SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                                   FORM 10-QSB

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

                  For the quarterly period ended June 30, 1997
                           Commission File No. 0-20943

                               Intelligroup, Inc.
             ------------------------------------------------------
        (Exact Name of Small Business Issuer as Specified in Its Charter)

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

517 Route One South, Iselin, New Jersey                                 08830
-----------------------------------------------------------------------------
(Address of Principal Executive Offices)                           (Zip Code)

                                 (908) 750-1600
                          -----------------------------
                           (Issuer's Telephone Number,
                              Including Area Code)

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

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

     Indicate  the  number of  shares  outstanding  of each of the  Registrant's
classes of common stock, as of July 31, 1997:

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

     Common Stock, $.01 par value                         11,928,367

                 Transitional Small Business Disclosure Format:

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

<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES

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

                                                                            Page
                                                                            ----
PART I.  FINANCIAL INFORMATION

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

                 Consolidated Balance Sheets
                 as of June 30, 1997 (unaudited)
                 and December 31, 1996 ...................................    2

                 Consolidated Statements of Income
                 for the Three Months and Six Months Ended
                 June 30, 1997 and 1996 (unaudited).......................    3

                 Consolidated Statements of Cash Flows
                 for the Six Months Ended
                 June 30, 1997 and 1996 (unaudited).......................    4

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

         Item 2. Management's Discussion and Analysis of
                 Financial Condition and Results of Operations............    7

PART II. OTHER INFORMATION

         Item 1. Legal Proceedings........................................    14

         Item 2. Changes in Securities....................................    14

         Item 4. Submission of Matters to a Vote of Security Holders......    15

         Item 5. Other Information........................................    15

         Item 6. Exhibits and Reports on Form 8-K.........................    16

SIGNATURES................................................................    17


                                      - i -
<PAGE>

                         PART I.  FINANCIAL INFORMATION

                   Item 1.  Consolidated Financial Statements



                                     - 1 -
<PAGE>

<TABLE>
<CAPTION>

                              INTELLIGROUP, INC. AND SUBSIDIARIES

                                  CONSOLIDATED BALANCE SHEETS
                              June 30, 1997 and December 31, 1996

                                                                        June 30,      December 31,
                                                                         1997             1996
                                                                      -----------     ------------
                                                                      (unaudited)

<S>                                                                 <C>             <C>         
                  Assets
Current Assets:
  Cash and cash equivalents ......................................  $  2,638,000    $  7,479,000
  Accounts receivable, less allowance for doubtful accounts of
      $661,000 at June 30, 1997 and $546,000 at December 31, 1996.    11,747,000       8,538,000
  Unbilled services ..............................................     5,449,000       2,916,000
  Deferred income taxes ..........................................       331,000         331,000
  Subscriptions receivable .......................................     9,025,000              --
  Other current assets ...........................................       646,000         492,000
                                                                    ------------    ------------

      Total current assets .......................................    29,836,000      19,756,000

Property and equipment, less accumulated depreciation of $425,000
  at June 30, 1997 and $243,000 at December 31, 1996 .............     2,661,000       1,281,000
Other assets .....................................................       261,000         225,000
                                                                    ------------    ------------
                                                                    $ 32,758,000    $ 21,262,000
                                                                    ============    ============

               Liabilities and Shareholders' Equity
Current Liabilities:
  Accounts payable ...............................................  $    887,000    $    406,000
  Accrued payroll and related taxes ..............................     2,563,000       1,814,000
  Accrued expenses and other liabilities .........................     1,181,000       1,268,000
  Income taxes payable ...........................................          --           535,000
  Current portion of obligations under capital leases ............        20,000          20,000
                                                                    ------------    ------------
      Total current liabilities ..................................     4,651,000       4,043,000
                                                                    ------------    ------------

Obligations under capital leases, less current portion ...........        53,000          57,000
                                                                    ------------    ------------

Commitments and contingencies

Shareholders' Equity
  Preferred stock, $.01 par value, 5,000,000 shares authorized, 
      none outstanding............................................             --              --
  Common stock, $.01 par value, 25,000,000 shares authorized;
      11,778,367 and 10,735,600 shares issued and outstanding
      at June 30, 1997 and December 31, 1996, respectively .......        118,000         107,000
  Additional paid-in capital .....................................     28,078,000      19,201,000
  Accumulated deficit ............................................       (142,000)     (2,146,000)
                                                                    -------------   ------------- 
      Total shareholders' equity                                       28,054,000      17,162,000
                                                                    -------------   -------------
                                                                    $  32,758,000   $  21,262,000
                                                                    =============   =============


                  See accompanying notes to consolidated financial statements.

