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SECURITIES AND EXCHANGE COMMISSION
Washington, 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, 2006

Commission file number 0-20943

|INTELLIGROUP,   INC.                                    
|--------------------------------------------------------
|                                                        
|(Exact   Name of Registrant as Specified In Its Charter)

|New Jersey                                                       |  | 11-2880025                            
|---------------------------------------------------------------- |  | --------------------------------------
|                                                                 |  |                                       
|(State or   Other Jurisdiction of Incorporation or Organization) |  | (I.R.S.   Employer Identification No.)
|                                                                 |  |                                       
|499 Thornall Street, Edison, New   Jersey                        |  | 08837                                 
|                                                                 |  |                                       
|(Address   of Principal Executive Offices)                       |  | (Zip Code)                            
|                                                                 |  |                                       
|(732) 590-1600                                                  
|                                                                
|(Registrants   Telephone Number, Including Area Code)          

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

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

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

|Large   accelerated filer:
o | 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 October 24, 2006:

|Class                          |  | Number of   Shares |           
|------------------------------ |  | ------------------ | ----------
|                               |  |                    |           
|Common Stock, $.01 par   value |  |                    | 41,932,857

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TABLE OF CONTENTS

|                                 |                                                                                                                                                                 |  | Page
|-------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|                                 |                                                                                                                                                                 |  |     
|PART   I.  FINANCIAL INFORMATION |                                                                                                                                                                 | 
|                                 |                                                                                                                                                                 | 
|Item 1.                          | Financial   Statements                                                                                                                                          |  |     
|                                 | Condensed   Consolidated Balance Sheets as of September 30, 2006 (unaudited) and December   31, 2005                                                            |  | 4   
|                                 | Condensed   Consolidated Statements of Operations and Comprehensive Income (Loss) for the   Nine and Three Months Ended September 30, 2006 and 2005 (unaudited) |  | 5   
|                                 | Condensed   Consolidated Statements of Cash Flows for the Nine Months Ended September 30,   2006 and 2005 (unaudited)                                           |  | 6   
|                                 | Notes to   Condensed Consolidated Financial Statements                                                                                                          |  | 7   
|Item 2.                          | Managements   Discussion and Analysis of Financial Condition and Results of Operations                                                                         |  | 16  
|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 5.                          | Other   Information                                                                                                                                             |  | 28  
|Item 6.                          | Exhibits                                                                                                                                                        |  | 29  
|Signatures                       |                                                                                                                                                                 |  | 34  

2



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 Section 21E 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



PART I          FINANCIAL STATEMENTS

ITEM 1.

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

|                                                                                                                                                                        |  | September   30,   2006 |             | December   31,   2005 |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | ----------- | --------------------- | -
|                                                                                                                                                                        |  |                        |             |                       |  
|                                                                                                                                                                        |  |                        | (unaudited) |                       |  
|ASSETS                                                                                                                                                                  |  |                        |             |                       |  
|CURRENT   ASSETS                                                                                                                                                        |  |                        |             |                       |  
|Cash   and cash equivalents                                                                                                                                             |  | $                      | 13,425      |                       | $
|Accounts   receivable, less allowance for doubtful accounts of $634 and $1,329 at September   30, 2006 and December 31, 2005, respectively                              |  |                        | 19,635      |                       |  
|Unbilled   services                                                                                                                                                     |  |                        | 11,064      |                       |  
|Prepaid   expenses and other current assets                                                                                                                             |  |                        | 2,160       |                       |  
|                                                                                                                                                                        |  |                        |             |                       |  
|Total   current assets                                                                                                                                                  |  |                        | 46,284      |                       |  
|Property and equipment, net                                                                                                                                             |  |                        | 6,589       |                       |  
|Deferred tax and other   assets                                                                                                                                         |  |                        | 2,511       |                       |  
|                                                                                                                                                                        |  |                        |             |                       |  
|Total   assets                                                                                                                                                          |  | $                      | 55,384      |                       | $
|                                                                                                                                                                        |  |                        |             |                       |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                                    |  |                        |             |                       |  
|CURRENT   LIABILITIES                                                                                                                                                   |  |                        |             |                       |  
|Line   of credit borrowings                                                                                                                                             |  | $                      | 4,345       |                       | $
|Accounts   payable                                                                                                                                                      |  |                        | 3,705       |                       |  
|Accrued   payroll and related taxes                                                                                                                                     |  |                        | 10,852      |                       |  
|Accrued   expenses and other current liabilities                                                                                                                        |  |                        | 4,173       |                       |  
|Deferred   revenue                                                                                                                                                      |  |                        | 1,312       |                       |  
|Income   taxes payable                                                                                                                                                  |  |                        | 1,256       |                       |  
|Current   portion of obligations under capital lease                                                                                                                    |  |                        | 467         |                       |  
|                                                                                                                                                                        |  |                        |             |                       |  
|Total   current liabilities                                                                                                                                             |  |                        | 26,110      |                       |  
|Obligations under capital   lease, net of current portion                                                                                                               |  |                        | 403         |                       |  
|Other long-term liabilities                                                                                                                                             |  |                        | 1,852       |                       |  
|                                                                                                                                                                        |  |                        |             |                       |  
|Total   liabilities                                                                                                                                                     |  |                        | 28,365      |                       |  
|                                                                                                                                                                        |  |                        |             |                       |  
|Commitments and   contingencies                                                                                                                                         |  |                        |             |                       |  
|Shareholders   Equity                                                                                                                                                  |  |                        |             |                       |  
|Preferred   stock, $.01 par value, 5,000 shares authorized, none issued or outstanding                                                                                  |  |                        |            |                       |  
|Common   stock, $.01 par value, 50,000 shares authorized, 41,933 and 35,103 shares   issued and outstanding at September 30, 2006 and December 31, 2005,   respectively |  |                        | 419         |                       |  
|Additional   paid-in capital                                                                                                                                            |  |                        | 69,246      |                       |  
|Accumulated   deficit                                                                                                                                                   |  |                        | (41,412     | )                     |  
|Accumulated   other comprehensive loss                                                                                                                                  |  |                        | (1,234      | )                     |  
|                                                                                                                                                                        |  |                        |             |                       |  
|Total   shareholders equity                                                                                                                                            |  |                        | 27,019      |                       |  
|                                                                                                                                                                        |  |                        |             |                       |  
|Total   liabilities and shareholders equity                                                                                                                            |  | $                      | 55,384      |                       | $
|                                                                                                                                                                        |  |                        |             |                       |  

See accompanying notes.

4



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

|                                                                       |  | NINE   MONTHS ENDED    SEPTEMBER 30, |        | THREE   MONTHS ENDED SEPTEMBER 30, |  
|---------------------------------------------------------------------- |  | ------------------------------------ | ------ | ---------------------------------- | -
|                                                                       |  |                                      |        |                                    |  
|                                                                       |  | 2006                                 |        | 2005                               |  
|                                                                       |  |                                      |        |                                    |  
|Revenue                                                                |  | $                                    | 93,277 |                                    | $
|Cost of revenue                                                        |  |                                      | 66,527 |                                    |  
|                                                                       |  |                                      |        |                                    |  
|Gross   profit                                                         |  |                                      | 26,750 |                                    |  
|                                                                       |  |                                      |        |                                    |  
|Selling, general and   administrative expenses                         |  |                                      | 25,587 |                                    |  
|Depreciation and amortization                                          |  |                                      | 1,829  |                                    |  
|                                                                       |  |                                      |        |                                    |  
|Total   operating expenses                                             |  |                                      | 27,416 |                                    |  
|                                                                       |  |                                      |        |                                    |  
|Operating   income (loss)                                              |  |                                      | (666   | )                                  |  
|Interest income (expense),   net                                       |  |                                      | (399   | )                                  |  
|Other income (expense), net                                            |  |                                      | 1,647  |                                    |  
|                                                                       |  |                                      |        |                                    |  
|Income (loss) before income   tax provision (benefit)                  |  |                                      | 582    |                                    |  
|Provision for (benefit of)   income taxes                              |  |                                      | 1,947  |                                    |  
|                                                                       |  |                                      |        |                                    |  
|Net loss                                                               |  | $                                    | (1,365 | )                                  | $
|                                                                       |  |                                      |        |                                    |  
|Loss per share:                                                        |  |                                      |        |                                    |  
|Basic   net loss per share                                             |  | $                                    | (0.03  | )                                  | $
|                                                                       |  |                                      |        |                                    |  
|Weighted   average number of common shares outstanding - basic         |  |                                      | 39,591 |                                    |  
|Diluted   net loss per share                                           |  | $                                    | (0.03  | )                                  | $
|                                                                       |  |                                      |        |                                    |  
|Weighted   average number of common shares outstanding - diluted       |  |                                      | 39,591 |                                    |  
|Comprehensive loss                                                     |  |                                      |        |                                    |  
|Net   loss                                                             |  | $                                    | (1,365 | )                                  | $
|Other   comprehensive income (loss) - currency translation adjustments |  |                                      | (682   | )                                  |  
|                                                                       |  |                                      |        |                                    |  
|Comprehensive loss                                                     |  | $                                    | (2,047 | )                                  | $
|                                                                       |  |                                      |        |                                    |  

