UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                 ---------------

                                    FORM 10-Q

                  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended March 31, 2003
                           Commission File No. 0-20943


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


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


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


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


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

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

     Indicate by checkmark  whether the Registrant is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act).

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

     Indicate the number of shares  outstanding of each of the Issuer's  classes
of common stock, as of May 12, 2003:

             Class                                       Number of Shares
             -----                                       ----------------
  Common Stock, $.01 par value                              16,644,625




<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES

                                TABLE OF CONTENTS
                                -----------------

                                                                            Page
                                                                            ----
PART I.  FINANCIAL INFORMATION

   Item 1. Consolidated Financial Statements (unaudited)...............       1

           Consolidated Balance Sheets as of March 31, 2003 and
           December 31, 2002...........................................       2

           Consolidated Statements of Operations and Comprehensive
           Income (Loss) for the Three Months Ended March 31, 2003
           and 2002....................................................       3

           Consolidated Statements of Cash Flows for the Three Months
           Ended March 31, 2003 and 2002...............................       4

           Notes to Consolidated Financial Statements..................       5

   Item 2. Management's Discussion and Analysis of
           Financial Condition and Results of Operations...............      19

   Item 3. Quantitative and Qualitative Disclosures About Market Risk..      37

   Item 4. Controls and Procedures.....................................      37

PART II.  OTHER INFORMATION

   Item 1. Legal Proceedings...........................................      38

   Item 3. Defaults Upon Senior Securities.............................      41

   Item 5. Other Information...........................................      41

   Item 6. Exhibits and Reports on Form 8-K............................      42

SIGNATURES.............................................................      43

CERTIFICATIONS.........................................................      44



                                     - i -
<PAGE>


                          PART I. FINANCIAL INFORMATION

              ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)





                                      - 1 -
<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                      MARCH 31, 2003 AND DECEMBER 31, 2002

<TABLE>
<CAPTION>
                                                                        MARCH 31,     DECEMBER 31,
                                                                          2003            2002
                                                                      ------------    ------------
                              ASSETS
<S>                                                                   <C>             <C>
Current Assets:
  Cash and cash equivalents.....................................      $  2,256,000    $  1,163,000
  Accounts receivable, less allowance for doubtful accounts of
      $1,088,000 and $1,388,000 at March 31, 2003 and December
      31, 2002, respectively....................................        18,017,000      17,745,000
  Unbilled services.............................................         5,727,000       6,818,000
  Prepaid income taxes..........................................           517,000         624,000
  Deferred tax asset............................................         1,088,000       1,088,000
  Other current assets..........................................         2,917,000       2,858,000
  Note receivable - SeraNova....................................                --       4,000,000
  Assets held for sale..........................................                --       3,069,000
                                                                      ------------    ------------
         Total current assets...................................        30,522,000      37,365,000

  Property and equipment, net...................................         5,229,000       5,725,000
  Deferred tax asset............................................           119,000         118,000
  Other assets..................................................           938,000         911,000
                                                                      ------------    ------------
                                                                      $ 36,808,000    $ 44,119,000
                                                                      ============    ============

               LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
  Accounts payable..............................................      $  4,051,000  $    5,229,000
  Accrued payroll and related taxes.............................         7,123,000       5,891,000
  Accrued expenses and other current liabilities................         4,302,000       3,491,000
  Deferred revenue..............................................         1,050,000       1,280,000
  Income taxes payable..........................................           394,000         356,000
  Current portion of long-term debt and obligations under
      capital leases............................................         6,051,000       6,374,000
  Liabilities held for sale.....................................                --       1,681,000
                                                                      ------------    ------------
         Total current liabilities..............................        22,971,000       24,302,000
                                                                      ------------    ------------
Obligations under capital leases, less current portion..........            64,000          63,000
Other long-term liabilities.....................................           932,000       1,028,000
                                                                      ------------    ------------
         Total long-term liabilities............................           996,000       1,091,000
                                                                      ------------    ------------

Commitments and contingencies

Shareholders' Equity:
  Preferred stock, $.01 par value, 5,000,000 shares authorized,
      none issued or outstanding................................                --              --
  Common stock, $.01 par value, 25,000,000 shares authorized,
      16,630,000 shares issued and outstanding at March 31,
       2003 and December 31, 2002, respectively.................           166,000         166,000
  Additional paid-in capital....................................        41,366,000      41,366,000
  Accumulated deficit...........................................       (26,519,000)    (19,168,000)
  Accumulated other comprehensive loss..........................        (2,172,000)     (3,638,000)
                                                                      ------------    ------------
        Total shareholders' equity .............................        12,841,000      18,726,000
                                                                      ------------    ------------
                                                                      $ 36,808,000    $ 44,119,000
                                                                      ============    ============
</TABLE>


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

                                     - 2 -
<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                         AND COMPREHENSIVE INCOME (LOSS)
               FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002

<TABLE>
<CAPTION>
                                                                        THREE MONTHS
                                                                        ------------
                                                                       ENDED MARCH 31,
                                                                       ---------------
                                                                   2003               2002
                                                             --------------     --------------

<S>                                                          <C>                <C>
Revenue ................................................     $  27,235,000      $  23,005,000
Cost of sales ..........................................        19,309,000         16,025,000
                                                             -------------      -------------
    Gross profit .......................................         7,926,000          6,980,000
                                                             -------------      -------------
Selling, general and administrative expenses ...........         6,868,000          5,996,000
Depreciation and amortization...........................           699,000            692,000
SeraNova receivable impairment and other charges........         5,060,000                 --
Proxy contest charges ..................................           297,000                 --
                                                             -------------      -------------
    Total operating expenses ...........................        12,924,000          6,688,000
                                                             -------------      -------------
    Operating income (loss) ............................        (4,998,000)           292,000
Interest income ........................................            13,000              7,000
Interest expense .......................................          (108,000)          (105,000)
Other income (expense)..................................           (49,000)            40,000
                                                             -------------      -------------
Income (loss) from continuing operations before
    income tax provision ...............................        (5,142,000)           234,000
Income tax provision ...................................            75,000            104,000
                                                             -------------      -------------
Income (loss) from continuing operations ...............        (5,217,000)           130,000
Loss from discontinued operations (including loss
    on sale of $1,706,000 in 2003), net of tax
    provision of $15,000 and $27,000, respectively              (2,134,000)          (119,000)
                                                             -------------      -------------
Net income (loss) ......................................     $  (7,351,000)     $      11,000
                                                             =============      =============

Earnings per share:
    Basic earnings (loss) per share:
      Income (loss) from continuing operations .........     $       (0.31)     $        0.01
      Loss from discontinued operations ................             (0.13)             (0.01)
                                                             -------------      -------------
         Net income (loss) per share....................     $       (0.44)     $        0.00
                                                             =============      =============
      Weighted average number of common shares - basic..        16,630,000         16,630,000
                                                             =============      =============

  Diluted earnings (loss) per share:
      Income (loss) from continuing operations..........     $       (0.31)     $        0.01
      Loss from discontinued operations ................             (0.13)             (0.01)
                                                             -------------      -------------
         Net income (loss) per share....................     $       (0.44)     $        0.00
                                                             =============      =============
      Weighted average number of common shares -
         diluted........................................        16,630,000         16,631,000
                                                             =============      =============

Comprehensive Income (Loss)
---------------------------
Net income (loss) ......................................     $  (7,351,000)     $      11,000
Other comprehensive income (loss) -
    Currency translation adjustments ...................         1,466,000           (424,000)
                                                             -------------      -------------
Comprehensive loss .....................................     $  (5,885,000)     $    (413,000)
                                                             =============      =============
</TABLE>



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



                                     - 3 -
<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
               FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002

<TABLE>
<CAPTION>
                                                                                THREE MONTHS ENDED MARCH 31,
                                                                                  2003               2002
                                                                            --------------       -------------
<S>                                                                         <C>                  <C>
Cash flows from operating activities:
   Net income (loss)..................................................      $  (7,351,000)       $     11,000
   Less: loss from discontinued operations, net of tax................         (2,134,000)           (119,000)
                                                                            -------------        ------------
   Income (loss) from continuing operations...........................         (5,217,000)            130,000
   Adjustments to reconcile net income (loss) to net cash provided
     by (used in) operating activities of continuing operations:
       Depreciation and amortization..................................            880,000             954,000
       Provision for doubtful accounts................................              8,000             197,000
       SeraNova receivable impairment and other charges...............          5,060,000                  --
       Deferred income taxes..........................................             (1,000)            358,000
   Changes in operating assets and liabilities:
     Accounts receivable..............................................           (280,000)            (49,000)
     Unbilled services................................................          1,091,000             583,000
     Prepaid income taxes.............................................            107,000             (38,000)
     Other current assets.............................................            (59,000)           (183,000)
     Other assets.....................................................            (27,000)           (384,000)
     Accounts payable.................................................         (1,178,000)           (110,000)
     Accrued payroll and related taxes................................          1,232,000             138,000
     Accrued expenses and other liabilities...........................           (194,000)           (225,000)
     Accrued restructuring charges....................................            (55,000)           (437,000)
     Deferred revenue.................................................           (230,000)           (955,000)
     Income taxes payable.............................................             38,000             (67,000)
                                                                            -------------        ------------
  Net cash provided by (used in) operating activities of
      continuing operations...........................................          1,175,000             (88,000)
                                                                            -------------        ------------

Cash flows from investing activities:
     Purchase of equipment ...........................................           (384,000)           (298,000)
                                                                            -------------        ------------
  Net cash used in investing activities of continuing operations......           (384,000)           (298,000)
                                                                            -------------        ------------

Cash flows from financing activities:
     Principal payments under capital leases..........................           (108,000)           (165,000)
     Other borrowings (repayments)....................................            (94,000)                 --
     Net change in line of credit borrowings..........................           (216,000)            659,000
                                                                            -------------        ------------
  Net cash provided by (used in) financing activities of
      continuing operations...........................................           (418,000)            494,000
                                                                            -------------        ------------
  Effect of foreign currency exchange rate changes on cash............          1,466,000            (424,000)
                                                                            -------------        ------------
Net increase (decrease) in cash and cash equivalents from
    continuing operations ............................................          1,839,000            (316,000)
Net increase (decrease) in cash and cash equivalents from
    discontinued operations ..........................................           (746,000)            125,000
                                                                            -------------        ------------
Net increase (decrease) in cash and cash equivalents .................          1,093,000            (191,000)
Cash and cash equivalents at beginning of period......................          1,163,000           1,620,000
                                                                            -------------        ------------
Cash and cash equivalents at end of period............................      $   2,256,000        $  1,429,000
                                                                            =============        ============
Supplemental disclosures of cash flow information:
  Cash paid for income taxes..........................................      $          --        $    408,000
                                                                            =============        ============
  Cash paid for interest..............................................      $     108,000        $    105,000
                                                                            =============        ============
</TABLE>


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


                                     - 4 -
<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - BASIS OF PRESENTATION

     The   consolidated   financial   statements  and   accompanying   financial
information  as of March 31, 2003 and for the three  months ended March 31, 2003
and  2002  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  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  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  most recent
annual financial  statements.  Such annual financial  statements did not reflect
the  classification  of certain  subsidiaries as held for sale (see Note 5). The
consolidated  balance  sheet as of December  31, 2002  included  herein has been
derived from the audited  consolidated  balance  sheet  included  the  Company's
Annual Report on Form 10-K, in order to present this classification with respect
to all subsidiaries divested subsequent to that date.

     The Company's 2003 operating plan contains  assumptions  regarding  revenue
and  expenses.  The  achievement  of the operating  plan depends  heavily on the
timing of work performed by the Company on existing  projects and the ability of
the Company to gain and perform  work on new  projects.  Project  cancellations,
delays in the timing of work  performed  by the Company on existing  projects or
the inability of the Company to gain and perform work on new projects could have
an adverse  impact on the Company's  ability to execute its  operating  plan and
maintain  adequate  cash  flow.  In the  event  actual  results  do not meet the
operating  plan,  management  believes  it could  execute  contingency  plans to
mitigate such effects.  Such plans include additional cost reductions or seeking
additional  financing.  Considering  the cash on hand,  the credit  facility and
based on the achievement of the operating plan and management's actions taken to
date,  management believes it has the ability to continue to generate sufficient
cash to satisfy its operating requirements in the normal course of business.

     The Company's  current  revolving  credit facility with PNC Bank, N.A. (the
"Bank") is due to expire on May 31, 2003. The Company has requested an extension
of the current  agreement  and believes that such  extension  will be granted on
terms substantially similar to the previous credit facility.  However,  there is
no assurance  that the Company  will be granted such an extension on  acceptable
terms,  if at all.  Should the Company not be able to obtain the credit facility
extension with the Bank, the Company  believes that it has the ability to obtain
another  revolving  credit  facility,  with  substantially  similar terms,  from
another financial institution.

     The  results  of  operations  for  interim   periods  are  not  necessarily
indicative of those that may be achieved for a full fiscal year.



                                     - 5 -
<PAGE>

NOTE 2 - STOCK-BASED COMPENSATION

     Stock-based  compensation issued to employees and directors is valued using
the intrinsic value method under Accounting Principles Board ("APB") Opinion No.
25, "Accounting for Stock Issued to Employees." Under this method,  compensation
expense is recorded on the date of grant only if the current market price of the
underlying  stock exceeded the exercise price.  Financial  Accounting  Standards
Board  ("FASB")  Statement of Financial  Accounting  Standard  ("SFAS")  No.123,
"Accounting for Stock-Based Compensation," established accounting and disclosure
requirements  using a  fair-value-based  method of  accounting  for  stock-based
employee compensation plans. As allowed by SFAS No. 123, the Company has elected
to continue to apply the  intrinsic-value-based  method of accounting  described
above,  and has  adopted  only the  disclosure  requirements  of SFAS  No.  123.
Stock-based  compensation issued to non-employees is valued using the fair value
method.

     In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation  - Transition  and  Disclosure."  SFAS No. 148 amends SFAS No. 123,
"Accounting for Stock-Based  Compensation,"  to provide  alternative  methods of
transition for a voluntary change to the fair  value-based  method of accounting
for stock-based employee compensation  ("Transition  Provisions").  In addition,
SFAS No. 148 amends the disclosure  requirements of APB Opinion No. 28, "Interim
Financial  Reporting,"  to require  pro forma  disclosure  in interim  financial
statements by companies that elect to account for stock-based compensation using
the  intrinsic  value  method  prescribed  in APB  Opinion  No. 25  ("Disclosure
Provisions").  The  Transition  Provisions  of SFAS No.  148 are  effective  for
financial  statements  for fiscal  years ending  after  December  31, 2002.  The
Company   continues  to  use  the  intrinsic  value  method  of  accounting  for
stock-based compensation.  As a result, the Transition Provisions do not have an
effect on the  Company's  consolidated  financial  statements.  The  Company has
adopted the  Disclosure  Provisions of SFAS No. 148;  however,  the Company will
continue to apply the intrinsic value method under APB Opinion No. 25.