</TABLE>
                                     - 2 -
<PAGE>

<TABLE>
<CAPTION>

                                     INTELLIGROUP, INC. AND SUBSIDIARIES

                                      CONSOLIDATED STATEMENTS OF INCOME
                       For the Three Months and Six Months Ended June 30, 1997 and 1996
                                                 (unaudited)

                                                Three Months Ended June 30,     Six Months Ended June 30,
                                                ----------------------------    ----------------------------
                                                    1997            1996            1997            1996
                                                ------------    ------------    ------------    ------------

<S>                                             <C>             <C>             <C>             <C>         
Revenue .....................................   $ 19,155,000    $ 10,916,000    $ 34,893,000    $ 19,626,000
Cost of sales ...............................     12,956,000       7,723,000      24,292,000      14,146,000
                                                ------------    ------------    ------------    ------------

         Gross profit .......................      6,199,000       3,193,000      10,601,000       5,480,000

Selling, general and administrative
     expenses ...............................      4,389,000       2,421,000       7,474,000       4,065,000
                                                ------------    ------------    ------------    ------------

         Operating income ...................      1,810,000         772,000       3,127,000       1,415,000
                                                ------------    ------------    ------------    ------------

Other expenses (income):
     Interest expense (income), net .........        (44,000)        122,000        (122,000)        129,000
     Factor charges .........................             --         265,000              --         573,000
                                                ------------    ------------    ------------    ------------
                                                     (44,000)        387,000        (122,000)        702,000
                                                ------------    ------------    ------------    ------------

Income before provision for income taxes ....      1,854,000         385,000       3,249,000         713,000

Provision for income taxes ..................        686,000         117,000       1,245,000         218,000
                                                ------------    ------------    ------------    ------------


Net income ..................................   $  1,168,000    $    268,000    $  2,004,000    $    495,000
                                                ============    ============    ============    ============


Earnings per share:

         Net income per share ...............   $       0.11    $       0.02    $       0.18    $        0.04
                                                ============    ============    ============    =============


         Shares used in per share calculation     10,884,000      11,913,000      10,859,000      11,913,000
                                                ============    ============    ============    ============


                         See accompanying notes to consolidated financial statements.

</TABLE>
                                     - 3 -
<PAGE>

<TABLE>
<CAPTION>

                              INTELLIGROUP, INC. AND SUBSIDIARIES

                             CONSOLIDATED STATEMENTS OF CASH FLOWS
                           For the Six Months Ended June 30, 1997 and
                                         June 30, 1996
                                          (unaudited)

                                                                   June 30,       June 30,
                                                                     1997           1996
                                                                 -----------    -------------

<S>                                                              <C>            <C>          
Cash flows from operating activities:
   Net income .................................................  $ 2,004,000    $     495,000
   Adjustments to reconcile net income to net cash
     used in operating activities:
     Depreciation and amortization ............................      182,000          76,000
     Provision for doubtful accounts ..........................       75,000         440,000
   Changes in assets and liabilities:
     Restricted cash deposited in escrow ......................           --         100,000
     Accounts receivable ......................................   (3,284,000)     (1,455,000)
     Unbilled services ........................................   (2,533,000)     (1,624,000)
     Other current assets .....................................     (154,000)        (78,000)
     Other assets .............................................     (217,000)       (530,000)
     Cash overdraft ...........................................           --         (83,000)
     Accounts payable .........................................      481,000         (82,000)
     Accrued payroll and related taxes ........................      749,000        (360,000)
     Income taxes payable .....................................     (535,000)        218,000
     Accrued expenses and other liabilities ...................     (385,000)        227,000
     Interest payable .........................................           --         105,000
                                                                 -----------    ------------
         Net cash used in operating activities ................   (3,617,000)     (2,551,000)
                                                                 -----------    ------------

Cash flows from investing activities:
   Purchase of property and equipment .........................   (1,562,000)       (230,000)
                                                                 -----------    ------------ 

Cash flows from financing activities:
   Proceeds from subordinated debt and warrants ...............           --       6,000,000
   Repurchase of common stock .................................           --      (1,500,000)
   Proceeds from the exercise of stock options ................      342,000              --
   Repayments to factor, net ..................................           --      (1,521,000)
   Repayments of lines of credit, net .........................           --          (5,000)
   Principal payments under capital leases ....................       (4,000)        (14,000)
                                                                 -----------    ------------ 
         Net cash provided by financing activities ............      338,000       2,960,000
                                                                 -----------    ------------

         Net increase (decrease) in cash and cash equivalents..   (4,841,000)        179,000

Cash and cash equivalents at beginning of period ..............    7,479,000          71,000
                                                                 -----------    ------------

Cash and cash equivalents at end of period ....................  $ 2,638,000    $    250,000
                                                                 ===========    ============

Supplemental disclosures of cash flow information:
   Cash paid for interest .....................................  $        --    $     10,000
                                                                 ===========    ============

   Cash paid for income taxes .................................  $ 1,780,000    $         --
                                                                 ===========    ============
Noncash transactions:
   Subscriptions receivable ...................................  $ 9,025,000    $         --
                                                                 ===========    ============


                 See accompanying notes to consolidated financial statements.