See accompanying notes.

5



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

|                                                                                           |  | NINE   MONTHS ENDED   SEPTEMBER 30, |       
|------------------------------------------------------------------------------------------ |  | ----------------------------------- | ------
|                                                                                           |  |                                     |       
|                                                                                           |  | 2006                                |       
|                                                                                           |  |                                     |       
|Cash flows from operating   activities:                                                    |  |                                     |       
|Net   loss                                                                                 |  | $                                   | (1,365
|Adjustments to reconcile   net loss to net cash provided by (used in) operating activities |  |                                     | 716   
|                                                                                           |  |                                     |       
|Net cash provided by (used   in) operating activities                                      |  |                                     | (649  
|                                                                                           |  |                                     |       
|Cash flows from investing   activities:                                                    |  |                                     |       
|Purchase   of property and equipment                                                       |  |                                     | (1,667
|                                                                                           |  |                                     |       
|Net cash used in investing   activities                                                    |  |                                     | (1,667
|                                                                                           |  |                                     |       
|Cash flows from financing   activities:                                                    |  |                                     |       
|Principal   payments under capital leases                                                  |  |                                     | (422  
|Net   proceeds from private placement                                                      |  |                                     | 9,750 
|Net   proceeds from stock options exercised                                                |  |                                     | 245   
|Net   change in line of credit borrowings                                                  |  |                                     | 918   
|                                                                                           |  |                                     |       
|Net cash provided by   financing activities                                                |  |                                     | 10,491
|                                                                                           |  |                                     |       
|Effect of foreign currency   exchange rate changes on cash                                 |  |                                     | (55   
|                                                                                           |  |                                     |       
|Net increase in cash and   cash equivalents                                                |  |                                     | 8,120 
|Cash and cash equivalents -   beginning of period                                          |  |                                     | 5,305 
|                                                                                           |  |                                     |       
|Cash and cash equivalents -   end of period                                                |  | $                                   | 13,425
|                                                                                           |  |                                     |       

See accompanying notes.

6



INTELLIGROUP, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) SEPTEMBER 30, 2006 AND 2005

|NOTE 1- | BASIS OF   PRESENTATION
|------- | -----------------------

The condensed consolidated financial statements and accompanying financial information as of September 30, 2006 and for the nine and three months ended September 30, 2006 and 2005 are unaudited and, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) which the Company considers necessary for a fair presentation of the financial position of the Company at such dates and the operating results and cash flows for those periods.  The unaudited condensed consolidated financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States of America and the instructions of Form 10-Q and Rule 10-01 of Regulation S-X. Pursuant to accounting requirements of the Securities and Exchange Commission applicable to quarterly reports on Form 10-Q, the accompanying unaudited condensed consolidated
financial statements and these notes do not include 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, 2005.

The amounts for the December 31, 2005 balance sheet have been extracted from the audited consolidated financial statements included in Form 10-K for the year ended December 31, 2005.

The results of the Companys operations for the nine and three months ended September 30, 2006 are not necessarily indicative of the results of operations to be expected for the full year ending December 31, 2006.

|NOTE 2- | SUMMARY OF   SIGNIFICANT ACCOUNTING POLICIES
|------- | --------------------------------------------

Earnings (loss) per Common Share

Basic net income (loss) per 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, 2006 and 2005, respectively, options to purchase 4,003,000 and 4,012,000 shares of common stock were not included in the computation of diluted earnings (loss) per share because inclusion would have been anti-dilutive.  For the nine months ended September 30, 2006 and 2005, respectively, options to purchase 4,003,000 and 4,012,000 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

During the three months ended September 30, 2006, the Company entered into a foreign currency forward contract to manage a portion of its foreign currency risk related to Indian Rupee denominated asset balances at its Indian subsidiary.  The foreign currency forward 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), net on the Companys consolidated statements of operations and comprehensive income (loss).

Share-Based Compensation Plans

The Companys share-based compensation plans are described in Note 6.  The Company adopted the provisions of Statement of Financial Accounting Standards No. 123 (Revised 2004), Share-Based Payment, (SFAS No. 123R) on January 1, 2006, using the modified prospective transition method.  Under this method, share-based compensation expense recognized in the condensed consolidated statement of operations and comprehensive loss for the nine and three months ended September 30, 2006 includes compensation expense for all share-based payments granted prior to, but not yet vested, as of January 1, 2006, based on the grant date fair value originally estimated in accordance with the provisions of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation  (SFAS No. 123).

There were eleven share-based payment awards granted in the nine months ended September 30, 2006.  The Company recognizes compensation expense for all share-based payment awards based on the grant date fair value estimated in accordance with the provisions of SFAS No. 123R.  Because the Company elected to use the modified prospective transition method, results for prior periods have not been restated.

7



INTELLIGROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) SEPTEMBER 30, 2006 AND 2005

|NOTE 2- | SUMMARY OF   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|------- | --------------------------------------------------------

Share-Based Compensation Plans (Continued)

Prior to the adoption of SFAS No. 123R, share-based employee compensation expense related to stock options was not recognized in the condensed consolidated statement of operations and comprehensive loss if the exercise price of the option was at least equal to the market price of common stock on the grant date, in accordance with the measurement and recognition provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, as permitted by SFAS No. 123.  As a result, the recognition of share-based compensation expense was generally limited to the expense attributed to modifications of granted options.  In accordance with SFAS No. 123 and Statement of Financial Accounting Standards No. 148, Accounting for Stock-Based Compensation  Transition and Disclosure, (SFAS No. 148) the Company provided pro forma net income or
loss and net earnings or loss per common share disclosures for each period prior to the adoption of SFAS No 123R as if it had applied the fair value-based method in measuring compensation expense for all share-based compensation plans, including stock options.  Had compensation costs for stock-based compensation plans been accounted for using the fair value method of accounting described by SFAS No. 123, net loss and basic and diluted loss per common share for the three and nine months ended September 30, 2005 would have been as follows (in thousands, except per share data):

|                                                                                                                                            |  | Nine Months   Ended   September 30, 2005 |        | Three Months   Ended   September 30, 2005 |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------- | ------ | ----------------------------------------- | -
|                                                                                                                                            |  |                                          |        |                                           |  
|Net loss - as reported                                                                                                                      |  | $                                        | (5,553 | )                                         | $
|Deduct: Total stock-based   employee compensation expense determined under fair value based method for   awards, net of related tax effects |  |                                          | (989   | )                                         |  
|                                                                                                                                            |  |                                          |        |                                           |  
|Net loss - pro forma                                                                                                                        |  | $                                        | (6,542 | )                                         | $
|                                                                                                                                            |  |                                          |        |                                           |  
|Loss per common share -   basic and diluted:                                                                                                |  |                                          |        |                                           |  
|As   reported                                                                                                                               |  | $                                        | (0.16  | )                                         | $
|                                                                                                                                            |  |                                          |        |                                           |  
|Pro   forma                                                                                                                                 |  | $                                        | (0.19  | )                                         | $
|                                                                                                                                            |  |                                          |        |                                           |  

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 for periods equal to the expected life of the options in effect at the time of grant.