     For disclosure  purposes,  pro forma net income (loss) and earnings  (loss)
per share impacts are provided as if the fair market value method under SFAS No.
123 had been applied:

<TABLE>
<CAPTION>
                                                              FOR THE THREE MONTHS ENDED MARCH 31,
                                                              ------------------------------------
                                                                    2003               2002
                                                              -----------------  -----------------

<S>                                                            <C>                <C>
Net income (loss), as reported............................     $ (7,351,000)       $     11,000

Deduct: total stock-based employee compensation expense
determined under fair-value-based method for all awards,
net of related tax effects................................         (199,000)         (1,267,000)
                                                               ------------        ------------
Pro forma net loss........................................     $ (7,550,000)       $ (1,256,000)
                                                               ============        ============

Basic earnings (loss) per share:
    as reported...........................................      $     (0.44)       $       0.00
                                                               ============        ============
    pro forma.............................................      $     (0.45)       $      (0.08)
                                                               ============        ============
Diluted earnings (loss) per share:
    as reported...........................................      $     (0.44)       $       0.00
                                                               ============        ============
    pro forma.............................................      $     (0.45)       $      (0.08)
                                                               ============        ============
</TABLE>


                                     - 6 -
<PAGE>

NOTE 2 - STOCK-BASED COMPENSATION (CONTINUED)

     The fair value of option grants for disclosure purposes is estimated on the
date of grant using the Black-Scholes  option-pricing  model using the following
weighted-average  assumptions:  expected volatility of 109% and 109%,  risk-free
interest rate of 1.72% and 4.02% and expected  lives of 2.3 years and 2.3 years,
in 2003 and 2002, respectively.

NOTE 3 - EARNINGS PER SHARE

     Basic  earnings  (loss) per share is computed by dividing net income (loss)
attributable  to common  shareholders  by the weighted  average number of common
shares outstanding for the period. Diluted earnings (loss) per share is computed
by dividing net income (loss)  available to common  shareholders by the weighted
average  number of  common  shares  outstanding,  adjusted  for the  incremental
dilution of outstanding stock options,  if applicable.  The computation of basic
earnings (loss) per share and diluted earnings (loss) per share were as follows:

<TABLE>
<CAPTION>
                                                               FOR THE THREE MONTHS ENDED MARCH 31,
                                                               ------------------------------------
                                                                       2003               2002

<S>                                                               <C>                <C>
Income (loss) from continuing operations....................      $ (5,217,000)      $    130,000

Loss from discontinued operations...........................        (2,134,000)          (119,000)
                                                                  ------------       ------------

Net income (loss)...........................................      $ (7,351,000)      $     11,000
                                                                  ============       ============
Basic earnings (loss) per share:
  Weighted average number of common shares - basic..........        16,630,000         16,630,000
                                                                  ------------       ------------
  Basic income (loss) per share from continuing operations..      $      (0.31)      $       0.01
  Basic loss per share from discontinued operations.........             (0.13)             (0.01)
                                                                  ------------       ------------
  Basic net income (loss) per share.........................      $      (0.44)      $       0.00
                                                                  ============       ============

Diluted earnings (loss) per share:
  Weighted average number of common shares - diluted .......        16,630,000         16,631,000
                                                                  ------------       ------------
  Diluted income (loss) per share from continuing
    operations..............................................      $      (0.31)      $       0.01
  Diluted loss per share from discontinued operations.......             (0.13)             (0.01)
                                                                  ------------       ------------
  Diluted net income (loss) per share.......................      $      (0.44)      $       0.00
                                                                  ============       ============
</TABLE>

     Stock options,  which would be antidilutive  (1,917,000 and 2,786,000 as of
March 31, 2003 and 2002,  respectively) have been excluded from the calculations
of  diluted  shares   outstanding   and  diluted   earnings  (loss)  per  share.


NOTE 4 - LINES OF CREDIT

     On May 31,  2000,  the  Company  and the  Bank  entered  into a  three-year
revolving credit facility. Such credit facility is comprised of a revolving line
of credit  pursuant to which the Company can borrow up to $20,000,000  either at
the  Bank's  prime rate per annum or the Euro Rate plus 1.75% to 2.5% based upon
the Company's ratio of debt to earnings before interest, taxes, depreciation and
amortization ("EBITDA").  The credit facility is collateralized by substantially
all of the assets of the Company's United States based operations. The maximum



                                     - 7 -
<PAGE>

NOTE 4 - LINES OF CREDIT (CONTINUED)

borrowing  availability  under the line of credit is based upon a percentage  of
eligible billed and unbilled accounts  receivable,  as defined.  As of March 31,
2003,  the  Company  had  outstanding  borrowings  under the credit  facility of
$5,843,000. The Company estimates undrawn availability under the credit facility
to be $7,544,000 as of March 31, 2003. As of December 31, 2002,  the Company had
outstanding borrowings under the credit facility of $6,059,000.

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

     In March 2002,  the Company  finalized  with the Bank the terms of a waiver
and  amendment to the credit  agreement.  The terms of the waiver and  amendment
included,  among  other  things,  (1) a waiver of the  covenant  defaults  as of
December 31, 2001, (2) a modification to the financial covenants, as of December
31, 2002 only, to require that  consolidated  net worth and  unconsolidated  net
worth as of December  31, 2002 be not less than 102% of  consolidated  net worth
and  unconsolidated  net worth,  respectively,  as of December 31,  2001,  (3) a
modification  to  the  consolidated  net  worth  and  unconsolidated  net  worth
covenants to exclude any changes to  consolidated  net worth and  unconsolidated
net worth resulting from the write-down or write-off of up to $10,833,000 of the
note due from  SeraNova,  and (4) a new financial  covenant  requiring  that the
Company generate EBITDA of at least 90% of the prior year's EBITDA.

     During  2002,  the  Company  incurred  charges  related  to  the  Company's
contested  2002 Annual  Meeting of  Shareholders  ("Proxy  Contest").  The Proxy
Contest charges included legal fees, proxy  solicitation  services and printing,
mailing and other costs.  As a direct result of the Proxy Contest  charges,  the
Company was not in compliance  with the EBITDA  covenant as of June 30, 2002 and
September  30, 2002. In January 2003,  the Company  finalized  with the Bank the
terms of a waiver and amendment to the credit agreement. The terms of the waiver
and amendment included,  among other things, (1) a waiver of the EBITDA covenant
defaults as of June 30, 2002 and September 30, 2002, (2) a  modification  to the
definitions of EBITDA, total stockholders equity and unconsolidated stockholders
equity (for purposes of computing related



                                     - 8 -
<PAGE>

NOTE 4 - LINES OF CREDIT (CONTINUED)


covenant  compliance)  to exclude  Proxy  Contest  charges of  $464,000  for the
quarter  ended June 30, 2002 and $413,000 for the quarter  ended  September  30,
2002 only,  (3), a  reduction  in the  minimum  EBITDA  covenant  for the fourth
quarter and full year 2002 only, and (4) a modification to the  consolidated net
worth  and  unconsolidated  net  worth  covenants  to  exclude  any  changes  to
consolidated  net  worth  and   unconsolidated  net  worth  resulting  from  the
write-down or write-off of up to $12,600,000 of the note due from SeraNova.

     As a result of the SeraNova receivable impairment and other related charges
and the Proxy Contest charges  incurred during the quarter ended March 31, 2003,
the  Company  was  not  in   compliance   with  the   consolidated   net  worth,
unconsolidated  net worth and EBITDA covenants as of March 31, 2003. The Company
is  currently  negotiating  with the Bank and expects to receive a waiver of the
existing covenant defaults. There can be no assurance, however, that the Company
will be able to  obtain a waiver to the  agreement  on terms  acceptable  to the
Company.

     The Company's  current  revolving  credit  facility with the Bank is due to
expire on May 31,  2003.  The Company has  requested an extension of the current
agreement   and  believes  that  such   extension   will  be  granted  on  terms
substantially  similar to the previous  credit  facility.  However,  there is no
assurance  that the Company  will be granted  such an  extension  on  acceptable
terms, if at all.

     Interest expense on debt and obligations under capital leases  approximated
$108,000  and  $105,000  for the three  months  ended  March 31,  2003 and 2002,
respectively.

NOTE 5 - DISCONTINUED OPERATIONS

     On April 2, 2003, the Company consummated the sale (the "Sale"),  effective
as  of  March  1,  2003,  of  Intelligroup   Singapore  Pte  Ltd.,  a  Singapore
corporation;   Intelligroup   Hong  Kong  Limited,   a  Hong  Kong  corporation;
Intelligroup Australia Pty limited, an Australian corporation;  and Intelligroup
New  Zealand  Limited,  a New Zealand  corporation,  together  representing  the
Company's  Asia-Pacific group of subsidiary  companies,  operating in Australia,
New Zealand,  Singapore, Hong Kong and Indonesia (together, the "Subsidiaries"),
to Soltius Global  Solutions PTE Ltd, a Singapore  corporation  ("Soltius").  As
consideration,  the Company  received a 5% minority  shareholding in Soltius and
$650,000  in cash to be paid by  Soltius  to the  Company  over a  period  of 12
months. The consideration was determined as a result of arms-length negotiations
between the parties.

     The Consolidated Financial Statements of the Company have been reclassified
to  reflect  the Sale of the  Subsidiaries  to  Soltius  as of March  31,  2003.
Accordingly,  the assets, liabilities,  results of operations, and cash flows of
the  Subsidiaries  have been  segregated  in the  Consolidated  Balance  Sheets,
Consolidated  Statements  of  Operations  and  Comprehensive  Income  (Loss) and
Consolidated  Statements  of Cash  Flows.  The net  operating  results,  assets,
liabilities  and net cash  flows  of the  Subsidiaries  have  been  reported  as
discontinued operations.



                                     - 9 -
<PAGE>

NOTE 5 - DISCONTINUED OPERATIONS (CONTINUED)

     Summarized  financial  information for the  discontinued  operations of the
Subsidiaries is as follows:

<TABLE>
<CAPTION>
                                                              FOR THE THREE MONTHS ENDED MARCH 31,
                                                              ------------------------------------
                                                                       2003              2002
                                                                       ----              ----

<S>                                                              <C>               <C>
Revenue.....................................................     $   1,691,000     $   1,604,000
Pre-tax loss................................................          (413,000)          (92,000)
Income tax provision........................................            15,000            27,000
Loss from discontinued operations, excluding loss on sale...          (428,000)         (119,000)

                                                                 December 31, 2002
                                                                 -----------------
Current assets..............................................     $   2,393,000
Total assets................................................         3,069,000
Current liabilities.........................................         1,681,000
Net intercompany liabilities................................         3,619,000
Total liabilities...........................................         5,300,000
Net assets (deficit) of discontinued operations.............        (2,231,000)
</TABLE>

        The  Company  reported  a  loss  on the  sale  of  the  Subsidiaries  of
$1,706,000 for the three months ended March 31, 2003.

NOTE 6 - NOTE RECEIVABLE - SERANOVA

     On May 31, 2000, SeraNova,  Inc.  ("SeraNova") and the Company formalized a
$15,100,000 unsecured promissory note (the "Note") relating to net borrowings by
SeraNova  from the Company  through  such date.  The Note bears  interest at the
prime rate plus 1/2%.  The  Company  had  recorded  total  accrued  interest  of
$940,000 as of December  31,  2001.  The  Company has not  recorded  any accrued
interest on the balance of the Note  subsequent to the maturity date of July 31,
2001.  On September  29, 2000,  the Company  received a $3,000,000  payment from
SeraNova.

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



                                     - 10 -
<PAGE>

NOTE 6 - NOTE RECEIVABLE - SERANOVA (CONTINUED)

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

     In 2001, the Company received principal  payments totaling  $2,060,000 from
SeraNova.  However,  SeraNova  failed to make final  payment of all  amounts due
under the Note to the  Company  as of July 31,  2001.  On August 16,  2001,  the
Company filed a complaint against SeraNova and Silverline  Technologies  Limited
("Silverline"), which acquired SeraNova in March 2001. As of such date, SeraNova
was  obligated  to pay to the Company  the  remaining  principal  (approximately
$9,140,000) and accrued interest  (approximately  $940,000),  or an aggregate of
$10,080,000. On September 25, 2001, SeraNova and Silverline filed a joint Answer
to the Company's complaint.  In addition,  SeraNova filed a counterclaim against
the Company for unspecified  damages as a set-off against the Company's  claims.
Thereafter,  in response to the  Company's  request for a statement  of damages,
SeraNova stated that it was in the process of calculating  its damages,  but for
informational  purposes claimed compensatory damages in excess of $5,500,000 and
punitive  damages in the amount of  $10,000,000.  The parties have completed the
discovery process and the Company has moved for summary  judgment.  On April 17,
2003,  the Court  granted  partial  summary  judgment and required  supplemental
briefing on certain issues. A trial date is expected to be scheduled thereafter.
The Company  believes  that there is no basis to support the amounts  claimed by
SeraNova in its counterclaim for compensatory and punitive  damages.  An adverse
decision with respect to the Company relating to SeraNova's  counterclaim  could
negatively  affect the  Company's  business,  financial  condition or results of
operations.

     In addition,  SeraNova failed to pay certain  outstanding lease obligations
to the Company's landlords.  Accordingly, on March 4, 2002, the Company filed an
arbitration demand with the American  Arbitration  Association against SeraNova,
Silverline  and  Silverline  Technologies,  Inc.  (collectively,  the  "SeraNova
Group"). The demand for arbitration,  which sought damages,  alleged among other
things that the SeraNova Group failed to pay  outstanding  lease  obligations to
the Company's  landlords and to reimburse the Company for all rent payments made
by the Company on their behalf. An arbitration hearing was held on June 25, 2002
and June 28, 2002 seeking $525,000 in outstanding lease  obligations.  On August
9, 2002,  an award was issued in the amount of  $616,905  (including  attorney's
fees) plus  reimbursement  of  administrative  fees, in favor of the Company and
against the  SeraNova  Group  jointly and  severally.  In an action filed in the
Superior Court of New Jersey,  the Court confirmed the $624,000  award,  jointly
and severally as to the SeraNova Group,  and issued a writ of execution  against
the SeraNova Group's assets. The Sheriff of Middlesex County levied this writ of
execution  on  October  8,  2002  against  a bank  account  held  by  Silverline
Technologies,  Inc. On October 16, 2002,  pursuant to this writ, the bank turned
over $626,247 to the Sheriff.  On November 6, 2002 the Sheriff sent the funds to
the Company's  attorneys  and the funds were  deposited  into an attorney  trust
account on November 8, 2002.  On December  13,  2002,  the Company  commenced an
action in the  Superior  Court of New  Jersey,  Chancery  Division,  to  recover
additional amounts due and owing from the SeraNova



                                     - 11 -
<PAGE>

NOTE 6 - NOTE RECEIVABLE - SERANOVA (CONTINUED)

Group  under  the  Arbitration  Award  and to  determine  whether  HSBC Bank USA
("HSBC"),  a creditor of the  SeraNova  Group,  has priority to the funds levied
upon by the Sheriff.  On January 31,  2003,  the Court  entered  judgment in the
Company's  favor in the amount of $218,805,  representing  the SeraNova  Group's
additional  unpaid rent arrearages under the arbitration  award. On February 28,
2003,  the  Court  entered  judgment  in the  Company's  favor in the  amount of
$220,415,  representing  the Company's  attorney's  fees in connection  with the
Company's  efforts  to  enforce  the  SeraNova  Group's  obligations  under  the
arbitration  award.  On March  10,  2003,  the  Court  ordered  HSBC to  produce
discovery proving its priority to the $626,247 being held in trust. The Court is
expected  to rule on this issue on June 2, 2003.  The  Company  does not believe
that the  outcome  of this claim will have a  materially  adverse  effect on the
Company's business, financial condition or results of operations.