</TABLE>
                                     - 4 -
<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)


(1) Basis of Presentation

     The   consolidated   financial   statements  and   accompanying   financial
information  as of June 30, 1997 and for the three and six months ended June 30,
1997 and 1996 are  unaudited  and,  in the  opinion of  management,  include all
adjustments  (consisting only of normal recurring adjustments) which the Company
considers  necessary for a fair  presentation  of the financial  position of the
Company  at such  dates  and the  operating  results  and cash  flows  for those
periods.  The  financial  statements  included  herein  have  been  prepared  in
accordance with generally accepted accounting principles and the instructions of
Form 10-QSB and Rule 10-01 of Regulation S-X.  Accordingly,  certain information
and footnote  disclosures  normally included in financial statements prepared in
accordance with generally accepted accounting  principles have been condensed or
omitted.  These  financial  statements  should be read in  conjunction  with the
Company's  audited  financial  statements  for the year ended December 31, 1996,
which were included as part of the Company's Form 10-KSB.

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


(2) Earnings Per Share

     Net income  per share is  computed  using the  weighted  average  number of
common and dilutive common equivalent shares outstanding during the period after
giving retroactive effect to an  81,351.1111-for-1  stock split effected in July
1996.  Pursuant to the  requirements of the Securities and Exchange  Commission,
stock  options  and  warrants  issued by the  Company  during the twelve  months
immediately  preceding the Company's  initial  public  offering  consummated  in
October  1996 have been  included in  computing  net income per share as if they
were  outstanding for all periods prior to the initial public offering using the
treasury stock method.

     On March 31, 1997, the Financial Accounting Standards Board issued SFAS No.
128,  "Earnings  Per Share"  ("Statement  128").  Statement 128 is effective for
fiscal years ending after December 15, 1997, and, when adopted,  it will require
restatement  of prior  years'  earnings  per share.  If the  Company had adopted
Statement  128 for the period  ending  June 30,  1997,  there would have been no
effect on earnings per share, on either the basic or diluted basis, except basic
earnings per share would have been $0.19 for the six months ended June 30, 1997.


                                     - 5 -
<PAGE>

(3) Follow-On Public Offering

     On July 2, 1997, the Company  consummated a follow-on  public offering (the
"Offering") of 1,000,000  shares of its Common Stock at a price to the public of
$9.50 per share.  On July 15, 1997 and as part of the  Offering,  an  additional
150,000 shares were issued and sold by the Company at a price of $9.50 per share
to cover  overallotments.  The net  proceeds to the Company  from the  Offering,
after   underwriting   discounts  and  commissions  and  other  expenses,   were
approximately  $10.1 million. As the effective date of the Offering was June 27,
1997, and the proceeds from the 1,000,000 shares of Common Stock issued and sold
by the  Company  were  received  on July  2,  1997,  the  Company  has  recorded
subscriptions  receivable of approximately $9.0 million as of June 30, 1997. The
balance of $1.1 million in net proceeds was collected on July 15, 1997, upon the
closing of the exercise of the underwriter's overallotment option.


                                     - 6 -
<PAGE>

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


Overview

     The  Company  provides a wide  range of  information  technology  services,
including  enterprise-wide  business process solutions,  systems integration and
custom software development based on leading technologies. The Company has grown
rapidly  since 1994 when it made a strategic  decision to diversify its customer
base by expanding the scope of its integration  and development  services and to
utilize SAP  software as a primary tool to  implement  enterprise-wide  business
process  solutions.  In 1995, the Company  became a SAP National  Implementation
Partner  and also began to utilize  Oracle  products  to  diversify  its service
offerings.  In 1997, the Company achieved National Logo Partner status with SAP.
The  Company's  current  contract  with SAP  expires on  December  31,  1997 and
provides for an automatic  one-year  renewal period unless either party provides
at least six weeks prior  written  notice of its  intention  not to renew.  This
agreement contains no minimum revenue  requirements or cost sharing arrangements
and does not provide for  commissions  or royalties to either  party.  Also,  in
1997,  the Company began to provide  implementation  services to PeopleSoft  and
Baan licensees to further diversify its service offerings.  The Company recently
expanded  its Oracle  applications  implementation  services  practice and added
upgrade  services to meet market demand of mid-size to large  companies that are
implementing  or upgrading  Oracle  applications.  In July 1997, the Company was
awarded an implementation partnership status by PeopleSoft.