Dividends  the Company uses an expected dividend yield of zero since it has never declared or paid any dividends on its capital stock. The Company intends to retain any earnings to fund future growth and the operation of its business, and, therefore does not anticipate paying any cash dividends in the foreseeable future.

Additionally, the Company estimates forfeitures at the time of grant and 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.  For purposes of calculating pro forma information under SFAS No. 123 for periods prior to January 1, 2006, the Company accounted for forfeitures as they occurred.

Prior to the adoption of SFAS No. 123R, all tax benefits for deductions resulting from the exercise of stock options were reported as operating cash flows on the statement of cash flows.  SFAS No. 123R requires the cash flows resulting from the tax benefits for tax deductions in excess of the compensation expense recorded for those options to be classified as financing cash flows.  Although there were options exercised during the nine months ended September 30, 2006, no tax benefits were recorded due to there being no tax benefits for tax deductions expected to be utilized, based on the history of net operating losses.

8



INTELLIGROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) SEPTEMBER 30, 2006 AND 2005

|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 the 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 8.25% as of September 30, 2006, 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 loan agreement related to the Credit Facility as of September 30, 2006.

As of September 30, 2006, the Company had $4.3 million outstanding borrowings under the Credit Facility. The Company estimates undrawn availability under the Credit Facility to be $10.1 million as of September 30, 2006.

|NOTE 4- | RELATED   PARTY TRANSACTIONS
|------- | ----------------------------

Effective August 1, 2005, IGA entered into an agreement to lease certain premises for certain of the Companys India operations from ILABS Hyderabad Technology Center Pvt. Ltd. (iLabs), a party with which two members of the Companys Board of Directors, Srini Raju and Sandeep Reddy, are affiliated.  The terms of the lease agreement provide for, among other things: (1) a minimum lease period of five years with an option for two three-year renewal periods; (2) payment of a security deposit equivalent to nine (9) months rent in the amount of 15.3 million Indian rupees (approximately $329,000); (3) payment of monthly lease fees in the amount of 1.7 million Indian rupees (approximately $40,000), subject to yearly five percent (5%) escalation; and (4) monthly operations and maintenance fees of 0.3 million Indian rupees (approximately $6,500).  Rent expense for the nine
months ended September 30, 2006 towards the said lease was 19.1 million rupees (approximately $421,000). There are no advance lease rentals as of September 30, 2006.

|NOTE 5- | LITIGATION
|------- | ----------

India Tax Assessment

The Companys India subsidiary has received tax assessments from the India taxing authority denying tax exemptions claimed for certain revenue earned and disallowing certain expenses claimed during the India subsidiarys fiscal years ended March 31, 1998 through March 31, 2003. The combined revised additional tax demands were for 32.9 million Indian rupees (or approximately $0.7 million) for those years. They include tax penalties and interest for the fiscal years ended March 31, 2001 and 2002 of 1.7 million Indian rupees (or approximately $37,000) and 0.7 million Indian rupees (or approximately $15,000), respectively. Against the total additional tax demand of $0.7 million, the Company has made payments of approximately $0.7 million under protest to the India tax authority.

The Company is currently appealing at the Appellant Tribunal stage for the fiscal years ended March 31, 1998 through March 31, 2002.  For the fiscal year ended March 31, 2003, the Company has filed an appeal with the Commissioner of Income Tax (Appeals) against the assessment order passed. In the event the Companys appeal is not successful, there will not be any additional future cash outlay.  However, in the event the Company is successful, an amount up to approximately $0.7 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.  Defendants motions to dismiss the second 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, 2006 AND 2005

|NOTE 6- | SHAREHOLDERS   EQUITY
|------- | ----------------------

2006 Private Placement

On March 31, 2006, the Company completed a $10 million private placement transaction whereby SOFTBANK Asia Infrastructure Fund, L.P., an affiliate of SOFTBANK Corporation, acquired an additional 3,333,333 shares of the Companys common stock and Venture Tech Assets Pvt. Ltd. acquired an additional 3,333,334 shares of the Companys common stock, at a share price of $1.50 (the 2006 Private Placement).  The 2006 Private Placement was approved by a special committee of disinterested members of the Board of Directors and generated $9.8 million of proceeds to the Company, net of transaction expenses.

Share-Based Compensation Plans

The Company has four share-based compensation plans that reserve common shares for issuance to key employees, consultants and directors, as described below.  The compensation cost that has been charged against income for those plans was $0.4 million for the three months ended September 30, 2006, and $1.2 million for the nine months ended September 30, 2006.  The Company did not recognize income tax benefit in the condensed consolidated statement of operations and comprehensive income (loss) for the first nine months of 2006 and 2005, respectively, due to its history of net operating losses.   The Company received approximately $245,000 and $0 from option exercises under share-based compensation plans for each of the nine months ended September 30, 2006 and 2005, 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 2004 Plan (as amended) shall be equal to 1,600,000, plus the number of shares of Common Stock which are or become available for issuance under the Companys 1996 Stock Plan (the Prior Plan), and which are not issued under such plan.  Those eligible to receive stock option grants or stock purchase rights under the 2004 Plan include employees, non employee Directors and consultants.  The Compensation Committee of the Board of Directors of the Company administers the 2004 Plan.  Subject to the provisions of the 2004 Plan, the administrator of the 2004 Plan has the discretion to determine 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 than 110% of the fair market value per share on the date of grant.  Notwithstanding the foregoing, the Compensation Committee of the Board may in its discretion issue non-qualified stock options to purchase up to 500,000 shares of 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 2004 Plan
at any time; provided, however, that stockholder approval must be obtained for any amendment to the extent necessary or desirable to comply with any applicable law, regulation or stock exchange rule, to increase the number of shares available under the 2004 Plan, to permit the Compensation Committee to grant options with an exercise price below fair market value on the date of grant, or to extend the exercise period for an option beyond ten years from the date of grant. The 2004 Plan terminates on June 8, 2014 unless terminated earlier by the Companys Board of Directors.

10



INTELLIGROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) SEPTEMBER 30, 2006 AND 2005

|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 a nonqualified stock options granted under the 1996 Plan may not be less than 85% of the fair market value per share of the Common Stock on the date of grant or, in the case of an optionee who beneficially owns 10% or more of the outstanding capital stock of the Company, not less than 110% of the fair market value per share on the date of grant.  The purchase price of shares issued pursuant to stock purchase rights may not be less than 50% of the fair market value of such shares as of the offer date of such rights.  The options terminate not more than ten years from the date of grant, subject to earlier termination on the optionees death, disability or termination of employment with 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s 1996 Non-Employee Director Stock Option Plan (the Director Plan) and it became effective on July 12, 1996. The Director Plan provides for the grant of options to purchase a maximum of 140,000 shares of Common Stock of the Company to non-employee Directors of the Company.  The Board of Directors administers the Director Plan.

