005 between the Company
      and Vikram Gulati. (Incorporated by reference to the Companys Current
      Report on Form 8-K dated June 30, 2005, filed with the Securities and
      Exchange Commission on July 7, 2005.)                                                                                                                                               
|               
|10.51           |  | Threeth Amendment to Loan Documents and Waiver Agreement dated
      September 30, 2005 between the Company, Empower, Inc. andPNC Bank,
      National Association. (Incorporated by reference to the Companys Current
      Report on Form 8-K dated September30, 2005, filed with the Securities and
      Exchange Commission on October 6, 2005.)                                                              
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.52*          |  | Second Amendment to the 2004 Equity Incentive Award Plan.
      (Incorporated by reference to the Companys Annual Report on Form 10-K for
      the year ended December 31, 2005, filed with the Securities and Exchange
      Commission on March 31, 2006.)                                                                                                                                                      
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.53           |  | Common Stock Purchase Agreement dated March 30, 2006 by and between
      Intelligroup Inc., SB Asia Infrastructure Fund LP and Venture Tech Assets,
      Ltd. (Incorporated by reference to the Companys current report on Form
      8-K dated March 30, 2006 filed with the Securities and Exchange Commission
      on April 5, 2006.)                                                                        
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.54*          |  | First Amendment to the Employment Agreement dated June 30, 2005
      between Intelligroup Inc. and Vikram Gulati. (Incorporated by reference to
      the Companys current report on Form 8-K dated April 6, 2006, filed with
      the Securities and Exchange Commission on April 13, 2006.)                                                                                                                    
|               
|10.55           |  | Second Amended and Restated Revolving Credit Loan and Security
      Agreement dated May 23, 2006 by and between Intelligroup, Inc.,Empower
      Inc. and Steel City Capital Funding, a division of PNC Bank, National
      Association. (Incorporated by reference to the Companys current report on
      Form 8-K dated May 23, 2006 filed with the Securities and Exchange
      Commission on May 30, 2006.)
|               
|10.56           |  | Second Amended and Restated Revolving Secured Note dated May 23,
      2006. (Incorporated by reference to the Companys current report on Form
      8-K dated May 23, 2006 filed with the Securities and Exchange Commission
      on May 30, 2006.)                                                                                                                                                              
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.57*          |  | Second Amendment to Employment Agreement dated June 30, 2005,
      between Intelligroup, Inc. and Vikram Gulati. (Incorporated by reference
      to the Companys current report on Form 8-K dated June 8, 2006 filed with
      the Securities and Exchange Commission on June 12, 2006.)                                                                                                                        
|               
|10.58*          |  | Third Amendment to the 2004 Equity Incentive Award
  Plan.                                                                                                                                                                                                                                                                                                                                                          
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.59*          |  | Separation Agreement dated July 21, 2006 by and between
      Intelligroup, Inc. and Madhu Poomalil. (Incorporated by reference to the
      Companys Current Report on Form 8-K dated July 21, 2006, filed with the
      Securities and Exchange Commission on July 21, 2006.)                                                                                                                                   
|               
|10.60*          |  | Employment Agreement dated September 7, 2006 by and between
      Intelligroup, Inc. and Alok Bajpai. (Incorporated by reference to the
      Companys Current Report on Form 8-K dated September 7, 2006, filed with
      the Securities and Exchange Commission on September 7, 2006.)                                                                                                                          
|               
|10.61*          |  | Amendment No. 3 to Employment Agreement dated June 30, 2005,
      between Intelligroup, Inc. and Vikram Gulati.                                                                                                                                                                                                                                                                                                    
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.62           |  | Master Assignment Agreement between Novasoft Information Technology
      (Europe) Ltd. and Intelligroup Europe Ltd. dated June 8,
2007.                                                                                                                                                                                                                                                                            
|               
|10.63           |  | Master Assignment Agreement between ISG Novasoft Technologies
      Limited and Intelligroup Asia Pvt. Ltd. dated June 8, 2007.                                                                                                                                                                                                                                                                                     
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.64           |  | Non Compete Agreement between Novasoft Information Technology
      Corporation and Intelligroup Europe Ltd. dated June 8, 2007.                                                                                                                                                                                                                                                                                    
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.65           |  | Sales Commission Agreement between Novasoft Information Technology
      Corporation and Intelligroup Europe Ltd. dated June 8, 2007.                                                                                                                                                                                                                                                                               
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                     
|31.1           |  | Certifications of Chief Executive Officer Pursuant to Rule
      13a-14(a), as Adopted Pursuant to Section 301 of the Sarbanes-Oxley Act of
      2002.                                                                                                                                                                                                                                                             
|               
|31.2           |  | Certifications of Chief Financial Officer Pursuant to Rule
      13a-14(a), as Adopted Pursuant to Section 301 of the Sarbanes-Oxley Act
      of2002.                                                                                                                                                                                                                                                              
|               
|32.1           |  | Certifications of Chief Executive Officer Pursuant to 18 U.S.C.
      Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
      of 2002.                                                                                                                                                                                                                                                     
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                     
|32.2           |  | Certifications of Chief Financial Officer Pursuant to 18 U.S.C.
      Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
      of 2002.                                                                                                                                                                                                                                                     

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

34

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SIGNATURES

Pursuant to
the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned; thereunto duly authorized this 6thday of November 2007.

|                             | INTELLIGROUP, INC.
|---------------------------- | ------------------
|                             |                   
|                             |                   
|Date: November
      9, 2007 | By:               
|                             |                   
|                             |                   
|                             |                   
|                             |                   
|                             |                   
|Date: November
      9, 2007 | By:               
|                             |                   
|                             |                   
|                             |                   

35

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