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

     The  Company  recently  has bid on  certain  projects  in which  it, at the
request  of the  potential  clients,  offered a fixed  price  for its  services,
however,  none of these projects are significant.  The Company believes that, as
it pursues its strategy of making turnkey project management a larger portion of
its  business,  it will likely be  required  to offer fixed price  projects to a
greater  degree.  The Company has had limited  prior  experience  in pricing and
performing  under fixed price  arrangements.  There can be no assurance that the
Company will be able to complete  such projects  within fixed price  timeframes.
The failure to perform within such fixed price contracts, if entered into, could
have a material adverse effect on the Company's  business,  financial  condition
and results of operations.


                                     - 7 -
<PAGE>

     The  Company has derived  and  believes  that it will  continue to derive a
significant  portion  of its  revenue  from a limited  number of  customers  and
projects. For the six months ended June 30, 1997 and the year ended December 31,
1996, the Company's ten largest  customers  accounted for  approximately 63% and
66% of its revenue, respectively. During the six months ended June 30, 1997, two
customers  each  accounted  for more than 10% of  revenue.  During  1996,  three
customers each accounted for more than 10% of revenue.  For the six months ended
June 30, 1997 and the year ended December 31, 1996, 35% and 44% respectively, of
the Company's  revenue was generated by serving as a member of consulting  teams
assembled by other  information  technology  consulting  firms.  There can be no
assurance that such  information  technology  consulting  firms will continue to
engage the  Company in the future at  current  levels of  retention,  if at all.
During the six months ended June 30, 1997 and the year ended  December 31, 1996,
71% and 74%,  respectively,  of the  Company's  total  revenue was derived  from
projects in which the Company implemented  software developed by SAP. During the
six months ended June 30, 1997,  approximately  28% of the Company's revenue was
derived  from   engagements   at  which  the  Company  had  project   management
responsibilities, compared to 16% during the year ended December 31, 1996.

     The Company's most significant cost is project  personnel  expenses,  which
consists of consultant salaries,  benefits and payroll-related  expenses.  Thus,
the Company's  financial  performance  is based  primarily  upon billing  margin
(billable  hourly rate less the cost to the Company of a consultant on an hourly
basis) and personnel  utilization  rates (billable hours divided by paid hours).
The Company believes that turnkey project management assignments typically carry
higher margins.  The Company intends to accelerate a shift to such higher-margin
turnkey  management  assignments  and more complex  projects by  leveraging  its
reputation,  existing  capabilities,   proprietary  implementation  methodology,
development tools and offshore development  capabilities with expanded sales and
marketing  efforts and new service  offerings to develop  turnkey  project sales
opportunities with both new and existing  customers.  The Company's inability to
accelerate a shift to  higher-margin  turnkey  management  assignments  and more
complex projects may adversely impact the Company's future growth.  Although the
Company expects that it will utilize its proprietary  implementation methodology
in an increasing number of projects,  there can be no assurance that the Company
will be engaged to do so.

     Since  late 1994,  the  Company  has made  substantial  investments  in its
infrastructure in order to support its rapid growth.  For example,  in 1994, the
Company  established and funded an affiliated  operation in India,  the Advanced
Development  Center (the  "ADC"),  and in 1995,  established  a sales  office in
California. In addition, from 1994 to date, the Company has incurred expenses to
develop   proprietary   development  tools  and  4SIGHT  and  4SIGHT  Plus,  its
proprietary accelerated  implementation  methodology and toolset.  Commencing in
1995,  the  Company  has been  increasing  its sales  force  and its  marketing,
finance,  accounting  and  administrative  staff.  The Company  employed 71 such
personnel  as of June 30, 1997 as compared to 41 such  personnel  as of June 30,
1996.

     This Form 10-QSB contains forward-looking  statements within the meaning of
Section 21E of the  Securities  Exchange  Act of 1934,  as  amended,  including,
without  limitation,  statements  regarding the Company's  intention to shift to
higher margin turnkey  management  assignments and more complex  projects and to
utilize its proprietary  implementation  methodology in an increasing  number of
projects.  Such  forward-looking  statements  include  risks 