     The Company is  continuing  to pursue its various  legal  options to obtain
payment from the SeraNova Group on the Note and outstanding  lease  obligations.
At the same time, the Company has also been periodically  engaged in discussions
with management of the SeraNova  Group,  with the objective of seeking an out of
court  resolution to all  outstanding  matters  involving the Note,  and certain
other receivables and lease obligations.  However, the Company believed that the
liquidity  issues  plaguing the SeraNova Group  required a  reassessment  of the
realizability  of these  outstanding  amounts as of June 30,  2002.  Although no
final  resolution had been reached,  the Company  believed that the substance of
these  discussions  provided a basis for determining the approximate  realizable
value of the Note and other  receivables,  as well as an  estimate  of the costs
required to exit certain lease obligations.

     Accordingly,   the  Company  recorded  $8,362,000  of  SeraNova  receivable
impairment  and other  charges as of June 30,  2002.  Specifically,  the Company
recorded a $5,140,000  charge to  write-down  the carrying  value of the Note to
$4,000,000.  Additionally, the Company recorded a $1,257,000 charge to write-off
the carrying value of other SeraNova receivables (primarily, accrued interest on
the Note  and a  receivable  for a system  implementation  project).  Also,  the
Company  recorded a charge of  $1,501,000  for certain  lease exit  costs.  Such
charge  represents  primarily  an  accrued  liability  for  obligated  space and
equipment  costs for which  the  Company  currently  believes  it cannot  use or
sublease and the  differential  between  certain  Company lease  obligations and
sublease  amounts to be received.  As of December 31,  2002,  $1,286,000  of the
liability  remains  outstanding,  of  which  $1,028,000  is  included  in  other
long-term liabilities.

     As of March 31,  2003,  the  Company  believes  there has been an  apparent
deterioration in the financial condition of the SeraNova Group. Accordingly, the
Company re-assessed,  as of March 31, 2003, the likelihood of recovering amounts
owed by the SeraNova  Group as well as the  assumptions  used in  recording  the
original lease obligation charge. Additionally,  the Company was notified during
the first quarter of 2003 of its obligation to pay  additional  office space and
equipment  rentals,  which  had been  previously  assigned  to  SeraNova  by the
Company, because the SeraNova Group had failed to make the required payments.



                                     - 12 -
<PAGE>

NOTE 6 - NOTE RECEIVABLE - SERANOVA (CONTINUED)

     Although the Company  expects to pursue the full legal  prosecution  of the
SeraNova Group,  the Company  believes the apparent  financial  condition of the
SeraNova Group warrants the write-off of any  receivables  due from the SeraNova
Group.  Additionally,  the  Company  has  re-evaluated  and  adjusted  its lease
obligations  (including  settlements  negotiated  by the Company)  involving the
SeraNova Group as of March 31, 2003.

<TABLE>
<CAPTION>
                                             WRITE-DOWN       WRITE-OFF          LEASE
                                               OF NOTE         OF OTHER        OBLIGATIONS      LEGAL AND
                                             RECEIVABLE      RECEIVABLES           AND           OTHER
                                             - SERANOVA      - SERANOVA        SETTLEMENTS       CHARGES         TOTAL
                                           -------------------------------------------------------------------------------

<S>                                        <C>              <C>             <C>              <C>             <C>
Charges to operations during 2002......    $   5,140,000    $  1,257,000    $   1,501,000    $    464,000    $  8,362,000
Costs paid during 2002.................               --              --         (361,000)       (318,000)       (679,000)
Non-cash items.........................       (5,140,000)     (1,257,000)              --              --      (6,397,000)
                                           -------------    ------------    -------------    ------------    ------------
Accrued costs as of December 31, 2002..               --              --        1,140,000         146,000       1,286,000

Charges to operations during 2003......        4,000,000              --          795,000         265,000       5,060,000
Costs paid during 2003.................               --              --         (215,000)       (180,000)       (395,000)
Non-cash items.........................       (4,000,000)             --               --              --      (4,000,000)
                                           -------------    ------------    -------------    ------------    ------------

Accrued costs as of March 31, 2003.....    $          --    $         --    $   1,720,000    $    231,000    $  1,951,000
                                           =============    ============    =============    ============    ============
</TABLE>

     As of March 31, 2003,  $1,951,000 of the liability remains outstanding,  of
which $932,000 is included in other long-term liabilities.

NOTE 7 - RESTRUCTURING AND OTHER SPECIAL CHARGES

     In December 2002, the Company  recorded a $30,000  restructuring  and other
special charges provision related to the downsizing of the Company's  operations
in Australia.  The charges  resulted  primarily from severance costs  associated
with reducing employee headcount in the region.

     During the quarter ended  December 31, 2001, in an effort to further refine
the Company's  business  strategy around its core competencies and to refocus on
more active markets, the Company recorded a $13,261,000  restructuring and other
special charges  provision.  The charges,  which were mainly non-cash in nature,
were related primarily to the ASP business in the United States, the termination
of an agreement to build and operate a technology development and support center
in  Puerto  Rico,  and to the  restructuring  and  downsizing  of the  Company's
operations in the United Kingdom.



                                     - 13 -
<PAGE>

NOTE 7 - RESTRUCTURING AND OTHER SPECIAL CHARGES (CONTINUED)

     Activity in accrued costs for restructuring and other special charges is as
follows:

<TABLE>
<CAPTION>
                                                SEVERANCE AND         ASSET
                                                RELATED COSTS      IMPAIRMENTS        EXIT COSTS          TOTAL
                                               --------------------------------------------------------------------

<S>                                             <C>               <C>               <C>                <C>
Accrued costs as of December 31, 1999.....      $     865,000     $         --      $      84,000      $    949,000

Costs paid during 2000....................           (608,000)              --                 --          (608,000)
                                                -------------     ------------      -------------      ------------
Accrued costs as of December 31, 2000.....            257,000               --            84,000            341,000

Charges to operations during 2001.........            530,000       10,999,000          1,732,000        13,261,000
Costs paid during 2001....................           (402,000)              --           (172,000)         (574,000)
Non-cash utilization during 2001..........                 --      (10,999,000)        (1,177,000)      (12,176,000)
                                                -------------     ------------      -------------      ------------
Accrued costs as of December 31, 2001.....            385,000               --            467,000           852,000

Charges to operations during 2002.........             30,000               --                 --            30,000
Costs paid during 2002....................           (326,000)              --           (384,000)         (710,000)
                                                -------------     ------------      -------------      ------------
Accrued costs as of December 31, 2002.....             89,000               --             83,000           172,000

Costs paid during 2003....................            (55,000)              --                 --           (55,000)
                                                -------------     ------------      -------------      ------------
Accrued costs as of March 31, 2003........      $      34,000     $         --      $      83,000      $    117,000
                                                =============     ============      =============      ============
</TABLE>

     The Company  expects to pay out the remaining costs above within the next 9
months.

NOTE 8 - SEGMENT DATA AND GEOGRAPHIC INFORMATION

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

     On April 2, 2003, the Company  consummated the sale,  effective as of March
1,  2003,  of its  Asia-Pacific  group of  subsidiary  companies,  operating  in
Australia,  New Zealand,  Singapore,  Hong Kong and Indonesia  (See Note 5). The
operating results and financial position of the Asia-Pacific group of subsidiary
companies are reported as discontinued operations for all periods presented. The
Company now has four reportable  operating segments from continuing  operations,
which are organized and managed on a geographical basis, as follows:

     o    United  States  ("US") - the  largest  segment  of the  Company,  with
          operations  in the United  States,  Puerto  Rico,  South  America  and
          Canada.  Includes  the  operations  of the  Company's  US  subsidiary,
          Empower, Inc., and all corporate functions and activities.  The US and
          corporate headquarters are located in Edison, New Jersey;

     o    India - includes  the  operations  of the Company in India,  including
          services provided on behalf of other Company subsidiaries.  The Indian
          headquarters are located in Hyderabad, India;

     o    Europe - includes the operations of the Company in Denmark, Sweden and
          the United  Kingdom.  However,  the Company has ceased  operations  in
          Sweden as of January 1, 2003. The European headquarters are located in
          Milton Keynes, United Kingdom; and



                                     - 14 -
<PAGE>

NOTE 8 - SEGMENT DATA AND GEOGRAPHIC INFORMATION (CONTINUED)

     o    Japan - includes the operations of the Company in Japan.  The Japanese
          headquarters are located in Tokyo, Japan.

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

     Accordingly, the Company's operating results and financial position for its
continuing operations are presented in the following geographic segments for the
three months ended March 31, 2003 and 2002.

<TABLE>
<CAPTION>
                                    UNITED STATES        INDIA           EUROPE            JAPAN               TOTAL
                                    -------------        -----           ------            -----               -----
<S>                                 <C>              <C>              <C>                <C>              <C>
THREE MONTHS ENDED MARCH 31, 2003
---------------------------------
Revenue.......................      $ 21,349,000     $  3,487,000     $  1,481,000       $  918,000       $  27,235,000
Depreciation & amortization...           451,000          204,000           36,000            8,000             699,000  (1)
Operating income (loss).......        (5,549,000)         493,000           (3,000)          61,000          (4,998,000) (2)
Total assets..................        25,453,000        7,556,000        2,032,000        1,767,000          36,808,000

THREE MONTHS ENDED MARCH 31, 2002
---------------------------------
Revenue.......................      $ 17,469,000     $  3,054,000     $  1,585,000       $  897,000       $  23,005,000
Depreciation & amortization...           474,000          148,000           57,000           13,000             692,000  (3)
Operating income (loss).......           115,000          483,000         (189,000)        (117,000)            292,000
Total assets..................        33,371,000        5,877,000        1,917,000        2,138,000          43,303,000  (4)
</TABLE>

-----------
     (1)  Excludes $181,000 of depreciation and amortization included in cost of
          sales for the three months ended March 31, 2003.
     (2)  Includes  $5,060,000  of  SeraNova  receivable  impairment  and  other
          charges and  $297,000 of proxy  contest  charges for the three  months
          ended March 31, 2003.
     (3)  Excludes $262,000 of depreciation and amortization included in cost of
          sales for the three months ended March 31, 2002.
     (4)  Excludes  $3,087,000 of net assets from discontinued  operations as of
          March 31, 2002.

     Included  above  are  application   management  and  support   revenues  of
$6,691,000  and  $6,171,000  for the three months ended March 31, 2003 and 2002,
respectively.  Other  information  related  to the  application  management  and
support  business is not maintained and the Company  determined that it would be
impractical to calculate such data.




                                     - 15 -
<PAGE>

NOTE 9 - CONTINGENCIES

Tax-Free Spin-off of SeraNova

     On  July  5,  2000,  the  Company  distributed  SeraNova  common  stock  to
shareholders  in a  transaction  that was  intended  to be a  tax-free  spin-off
pursuant to Section 355 of the Internal  Revenue Code  ("Section  355").  If the
distribution  qualifies  as a tax-free  spin-off,  neither  the  Company nor the
Company's  shareholders  recognize  any gain or  income in  connection  with the
transaction.  However,  Section 355 provides that the Company may be required to
recognize  a gain  on the  transaction  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.  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.

     On October  27,  2000,  SeraNova  and  Silverline  announced  that they had
entered  into an  agreement  and plan of merger,  under which  Silverline  would
acquire  SeraNova in exchange for American  depositary  shares of Silverline and
the  assumption  by  Silverline  of  SeraNova  indebtedness.  However,  SeraNova
management has represented  that the merger with Silverline was not contemplated
at the time of the spin-off and  accordingly,  the spin-off  should be tax-free.
Should the  spin-off  ultimately  be  construed as taxable,  the  resultant  tax
liability could be up to $65,000,000,  plus interest and, depending on the facts
that ultimately are established,  penalties. SeraNova and/or Silverline would be
obligated  to  indemnify  the  Company for these  amounts  under the Tax Sharing
Agreement.

Tax Contingency in India

     The Company's Indian  subsidiary has received an assessment from the Indian
taxing  authority  denying tax  exemptions  claimed for certain  revenue  earned
during each of the fiscal years ended March 31, 1997 through March 31, 1999. The
assessment is for 28 million  rupees,  or  approximately  $580,000.  Management,
after  consultation  with its advisors,  believes the Company is entitled to the
tax exemption  claimed and thus has not recorded a provision for taxes  relating
to these items as of March 31, 2003. If the Company were not successful with its
appeals,  which were filed in 2001 and 2002,  a future  charge of  approximately
$580,000 would be recorded and reflected in the Company's consolidated statement
of operations.

Proxy Contest and Related Legal Matters

     During the three months ended March 31, 2003, the Company incurred $297,000
of Proxy Contest  charges.  As discussed in Note 4, the Proxy  Contest  resulted
directly from a shareholder of the Company  launching a hostile and costly proxy
contest to take control of the Company's  Board of  Directors.  Since the second
quarter of 2002, the Company has incurred  cumulative  Proxy Contest  charges of
$1,370,000.  The cumulative  Proxy Contest  charges  included legal fees,  proxy
solicitation services and printing, mailing and other costs. Legal costs related
to this matter continue to be incurred.