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

A summary of stock option activity as of September 30, 2006, and changes during the nine months then ended is presented below:

|                                       |  | Shares         |       | Weighted-
    Average 
    Exercise 
    Price |   | Weighted-    Average 
    Remaining 
    Contractual 
    Term |  | Aggregate 
    Intrinsic 
    Value |    
|-------------------------------------- |  | -------------- | ----- | ---------------------------------------------- | - | -------------------------------------------------------------- |  | ----------------------------------- | ---
|                                       |  |                |       |                                                |   |                                                                |  |                                     |    
|                                       |  | (in thousands) |       |                                                |   | (Years)                                                        |  | (in thousands)                      |    
|Outstanding as of December   31, 2005  |  |                | 4,001 |                                                | $ | 2.32                                                           |  |                                     |    
|Granted                                |  |                | 902   |                                                |   | 1.56                                                           |  |                                     |    
|Exercised                              |  |                | (164  | )                                              |   | 1.50                                                           |  |                                     |    
|Canceled, forfeited or   expired       |  |                | (736  | )                                              |   | 2.10                                                           |  |                                     |    
|                                       |  |                |       |                                                |   |                                                                |  |                                     |    
|Outstanding as of September   30, 2006 |  |                | 4,003 |                                                | $ | 2.22                                                           |  |                                     | 8.2
|                                       |  |                |       |                                                |   |                                                                |  |                                     |    
|Exercisable as of September   30, 2006 |  |                | 1,512 |                                                | $ | 2.75                                                           |  |                                     | 7.0
|                                       |  |                |       |                                                |   |                                                                |  |                                     |    

11



INTELLIGROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) SEPTEMBER 30, 2006 AND 2005

|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   Months Ended    September 30, |  | Nine   Months Ended    September 30, | 
|----------------------- |  | ------------------------------------- |  | ------------------------------------ | 
|                        |  |                                       |  |                                      | 
|                        |  | 2006                                  |  | 2005                                 | 
|                        |  |                                       |  |                                      | 
|Expected Volatility     |  | 87.0%                                 |  | 97.7%                                | 
|Expected Lives          |  | 6.06   years                          |  | 6.06   years                         | 
|Risk free Interest Rate |  | 4.72   - 4.77%                        |  | 4.05%                                | 
|Expected Dividends      |  | 0%                                    |  | 0%                                   | 

The weighted average grant date fair value of options granted during the three months ended September 30, 2006 and 2005 was $1.16 and $1.69, respectively.  The weighted average grant date fair value of options granted during the nine months ended September 30, 2006 and 2005 was $1.12 and $1.21, respectively.   The aggregate intrinsic value of options outstanding as of September 30, 2006 is calculated as the difference between the exercise price of the underlying options and the market price of common shares for the shares that were in-the-money at that date.  The intrinsic value of exercised options during the nine months ended September 30, 2006 was $1,100.

The Company estimates forfeitures at the time of grant and revises those estimates in subsequent periods if actual forfeitures differ from those estimates.  It uses a combination of historical data, demographic characteristics and other factors to estimate pre-vesting option forfeitures and record share-based compensation expense only for those awards that are expected to vest.  The Company has calculated and applied a forfeiture rate for the nine months ended September 30, 2006.  For purposes of calculating pro forma information under SFAS No. 123 for periods prior to January 1, 2006, the Company accounted for forfeitures as they occurred.

As of September 30, 2006, there was $3.5 million of total unrecognized compensation cost related to the stock options.  That cost is expected to be recognized over the next four years.

In November 2005, the FASB issued FASB Staff Position No. FAS 123(R)-3 (FSP 123(R)-3), Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards. FSP 123(R)-3 provides an elective alternative transition method for calculating the pool of excess tax benefits available to absorb tax deficiencies recognized subsequent to the adoption of FAS 123(R). Companies may take up to one year from the effective date of FSP 123(R)-3 to evaluate the available transition alternatives and make a one-time election as to which method to adopt. The Company is currently in the process of evaluating the alternative methods.

12



INTELLIGROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) SEPTEMBER 30, 2006 AND 2005

|NOTE 6- | SHAREHOLDERS   EQUITY(CONTINUED)
|------- | ---------------------------------

Share-Based Compensation Plans (Continued)

Impact of the Adoption of SFAS No. 123R:

The Company adopted the provisions of SFAS No. 123R on January 1, 2006.  See Note 2 for information regarding the adoption of SFAS No. 123R.  The following table summarizes the share-based compensation expense for stock options that were recorded in accordance with SFAS No. 123R for the nine and three months ended September 30, 2006 (in thousands except per share information):

|                                               |  | Nine   Months    Ended    September 30,    2006 |       | Three   MonthsEndedSeptember 30,    2006 |  
|---------------------------------------------- |  | ----------------------------------------------- | ----- | ---------------------------------------- | -
|                                               |  |                                                 |       |                                          |  
|Cost of Revenue                                |  | $                                               | 473   |                                          | $
|Selling, general and   administrative expenses |  |                                                 | 710   |                                          |  
|                                               |  |                                                 |       |                                          |  
|Increase to net loss                           |  | $                                               | 1,183 |                                          | $
|                                               |  |                                                 |       |                                          |  
|Change in income (loss) per   share:           |  |                                                 |       |                                          |  
|Basic                                          |  | $                                               | (0.03 | )                                        | $
|                                               |  |                                                 |       |                                          |  
|Diluted                                        |  | $                                               | (0.03 | )                                        | $
|                                               |  |                                                 |       |                                          |  

|NOTE 7- | SEGMENT   DATA AND GEOGRAPHIC INFORMATION
|------- | -----------------------------------------

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

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

| |  | United States (US)  the   largest segment of the Company, with operations in the US and Puerto Rico.   Includes the operations of the Companys US subsidiary, Empower, Inc., and   all corporate functions and activities.  The US and corporate   headquarters is located in Edison, New Jersey;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                      
| |  | India  includes the   operations of the Company in India, including services provided on behalf of   other group subsidiaries, primarily to the US. The India headquarters is   located in Hyderabad, India;                                                                                        
| |   |                                                                                                                                                                                                                                                                                                      
| |  | Europe  includes the   operations of the Company in Denmark, 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, 2006 and 2005  are presented in   the following geographic segments (in thousands):                                                                                                                                                                                

13



INTELLIGROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) SEPTEMBER 30, 2006 AND 2005

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

|                                      |  | United    States |        | India |   | Europe |   | Japan |        | Total |  
|------------------------------------- |  | ---------------- | ------ | ----- | - | ------ | - | ----- | ------ | ----- | -
|                                      |  |                  |        |       |   |        |   |       |        |       |  
|Three months ended September 30, 2006 |  |                  |        |       |   |        |   |       |        |       |  
|Revenue                               |  | $                | 20,663 |       | $ | 8,649  |   | $     | 2,211  |       | $
|Operating income (loss)               |  |                  | (937   | )     |   | 1,908  |   |       | (176   | )     |  
|Income tax expense (benefit)          |  |                  | (80    | )     |   | 958    |   |       |       |       |  
|Net income (loss)                     |  |                  | (713   | )     |   | 895    |   |       | (117   | )     |  
|Three months ended September 30, 2005 |  |                  |        |       |   |        |   |       |        |       |  
|Revenue                               |  | $                | 20,570 |       | $ | 6,788  |   | $     | 1,417  |       | $
|Operating income (loss)               |  |                  | (3,829 | )     |   | 604    |   |       | (444   | )     |  
|Income tax expense                    |  |                  | 21     |       |   | 75     |   |       |       |       |  
|Net  income (loss)                    |  |                  | (3,758 | )     |   | 769    |   |       | (462   | )     |  
|                                      |  |                  |        |       |   |        |   |       |        |       |  
|                                      |  | United    States |        | India |   | Europe |   | Japan |        | Total |  
|                                      |  |                  |        |       |   |        |   |       |        |       |  
|Nine months ended September 30, 2006  |  |                  |        |       |   |        |   |       |        |       |  
|Revenue                               |  | $                | 59,286 |       | $ | 24,540 |   | $     | 6,009  |       | $
|Operating income (loss)               |  |                  | (5,200 | )     |   | 4,882  |   |       | 112    |       |  
|Income tax expense (benefit)          |  |                  | (94    | )     |   | 2,156  |   |       |       |       |  
|Net  income (loss)                    |  |                  | (4,561 | )     |   | 3,226  |   |       | 276    |       |  
|Long-lived assets, net                |  |                  | 1,109  |       |   | 3,343  |   |       | 2,088  |       |  
|Total assets                          |  |                  | 30,566 |       |   | 18,307 |   |       | 4,529  |       |  
|Nine months ended September 30, 2005  |  |                  |        |       |   |        |   |       |        |       |  
|Revenue                               |  | $                | 67,006 |       | $ | 20,932 |   | $     | 5,248  |       | $
|Operating income (loss)               |  |                  | (7,158 | )     |   | 2,904  |   |       | (637   | )     |  
|Income tax expense (benefit)          |  |                  | 62     |       |   | (113   | ) |       |       |       |  
|Net income (loss)                     |  |                  | (6,988 | )     |   | 3,068  |   |       | (1,286 | )     |  
|Long-lived assets, net                |  |                  | 1,462  |       |   | 1,839  |   |       | 82     |       |  
|Total assets                          |  |                  | 30,011 |       |   | 11,892 |   |       | 1,577  |       |  

|                                                                                                                                                                                                                    
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1)   Of the total capital expenditures incurred for the nine months ended   September 30, 2006, $0.7 million was incurred in the US, $0.9 million was   incurred in India, and $2.1 million was incurred in Europe.

|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, an issue that is currently being
analyzed.