                                     - 8 -
<PAGE>

and  uncertainties,   including,   but  not  limited  to:  (i)  the  substantial
variability of the Company's  quarterly operating results caused by a variety of
factors,  many of which are not  within the  Company's  control,  including  (a)
seasonal  patterns of hardware and software capital  spending by customers,  (b)
information  technology  outsourcing  trends, (c) the timing,  size and stage of
projects,  (d) new service introductions by the Company or its competitors,  (e)
levels of market  acceptance  for the  Company's  services  or (f) the hiring of
additional staff; (ii) changes in the Company's billing and employee utilization
rates;  (iii) the Company's ability to manage its growth  effectively which will
require the Company (a) to continue  developing  and improving its  operational,
financial  and  other  internal  systems,  as well as its  business  development
capabilities,  (b) to attract, train, retain, motivate and manage its employees,
(c) to continue to maintain  high rates of employee  utilization  at  profitable
billing rates and, (d) to maintain project quality, particularly if the size and
scope of the Company's projects increase; (iv) the Company's ability to maintain
an effective  internal control  structure;  (v) the Company's  limited operating
history  within its current line of business;  (vi) the Company's  reliance on a
continued  relationship  with SAP America and the Company's  present status as a
SAP National  Logo  Partner;  (vii) the  Company's  substantial  reliance on key
customers  and large  projects;  (viii)  the  highly  competitive  nature of the
markets for the Company's  services;  (ix) the Company's ability to successfully
address the continuing  changes in  information  technology,  evolving  industry
standards and changing  customer  objectives and preferences;  (x) the Company's
reliance on the  continued  services of its key  executive  officers and leading
technical  personnel;  (xi)  the  Company's  ability  to  attract  and  retain a
sufficient number of highly skilled employees in the future;  (xii) the progress
the Company may have at continuing to diversify its offerings,  including growth
in its Oracle and  PeopleSoft  services;  and  (xiii) the  Company's  ability to
protect its  intellectual  property  rights.  The Company's  actual  results may
differ materially from the results disclosed in such forward-looking statements.


                                     - 9 -
<PAGE>

Results of Operations

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

<TABLE>
<CAPTION>

                                                                    Percentage of Revenue

                                                --------------------------------------------------------
                                                Three Months Ended June 30,    Six Months Ended June 30,
                                                ---------------------------    -------------------------
                                                  1997           1996            1997           1996
                                                  ----           ----            ----           ----
<S>                                              <C>            <C>             <C>            <C>   
Revenue ....................................     100.0%         100.0%          100.0%         100.0%
Cost of sales ..............................      67.6           70.7            69.6           72.1
                                                 -----          -----           -----          -----
    Gross profit ...........................      32.4           29.3            30.4           27.9
Selling, general and administrative expenses      22.9           22.2            21.4           20.7
                                                 -----          -----           -----          -----
    Operating income .......................       9.5            7.1             9.0            7.2
Factor fees / Interest expense (income) ....      (0.2)           3.5            (0.3)           3.6
                                                 -----          -----           -----          -----
Income before provision for income taxes ...       9.7            3.6             9.3            3.6
Provision for income taxes .................       3.6            1.1             3.6            1.1
                                                 -----          -----           -----          -----
Net income .................................       6.1%           2.5%            5.7%           2.5%
                                                 =====          =====           =====          ===== 

</TABLE>

Three Months Ended June 30, 1997 Compared to Three Months Ended June 30, 1996

     Revenue.  Revenue  increased by 75.5%, or $8.3 million,  from $10.9 million
during the three  months ended June 30, 1996 to $19.2  million  during the three
months  ended  June 30,  1997.  This  increase  was  attributable  primarily  to
increased  demand for the Company's  SAP-related  consulting  services and, to a
lesser extent,  to increased  demand for the Company's  systems  integration and
custom software development services.

     Gross profit.  The Company's cost of sales  includes  primarily the cost of
salaries to consultants  and related  employee  benefits and payroll taxes.  The
Company's cost of sales increased by 67.8%,  or $5.3 million,  from $7.7 million
during the three  months ended June 30, 1996 to $13.0  million  during the three
months ended June 30, 1997.  The increase was due to increased  personnel  costs
resulting  from the hiring of additional  consultants to support the increase in
demand for the  Company's  services.  The  Company's  gross profit  increased by
94.1%, or $3.0 million, from $3.2 million during the three months ended June 30,
1996 to $6.2 million  during the three months ended June 30, 1997.  Gross profit
margin  increased  from 29.3% of revenue  during the three months ended June 30,
1996 to 32.4% of  revenue  during the three  months  ended  June 30,  1997.  The
increase in such gross profit margin was attributable primarily to the fact that
revenue  increased  at a faster  rate than cost of sales which  resulted  from a
combination of improved billing margins and greater consultant utilization.

     Selling,  general  and  administrative   expenses.   Selling,  general  and
administrative  expenses consist  primarily of  administrative  salaries,  sales
person compensation, travel and entertainment, the costs associated with the ADC
and  related  development  costs and  professional  fees.  Selling,  general and
administrative  expenses increased by 81.3%, or $2.0 million,  from $2.4 million
during the three  months  ended June 30, 1996 to $4.4  million  during the three
months ended June 30, 1997,  and increased as a percentage of revenue from 22.2%
to 22.9% of revenue.  The  increase in such  expenses  was due  primarily to the
expansion of the Company's


                                     - 10 -
<PAGE>

sales and marketing activities, and increased travel and entertainment expenses.
These  expenses  were incurred to support the  continued  revenue  growth of the
Company.