                                     - 16 -
<PAGE>

NOTE 9 - CONTINGENCIES (CONTINUED)

     On June 26,  2002,  Ashok  Pandey  filed a Complaint  in the United  States
District   Court  for  the  District  of  New  Jersey,   alleging  that  certain
shareholders  of the Company  constituted  a group that held more than 5% of the
outstanding  shares of the  Company's  common stock and had not filed a Schedule
13D disclosure  statement with the Securities and Exchange  Commission.  On June
28, 2002, plaintiff obtained an ex parte injunctive order from the Court barring
Srini Raju, an alleged member of the "group" and a shareholder  holding 4.61% of
the Company's  common  stock,  from voting in the annual  election.  On July 12,
2002,  after  reviewing  actual  evidence of record,  and hearing  argument from
Pandey's counsel, the Court held that there was no basis to enjoin Mr. Raju from
voting his shares at the Annual  Meeting.  After the election,  Pandey sought to
file an amended  complaint  dropping  certain  defendants,  and  adding  others,
including  the Company.  On September 27, 2002,  the Court  granted  plaintiff's
motion,  and allowed certain limited discovery to proceed.  On October 11, 2002,
the Company filed a motion for Judgment on the  Pleadings in its favor,  arguing
that the relief sought by plaintiff, the retroactive sterilization of Mr. Raju's
shares  and  the  invalidation  of his  votes  at  the  Annual  Meeting,  is not
sanctioned by law, and is unavailable as a remedy.  In response,  Pandey filed a
motion  seeking leave to file a Second  Amended  Complaint,  seeking to drop the
Section 13D claims against the Company and  substitute  them with claims brought
under Section 14A of the  Securities  and Exchange Act. On January 31, 2003, the
Court denied each of the parties'  motions.  The parties are continuing with the
discovery process.

     On July 2, 2002,  Ashok Pandey  filed a complaint in the Superior  Court of
New Jersey,  Middlesex  County,  in connection  with the Company's  recent Proxy
contest with respect to the Annual Meeting. In his Complaint,  plaintiff claimed
that  Intelligroup's  Board of  Directors  violated  their  fiduciary  duties by
adjourning  the Annual  Meeting from July 2, 2002 to July 16,  2002.  On July 3,
2002, the Court denied  Plaintiff's  application for emergent relief,  and ruled
that  Intelligroup  could adjourn its Annual Meeting,  finding that  plaintiff's
conduct in obtaining ex parte  injunctive  relief in federal court enjoining the
voting of 4.61% of the Company's  outstanding common stock without notice to the
Company, "estopped [Pandey] from complaining about the adjournment." Despite the
court's denial of his emergent  application,  plaintiff continued the litigation
in an effort to have the court sanction his unilateral attempt to hold an annual
meeting and election on July 2, 2002,  despite the Company's  adjournment of the
meeting  and  the  absence  of  its  Board  of  Directors  and a  quorum  of its
shareholders  on July 2, 2002.  The  Company  filed its  Answer and  Affirmative
Defenses on August 30, 2002 and discovery is ongoing.  On November 6, 2002,  the
Company  filed a Motion for Summary  Judgment and on January 7, 2003,  the Court
granted  Partial  Summary  Judgment.  The  discovery  process is  ongoing  and a
discovery master has been appointed to hear discovery disputes.  The trial date,
originally   scheduled  for  May  5,  2003,  has  been  adjourned  and  will  be
rescheduled.



                                     - 17 -
<PAGE>

NOTE 9 - CONTINGENCIES (CONTINUED)

     On July 3,  2002,  the  Company  filed a  complaint  in the  United  States
District  Court for the  District  of New  Jersey,  naming  Ashok  Pandey,  TAIB
Securities,  Inc.,  Beechrock  Holdings  Limited and Braydon Holdings Limited as
defendants.  The  complaint  alleges,  among other things,  that the  defendants
violated  federal  securities laws in connection with the Company's recent proxy
contest.  The defendants have filed an Answer to the Company's complaint denying
the Company's claims and discovery is ongoing. The Company does not believe that
the outcome of this claim will have a material  adverse  effect on the Company's
business, financial condition or results of operations.

Other Legal Matters

     On February 7, 2001, NSA Investments II LLC filed a complaint in the United
States District Court for the District of  Massachusetts  naming,  among others,
SeraNova,  the Company and Rajkumar Koneru, a former director of the Company, as
defendants.  The  plaintiff  alleges that it invested  $4,000,000 in SeraNova as
part of a private placement of SeraNova common stock in March 2000, prior to the
spin-off of SeraNova by the Company. The complaint, which seeks compensatory and
punitive  damages,  alleges  that the  Company,  as a  "controlling  person"  of
SeraNova,  is  jointly  and  severally  liable  with and to the same  extent  as
SeraNova  for false  and  misleading  statements  constituting  securities  laws
violations and breach of contract.  After being served with the  complaint,  the
Company made a request for indemnification from SeraNova pursuant to the various
inter-company  agreements in connection with the spin-off. By letter dated April
13, 2001,  SeraNova's  counsel,  advised the Company that SeraNova  acknowledged
liability for such indemnification  claims and has elected to assume the defense
of the  plaintiff's  claims.  In October 2001,  the motion to dismiss,  filed on
behalf of the Company in May 2001, was denied without prejudice to refile at the
close of the discovery period. Court-ordered mediation between the plaintiff and
SeraNova  during  January and February 2002 was  unsuccessful.  In January 2002,
plaintiff  filed a motion for  partial  summary  judgment  as to certain  claims
against SeraNova.  No summary judgment motion was filed against the Company.  On
September  30,  2002,  the Court  granted  plaintiff's  motion in part,  finding
SeraNova liable for breach of contract as a matter of law. The parties  executed
a settlement  agreement,  which became  effective upon payment of the settlement
amount,  including the Company's  portion of the  settlement  amount equal to an
aggregate  amount  of  $50,000.  The  Company  has  accrued  such  amount in the
consolidated balance sheet as of March 31, 2003.

     The  Company  is  engaged in other  legal and  administrative  proceedings.
Management  believes the outcome of these  proceedings  will not have a material
adverse effect on the Company's  consolidated  financial  position or results of
operations.



                                     - 18 -
<PAGE>

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

OVERVIEW

     The  Company is a strategic  information  technology  services  outsourcing
partner to the world's largest companies.  Intelligroup develops, implements and
supports  information  technology  solutions for global  corporations and public
sector organizations.  The Company's  onsite/offshore delivery model has enabled
hundreds of customers to accelerate results and significantly reduce costs. With
extensive expertise in industry-specific enterprise solutions,  Intelligroup has
earned a reputation for consistently exceeding client expectations.

     In October 1987, the Company first began to provide systems integration and
custom software development services to customers. In 1994, the Company began to
diversify its customer  base by expanding  the scope of its systems  integration
and custom development  services to include Enterprise Resource Planning ("ERP")
software.  ERP software products are pre-packaged  solutions for a wide-range of
business  areas,  including  financial  information,   manufacturing  and  human
resources.  For  prospective  customers,  ERP products are an alternative to the
custom design and development of their own  applications.  Although ERP products
are  pre-packaged  solutions,  there is a significant  amount of technical  work
involved  in  implementing  them  and  tailoring  their  use  for  a  particular
customer's needs.

     Throughout  the  mid-to-late  1990s,  the  Company  grew  significantly  by
capitalizing  on  the  business   opportunity  to  provide   implementation  and
customization services work to the expanding ERP market. The Company first began
to provide  these  technical  services to  customers  implementing  SAP software
before  expanding  its service  offerings to include ERP  products  developed by
Oracle in 1995 and PeopleSoft in 1997.

     In late 1999,  the Company  made the  strategic  decision  to leverage  its
traditional  application  integration  and consulting  experience and reposition
Intelligroup for future growth by focusing on the emerging  Application  Service
Provider  ("ASP")  market.  At the same time,  the  Company  made the  strategic
decision  to  spin-off  its  Internet  services  business  to its  shareholders.
Accordingly,   on  January  1,  2000,  the  Company   transferred  its  Internet
applications  services and management  consulting  businesses to SeraNova,  Inc.
("SeraNova"), a wholly owned subsidiary of the Company on such date.

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

     During the second half of 2000,  finding  that the market for ASP  services
had not  developed  and grown as  projected  by  market  analysts,  the  Company
significantly reduced its investment in the ASP business model. Expenditures for
marketing and direct selling initiatives were significantly  decreased,  as were
the infrastructure and personnel that supported the



                                     - 19 -
<PAGE>

Company's  ASP  services.  The Company  renewed it focus and efforts on pursuing
shorter-term  success  opportunities of implementing  and enhancing  application
solutions based on SAP, Oracle and PeopleSoft products.

     At the same time, the Company redirected some of its ASP infrastructure and
personnel   towards  the  management  and  support  of  customers'   enterprise,
e-commerce  and m-commerce  applications  ("Application  Management  Services").
Additionally,  the Company introduced  certain SAP-based  proprietary tools that
are  designed  to reduce  the time and cost of  upgrading  and  maintaining  SAP
systems ("Power Up Services(SM)"). In 2001, the Company developed pre-configured
SAP solutions for the  pharmaceutical  industry  ("Pharma  Express(SM)") and the
engineering  and  construction  industry  ("Contractor   Express(SM)").   Pharma
Express, a solution designed for small-to-medium  sized life sciences companies,
improves  manufacturing  efficiencies  and  helps  control  the  total  cost  of
production.  Contractor  Express  assists  companies  in  improving  operational
efficiency and controlling manufacturing project schedules.

     On April 2, 2003, the Company consummated the sale (the "Sale"),  effective
as of  March  1,  2003,  of its  Asia-Pacific  group  of  subsidiary  companies,
operating  in  Australia,  New  Zealand,  Singapore,  Hong  Kong  and  Indonesia
(together, the "Subsidiaries"), to Soltius Global Solutions PTE Ltd, a Singapore
corporation  ("Soltius").  As consideration,  the Company received a 5% minority
shareholding  in  Soltius  and  $650,000  in cash to be paid by  Soltius  to the
Company over a period of 12 months. The consideration was determined as a result
of arms-length negotiations between the parties.

     The Consolidated Financial Statements of the Company have been reclassified
to  reflect  the Sale of the  Subsidiaries  to  Soltius  as of March  31,  2003.
Accordingly,  the assets, liabilities,  results of operations, and cash flows of
the  Subsidiaries  have been  segregated  in the  Consolidated  Balance  Sheets,
Consolidated  Statements  of  Operations  and  Comprehensive  Income  (Loss) and
Consolidated  Statements  of Cash Flows and have been  reported as  discontinued
operations.

     Financial  information regarding the Company's geographic areas and results
of operations for continuing operations appears in the footnote entitled Segment
Data and  Geographic  Information  in the  Notes to the  Consolidated  Financial
Statements included in Part 1. Financial Information.

     The  majority  of the  Company's  revenues  are 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
information  technology  consulting firm. Where contractual  provisions  permit,
customers also are billed for  reimbursement of expenses incurred by the Company
on the customers' behalf.



                                     - 20 -
<PAGE>

     The markets for the Company's services are highly competitive.  The Company
believes that its principal competitors include the internal information systems
groups  of its  prospective  customers,  as well  as the  following  classes  of
companies (some of which are also customers or referral sources of the Company):

     o    Consulting  and  software  integration  firms:  including,  IBM Global
          Services,  Electronic Data Systems, Computer Sciences Corporation, Cap
          Gemini Ernst & Young, and BearingPoint.

     o    Software applications vendors: including, SAP, Oracle and PeopleSoft.

     o    Application management consulting firms:  including,  Covansys,  Wipro
          Technologies,   Infosys   Technologies  Limited  and  Satyam  Computer
          Services Ltd.

     Many of the Company's competitors have longer operating histories,  possess
greater  industry  and  name  recognition  and/or  have  significantly   greater
financial,  technical and  marketing  resources  than the Company.  In addition,
there are  relatively  low barriers to entry into the Company's  markets and the
Company has faced, and expects to continue to face, additional  competition from
new entrants into its markets.

     The Company has provided  services on certain  projects in which it, at the
request of the  clients,  offered a fixed price for its  services.  For the year
ended  December  31, 2002,  revenues  derived  from  projects  under fixed price
contracts represented 35% of the Company's total revenue. Fixed price contracts,
in the  aggregate,  represented  43% of the Company's  total revenue  during the
three months ended March 31, 2003. No single fixed price project was material to
the  Company's  business  during 2002 or during the three months ended March 31,
2003.  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.

     The  Company has derived  and  believes  that it will  continue to derive a
significant  portion  of its  revenue  from a limited  number of  customers  and
projects.  For the three months ended March 31, 2003 and the year ended December
31, 2002,  the Company's ten largest  customers  accounted for in the aggregate,
approximately  49% and 42% of its  revenue,  respectively.  For the three months
ended March 31, 2003, no single customer accounted for more than 10% of revenue.
For the year ended December 31, 2002,  one customer  accounted for more than 10%
of  revenue.  For the  three  months  ended  March 31,  2003 and the year  ended
December 31,  2002,  18% and 24%,  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 information technology consulting
firm.  There can be no assurance  that such  information  technology  consulting
firms will  continue  to engage the  Company in the future at current  levels of
retention, if at all.



                                     - 21 -
<PAGE>

     For each of the  three  months  ended  March  31,  2003 and the year  ended
December 31, 2002,  approximately 62% of the Company's total revenue was derived
from projects in which the Company implemented, extended, maintained, managed or
supported  software  developed  by SAP. For each of the three months ended March
31,  2003  and the  year  ended  December  31,  2002,  approximately  22% of the
Company's  total  revenue  was  derived  from  projects  in  which  the  Company
implemented,  extended,  maintained,  managed or supported software developed by
PeopleSoft.  For the  three  months  ended  March  31,  2003 and the year  ended
December 31, 2002, approximately 7% and 9%, respectively, of the Company's total
revenue was derived from  projects in which the Company  implemented,  extended,
maintained, managed or supported software developed by Oracle.

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

     The Company currently serves the United States market with its headquarters
in Edison (New Jersey),  and a branch office in Atlanta  (Georgia).  The Company
also maintains local offices to serve the markets in Denmark,  India,  Japan and
the United Kingdom.  The Company leases its headquarters in Edison,  New Jersey.
Such lease has an initial term of ten (10) years,  which  commenced in September
1998.

CRITICAL ACCOUNTING POLICIES, ESTIMATES AND RISKS

     The  Company's  critical  accounting  policies  are set forth in its Annual
Report on Form 10-K for the year  ended  December  31,  2002.  There has been no
change,  update  or  revision  to the  Company's  critical  accounting  policies
subsequent to the filing of the Company's  Form 10-K for the year ended December
31, 2002.