14



INTELLIGROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) SEPTEMBER 30, 2006 AND 2005

|NOTE 8- | COMMITMENTS   AND CONTINGENCIES (CONTINUED)
|------- | -------------------------------------------

Employment Agreements

As of September 30, 2006, the Company had employment agreements with certain of its executive officers, which provide for minimum payments in the event of termination for reasons other than just cause.  The aggregate amount of compensation commitment in the event of termination under such agreements is approximately $1.1 million.  In addition, Intelligroup Asia Pvt. Ltd. (IGA) had entered into Severance Packages totaling approximately $0.6 million with certain former members of the IGA management team.  Pursuant to the terms of the Agreement for Severance Package, the Severance Package is activated upon the fulfillment of certain events, including a change in management of the Company or IGA.  In April 2005, following the termination of the Companys Chief Executive Officer, three members of the IGA management team, each of whom had a Severance Package, resigned. 

Except as set forth below, to date, the Company has not received any claim for payment of the Severance Package.  In or about September 2005, two former members of the IGA management team sent IGA notices under Section 433 and 434 of the 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.

|NOTE 9- | RECENT   ACCOUNTING PRONOUNCEMENTS
|------- | ----------------------------------

In July, 2006, the Financial Accounting Standards Board issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109 (FIN 48), which clarifies the accounting for uncertainty in tax positions. FIN 48 requires recognition in the financial statements of the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. The provisions are effective for the Company beginning in the first quarter of 2007 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 FIN 48 on its consolidated financial statements.

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 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.

|NOTE 10- | OTHER   INCOME
|-------- | --------------

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 nine months ended September 30, 2006, the Company recorded transaction gains of approximately $0.6 million, compared with transaction losses of $0.7 million for the nine months ended September 30, 2005, 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, 2006, the Company recorded sublease, dividend and other items of approximately $1.0 million, compared with $0.4 million for the nine months ended September 30, 2005.

For the three months ended September 30, 2006 and  2005, the Company recorded transaction losses of approximately $35,000, and transaction gains of approximately $167,000, 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, 2006, the Company recorded sublease, dividend and other items of approximately $0.4 million, compared with $0.1 million for the three months ended September 30, 2005.

15



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

Overview

In this Section, the Company will discuss the following:  (i)  key factors in evaluating the Companys financial performance;  (ii) application of critical accounting principles, which explains the accounting principles necessary to understand how the Company records its financial information; (iii)  results of operations - consolidated, in which the Companys consolidated results are compared 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 clients, offers a fixed price for its services. For the nine months ended September 30, 2006 and 2005, revenue derived from projects under fixed price contracts represented approximately 40% and 44% of the Companys total revenue. No single fixed price project was material to the Companys business during 2006 or 2005. The Company believes that, as it pursues its strategy of providing application management services to customers, it will continue to offer fixed price projects. The Company believes that there are certain risks related to fixed price arrangements and thus prices such arrangements to reflect the associated risk. There can be no assurance that the Company will be able to complete such projects within the fixed price timeframes. The failure to perform within such fixed price contracts, if entered

into, could have a material adverse effect on the Companys business, financial condition and results of operations.

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, 2006 and 2005, the Companys ten largest customers accounted for in the aggregate approximately 51% and 48% of its revenue, respectively. During each of the nine months ended September 30, 2006 and 2005, one customer accounted for 10% or more of revenue.  For the nine months ended September 30, 2006 and 2005, 20% and 12%, respectively, of the Companys revenue was generated by providing supplemental resources directly to the end-customer or as part of a consulting team assembled by another IT consulting firm. The increase in supplemental resources revenue was primarily the result of increased resources required by a few customers.  There can be no assurance that such IT consulting firms will
continue to engage the Company in the future at current levels of retention, if at all.

Software Partners

For the nine months ended September 30, 2006 and 2005, the Company derived the following percentages of total revenue from projects in which the Company implemented, extended, maintained, managed or supported software developed by SAP, PeopleSoft and Oracle.

|           |  | Percentage   of Revenue                   |    
|---------- |  | ----------------------------------------- | ---
|           |  |                                           |    
|           |  | Nine   Months Ended    September 30, 2006 |    
|           |  |                                           |    
|SAP        |  |                                           | 72 
|PeopleSoft |  |                                           | 13 
|Oracle     |  |                                           | 7  
|e-Business |  |                                           | 5  
|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 Santa Clara (California). The Company also maintains local offices to serve the markets in India, the United Kingdom, Denmark and Japan.  The Company leases its headquarters in Edison, New Jersey. Such lease has an initial term of ten (10) years, which commenced in September 1998.

16



Expenses

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

Application of Critical Accounting Policies

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

Certain of the Companys accounting policies require higher degrees of judgment than others in their application.  These include revenue recognition and allowance for doubtful accounts, impairments and estimation of useful lives of long-term assets, income tax recognition of current and deferred tax items, 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, 2005, except as follows:

Derivative Instruments

During the three months ended September 30, 2006, the Company entered into a foreign currency forward contract to manage a portion of its foreign currency risk related to Indian Rupee denominated asset balances at its Indian subsidiary.  The foreign currency forward 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), net on the Companys consolidated statements of operations and comprehensive income (loss).

Share-Based Compensation Plans

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

per common share disclosures for each period prior to January 1, 2006, as if it had applied the fair value-based method in measuring compensation expense for share-based compensation plans.

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

The
compensation cost that has been charged against income for share-based
compensation plans was $0.4 million for the three months ended September 30,
2006, and $1.2 million for the nine months ended September 30, 2006.  Due
to the Companys net operating losses carried forward, along with current
year losses, the Company did not recognize income tax benefit in the condensed
consolidated statement of operations and comprehensive income for the first nine
months of 2006.   The Company received approximately $245,000 and $0
from option exercises under share-based compensation plans for the nine
months ended September 30, 2006 and 2005, respectively.

As of September 30, 2006, there was $3.5 million of total unrecognized compensation cost related to stock options.  Those costs are expected to be recognized the next four years.

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

| |  | Expected volatility  the   Company estimates the volatility of common stock at the date of grant using a   combination of unadjusted historical volatility, historical volatility   adjusted for periods of unusual stock price activity.                                                                                                                       
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                  
| |  | 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 for periods equal to the expected life of the options in effect   at the time of grant.                                                                                                                                                      
| |   |                                                                                                                                                                                                                                                                                                                                                                  
| |  | Dividends  the Company   uses an expected dividend yield of zero since it has never declared or paid   any dividends on its capital stock. The Company intends to retain any   earnings to fund future growth and the operation of its business and,   therefore, does not anticipate paying any cash dividends in the foreseeable   future.                    