     Factor fees/Interest expense (income),  net. Factor fees in the 1996 period
were the charges incurred by the Company to finance its accounts receivable.  On
October 10, 1996,  the Company  repaid the factor with a portion of the proceeds
from  the  Company's  initial  public  offering,   approximately  $4.4  million,
consisting of all amounts  outstanding  under the agreement  with its factor and
terminated  its factor  agreement.  

     Provision for income taxes. The Company's effective income tax rate was 37%
and 30.4% for the three months ended June 30, 1997 and 1996, respectively.  Such
tax rates were  favorably  impacted in 1997 by the  Company's  Indian  affiliate
where the Company is not  obligated to pay tax for the next five years and plans
to  permanently  reinvest such funds and a reduction of the Company's  valuation
allowance in 1997 and 1996.


Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996

     Revenue.  Revenue increased by 77.8%, or $15.3 million,  from $19.6 million
during the six months ended June 30, 1996 to $34.9 million during the six months
ended June 30,  1997.  This  increase  was  attributable  primarily to increased
demand  for the  Company's  SAP-related  consulting  services  and,  to a lesser
extent,  to increased  demand for the Company's  systems  integration and custom
software development services.

     Gross profit.  The  Company's  cost of sales  increased by 71.7%,  or $10.2
million,  from $14.1 million  during the six months ended June 30, 1996 to $24.3
million  during the six months  ended June 30,  1997.  The  increase  was due to
increased personnel costs resulting from the hiring of additional consultants to
support the increase in demand for the Company's  services.  The Company's gross
profit  increased by 93.4%,  or $5.1 million,  from $5.5 million  during the six
months ended June 30, 1996 to $10.6 million during the six months ended June 30,
1997.  Gross profit margin increased from 27.9% of revenue during the six months
ended  June 30,  1996 to 30.4% of revenue  during the six months  ended June 30,
1997. The increase in such gross profit margin was attributable primarily to the
fact that revenue  increased at a faster rate than cost of sales which  resulted
from  a  combination  of  improved   billing  margins  and  greater   consultant
utilization.

     Selling,  general  and  administrative   expenses.   Selling,  general  and
administrative  expenses increased by 83.9%, or $3.4 million,  from $4.1 million
during the six months ended June 30, 1996 to $7.5 million  during the six months
ended June 30, 1997,  and  increased  as a  percentage  of revenue from 20.7% to
21.4% of  revenue.  The  increase  in such  expenses  was due  primarily  to the
expansion of the Company's sales and marketing activities,  and increased travel
and  entertainment  expenses  due to the growth of the business and the employee
base.  These  expenses were incurred to support the continued  revenue growth of
the Company.

     Factor fees/Interest expense (income),  net. Factor fees in the 1996 period
were the charges incurred by the Company to finance its accounts receivable.  On
October 10, 1996,  the Company  repaid the factor with a portion of the proceeds
from  the  Company's  initial  public  offering,   approximately  $4.4  million,
consisting of all amounts  outstanding  under the agreement  with its factor and
terminated its factor agreement.


                                     - 11 -
<PAGE>

     Provision for income taxes.  The  Company's  effective  income tax rate was
38.3% and 30.6% for the six months  ended June 30,  1997 and 1996  respectively.
Such tax rates were favorably impacted in 1997 by the Company's Indian affiliate
where the Company is not  obligated to pay tax for the next five years and plans
to  permanently  reinvest such funds and a reduction of the Company's  valuation
allowance in 1997 and 1996.


Backlog

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


Liquidity and Capital Resources

     The Company funds its  operations  primarily  from cash flow generated from
operations,  and to a lesser  extent,  from  cash  balances  generated  from the
Company's initial and follow-on public  offerings.  In October 1996, the Company
consummated  its initial  public  offering of its common stock  resulting in net
proceeds to the Company of  approximately  $17.8  million.  On July 2, 1997, the
Company  received the proceeds from a follow-on public offering (the "Offering")
of 1,000,000  shares of its Common Stock at a price of $9.50 per share.  On July
15, 1997 and as part of the Offering, an additional 150,000 shares at a price of
$9.50 per share were  issued to cover  overallotments.  The net  proceeds to the
Company from the Offering,  after  underwriting  discounts and  commissions  and
other  expenses of the  Offering,  were  approximately  $10.1  million.  Of this
amount,  approximately $9.0 million constituted subscriptions receivable at June
30, 1997.  Such  subscriptions  receivable  were  collected on July 2, 1997. The
balance was  collected  on July 15, 1997 upon the closing of the exercise of the
underwriter's overallotment option.

     Cash used in operating  activities  was $3.6 million  during the six months
ended June 30, 1997,  resulting primarily from the growth in accounts receivable
and unbilled  services and the payment  during the period of income taxes.  Cash
used in  operating  activities  for the six months  ended June 30, 1996 was $2.6
million.