FORWARD-LOOKING STATEMENTS

     This Form 10-Q contains  forward-looking  statements  within the meaning of
Section 21E of the  Securities  Exchange  Act of 1934,  as  amended,  including,
without limitation,  statements  regarding the Company's intention to shift more
of its focus  towards  the  management  and  support of  customers'  enterprise,
e-commerce and m-commerce applications.  Such forward-looking statements include
risks and uncertainties, including, but not limited to:

     o    the continued  uncertainty  associated  with the slowdown in economies
          worldwide, including its impact on IT spending habits by customers;

     o    the  continued  uncertainty  of the  outsourcing  market and  revenues
          derived from anticipated application management and support business;


                                     - 22 -
<PAGE>

     o    the failure to maintain the minimum bid price of $1.00 per share for a
          period of 30  consecutive  business days or other criteria as required
          for continued listing by the Nasdaq National Market;

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

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

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

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

     o    the Company's  reliance on continued  relationships  with SAP America,
          Oracle and PeopleSoft, and the Company's present partnership status;

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

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

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

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

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

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


                                     - 23 -
<PAGE>

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

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

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

RESULTS OF OPERATIONS - CONSOLIDATED

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

<TABLE>
<CAPTION>
                                                                    PERCENTAGE OF REVENUE
                                                             ----------------------------------
                                                                     THREE MONTHS ENDED
                                                             ----------------------------------
                                                                          MARCH 31,
                                                             ----------------------------------
                                                                  2003                 2002
                                                                  ----                 ----

<S>                                                              <C>                  <C>
Revenue..............................................             100.0%               100.0%
Cost of sales........................................              70.9                 69.7
                                                                 ------               ------
    Gross profit.....................................              29.1                 30.3
Selling, general and administrative
  expenses...........................................              25.2                 26.0
Depreciation and amortization expenses...............               2.6                  3.0
SeraNova receivable settlement and related charges...              18.6                   --
Proxy contest charges................................               1.1                   --
                                                                 ------               ------
    Total operating expenses.........................              47.5                 29.0
                                                                 ------               ------
    Operating income (loss)..........................             (18.4)                 1.3
Interest income......................................               0.0                  0.0
Interest expense.....................................              (0.4)                (0.5)
Other income (expense)...............................              (0.1)                 0.2
                                                                 ------               ------
Income (loss) from continuing operations before
   income tax provision..............................             (18.9)                 1.0
Income tax provision.................................               0.3                  0.4
                                                                 ------               ------
Income (loss) from continuing operations.............             (19.2)%                0.6%
                                                                 ======               ======
</TABLE>



                                     - 24 -
<PAGE>

     Three Months Ended March 31, 2003  Compared to Three Months Ended March 31,
2002

     The following  discussion compares the consolidated results from continuing
operations  for the three months ended March 31, 2003 and the three months ended
March 31, 2002.

     Revenue.  Total revenue  increased by 18.4%,  or $4.2  million,  from $23.0
million for the three  months  ended March 31,  2002,  to $27.2  million for the
three months ended March 31, 2003.  The increase was  attributable  primarily to
growth in revenue  generated in the United  States (an increase of $3.9 million)
and India (an  increase  of  $433,000),  offset by a slight  decline  in revenue
generated in Europe (a decrease of $104,000).  The revenue  growth in the United
States and India results  directly from increased demand for the majority of the
Company's  services,   including   traditional   consulting  service  offerings,
application  management and support services,  offshore development services and
Power Up  services.  The  majority of the 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
predominately with the United States.

     Gross profit.  The Company's cost of sales  primarily  includes the cost of
salaries to consultants  and related  employee  benefits and payroll taxes.  The
Company's cost of sales increased by 20.5%, or $3.3 million,  from $16.0 million
for the three months ended March 31, 2002, to $19.3 million for the three months
ended  March 31,  2003.  The  Company's  gross  profit  increased  by 13.6%,  or
$946,000,  from $7.0 million for the three months ended March 31, 2002,  to $7.9
million for the three months ended March 31, 2003.  The increase in gross profit
results  from the increase in revenue.  Gross margin  decreased to 29.1% for the
three months  ended March 31, 2003,  from 30.3% for the three months ended March
31, 2002.  The decline in gross margin  results  primarily from a combination of
factors affecting revenue  recognition  including timing of project  milestones,
unanticipated  weather related downtime and customer driven project commencement
delays. Additionally, the Company has continued to experience pricing pressures,
due to the increased competition for new projects.

     Selling,  general  and  administrative   expenses.   Selling,  general  and
administrative  expenses  primarily  consist  of  administrative  salaries,  and
related benefits costs,  occupancy costs, sales person compensation,  travel and
entertainment  and  professional  fees.  Selling,   general  and  administrative
expenses  increased by 14.5% or  $872,000,  to $6.9 million for the three months
ended March 31,  2003,  from $6.0  million for the three  months ended March 31,
2002,   but   decreased  as  a  percentage  of  revenue  to  25.2%  from  26.0%,
respectively.  The increase in selling,  general and administrative expenses, in
absolute  dollars,  was related  primarily to discretionary  sales and marketing
expenditures,  which vary in proportion  to changes in revenue.  The decrease in
selling,  general  and  administrative  expenses,  as a  percentage  of revenue,
reflects concerted efforts by management to control  expenditures in conjunction
with growth in revenue.

     Depreciation  and  amortization.  Depreciation  and  amortization  expenses
increased to $699,000  for the three  months  ended March 31, 2003,  compared to
$692,000  for the  three  months  ended  March 31,  2002.  The  increase  is due
primarily to additional capital  expenditures during the quarter ended March 31,
2003.



                                     - 25 -
<PAGE>

     SeraNova receivable  impairment and other charges.  During the three months
ended March 31, 2003, the Company incurred approximately $5.1 million of charges
associated  with the note  receivable  from  SeraNova and certain  other related
issues.  The Company has  recognized  an  additional  impairment  charge of $4.0
million  related to the note,  approximately  $321,000  related to other assets,
approximately  $424,000 in costs required to exit certain lease  obligations and
$315,000 in legal fees.  The Company  has  determined  that due to the  apparent
financial condition of SeraNova,  Silverline and Silverline  Technologies,  Inc.
(collectively,  the  "SeraNova  Group")  that  recovery  of  this  asset  is not
probable.

     Proxy contest  charges.  During the three months ended March 31, 2003,  the
Company  incurred  $297,000  in legal  fees and  other  charges  related  to the
Company's contested 2002 Annual Meeting of Shareholders  ("Proxy Contest").  The
Proxy Contest  resulted  directly from a shareholder of the Company  launching a
hostile  and costly  proxy  contest to take  control of the  Company's  Board of
Directors. Since the second quarter of 2002, the Company has incurred cumulative
proxy charges of $1,370,000. The cumulative Proxy Contest charges included legal
fees,  proxy  solicitation  services and printing,  mailing and other costs. The
Company expects to continue to incur charges until the litigation is resolved.

     Interest  income.  The Company earned $13,000 in interest income during the
three months ended March 31, 2003,  compared with $7,000 during the three months
ended March 31, 2002.

     Interest  expense.  The Company incurred  $108,000 and $105,000 in interest
expense  during the three  months  ended March 31, 2003 and 2002,  respectively,
related  primarily to borrowings under its line of credit.  Borrowings under the
line of credit were used to fund operating activities and the charges associated
with the proxy contest.  The increase in interest  expense results from slightly
higher average outstanding  borrowings under the line of credit during the three
months ended March 31, 2003.

     Other income (expense). Other income (expense) results primarily from gains
or (losses)  associated with changes in foreign  currency  exchange  rates.  The
Company  reported  other expense of $49,000  during the three months ended March
31, 2003,  compared  with other income of $40,000  during the three months ended
March 31, 2002. The change results from foreign currency fluctuations.

     Provision  for income  taxes.  Despite an operating  loss, a provision  for
income  taxes of $75,000 was required for the three months ended March 31, 2003,
due to  taxable  income  in  certain  jurisdictions  combined  with a  valuation
allowance offsetting other loss benefits in other  jurisdictions.  The Company's
net  deferred  tax  asset as of  March  31,  2003  relates  primarily  to the US
operations.  Based on anticipated  profitability in the near future,  management
believes it is more likely than not, that the deferred tax asset of $1.2 million
will be realized.  The Company's  effective  rate was 44.4% for the three months
ended March 31, 2002.

     In  1996,  the  Company  elected  a five  year tax  holiday  in  India,  in
accordance with a local tax incentive  program whereby no income tax will be due
in such period.  Such tax holiday was extended an additional five years in 1999.
Effective  April 1, 2000 pursuant to changes



                                     - 26 -
<PAGE>

introduced by the Indian Finance Act, 2000, the tax holiday  previously  granted
is no longer  available  and has been  replaced  in the form of a tax  deduction
incentive.  The impact of this  change is not  expected  to be  material  to the
consolidated  financial statements of the Company.  Effective April 1, 2002, the
tax  deduction  incentive  for income  from the export of  software  and related
services is restricted  to 90% of such income.  Further,  domestic  revenue from
software  and related  services is taxable in India.  For the three months ended
March  31,  2003 and  2002,  the tax  holiday  and new tax  deduction  favorably
impacted the Company's effective tax rate.

     The Company's Indian  subsidiary has received an assessment from the Indian
taxing  authority  denying tax  exemptions  claimed for certain  revenue  earned
during each of the fiscal years ended March 31, 1997 through March 31, 1999. The
assessment is for 28 million  rupees,  or  approximately  $580,000.  Management,
after  consultation  with its advisors,  believes the Company is entitled to the
tax exemption  claimed and thus has not recorded a provision for taxes  relating
to these items as of March 31, 2003. If the Company were not successful with its
appeals,  which were filed in 2001 and 2002,  a future  charge of  approximately
$580,000 would be recorded and reflected in the Company's consolidated statement
of operations.

RESULTS OF OPERATIONS BY BUSINESS SEGMENT

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

     On April 2, 2003, the Company  consummated the sale,  effective as of March
1,  2003,  of its  Asia-Pacific  group of  subsidiary  companies,  operating  in
Australia,  New  Zealand,  Singapore,  Hong Kong and  Indonesia.  The  operating
results and financial position of the Asia-Pacific group of subsidiary companies
are reported as discontinued  operations for all periods presented.  The Company
now has four reportable operating segments from continuing operations, which are
organized and managed on a geographical basis, as follows:

     o    United  States  ("US") - the  largest  segment  of the  Company,  with
          operations  in the United  States,  Puerto  Rico,  South  America  and
          Canada.  Includes  the  operations  of the  Company's  US  subsidiary,
          Empower, Inc., and all corporate functions and activities.  The US and
          corporate headquarters are located in Edison, New Jersey;

     o    India - includes  the  operations  of the Company in India,  including
          services provided on behalf of other Company subsidiaries.  The Indian
          headquarters are located in Hyderabad, India;

     o    Europe - includes the operations of the Company in Denmark, Sweden and
          the United  Kingdom.  However,  the Company has ceased  operations  in
          Sweden as of January 1, 2003. The European headquarters are located in
          Milton Keynes, United Kingdom; and

     o    Japan - includes the operations of the Company in Japan.  The Japanese
          headquarters are located in Tokyo, Japan.



                                     - 27 -
<PAGE>

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

     Three months Ended March 31, 2003  Compared to Three months Ended March 31,
2002

     The  following  discussion  compares  the segment  results  for  continuing
operations  for the three months ended March 31, 2003 and the three months ended
March 31, 2002.

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

<TABLE>
<CAPTION>
                                               THREE MONTHS ENDED MARCH 31,
                               -------------------------------------------------------------
                                         2003                             2002
                               -------------------------------------------------------------
                                             PERCENTAGE OF                    PERCENTAGE OF
                                 DOLLARS         TOTAL            DOLLARS         TOTAL
                               -----------   -------------      -----------   -------------
<S>                            <C>               <C>            <C>               <C>
United States...........       $   21,349        78.4%          $   17,469        75.9%
India...................            3,487        12.8                3,054        13.3
Europe.................,            1,481         5.4                1,585         6.9
Japan...................              918         3.4                  897         3.9
                               -----------    ----------        -----------    ----------
Total...................       $   27,235       100.0%          $   23,005       100.0%
                               ===========    ==========        ===========    ==========
</TABLE>

     US revenue increased by 22.2%, or $3.9 million,  from $17.5 million for the
three months ended March 31, 2002,  to $21.4  million for the three months ended
March 31, 2003. The increase was attributable  primarily to increased demand for
the  majority  of  the  Company's  service  offerings,   including   traditional
consulting  service  offerings,  application  management  and support  services,
offshore development services and Power Up services.

     India revenue  increased by 14.2%,  or $433,000,  from $3.1 million for the
three months  ended March 31,  2002,  to $3.5 million for the three months ended
March 31, 2003. The increase was attributable  primarily to increased demand for
services in the United States,  as a majority of the total revenue  generated in
India is derived from providing  offshore  development  and support  services to
customers  sourced through the Company's  affiliated  entities in other parts of
the world, but most predominantly with the United States.

     Europe  revenue  decreased by 6.6%, or $104,000,  from $1.6 million for the
three months  ended March 31,  2002,  to $1.5 million for the three months ended
March 31,  2003.  The  decrease  was  attributable  primarily  to the  Company's
operations in the United Kingdom (a decrease of $112,000).

     Japan  revenue  increased by 2.3% or $21,000,  from  $897,000 for the three
months  ended March 31,  2002,  to $918,000 for the three months ended March 31,
2003.  The  increase  was due  primarily  to a small  increase in demand for the
Company's consulting services.



                                     - 28 -
<PAGE>

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

                                                 THREE MONTHS ENDED MARCH 31,
                                              ---------------------------------
                                                  2003                 2002
                                              ------------         ------------

United States....................               $ (5,549)             $   115
India............................                    493                  483
Europe...........................                     (3)                (189)
Japan............................                     61                 (117)
                                              ------------         ------------
Total............................               $ (4,998)             $   292
                                              ============         ============

     US operating  performance declined by $5,664,000,  from operating income of
$115,000 for the three months ended March 31, 2002, to an operating loss of $5.5
million for the three  months  ended March 31,  2003.  The decrease in operating
performance  was  attributable  primarily to the  approximately  $5.1 million of
SeraNova  receivable  impairment  and other  charges and the $297,000 of charges
associated with the proxy contest during the three months ended March 31, 2003.

     India operating  income  decreased by $10,000,  from $483,000 for the three
months  ended March 31,  2002,  to $493,000 for the three months ended March 31,
2003.  The  marginal  decrease  was  attributable  primarily  to an  increase in
revenue, which was partially offset by a decrease in gross margins.

     Europe operating  performance improved by $186,000,  from an operating loss
of $189,000 for the three months ended March 31, 2002,  to an operating  loss of
$3,000  for  the  three  months  ended  March  31,  2003.  The  improvement  was
attributable primarily to an improvement in the operating performance of Denmark
(an improvement of $79,000) and the UK (an improvement of $29,000).

     Japan operating performance improved by $178,000, from an operating loss of
$117,000  for the three months  ended March 31,  2002,  to  operating  income of
$61,000  for the  three  months  ended  March  31,  2003.  The  improvement  was
attributable  primarily to management efforts to re-organize and restructure the
local  operations  during late 2002.  In  December  2002,  management  initiated
efforts to decrease total operating  expenses by reducing employee headcount and
eliminating  discretionary  expenditures  such as sales and marketing  programs,
training, etc.

LIQUIDITY AND CAPITAL RESOURCES

     The Company had cash and cash equivalents of $2.3 million at March 31, 2003
and $1.2 million at December 31, 2002.  The Company had working  capital of $7.6
million at March 31, 2003 and $13.1 million at December 31, 2002.