17



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

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

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

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

Results of Operations - Consolidated

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

|                                               |  | Percentage   of Revenue    Nine Months Ended September 30, |      
|---------------------------------------------- |  | ---------------------------------------------------------- | -----
|                                               |  |                                                            |      
|                                               |  | 2006                                                       |      
|                                               |  |                                                            |      
|Revenue                                        |  |                                                            | 100.0
|Cost of revenue                                |  |                                                            | 71.3 
|                                               |  |                                                            |      
|Gross   profit                                 |  |                                                            | 28.7 
|                                               |  |                                                            |      
|Selling, general and   administrative expenses |  |                                                            | 27.4 
|Depreciation and   amortization                |  |                                                            | 2.0  
|                                               |  |                                                            |      
|Total   operating expenses                     |  |                                                            | 29.4 
|                                               |  |                                                            |      
|Operating   loss                               |  |                                                            | (0.7 
|Interest income (expense)                      |  |                                                            | (0.4 
|Other income (expense)                         |  |                                                            | 1.7  
|                                               |  |                                                            |      
|Loss before income tax   provision (benefit)   |  |                                                            | 0.6  
|Income tax provision   (benefit)               |  |                                                            | 2.1  
|                                               |  |                                                            |      
|Net loss                                       |  |                                                            | (1.5 
|                                               |  |                                                            |      

Nine Months Ended September 30, 2006 Compared to Nine Months Ended September 30, 2005

The following discussion compares the consolidated results of operations for the nine months ended September 30, 2006 and 2005.

Revenue. Total
revenue decreased by 2.7%, or $2.6 million, from $95.9 million for the nine
months ended September 30, 2005 to $93.3 million for the nine months ended
September 30, 2006. While total revenue decreased for the nine months ended
September 30, 2006, the Company's India subsidiary (an increase of $3.6
million), European operations (an increase of $0.8 million) and Japan subsidiary
(an increase of $0.8 million) experienced revenue growth. The increase in India
revenues was attributable primarily to increased demand for offshore services
from customers in the United States, as a majority of the total revenue
generated in India is derived from providing offshore development and support
services to customers sourced through the Company's affiliated entities in other
parts of the world, but most predominantly with the United States. The increase
in European revenue results primarily fro m revenues derived from one large
contract entered into during the three months ended June 30, 2006. The increase
in Japan revenue results primarily from increased demand for the Company's
consulting services within the local SAP market. Meanwhile, the revenue for the
United States decreased by $7.7 million, which is primarily attributable to the
completion of several major implementation projects during 2005 coupled with the
lack of new projects, particularly during the first and second quarters of 2006,
sufficient to replace the revenue. These major implementation projects ramped
down in the Company's United States PeopleSoft business, which decreased by $6.5
million from $16.5 million for the nine months ended September 30, 2005 to $10.0
million for the nine months ended September 30, 2006, primarily as a result of
the uncertainty generated by Oracle's acquisition of PeopleSoft. However, during
the three months ended September 30, 2006, the United States revenues increased
by $0.1 million, resulting from decreased PeopleSoft revenues of approximately
$2.1 million, offset by growth in SAP and Oracle revenues by $2.2
million.

18



Cost of revenue and gross profit.  The Companys cost of revenue decreased by 7.0%, or $5.0 million, from $71.5 million for the nine months ended September 30, 2005, to $66.5 million for the nine months ended September 30, 2006, due primarily to the decrease in headcount and related compensation and travel costs for consultants related to the decline in the Companys PeopleSoft business.  The Company does not expect continued decreases in headcount.  The Companys gross profit increased 9.9% from $24.4 million for the nine months ended September 30, 2005 to $26.8 million for the nine months ended September 30, 2006. Gross margin increased to 28.7% for the nine months ended September 30, 2006, from 25.4% for the nine months ended September 30, 2005. The increase in gross profit and gross margin is primarily attributable to reduced non-project expenses and increased
utilization of consultants.  Due to increasing compensation costs beginning in the third quarter of 2006, the Company expects lower gross margin through the full year 2006.

Selling, general and administrative expenses.  Selling, general and administrative expenses primarily consist of salaries, and related benefits costs for sales and general administrative personnel, occupancy costs, sales person compensation, travel and entertainment and professional fees. Selling, general and administrative expenses decreased by 8.5% or $2.4 million to $25.6 million for the nine months ended September 30, 2006, from $28.0 million for the nine months ended September 30, 2005, and decreased as a percentage of revenue to 27.4% from 29.2%, respectively.  The decrease in selling, general and administrative expenses was related primarily to decreased legal and professional fees, offset slightly by costs associated with increased sales personnel and related travel and marketing expenses.

Income tax provision (benefit).  The Company recorded an income tax provision of $1.9 million on a pretax income of $0.6 million for the nine months ended September 30, 2006 as opposed to a benefit for income taxes of $0.2 million on pretax loss of $5.7 million for the nine months ended September 30, 2005 primarily due to the expiration of the India tax holiday, as well as taxable income in certain jurisdictions combined with a valuation allowance offsetting other loss benefits in other jurisdictions, resulting in an increase of $2.1 million.

|                                                      |  | Percentage   of Revenue Three Months Ended September 30, |      
|----------------------------------------------------- |  | -------------------------------------------------------- | -----
|                                                      |  |                                                          |      
|                                                      |  | 2006                                                     |      
|                                                      |  |                                                          |      
|Revenue                                               |  |                                                          | 100.0
|Cost of revenue                                       |  |                                                          | 71.4 
|                                                      |  |                                                          |      
|Gross   profit                                        |  |                                                          | 28.6 
|                                                      |  |                                                          |      
|Selling, general and   administrative expenses        |  |                                                          | 24.9 
|Depreciation and   amortization                       |  |                                                          | 2.1  
|                                                      |  |                                                          |      
|Total   operating expenses                            |  |                                                          | 27.0 
|                                                      |  |                                                          |      
|Operating   income (loss)                             |  |                                                          | 1.6  
|Interest income (expense)                             |  |                                                          | (0.7 
|Other income (expense)                                |  |                                                          | 1.0  
|                                                      |  |                                                          |      
|Income (loss) before income   tax provision (benefit) |  |                                                          | 1.9  
|Income tax provision                                  |  |                                                          | 2.7  
|                                                      |  |                                                          |      
|Net loss                                              |  |                                                          | (0.8 
|                                                      |  |                                                          |      

Three Months Ended September 30, 2006 Compared to Three Months Ended September 30, 2005

The following discussion compares the consolidated results of operations for the three months ended September 30, 2006 and 2005.

Revenue. Total revenue increased by 9.4%, or $2.8 million, from $29.7 million for the three months ended September 30, 2005 to $32.5 million for the three months ended September 30, 2006.  The Company's India subsidiary (an increase of $1.9 million), European operations (an increase of $0.8 million), and US operations (an increase of $0.1 million) experienced revenue growth, while its Japan subsidiary remained relatively constant.  The increase in India revenues was attributable primarily to increased demand for offshore services from customers in the United States, as a majority of the total revenue generated in India is derived from providing offshore development and support services to customers sourced through the Company's affiliated entities in other parts of the world, but most predominantly with the United States. The increase in Europe was primarily attributable to one new large contract ent
ered into during the three months ended June 30, 2006.  Meanwhile, the revenue for the United States increased by $0.1 million, which is primarily attributable to new projects and extensions from existing customers in the SAP and Oracle markets, significantly offset by a $2.1 million decline in the Company's PeopleSoft business.  The Company's United States PeopleSoft business decreased $2.1 million from $5.3 million for the three months ended September 30, 2005 to $3.2 million for the three months ended September 30, 2006 primarily as a result of the uncertainty generated by Oracle's acquisition of PeopleSoft.

Cost of revenue and gross profit.  The Companys cost of revenue increased by 1.7%, or $0.4 million, from $22.8 million for the three months ended September 30, 2005, to $23.2 million for the three months ended September 30, 2006, primarily due to the increased compensation costs effective in the third quarter 2006.  The Companys gross profit increased by 34.7% to $9.3 million for the three months ended September 30, 2006 from $6.9 million for the three months ended September 30, 2005. Gross margin increased to 28.6% for the three months ended September 30, 2006 from 23.3% for the three months ended September 30, 2005. The increase in gross profit and gross margin results from increased revenues in combination with increased utilization rates.  Due to increasing compensation costs beginning in the third quarter of 2006, the Company expects lower gross margin through the

full year 2006.