     The Company had working capital of $25.2 million at June 30, 1997 and $15.7
million at December 31, 1996.

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


                                     - 12 -
<PAGE>

     The Company  invested  $1.6 million and $230,000 in computer  equipment and
furniture  during the six months  ended  June 30,  1997 and 1996,  respectively.
There  are  no  material   commitments   for  capital   expenditures   currently
outstanding.

     In January 1997, the Company entered into a two-year credit  agreement with
PNC Bank, National  Association (the "Bank").  The credit facility with the Bank
has two components comprised of (i) a revolving line of credit pursuant to which
the Company may borrow up to $7.5  million (at the Bank's prime rate plus 1/4 of
1% per annum) to finance  the  working  capital  needs of the  Company  and (ii)
equipment term loans pursuant to which the Company may borrow up to an aggregate
of  $350,000  (at the Bank's  prime  rate plus 3/4 of 1% per annum) to  purchase
equipment.  The credit  limit of the  revolving  line of credit is the lesser of
$7.5 million or the Company's  borrowing base. Such borrowing base is 70% of the
net face amount of the Company's eligible accounts receivable at the time of any
loan under the revolving line of credit. The credit agreement contains covenants
which require the Company to (i) maintain its working capital during the year at
no less than 90% of the working capital at the end of the immediately  preceding
fiscal  year  and at the end of each  fiscal  year at no less  than  105% of its
working  capital at the end of the immediately  preceding  fiscal year; and (ii)
maintain  its  tangible  net  worth  during  the year at no less than 95% of its
tangible net worth at the end of the  immediately  preceding  fiscal year and at
the end of each fiscal  year at no less than 108% of  tangible  net worth at the
end of the immediately  preceding fiscal year. The Company's  obligations  under
the credit agreement are  collateralized  by substantially  all of the Company's
assets,  including  its  accounts  receivable  and  intellectual  property.  The
Company's obligations under the credit facility are payable at the expiration of
such  facility  on January  22,  1999.  In June 1997,  the  Company and the Bank
entered into a letter agreement, to modify several terms of the credit facility,
subject to the execution of a definitive modification  agreement.  Under the new
terms,  the borrowing base  limitation  will be eliminated and the interest rate
will be reduced to, at the  Company's  option,  either the Bank's prime rate per
annum or the EuroRate plus 2% on the revolving  line of credit and to the Bank's
prime rate plus 0.25% on the equipment  line of credit.  These terms are subject
to the Company maintaining an unsubordinated debt to tangible net worth ratio of
no greater than one to one and an earnings before interest and taxes to interest
expense  ratio of no less than three to one. The Bank also agreed to release the
collateral  securing the  revolving  line of credit if the Company meets certain
financial  criteria at December 31, 1997.  Although the Company has no reason to
believe that the  definitive  modification  agreement  with the Bank  reflecting
these terms will not be executed,  there can be no assurance that such agreement
will be executed in the near term, if at all.

     As of June 30, 1997, there were no amounts  outstanding under the revolving
line of credit and no equipment term loans outstanding.

     The Company believes that its available funds, together with current credit
arrangements and the cash flows expected to be generated from  operations,  will
be adequate to satisfy its current and planned  operations through at least June
30, 1999.


                                     - 13 -
<PAGE>

PART II. OTHER INFORMATION


Item 1. Legal Proceedings.

     The Company was being  investigated by the  Immigration and  Naturalization
Service  (the "INS") and on April 2, 1997,  the Company  received two Notices of
Intent to Fine from the INS in  relation  to  violations  by the  Company of the
Immigration Reform and Control Act of 1990.  Specifically,  the INS investigated
whether the Company  improperly  employed certain foreign  national  individuals
prior to their obtaining  appropriate work  authorization and failed to complete
proper employment eligibility  verification forms for all employees. The Company
cooperated fully with the INS.  Pursuant to settlement  agreements  signed April
28, 1997, fines totaling approximately $42,000 were assessed by the INS and paid
by the Company.  Such amounts were accrued as of December 31, 1996.  The Company
employs many foreign  national  individuals and has  implemented  procedures and
controls  which it believes  will ensure full  compliance  with the  Immigration
Reform and Control Act of 1990 and related regulations.  The Company now employs
in-house counsel to oversee this function.


Item 2. Changes in Securities.