     Cash provided by operating  activities of  continuing  operations  was $1.2
million for the three months ended March 31, 2003,  resulting primarily from the
SeraNova receivable  impairment and other charges of $5.1 million,  depreciation
and  amortization of $880,000,  a decrease in unbilled  services of $1.1 million
and an increase in accrued payroll and related taxes



                                     - 29 -
<PAGE>

of $1.2  million.  These  amounts  were  partially  offset by the net  loss,  an
increase in accounts receivable of $280,000 and decreases in accounts payable of
$1.2 million,  accrued  expenses and other  liabilities of $194,000 and deferred
revenue of $230,000.  The changes in  operating  assets and  liabilities  result
primarily  from  timing  differences.  Cash  used  in  operating  activities  of
continuing operations the three months ended March 31, 2002 was $88,000.

     The  Company  invested   $384,000  and  $298,000  in  computer   equipment,
internal-use  computer  software and office  furniture  and fixtures  during the
three months ended March 31, 2003 and 2002,  respectively.  The increase results
primarily from the replacement of certain outdated computer equipment.

     On May 31, 2000, the Company and PNC Bank, N.A. (the "Bank") entered into a
three-year  revolving  credit  facility.  Such credit facility is comprised of a
revolving  line of  credit  pursuant  to which  the  Company  can  borrow  up to
$20,000,000  either  at the  Bank's  prime  rate per annum or the Euro Rate plus
1.75%  to 2.5%  based  upon  the  Company's  ratio  of debt to  earnings  before
interest, taxes,  depreciation and amortization ("EBITDA").  The credit facility
is  collateralized  by  substantially  all of the assets of the Company's United
States based operations.  The maximum borrowing  availability  under the line of
credit is based upon a  percentage  of  eligible  billed and  unbilled  accounts
receivable,  as defined.  As of March 31,  2003,  the  Company  had  outstanding
borrowings  under the credit  facility of $5.8  million.  The Company  estimates
undrawn  availability  under the credit  facility to be $7.5 million as of March
31, 2003. As of December 31, 2002, the Company had outstanding  borrowings under
the credit facility of $6.1 million.

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

     In March 2002,  the Company  finalized  with the Bank the terms of a waiver
and  amendment to the credit  agreement.  The terms of the waiver and  amendment
included,  among  other  things,  (1) a waiver of the  covenant  defaults  as of
December 31, 2001, (2) a modification to the financial covenants, as of December
31, 2002 only, to require that  consolidated  net worth and



                                     - 30 -
<PAGE>

unconsolidated  net  worth as of  December  31,  2002 be not less  than  102% of
consolidated  net  worth  and  unconsolidated  net  worth,  respectively,  as of
December  31,  2001,  (3) a  modification  to the  consolidated  net  worth  and
unconsolidated  net worth covenants to exclude any changes to  consolidated  net
worth and unconsolidated net worth resulting from the write-down or write-off of
up to $10.8  million  of the note due  from  SeraNova,  and (4) a new  financial
covenant requiring that the Company generate EBITDA of at least 90% of the prior
year's EBITDA.

     As a direct  result of the Proxy  Contest  charges,  the Company was not in
compliance  with the EBITDA covenant as of June 30, 2002 and September 30, 2002.
In January 2003,  the Company  finalized with the Bank the terms of a waiver and
amendment  to the  credit  agreement.  The  terms of the  waiver  and  amendment
included, among other things, (1) a waiver of the EBITDA covenant defaults as of
June 30, 2002 and September 30, 2002, (2) a modification  to the  definitions of
EBITDA,  total stockholders  equity and unconsolidated  stockholders equity (for
purposes of computing  related  covenant  compliance)  to exclude  Proxy Contest
charges of $464,000  for the quarter  ended June 30, 2002 and  $413,000  for the
quarter ended  September 30, 2002 only,  (3), a reduction in the minimum  EBITDA
covenant for the fourth  quarter and full year 2002 only, and (4) a modification
to the consolidated net worth and  unconsolidated net worth covenants to exclude
any changes to  consolidated  net worth and  unconsolidated  net worth resulting
from the  write-down  or write-off  of up to $12.6  million of the note due from
SeraNova.

     As a result of the SeraNova receivable impairment and other related charges
and the Proxy Contest charges  incurred during the quarter ended March 31, 2003,
the  Company  was  not  in   compliance   with  the   consolidated   net  worth,
unconsolidated  net worth and EBITDA covenants as of March 31, 2003. The Company
is  currently  negotiating  with the Bank and expects to receive a waiver of the
existing covenant defaults. There can be no assurance, however, that the Company
will be able to  obtain a waiver to the  agreement  on terms  acceptable  to the
Company.

     The Company's  current  revolving  credit  facility with the Bank is due to
expire on May 31,  2003.  The Company has  requested an extension of the current
agreement   and  believes  that  such   extension   will  be  granted  on  terms
substantially  similar to the previous  credit  facility.  However,  there is no
assurance  that the Company  will be granted  such an  extension  on  acceptable
terms, if at all.

     On May 31,  2000,  SeraNova  and the  Company  formalized  a $15.1  million
unsecured  promissory  note (the "Note")  relating to net borrowings by SeraNova
from the Company  through such date.  The Note bears  interest at the prime rate
plus 1/2%.  The Company had recorded  total  accrued  interest of $940,000 as of
December  31, 2001.  The Company has not  recorded  any accrued  interest on the
balance  of the  Note  subsequent  to the  maturity  date of July 31,  2001.  On
September 29, 2000, the Company received a $3.0 million payment from SeraNova.

     In September  2000,  SeraNova  consummated an $8.0 million  preferred stock
financing  with  two  institutional   investors.   According  to  the  mandatory
prepayment provisions of the Note, SeraNova was required to make a prepayment of
$3.0 million on the Note as a result of the stock financing.  Subsequently,  the
Company finalized, with SeraNova, the terms of an agreement to waive, subject to
certain conditions, certain of the mandatory prepayment obligations arising as a
result of the financing.  The terms of the new agreement  included,  among other
things,  that



                                     - 31 -
<PAGE>

SeraNova pay the Company (i) $500,000  upon  execution  of the  agreement;  (ii)
$500,000 on or before each of January 31, 2001,  February  28,  2001,  March 31,
2001,  April 30, 2001 and May 31, 2001; and (iii) $400,000 on or before December
15, 2000 to be applied either as (a) an advance  payment  towards a contemplated
services  arrangement for hosting services to be provided to SeraNova by Company
(the "Hosting Agreement"); or (b) in the event that no such Hosting Agreement is
executed on or before December 15, 2000, an additional advance prepayment toward
the principal of the Note.

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

     In 2001, the Company received principal payments totaling $2.1 million from
SeraNova.  However,  SeraNova  failed to make final  payment of all  amounts due
under the Note to the  Company  as of July 31,  2001.  On August 16,  2001,  the
Company  filed a complaint  against  SeraNova and  Silverline.  As of such date,
SeraNova  was  obligated  to  pay  to  the  Company  the   remaining   principal
(approximately $9.1 million) and accrued interest  (approximately $1.0 million),
or an aggregate of $10.1 million. On September 25, 2001, SeraNova and Silverline
filed a joint Answer to the Company's complaint.  In addition,  SeraNova filed a
counterclaim  against the Company for  unspecified  damages as a set-off against
the Company's  claims.  Thereafter,  in response to the Company's  request for a
statement of damages,  SeraNova stated that it was in the process of calculating
its damages,  but for  informational  purposes claimed  compensatory  damages in
excess of $5.5 million and punitive damages in the amount of $10.0 million.  The
parties  have  completed  the  discovery  process  and the Company has moved for
summary judgment.  On April 17, 2003, the Court granted partial summary judgment
and required  supplemental  briefing on certain issues. A trial date is expected
to be  scheduled  thereafter.  The  Company  believes  that there is no basis to
support the amounts claimed by SeraNova in its counterclaim for compensatory and
punitive  damages.  The  inability of the Company to collect the amount due from
SeraNova  and/or  Silverline or an adverse  decision with respect to the Company
relating  to  SeraNova's  counterclaim  could  negatively  affect the  Company's
business, financial condition or results of operations.

     In addition,  SeraNova failed to pay certain  outstanding lease obligations
to the Company's landlords.  Accordingly, on March 4, 2002, the Company filed an
arbitration  demand  with  the  American  Arbitration  Association  against  the
SeraNova Group. The demand for arbitration,  which sought damages, alleged among
other things that the SeraNova Group failed to pay outstanding lease obligations
to the  Company's  landlords  and to reimburse the Company for all rent payments
made by the Company on their behalf. An arbitration hearing was held on June 25,
2002 and June 28, 2002 seeking  $525,000 in outstanding  lease  obligations.  On
August 9,  2002,  an award  was  issued in the  amount  of  $616,905  (including
attorney's  fees) plus  reimbursement  of  administrative  fees, in favor of the
Company and against the SeraNova Group jointly and severally. In an action filed
in the Superior  Court of New Jersey,  the Court  confirmed the $624,000  award,
jointly and severally as to the SeraNova  Group,  and issued a writ of execution
against the SeraNova Group's assets. The Sheriff of Middlesex County levied this
writ of execution  on October 8, 2002 against a bank account held by  Silverline
Technologies,



                                     - 32 -
<PAGE>

Inc. On October 16, 2002,  pursuant to this writ,  the bank turned over $626,247
to the Sheriff.  On November 6, 2002 the Sheriff sent the funds to the Company's
attorneys  and the funds  were  deposited  into an  attorney  trust  account  on
November 8, 2002. On December 13, 2002,  the Company  commenced an action in the
Superior Court of New Jersey,  Chancery Division,  to recover additional amounts
due and  owing  from the  SeraNova  Group  under  the  Arbitration  Award and to
determine whether HSBC Bank USA ("HSBC"),  a creditor of the SeraNova Group, has
priority to the funds levied upon by the Sheriff. On January 31, 2003, the Court
entered judgment in the Company's favor in the amount of $218,805,  representing
the SeraNova  Group's  additional  unpaid rent arrearages  under the arbitration
award.  On February 28, 2003, the Court entered  judgment in the Company's favor
in the  amount  of  $220,415,  representing  the  Company's  attorney's  fees in
connection  with  the  Company's   efforts  to  enforce  the  SeraNova   Group's
obligations  under the  arbitration  award. On March 10, 2003, the Court ordered
HSBC to produce  discovery  proving its priority to the  $626,247  being held in
trust.  The Court is expected to rule on this issue on June 2, 2003. The Company
does not believe that the outcome of this claim will have a  materially  adverse
effect on the Company's business, financial condition or results of operations.

     The Company is  continuing  to pursue its various  legal  options to obtain
payment from the SeraNova Group on the Note and outstanding  lease  obligations.
At the same time, the Company has also been periodically  engaged in discussions
with management of the SeraNova  Group,  with the objective of seeking an out of
court  resolution to all  outstanding  matters  involving the Note,  and certain
other receivables and lease obligations.  However, the Company believed that the
liquidity  issues  plaguing the SeraNova Group  required a  reassessment  of the
realizability  of these  outstanding  amounts as of June 30,  2002.  Although no
final  resolution had been reached,  the Company  believed that the substance of
these  discussions  provided a basis for determining the approximate  realizable
value of the Note and other  receivables,  as well as an  estimate  of the costs
required to exit certain lease obligations.

     Accordingly,   the  Company  recorded  $8,362,000  of  SeraNova  receivable
impairment  and other  charges as of June 30,  2002.  Specifically,  the Company
recorded a $5,140,000  charge to  write-down  the carrying  value of the Note to
$4,000,000.  Additionally, the Company recorded a $1,257,000 charge to write-off
the carrying value of other SeraNova receivables (primarily, accrued interest on
the Note  and a  receivable  for a system  implementation  project).  Also,  the
Company  recorded a charge of  $1,501,000  for certain  lease exit  costs.  Such
charge  represents  primarily  an  accrued  liability  for  obligated  space and
equipment  costs for which  the  Company  currently  believes  it cannot  use or
sublease and the  differential  between  certain  Company lease  obligations and
sublease  amounts to be received.  As of December 31,  2002,  $1,286,000  of the
liability  remains  outstanding,  of  which  $1,028,000  is  included  in  other
long-term liabilities.

     As of March 31,  2003,  the  Company  believes  there has been an  apparent
deterioration in the financial condition of the SeraNova Group. Accordingly, the
Company re-assessed,  as of March 31, 2003, the likelihood of recovering amounts
owed by the SeraNova  Group as well as the  assumptions  used in  recording  the
original lease obligation charge. Additionally,  the Company was notified during
the first quarter of 2003 of its obligation to pay  additional  office space and
equipment  rentals,  which  had been  previously  assigned  to  SeraNova  by the
Company, because the SeraNova Group had failed to make the required payments.



                                     - 33 -
<PAGE>

     Although the Company  expects to pursue the full legal  prosecution  of the
SeraNova Group,  the Company  believes the apparent  financial  condition of the
SeraNova Group warrants the write-off of any  receivables  due from the SeraNova
Group.  Additionally,  the  Company  has  re-evaluated  and  adjusted  its lease
obligations  (including  settlements  negotiated  by the Company)  involving the
SeraNova Group as of March 31, 2003.

<TABLE>
<CAPTION>
                                             WRITE-DOWN       WRITE-OFF          LEASE
                                               OF NOTE         OF OTHER        OBLIGATIONS      LEGAL AND
                                             RECEIVABLE      RECEIVABLES           AND           OTHER
                                             - SERANOVA      - SERANOVA        SETTLEMENTS       CHARGES         TOTAL
                                           -------------------------------------------------------------------------------

<S>                                        <C>              <C>             <C>              <C>             <C>
Charges to operations during 2002......    $   5,140,000    $  1,257,000    $   1,501,000    $    464,000    $  8,362,000
Costs paid during 2002.................               --              --         (361,000)       (318,000)       (679,000)
Non-cash items.........................       (5,140,000)     (1,257,000)              --              --      (6,397,000)
                                           -------------    ------------    -------------    ------------    ------------
Accrued costs as of December 31, 2002..               --              --        1,140,000         146,000       1,286,000

Charges to operations during 2003......        4,000,000              --          795,000         265,000       5,060,000
Costs paid during 2003.................               --              --         (215,000)       (180,000)       (395,000)
Non-cash items.........................       (4,000,000)             --               --              --      (4,000,000)
                                           -------------    ------------    -------------    ------------    ------------

Accrued costs as of March 31, 2003.....    $          --    $         --    $   1,720,000    $    231,000    $  1,951,000
                                           =============    ============    =============    ============    ============
</TABLE>

     As of March 31, 2003,  $1,951,000 of the liability remains outstanding,  of
which $932,000 is included in other long-term liabilities.