Selling, general and administrative expenses.  Selling, general and administrative expenses decreased by 19.4% or $1.9 million to $8.1 million for the three months ended September 30, 2006, from $10.0 million for the three months ended September 30, 2005, and decreased as a percentage of revenue to 24.9% from 33.8%, respectively.  The decrease in selling, general and administrative expenses was related primarily to decreased costs associated with legal and professional fees, offset slightly by costs associated with increased sales personnel and related travel and marketing expenses.

19



Income tax provision (benefit).  The Company recorded an income tax provision of $0.9 million on pretax income of $0.7 million for the three months ended September 30, 2006 as opposed to an income tax provision of $0.1 million on pretax loss of $3.4 million for the three months ended September 30, 2005 primarily due to the expiration of the India tax holiday, as well as taxable income in certain jurisdictions combined with a valuation allowance offsetting other loss benefits in other jurisdictions, resulting in an increase of $0.7 million.

Results of Operations by Business Segment

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

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

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

Nine Months Ended September 30, 2006 Compared to Nine Months Ended September 30, 2005

The following discussion compares the segment results of operations for the nine months ended September 30, 2006 and 2005.

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

|              |  | Nine   Months Ended September 30, |       
|------------- |  | --------------------------------- | ------
|              |  |                                   |       
|              |  | 2006                              |       
|              |  |                                   |       
|              |  | Dollars                           |       
|              |  |                                   |       
|United States |  | $                                 | 59,286
|India         |  |                                   | 24,540
|Europe        |  |                                   | 6,009 
|Japan         |  |                                   | 3,442 
|              |  |                                   |       
|Total         |  | $                                 | 93,277
|              |  |                                   |       

US revenue decreased by 11.5%, or $7.7 million, from $67.0 million for the nine months ended September 30, 2005 to $59.3 million for the nine months ended September 30, 2006. The decrease in the United States revenue results primarily from the completion of a few major implementation projects during 2005 coupled with the lack of new customer engagements sufficient to replace the revenue as these major implementation projects ramped down in the Companys PeopleSoft business as a result of the uncertainty generated by Oracles acquisition of PeopleSoft.

India revenue increased by 17.2%, or $3.6 million, from $20.9 million for the nine months ended September 30, 2005, to $24.5 million for the nine months ended September 30, 2006. The increase was attributable primarily to increased demand for offshore services from customers in the United States, as a majority of the total revenue generated in India is derived from providing offshore development and support services to customers sourced through the Companys affiliated entities in other parts of the world, but most predominantly with the United States.

Europe revenue increased 14.5%, or $0.8 million, from $5.2 million for the nine months ended September 30, 2005, to $6.0 million for the nine months ended September 30, 2006.  The increase was attributable primarily to one large contract entered into during the three months ended June 30, 2006.

Japan revenue increased by 28.5% or $0.8 million, from $2.7 million for the nine months ended September 30, 2005, to $3.4 million for the nine months ended September 30, 2006.  The increase was due primarily to increased demand for the Companys consulting services within the local SAP market.

20



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

|              |  | Nine   Months Ended September 30, |       
|------------- |  | --------------------------------- | ------
|              |  |                                   |       
|              |  | 2006                              |       
|              |  |                                   |       
|United States |  | $                                 | (5,200
|India         |  |                                   | 4,882 
|Europe        |  |                                   | 112   
|Japan         |  |                                   | (460  
|              |  |                                   |       
|Total         |  | $                                 | (666  
|              |  |                                   |       

US operating performance improved by $2.0 million from an operating loss of $7.2 million for the nine months ended September 30, 2005 to an operating loss of $5.2 million for the nine months ended September 30, 2006.  The decrease in the operating loss was primarily the result of decreased cost of revenues due to reduction in billable headcount in the PeopleSoft business, and decreased selling, general and administrative expenses associated with legal and professional fees.

India operating income increased by $2.0 million, from $2.9 million for the nine months ended September 30, 2005, to $4.9 million for the nine months ended September 30, 2006. The increase in operating income was primarily related to increased revenues partly offset by increased compensation costs and additional infrastructure costs as a result of increased headcount and newly leased premises.

Europe operating performance improved by $0.7 million from an operating loss of $0.6 million for the nine months ended September 30, 2005, to an operating income of $0.1 million for the nine months ended September 30, 2006. The improvement was attributable primarily to increased revenues and decreased project related costs.

Japan operating performance decreased slightly by $0.1 million from operating loss of $0.3 million for the nine months ended September 30, 2005, to an operating loss of $0.4 million for the nine months ended September 30, 2006.  The decrease was attributable primarily to increased compensation costs, offset slightly by increased revenues.

Three Months Ended September 30, 2006 Compared to Three Months Ended September 30, 2005

The following discussion compares the segment results of operations for the three months ended September 30, 2006 and 2005.

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

|              |  | Three Months Ended September 30, |       
|------------- |  | -------------------------------- | ------
|              |  |                                  |       
|              |  | 2006                             |       
|              |  |                                  |       
|              |  | Dollars                          |       
|              |  |                                  |       
|United States |  | $                                | 20,663
|India         |  |                                  | 8,649 
|Europe        |  |                                  | 2,211 
|Japan         |  |                                  | 1,007 
|              |  |                                  |       
|Total         |  | $                                | 32,530
|              |  |                                  |       

US revenue increased slightly by 0.5%, or $0.1 million, from $20.6 million for the three months ended September 30, 2005 to $20.7 million for the three months ended September 30, 2006.

India revenue increased by 27.4%, or $1.9 million, from $6.8 million for the three months ended September 30, 2005, to $8.6 million for the three months ended September 30, 2006. The increase was attributable primarily to increased demand for offshore services from customers in the United States, as a majority of the total revenue generated in India is derived from providing offshore development and support services to customers sourced through the Companys affiliated entities in other parts of the world, but most predominantly with the United States.

Europe revenue increased by 56.0%, or $0.8 million, from $1.4 million for the three months ended September 30, 2005, to $2.2 million for the three months ended September 30, 2006.  The increase was primarily attributable to one new large contract entered into during the three months ended June 30, 2006.

Japan revenue remained relatively constant at $1.0 million for each of the three months ended September 30, 2005 and 2006.

21



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

|              |  | Three Months Ended September 30, |      
|------------- |  | -------------------------------- | -----
|              |  |                                  |      
|              |  | 2006                             |      
|              |  |                                  |      
|United States |  | $                                | (937 
|India         |  |                                  | 1,908
|Europe        |  |                                  | (176 
|Japan         |  |                                  | (250 
|              |  |                                  |      
|Total         |  | $                                | 545  
|              |  |                                  |      

US operating performance improved by 75.5%, or $2.9 million,  from an operating loss of $3.8 million for the three months ended September 30, 2005 to an operating loss of $0.9 million for the three months ended September 30, 2006, primarily the result of decreased selling, general and administrative costs associated with legal and professional expenses.

India operating income increased by $1.3 million, from $0.6 million for the three months ended September 30, 2005, to $1.9 million for the three months ended September 30, 2006. The increase in operating income was primarily related to increased revenues partially offset by increased compensation costs.

Europe operating performance improved by $0.3 million from an operating loss of $0.4 million for the three months ended September 30, 2005, to operating loss of $0.1 million for the three months ended September 30, 2006. The improvement was attributable primarily to increased revenues.

Japan operating performance decreased to $0.3 million operating loss for the three months ended September 30, 2006 from $42,000 operating loss for the three months ended September 30, 2005, primarily due to increased compensation costs.

Liquidity and Capital Resources

2006 Cash Position and Cash Flows

The Company had cash and cash equivalents of $13.4 million at September 30, 2006 and $5.3 million at December 31, 2005.  The Company had working capital of $20.2 million at September 30, 2006 and $11.3 million at December 31, 2005.  The increase in working capital resulted primarily from the 2006 Private Placement completed on March 31, 2006.

Cash used in operating activities was $0.6 million for the nine months ended September 30, 2006, resulting primarily from the net loss of $1.4 million.