     The following  information relates to all securities of the Company sold by
the  Company  within the quarter  ended June 30, 1997 which were not  registered
under the Securities Act of 1933, as amended (the "Securities Act"), at the time
of grant, issuance and/or sale:

          The Company has issued  shares of its Common Stock to employees of the
          Company  pursuant to the  exercise of stock  options that were granted
          under the 1996 Stock Plan and which,  at the time of  exercise of such
          options and  issuance  of the Common  Stock,  had not been  registered
          under the  Securities  Act. On April 16, 1997, the Company sold to Ms.
          Eileen  Clark 100 shares of its  Common  Stock,  on May 1,  1997,  the
          Company sold to Mr. Uma Pandey  14,667 shares of its Common Stock and,
          on June 3, 1997,  the Company sold to Mr. Paul Coombs 28,000 shares of
          its Common  Stock,  each such sale being made pursuant to the exercise
          of stock  options  that were  issued to each of Ms.  Clark and Messrs.
          Pandey and Coombs on July 12, 1996 at an  exercise  price of $8.00 per
          share.

     No underwriter  was employed by the Company in connection with the issuance
and sale of the securities described above. The Company claims that the issuance
and sale of all of the foregoing  securities were exempt from registration under
Section 4(2) of the  Securities  Act as  transactions  not  involving any public
offering.  Appropriate  legends were affixed to the stock certificates issued in
such  transactions.  All recipients had adequate access to information about the
Company.

     Subsequent to the end of the quarter, on July 22, 1997, the Company filed a
Registration  Statement on Form S-8 to register an aggregate of 1,547,333 shares
of Common Stock  issuable upon the exercise of stock options  granted,  or to be
granted,  under the  Company's  1996 Stock Plan and 1996  Non-Employee  Director
Stock Option Plan.


                                     - 14 -
<PAGE>

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

     The Annual Meeting of Shareholders of the Company was held on May 12, 1997.

     There  were  present  at the  meeting  in person  or by proxy  shareholders
holding an  aggregate of 9,961,112  shares of Common  Stock.  The results of the
vote taken at such meeting  with  respect to each  nominee for director  were as
follows:

Common Stock Nominees                For                 Withheld
---------------------                ---                 --------

Ashok Pandey                  9,938,712 Shares         22,400 Shares
Rajkumar Koneru               9,938,712 Shares         22,400 Shares
Nagarjun Valluripalli         9,938,712 Shares         22,400 Shares
Klaus P. Besier               9,938,712 Shares         22,400 Shares
David A. Finley               9,938,712 Shares         22,400 Shares
Kevin P. Mohan                9,938,712 Shares         22,400 Shares
Thomas S. Roberts             9,938,712 Shares         22,400 Shares


     In  addition,  a vote of the  shareholders  was taken at the meeting on the
proposal to ratify the  appointment  of Arthur  Andersen LLP as the  independent
auditors of the Company for the fiscal year ending  December  31,  1997.  Of the
shares present at the meeting in person or by proxy,  9,958,612 shares of Common
Stock were voted in favor of such  proposal,  2,300  shares of Common Stock were
voted  against  such  proposal  and 200 shares of Common  Stock  abstained  from
voting.


Item 5. Other Information.


Follow-on Public Offering

     On July 2, 1997, the Company  consummated a follow-on  public offering (the
"Offering") of 1,000,000  shares of its Common Stock at a price to the public of
$9.50 per share.  On July 15, 1997 and as part of the  Offering,  an  additional
150,000 shares were issued and sold by the Company at a price of $9.50 per share
to cover  overallotments.  The net  proceeds to the Company  from the  Offering,
after underwriting discounts and commissions and other expenses of the Offering,
were approximately $10.1 million. As the effective date of the Offering was June
27, 1997, and the proceeds from the 1,000,000  shares of Common Stock issued and
sold by the  Company  were  received on July 2, 1997,  the Company has  recorded
subscriptions  receivable of approximately $9.0 million as of June 30, 1997. The
balance of $1.1 million in net proceeds was collected on July 15, 1997, upon the
closing of the exercise of the underwriter's overallotment option.

     The  Company  intends to utilize  the net  proceeds  of this  Offering  for
general corporate purposes, including working capital and possible acquisitions.


                                     - 15 -
<PAGE>

New Offices

     During the  quarter  ended June 30,  1997,  the  Company  opened  sales and
operations offices in Atlanta, Boston, and Dallas.


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

        (a) Exhibits.

                    11 Statement re: Computation of Per Share Earnings.

                    27 Financial Data Schedule.

        (b) Reports on Form 8-K.

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


                                     - 16 -
<PAGE>

                                   SIGNATURES


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


                                       Intelligroup, Inc.




DATE:  August 6, 1997            By: /s/ Ashok Pandey
                                        ----------------------
                                    Ashok Pandey,
                                    President and Chief Executive Officer
                                    (Principal Executive Officer)


DATE:  August 6, 1997            By: /s/ Robert Olanoff
                                        -----------------------
                                    Robert Olanoff,
                                    Chief Financial Officer, Secretary
                                    and Treasurer
                                    (Principal Financial and Accounting Officer)


                                     - 17 -