     The Company's 2003 operating plan contains  assumptions  regarding  revenue
and  expenses.  The  achievement  of the operating  plan depends  heavily on the
timing of work performed by the Company on existing  projects and the ability of
the Company to gain and perform  work on new  projects.  Project  cancellations,
delays in the timing of work  performed  by the Company on existing  projects or
the inability of the Company to gain and perform work on new projects could have
an adverse  impact on the Company's  ability to execute its  operating  plan and
maintain  adequate  cash  flow.  In the  event  actual  results  do not meet the
operating  plan,  management  believes  it could  execute  contingency  plans to
mitigate such effects.  Such plans include additional cost reductions or seeking
additional financing.  Considering the cash on hand, the remaining  availability
under the credit facility and based on the achievement of the operating plan and
management's  actions taken to date,  management  believes it has the ability to
continue to generate  sufficient  cash to satisfy its operating  requirements in
the  normal  course  of  business.  However,  no  assurance  can be  given  that
sufficient cash will be generated from operations.

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

NASDAQ NATIONAL MARKET

     On April 4,  2002,  the  Company  received a letter  from the Nasdaq  Stock
Market   ("Nasdaq")   advising  the  Company  that  it  failed  to  meet  Nasdaq
requirements  for continued  listing as the closing "bid" price of the Company's
common  stock was less than  $1.00 for 30


                                     - 34 -
<PAGE>

 trading  days.  On May 13,  2002,  the
Company  received a letter from Nasdaq advising the Company that it had regained
compliance with the continued listing requirements.

     On  November  7, 2002,  the  Company  received  another  letter from Nasdaq
advising the Company that it failed to meet Nasdaq  requirements  for  continued
listing as the closing "bid" price of the  Company's  common stock was less than
$1.00 for 30 trading  days. On January 28, 2003,  the Company  received a letter
from  Nasdaq  advising  the Company  that it had  regained  compliance  with the
continued listing requirements.

     In the future,  should the Company  fail to maintain a minimum  closing bid
price of $1.00 for a period of 30 consecutive  trading days, it would once again
be subject to notification by Nasdaq that it failed to meet Nasdaq  requirements
for continued  listing.  Upon such notice,  the Company would have 180 days from
the  notice  date to regain  compliance  by having  the bid price for its Common
Stock close at $1.00 or greater  for a minimum of 10  consecutive  trading  days
during the  180-day  compliance  period.  A delisting  from the Nasdaq  National
Market could severely and adversely affect the market liquidity of the Company's
Common Stock.

COMMITMENTS

     Beginning in late 2001,  SeraNova failed to pay certain  outstanding  lease
obligations  to the  Company's  landlords.  Accordingly,  on March 4, 2002,  the
Company filed an arbitration  demand with the American  Arbitration  Association
against the SeraNova Group.  The demand for  arbitration,  which sought damages,
alleged  among other  things that the SeraNova  Group failed to pay  outstanding
lease  obligations  to the Company's  landlords and to reimburse the Company for
all rent payments made by the Company on their behalf.  An  arbitration  hearing
was held on June 25, 2002 and June 28,  2002  seeking  $525,000  in  outstanding
lease  obligations.  On August 9,  2002,  an award was  issued in the  amount of
$616,905 (including  attorney's fees) plus reimbursement of administrative fees,
in favor of the Company and against the SeraNova Group jointly and severally. In
an action filed in the Superior  Court of New Jersey,  the Court  confirmed  the
$624,000  award,  jointly and severally as to the SeraNova  Group,  and issued a
writ of execution against the SeraNova Group's assets.  The Sheriff of Middlesex
County  levied this writ of  execution on October 8, 2002 against a bank account
held by  Silverline  Technologies,  Inc. On October 16,  2002,  pursuant to this
writ,  the bank turned over  $626,247  to the  Sheriff.  On November 6, 2002 the
Sheriff sent the funds to the Company's  attorneys and the funds were  deposited
into an attorney  trust account on November 8, 2002.  On December 13, 2002,  the
Company  commenced  an  action in the  Superior  Court of New  Jersey,  Chancery
Division,  to recover  additional  amounts due and owing from the SeraNova Group
under the  Arbitration  Award and to determine  whether  HSBC, a creditor of the
SeraNova Group, has priority to the funds levied upon by the Sheriff. On January
31, 2003,  the Court entered  judgment in the  Company's  favor in the amount of
$218,805,  representing the SeraNova Group's  additional  unpaid rent arrearages
under the arbitration award. On February 28, 2003, the Court entered judgment in
the  Company's  favor in the  amount of  $220,415,  representing  the  Company's
attorney's fees in connection with the Company's efforts to enforce the SeraNova
Group's  obligations  under the arbitration  award. On March 10, 2003, the Court
ordered HSBC to produce  discovery  proving its  priority to the $626,247  being
held in trust.  The Court is expected to rule on this issue on May 12, 2003. The
Company does not believe that the outcome of this claim



                                     - 35 -
<PAGE>

will have a  materially  adverse  effect on the  Company's  business,  financial
condition or results of operations.

     On October 4, 2002,  the Company filed a complaint in the Superior Court of
New  Jersey,  Middlesex  County  against  the  SeraNova  Group and HSBC  seeking
compensatory,  consequential  and punitive damages arising out of SeraNova's and
Silverline's  failure  to  pay  certain  amounts  due  and  owing  the  Company,
SeraNova's  fraudulent conveyance of assets and customer accounts to Silverline,
and  HSBC's  allegedly   knowing   acceptance  of  a  fraudulent   guarantee  of
Silverline's debt to HSBC from SeraNova. Defendants have been served. Defendants
SeraNova and Silverline answered the Complaint on January 2, 2003. The inability
of the Company to collect the full amount due from  SeraNova  and/or  Silverline
could negatively affect the Company's  business,  financial condition or results
of operations.

     On January 30, 2003, CA Metro Center Limited  Partnership filed a complaint
in the Superior  Court of California,  County of San Mateo,  against the Company
and SeraNova as defendants.  The Complaint  seeks damages against the defendants
in the amount of $186,312 for breach of a lease agreement  relating to the lease
of premises occupied by SeraNova. The plaintiff granted the Company an extension
of time in which to answer the complaint while the parties engaged in settlement
discussions.  The  parties  have  executed a  settlement  agreement  whereby the
Company will pay an aggregate of $160,000 over time, with the last payment being
due on or before  November 30, 2003.  The Company has accrued such amount in the
consolidated balance sheet as of March 31, 2003.

     During 2002,  SeraNova failed to pay certain  obligations under a telephone
equipment lease agreement, which the Company assigned to SeraNova in February of
2001.  On  March  12,  2003,  CIT  Communications  Finance  Corporation  filed a
complaint in the Superior  Court of New Jersey,  Law  Division,  Morris  County,
against  Intelligroup and SeraNova,  jointly and severally,  as defendants.  The
complaint,  which seeks damages,  alleges among other things that the defendants
failed to pay  outstanding  lease  obligations  in the amount of  $217,899.  The
parties  have  executed a settlement  agreement  whereby the Company will pay an
aggregate of $127,000.  The Company has accrued such amount in the  consolidated
balance sheet as of March 31, 2003.

EUROPEAN MONETARY UNION (EMU)

     The Company  currently only operates in certain European  countries that do
not  participate  in the EMU.  Therefore,  the Company  believes that the recent
conversion  to  the  euro  did  not  have a  material  financial  impact  on its
operations  in Europe.  However,  the Company  would  re-evaluate  the financial
impact of the conversion to the euro on its operations should those countries in
which the Company operates decide to join the EMU.



                                     - 36 -
<PAGE>

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4.   CONTROLS AND PROCEDURES

     The Company maintains  disclosure controls and procedures that are designed
to ensure  that  information  required  to be  disclosed  by the  Company in the
reports that it files or submits under the  Securities  Exchange Act of 1934, as
amended, is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms, and that such information is accumulated
and  communicated  to the Company's  management,  President and Chief  Executive
Officer and Senior Vice President-Finance and Administration and Chief Financial
Officer, as appropriate to allow timely decisions regarding required disclosure.

     Within 90 days prior to the date of this report, the Company carried out an
evaluation,  under the supervision and with the  participation  of the Company's
management,   President   and  Chief   Executive   Officer   and   Senior   Vice
President-Finance  and  Administration  and  Chief  Financial  Officer,  of  the
effectiveness of the design and operation of the Company's  disclosure  controls
and procedures.  Based upon that evaluation,  the Company's  President and Chief
Executive Officer and Senior Vice President-Finance and Administration and Chief
Financial  Officer,  have concluded that the Company's  disclosure  controls and
procedures  are  effective.  There  have  been  no  significant  changes  in the
Company's internal controls or in other factors that could significantly  affect
the  internal  controls  subsequent  to  the  date  the  Company  completed  its
evaluation.



                                     - 37 -
<PAGE>

PART II.     OTHER INFORMATION

ITEM 1.      LEGAL PROCEEDINGS

     On February 7, 2001, NSA Investments II LLC filed a complaint in the United
States District Court for the District of  Massachusetts  naming,  among others,
SeraNova,  the Company and Rajkumar Koneru, a former director of the Company, as
defendants.  The  plaintiff  alleges that it invested  $4,000,000 in SeraNova as
part of a private placement of SeraNova common stock in March 2000, prior to the
spin-off of SeraNova by the Company. The complaint, which seeks compensatory and
punitive  damages,  alleges  that the  Company,  as a  "controlling  person"  of
SeraNova,  is  jointly  and  severally  liable  with and to the same  extent  as
SeraNova  for false  and  misleading  statements  constituting  securities  laws
violations and breach of contract.  After being served with the  complaint,  the
Company made a request for indemnification from SeraNova pursuant to the various
inter-company  agreements in connection with the spin-off. By letter dated April
13, 2001,  SeraNova's  counsel,  advised the Company that SeraNova  acknowledged
liability for such indemnification  claims and has elected to assume the defense
of the  plaintiff's  claims.  In October 2001,  the motion to dismiss,  filed on
behalf of the Company in May 2001, was denied without prejudice to refile at the
close of the discovery period. Court-ordered mediation between the plaintiff and
SeraNova  during  January and February 2002 was  unsuccessful.  In January 2002,
plaintiff  filed a motion for  partial  summary  judgment  as to certain  claims
against SeraNova.  No summary judgment motion was filed against the Company.  On
September  30,  2002,  the Court  granted  plaintiff's  motion in part,  finding
SeraNova liable for breach of contract as a matter of law. The parties  executed
a settlement  agreement,  which became  effective upon payment of the settlement
amount,  including the Company's  portion of the  settlement  amount equal to an
aggregate  amount  of  $50,000.  The  Company  has  accrued  such  amount in the
consolidated balance sheet as of March 31, 2003.

     On August 16, 2001,  the Company filed a complaint in the Superior Court of
New Jersey, Middlesex County, against SeraNova, Inc. and Silverline Technologies
Limited,  which  acquired  SeraNova in March 2001.  The  complaint,  which seeks
damages,  alleges among other things that  SeraNova  failed to pay amounts owing
under (i) an unsecured promissory note totaling  $10,079,717,  and (ii) a system
implementation  project totaling $511,573.  On September 25, 2001,  SeraNova and
Silverline  filed  a joint  Answer  to the  Company's  complaint.  In  addition,
SeraNova filed a counterclaim  against the Company for unspecified  damages as a
set-off against the Company's claims.  Thereafter,  in response to the Company's
request for a statement of damages,  SeraNova  stated that it was in the process
of calculating its damages, but for informational  purposes claimed compensatory
damages  in  excess  of  $5,500,000  and  punitive  damages  in  the  amount  of
$10,000,000.  The parties have  completed the discovery  process and the Company
moved for summary judgment. On April 17, 2003, the Court granted partial summary
judgment and required  supplemental  briefing on certain issues. A trial date is
expected to be scheduled thereafter. The Company believes that there is no basis
to support the amounts claimed by SeraNova in its  counterclaim for compensatory
and  punitive  damages.  The  inability of the Company to collect the amount due
from  SeraNova  and/or  Silverline  or an adverse  decision  with respect to the
Company  relating  to  SeraNova's   counterclaim  could  negatively  affect  the
Company's business, financial condition or results of operations.



                                     - 38 -
<PAGE>

     Beginning in late 2001,  SeraNova failed to pay certain  outstanding  lease
obligations  to the  Company's  landlords.  Accordingly,  on March 4, 2002,  the
Company filed an arbitration  demand with the American  Arbitration  Association
against the SeraNova Group.  The demand for  arbitration,  which sought damages,
alleged  among other  things that the SeraNova  Group failed to pay  outstanding
lease  obligations  to the Company's  landlords and to reimburse the Company for
all rent payments made by the Company on their behalf.  An  arbitration  hearing
was held on June 25, 2002 and June 28,  2002  seeking  $525,000  in  outstanding
lease  obligations.  On August 9,  2002,  an award was  issued in the  amount of
$616,905 (including  attorney's fees) plus reimbursement of administrative fees,
in favor of the Company and against the SeraNova Group jointly and severally. In
an action filed in the Superior  Court of New Jersey,  the Court  confirmed  the
$624,000  award,  jointly and severally as to the SeraNova  Group,  and issued a
writ of execution against the SeraNova Group's assets.  The Sheriff of Middlesex
County  levied this writ of  execution on October 8, 2002 against a bank account
held by  Silverline  Technologies,  Inc. On October 16,  2002,  pursuant to this
writ,  the bank turned over  $626,247  to the  Sheriff.  On November 6, 2002 the
Sheriff sent the funds to the Company's  attorneys and the funds were  deposited
into an attorney  trust account on November 8, 2002.  On December 13, 2002,  the
Company  commenced  an  action in the  Superior  Court of New  Jersey,  Chancery
Division,  to recover  additional  amounts due and owing from the SeraNova Group
under the Arbitration Award and to determine  whether HSBC Bank USA ("HSBC"),  a
creditor of the  SeraNova  Group,  has  priority to the funds levied upon by the
Sheriff.  On January 31, 2003, the Court entered judgment in the Company's favor
in the amount of $218,805,  representing the SeraNova Group's  additional unpaid
rent  arrearages  under the  arbitration  award. On February 28, 2003, the Court
entered judgment in the Company's favor in the amount of $220,415,  representing
the  Company's  attorney's  fees in  connection  with the  Company's  efforts to
enforce the SeraNova Group's  obligations under the arbitration  award. On March
10, 2003,  the Court ordered HSBC to produce  discovery  proving its priority to
the $626,247 being held in trust. The Court is expected to rule on this issue on
June 2, 2003.  The Company  does not believe that the outcome of this claim will
have a materially adverse effect on the Company's business,  financial condition
or results of operations.

     On June 14, 2002,  the Company  filed a complaint in the Superior  Court of
New Jersey,  Mercer  County,  against  Ashok Pandey,  a  shareholder  and former
officer and  director of the  Company.  The  complaint,  which seeks  damages in
excess of $400,000,  alleges among other things that Mr. Pandey breached certain
terms and conditions of a separation  agreement he entered into with the Company
and that Mr. Pandey has been unjustly enriched in an amount of $350,000 from the
Company.  Mr. Pandey has filed an Answer to the Company's  complaint denying the
Company's  claims.  The parties have  completed  the  discovery  process and the
Company has moved for summary judgment.  A trial date is currently scheduled for
May 19,  2003.  The Company does not believe that the outcome of this claim will
have a material adverse effect on the Company's business, financial condition or
results of operations.