The Company invested $1.7 million and $1.1 million in computer equipment, internal-use computer software and office furniture and fixtures and leasehold improvements during the nine months ended September 30, 2006 and 2005, 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 the 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, 2006.  The Company estimates undrawn availability under the credit facility to be $10.1 million as of September 30, 2006.

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 its default on such covenants to maintain its line of credit with the Bank.  Given the Companys variable operating performance in the past few years, there can be no assurances that the Company will be able to maintain compliance with its bank covenants or obtain waivers of any defaults.

The Companys 2006 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 for to fund its cash requirements for operating expenses and capital expenses, however that 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.

22



Recent Accounting Pronouncements

In July 2006, the Financial Accounting Standards Board issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109 (FIN 48), which clarifies the accounting for uncertainty in tax positions. FIN 48 requires recognition in the financial statements of the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. The Company is required to adopt FIN 48 beginning in the first quarter of 2007 with the cumulative effect, if any, of the change in accounting principle recorded as an adjustment to opening balance of retained earnings. The Company is currently evaluating the impact of adopting FIN 48 on its consolidated financial statements.

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.

23



|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, 2006, the
Company entered into a foreign currency forward contract totaling $8.0 million
to sell the Indian Rupee for U.S. dollars.  As of September 30, 2006, $4.0
million of the foreign currency forward contract remains, which is expected to
be settled by January 2007. Management may continue to enter into such
instruments in the future to reduce foreign currency exposure to appreciation or
depreciation in the value of certain foreign currencies. Other than the
aforementioned forward contract, 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 its most recent evaluation, the Companys principal executive officer and principal financial officer have concluded that, as of September 30, 2006, our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in this quarterly report on Form 10-Q was recorded, processed, summarized and reported within the time periods specified in the SECs rules and instructions for Form 10-Q.

Changes in Internal Controls

Except for the appointment of a new Chief Financial Officer and the steps taken in the ongoing remediation efforts discussed in Item 7  Managements Discussion and Analysis of Financial Condition and Results of Operations  Managements Discussion of its Internal Control Over Financial Reporting, of the Companys annual report on Form 10-K for the year ended December 31, 2005 some of which continued through the three months ended September 30, 2006, there was no change in the Companys internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting during the three months ended September 30, 2006.

24



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

India Tax Assessments

The Companys India subsidiary has received tax assessments from the India taxing authority denying tax exemptions claimed for certain revenue earned and disallowing certain expenses claimed during the India subsidiarys fiscal years ended March 31, 1998 through March 31, 2003. The combined revised additional tax demands were for 32.9 million Indian rupees (or approximately $0.7 million) for those years. They include tax penalties and interest for the fiscal years ended June 30, 2001 and 2002 of 1.7 million Indian rupees (or approximately $37,000) and 0.7 million Indian rupees (or approximately $15,000), respectively. Against the total additional tax demand of $0.7 million, the Company has made payments of approximately $0.7 million under protest to the India tax authority.

The Company is currently appealing at the Appellant Tribunal stage for the fiscal years ended March 31, 1998 through March 31, 2002.  For the fiscal year ended March 31, 2003, the Company has filed an appeal with the Commissioner of Income Tax (Appeals) against the assessment order passed. In the event the Companys appeal is not successful, there will not be any additional future cash outlay.  However, in the event the Company is successful, an amount up to approximately $0.7 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.  Defendants motions to dismiss the second 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.

25



|Item 1a. | Risk Factors
|-------- | ------------

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

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

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

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

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

     Ability to Maintain Effective Internal Control.  The Company has previously experienced material weaknesses in its internal control over financial reporting.  If the Company is unable to continue to improve its control environment and to prevent material weaknesses, or to remediate any weaknesses that may arise, such failure will adversely impact its ability: (i) to effectively manage the business; (ii) to timely record, process, summarize and report financial statements that fairly present, in all material aspects, the Companys financial condition, statements of operations and cash flows; and (iii)  to comply with applicable law, including the Sarbanes-Oxley Act of 2002.  In addition the Company will be required to comply with the internal control reporting requirements of Section 404 of the Sarbanes Oxley Act of 2002 beginning in 2007. 
If the Company is unable to maintain effective internal control over financial reporting, such inability will adversely affect the Companys ability to comply with Section 404.

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

     Ability to Secure and Maintain Access to External Sources of Funding.  In addition to cash generated by on-going operations, the Company relies on access to external sources of funding and its ability to timely collect cash from its customers to manage its business.  The Companys ability to continue its ongoing business operations and fund future growth depends on its ability to maintain compliance with the financial and other covenants in its 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 the Company.

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

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

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

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

26



     Litigation and Compliance Risks.  The Company and certain former officers are defendants in a shareholder class action suit, as described under Part II. Item 1  Legal Proceedings  Shareholder Class Actions.  If the Company is unable to defend itself and resolve the ongoing shareholder litigation related to the Companys restatement of prior periods consolidated financial statements within the limits of the Companys director and officer liability insurance policy such failure will adversely affect its financial condition.   In addition, there is the potential for significant claims against the Company relating to its professional services from customers or otherwise and the ability of the Company to adequately mitigate the risk of such potential claims may impact its future financial condition.  The
Companys ability to comply with existing and future immigration regulations may impact its ability to engage and deploy consultants on billable engagements.  Uncertainties resulting from pending litigation matters and from potential administrative and regulatory issues including, but not limited to, accounting, corporate governance, immigration and taxation matters.

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

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

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

     Risks Associated with Potential Tax Liabilities.  The Company was previously entitled to a tax holiday for certain revenue earned and expenses incurred by its existing Software Technology parks of India unit (STPI Unit) of its Hyderabad operations.  Such tax holiday expired effective April 1, 2006 and therefore the Companys tax liability will increase.  In addition, in July 2000, the Company completed the tax-free spin-off of SeraNova, its former subsidiary.  In March 2001, SeraNova and Silverline Technologies Limited (Silverline) consummated the acquisition of SeraNova by Silverline. Had the acquisition of SeraNova by Silverline been contemplated at the time of the spin-off, the spin-off would have been a taxable transaction.  SeraNovas management has represented that such acquisition was not contemplated
at the time of the spin-off of SeraNova by the Company, and accordingly should not impact the tax-free nature of the spin-off.  Although the Company and SeraNova are parties to a tax sharing agreement pursuant to which SeraNova agreed to indemnify the Company with respect to any possible tax liability related to the spin-off, SeraNova has filed for bankruptcy protection under Chapter 7 of the United States Bankruptcy Code and would be unable to pay the resultant tax liability pursuant to SeraNovas indemnification obligations under its tax sharing agreement with the Company.  If it were determined that the spin-off was taxable, the Company would bear the liability to pay such the tax liability, which would be material.  Please refer to Note 8 to the unaudited consolidated financial statements of the Company included elsewhere in this report for further information.

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

27



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

Effective August 1, 2005, IGA entered into an agreement to lease certain premises for certain of the Companys India operations from iLABS Hyderabad Technology Center Pvt. Ltd. (iLabs) a party with which two members of the Companys Board of Directors, Srini Raju and Sandeep Reddy, are affiliated.  The terms of the lease agreement provide for, among other things:  (i) a minimum lease period of five years with an option for two three-year renewal periods; (ii) payment of a security deposit in the amount of 15.3 million Indian rupees (approximately $329,000); (iii) payment of monthly lease fees in the amount of 1.7 million Indian rupees (approximately $40,000), subject to yearly five percent (5%) escalation; and (iv) monthly operations and maintenance fees of 0.3 million Indian rupees (approximately $6,500).  Rent expense for the nine months ended September 30, 2006
towards the said lease was 19.1 million Indian rupees (approximately $421,000).

28



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

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

29



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

30



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

31



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

32



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

| 
|-
|*
| 
|

33



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 __ day of November 2006.

|                        | INTELLIGROUP, INC.
|----------------------- | ------------------
|                        |                   
|                        |                   
|Date: November __, 2006 | By:               
|                        |                   
|                        |                   
|                        |                   
|                        |                   
|                        |                   
|Date: November __, 2006 | By:               
|                        |                   
|                        |                   
|                        |                   

34