     On June 26,  2002,  Ashok  Pandey  filed a Complaint  in the United  States
District   Court  for  the  District  of  New  Jersey,   alleging  that  certain
shareholders  of the Company  constituted  a group that held more than 5% of the
outstanding  shares of the  Company's  common stock and had not filed a Schedule
13D disclosure  statement with the Securities and Exchange  Commission.  On June
28, 2002, plaintiff obtained an ex parte injunctive order from the Court barring
Srini Raju, an alleged member of the "group" and a shareholder  holding 4.61% of
the Company's common



                                     - 39 -
<PAGE>

stock,  from voting in the annual  election.  On July 12, 2002,  after reviewing
actual evidence of record, and hearing argument from Pandey's counsel, the Court
held that  there was no basis to enjoin Mr.  Raju from  voting his shares at the
Annual Meeting.  After the election,  Pandey sought to file an amended complaint
dropping  certain  defendants,  and adding  others,  including  the Company.  On
September 27, 2002, the Court granted  plaintiff's  motion,  and allowed certain
limited  discovery to proceed.  On October 11, 2002,  the Company filed a motion
for Judgment on the  Pleadings in its favor,  arguing that the relief  sought by
plaintiff,   the  retroactive   sterilization  of  Mr.  Raju's  shares  and  the
invalidation of his votes at the Annual  Meeting,  is not sanctioned by law, and
is unavailable as a remedy. In response,  Pandey filed a motion seeking leave to
file a Second Amended Complaint,  seeking to drop the Section 13D claims against
the Company and  substitute  them with claims  brought  under Section 14A of the
Securities  and Exchange Act. On January 31, 2003,  the Court denied each of the
parties' motions. The parties are continuing with the discovery process.

     On July 2, 2002,  Ashok Pandey  filed a complaint in the Superior  Court of
New Jersey,  Middlesex  County,  in connection  with the Company's  recent Proxy
contest with respect to the Annual Meeting. In his Complaint,  plaintiff claimed
that  Intelligroup's  Board of  Directors  violated  their  fiduciary  duties by
adjourning  the Annual  Meeting from July 2, 2002 to July 16,  2002.  On July 3,
2002, the Court denied  Plaintiff's  application for emergent relief,  and ruled
that  Intelligroup  could adjourn its Annual Meeting,  finding that  plaintiff's
conduct in obtaining ex parte  injunctive  relief in federal court enjoining the
voting of 4.61% of the Company's  outstanding common stock without notice to the
Company, "estopped [Pandey] from complaining about the adjournment." Despite the
court's denial of his emergent  application,  plaintiff continued the litigation
in an effort to have the court sanction his unilateral attempt to hold an annual
meeting and election on July 2, 2002,  despite the Company's  adjournment of the
meeting  and  the  absence  of  its  Board  of  Directors  and a  quorum  of its
shareholders  on July 2, 2002.  The  Company  filed its  Answer and  Affirmative
Defenses on August 30, 2002 and discovery is ongoing.  On November 6, 2002,  the
Company  filed a Motion for Summary  Judgment and on January 7, 2003,  the Court
granted  Partial  Summary  Judgment.  The  discovery  process is  ongoing  and a
discovery master has been appointed to hear discovery disputes.  The trial date,
originally   scheduled  for  May  5,  2003,  has  been  adjourned  and  will  be
rescheduled.

     On July 3,  2002,  the  Company  filed a  complaint  in the  United  States
District  Court for the  District  of New  Jersey,  naming  Ashok  Pandey,  TAIB
Securities,  Inc.,  Beechrock  Holdings  Limited and Braydon Holdings Limited as
defendants.  The  complaint  alleges,  among other things,  that the  defendants
violated  federal  securities laws in connection with the Company's recent proxy
contest.  The defendants have filed an Answer to the Company's complaint denying
the Company's claims and discovery is ongoing. The Company does not believe that
the outcome of this claim will have a material  adverse  effect on the Company's
business, financial condition or results of operations.

     On October 4, 2002,  the Company filed a complaint in the Superior Court of
New  Jersey,  Middlesex  County  against  the  SeraNova  Group and HSBC  seeking
compensatory,  consequential  and punitive damages arising out of SeraNova's and
Silverline's  failure  to  pay  certain  amounts  due  and  owing  the  Company,
SeraNova's  fraudulent conveyance of assets and customer accounts to Silverline,
and  HSBC's  allegedly   knowing   acceptance  of  a  fraudulent   guarantee  of
Silverline's



                                     - 40 -
<PAGE>

debt to HSBC from SeraNova. Defendants have been served. Defendants SeraNova and
Silverline  answered  the  Complaint  on January 2, 2003.  The  inability of the
Company to collect the full amount due from  SeraNova  and/or  Silverline  could
negatively  affect the  Company's  business,  financial  condition or results of
operations.

     On January 30, 2003, CA Metro Center Limited  Partnership filed a complaint
in the Superior  Court of California,  County of San Mateo,  against the Company
and SeraNova as defendants.  The Complaint  seeks damages against the defendants
in the amount of $186,312 for breach of a lease agreement  relating to the lease
of premises occupied by SeraNova. The plaintiff granted the Company an extension
of time in which to answer the complaint while the parties engaged in settlement
discussions.  The  parties  have  executed a  settlement  agreement  whereby the
Company will pay an aggregate of $160,000 over time, with the last payment being
due on or before  November 30, 2003.  The Company has accrued such amount in the
consolidated balance sheet as of March 31, 2003.

     During 2002,  SeraNova failed to pay certain  obligations under a telephone
equipment lease agreement, which the Company assigned to SeraNova in February of
2001.  On  March  12,  2003,  CIT  Communications  Finance  Corporation  filed a
complaint in the Superior  Court of New Jersey,  Law  Division,  Morris  County,
against  Intelligroup and SeraNova,  jointly and severally,  as defendants.  The
complaint,  which seeks damages,  alleges among other things that the defendants
failed to pay  outstanding  lease  obligations  in the amount of  $217,899.  The
parties  have  executed a settlement  agreement  whereby the Company will pay an
aggregate of $127,000.  The Company has accrued such amount in the  consolidated
balance sheet as of March 31, 2003.

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

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

     On May 31, 2000, the Company and PNC Bank, N.A. (the "Bank") entered into a
three-year  revolving  credit facility.  As a result of the SeraNova  receivable
impairment  and other  related  charges and the Proxy Contest  charges  incurred
during the quarter ended March 31, 2003, the Company was not in compliance  with
the consolidated net worth,  unconsolidated net worth and EBITDA covenants as of
March 31, 2003. The Company is currently  negotiating  with the Bank and expects
to  receive  a  waiver  of  the  existing  covenant  defaults.  There  can be no
assurance,  however,  that the  Company  will be able to  obtain a waiver to the
agreement on terms acceptable to the Company.

ITEM 5.  OTHER INFORMATION

     On April 2, 2003, the Company  consummated the sale,  effective as of March
1,  2003,  of its  Asia-Pacific  group of  subsidiary  companies,  operating  in
Australia,  New Zealand,  Singapore,  Hong Kong and Indonesia to Soltius  Global
Solutions PTE Ltd, a Singapore corporation  ("Soltius").  As consideration,  the
Company  received a 5% minority  shareholding in Soltius and $650,000 in cash to
be paid by Soltius to the Company over a period of 12 months.  The consideration
was determined as a result of arms-length negotiations between the parties.



                                     - 41 -
<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

        (a)    Exhibits.

               99.1   Certification pursuant to 18 U.S.C Section 1350.

        (b)    Reports on Form 8-K.

               On April 4, 2003,  the Company filed a Form 8-K to report that on
               April 2, 2003, the Company  consummated  the sale of Intelligroup
               Singapore Pte Ltd., a Singapore  corporation,  Intelligroup  Hong
               Kong Limited, a Hong Kong corporation, Intelligroup Australia Pty
               Limited,  an Australian  corporation and Intelligroup New Zealand
               Limited,  a New Zealand  corporation,  together  representing the
               Company's  Asia-Pacific group of subsidiary companies,  operating
               in Australia, New Zealand, Singapore, Hong Kong and Indonesia, to
               Soltius Global Solutions PTE Ltd., a Singapore corporation.

               On April  17,  2003,  the  Company  filed a Form  8-K/A  with the
               Securities  and  Exchange  Commission  to provide  the  financial
               statements and pro forma financial  required under Item 7 related
               to the sale of the  Company's  Asia-Pacific  Group of  subsidiary
               companies to Soltius Global Solutions PTE Ltd.

               On May 13, 2003,  the Company  furnished a Form 8-K under Item 9,
               containing a copy of its earnings  release for the period  ending
               March 31, 2003 (including financial  statements) pursuant to Item
               12 (Results of Operations and Financial Condition).



                                     - 42 -
<PAGE>

                                   SIGNATURES


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

                                Intelligroup, Inc.


DATE: May 15, 2003              By: /s/ Nagarjun Valluripalli
                                    --------------------------------------------
                                    Nagarjun Valluripalli,
                                    Chairman of the Board, President and Chief
                                    Executive Officer
                                    (Principal Executive Officer)


DATE: May 15, 2003              By: /s/ Nicholas Visco
                                    --------------------------------------------
                                    Nicholas Visco,
                                    Senior Vice President-Finance and
                                    Administration and Chief Financial Officer
                                    (Principal Financial and Accounting Officer)




                                     - 43 -
<PAGE>

                                 CERTIFICATIONS

I, Nagarjun Valluripalli certify that:

     1.   I have reviewed this  Quarterly  Report on Form 10-Q of  Intelligroup,
          Inc.;

     2.   Based on my  knowledge,  this  Quarterly  Report  does not contain any
          untrue  statement of a material  fact or omit to state a material fact
          necessary to make the statements  made, in light of the  circumstances
          under which such  statements were made, not misleading with respect to
          the period covered by this Quarterly Report;

     3.   Based on my knowledge,  the financial statements,  and other financial
          information  included in this Quarterly Report,  fairly present in all
          material respects the financial  condition,  results of operations and
          cash flows of the registrant as of, and for, the periods  presented in
          this Quarterly Report;

     4.   The registrant's  other certifying  officers and I are responsible for
          establishing  and maintaining  disclosure  controls and procedures (as
          defined in Exchange  Act Rules  13a-14 and 15d-14) for the  registrant
          and we have:

               a.   designed such  disclosure  controls and procedures to ensure
                    that  material   information  relating  to  the  registrant,
                    including its consolidated subsidiaries, is made known to us
                    by others  within those  entities,  particularly  during the
                    period in which this Quarterly Report is being prepared;

               b.   evaluated the  effectiveness of the registrant's  disclosure
                    controls and procedures as of a date within 90 days prior to
                    the filing date of this  Quarterly  Report (the  "Evaluation
                    Date"); and

               c.   presented in this Quarterly Report our conclusions about the
                    effectiveness  of the  disclosure  controls  and  procedures
                    based on our evaluation as of the Evaluation Date;

     5.   The registrant's other certifying officers and I have disclosed, based
          on our most recent  evaluation,  to the registrant's  auditors and the
          audit  committee  of  registrant's  board  of  directors  (or  persons
          performing the equivalent function):

               a.   all  significant  deficiencies in the design or operation of
                    internal   controls   which  could   adversely   affect  the
                    registrant's  ability  to  record,  process,  summarize  and
                    report   financial   data  and  have   identified   for  the
                    registrant's  auditors any material  weaknesses  in internal
                    controls; and

               b.   any fraud, whether or not material, that involves management
                    or  other  employees  who  have a  significant  role  in the
                    registrant's internal controls; and


                                     - 44 -
<PAGE>

     6.   The  registrant's  other  certifying  officers and I have indicated in
          this Quarterly Report whether or not there were significant changes in
          internal controls or in other factors that could significantly  affect
          internal   controls   subsequent  to  the  date  of  our  most  recent
          evaluation,   including   any   corrective   actions  with  regard  to
          significant deficiencies and material weaknesses.


DATE: May 15, 2003                         By: /s/ Nagarjun Valluripalli
                                              ----------------------------------
                                            Nagarjun Valluripalli
                                            Chairman of the Board, President
                                            and Chief Executive Officer


I, Nicholas Visco certify that:

     1.   I have reviewed this  Quarterly  Report on Form 10-Q of  Intelligroup,
          Inc.;

     2.   Based on my  knowledge,  this  Quarterly  Report  does not contain any
          untrue  statement of a material  fact or omit to state a material fact
          necessary to make the statements  made, in light of the  circumstances
          under which such  statements were made, not misleading with respect to
          the period covered by this Quarterly Report;

     3.   Based on my knowledge,  the financial statements,  and other financial
          information  included in this Quarterly Report,  fairly present in all
          material respects the financial  condition,  results of operations and
          cash flows of the registrant as of, and for, the periods  presented in
          this Quarterly Report;

     4.   The registrant's  other certifying  officers and I are responsible for
          establishing  and maintaining  disclosure  controls and procedures (as
          defined in Exchange  Act Rules  13a-14 and 15d-14) for the  registrant
          and we have:

               a.   designed such  disclosure  controls and procedures to ensure
                    that  material   information  relating  to  the  registrant,
                    including its consolidated subsidiaries, is made known to us
                    by others  within those  entities,  particularly  during the
                    period in which this Quarterly Report is being prepared;

               b.   evaluated the  effectiveness of the registrant's  disclosure
                    controls and procedures as of a date within 90 days prior to
                    the filing date of this  Quarterly  Report (the  "Evaluation
                    Date"); and

               c.   presented in this Quarterly Report our conclusions about the
                    effectiveness  of the  disclosure  controls  and  procedures
                    based on our evaluation as of the Evaluation Date;

     5.   The registrant's other certifying officers and I have disclosed, based
          on our most recent  evaluation,  to the registrant's  auditors and the
          audit  committee  of  registrant's  board  of  directors  (or  persons
          performing the equivalent function):



                                     - 45 -
<PAGE>

               a.   all  significant  deficiencies in the design or operation of
                    internal   controls   which  could   adversely   affect  the
                    registrant's  ability  to  record,  process,  summarize  and
                    report   financial   data  and  have   identified   for  the
                    registrant's  auditors any material  weaknesses  in internal
                    controls; and

               b.   any fraud, whether or not material, that involves management
                    or  other  employees  who  have a  significant  role  in the
                    registrant's internal controls; and

     6.   The  registrant's  other  certifying  officers and I have indicated in
          this Quarterly Report whether or not there were significant changes in
          internal controls or in other factors that could significantly  affect
          internal   controls   subsequent  to  the  date  of  our  most  recent
          evaluation,   including   any   corrective   actions  with  regard  to
          significant deficiencies and material weaknesses.


DATE: May 15, 2003              By: /s/ Nicholas Visco
                                   ---------------------------------------------
                                Nicholas Visco
                                Senior Vice President-Finance and Administration
                                and Chief Financial Officer



                                     - 46 -