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 September 30, 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 November 11, 2003:

             Class                                    Number of Shares
             -----                                    ----------------
  Common Stock, $.01 par value                           16,721,325




<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 September 30, 2003
             and December 31, 2002........................................   2

            Consolidated Statements of Operations and Comprehensive
             Income (Loss) for the Three and Nine Months Ended
             September 30, 2003 and 2002..................................   3

            Consolidated Statements of Cash Flows for the Nine Months
             Ended September 30, 2003 and 2002............................   4

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

    Item 2. Management's Discussion and Analysis of
            Financial Condition and Results of Operations.................  20

    Item 3. Quantitative and Qualitative Disclosures About Market Risk....  45

    Item 4. Controls and Procedures.......................................  45

PART II.  OTHER INFORMATION

    Item 1. Legal Proceedings.............................................  46

    Item 3. Defaults Upon Senior Securities...............................  48

    Item 4. Submission of Matters to a Vote of Security Holders...........  49

    Item 5. Other Information.............................................  49

    Item 6. Exhibits and Reports on Form 8-K..............................  50

SIGNATURES................................................................  52



                                      - i -
<PAGE>

                          PART I. FINANCIAL INFORMATION

              ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



                                     - 1 -
<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                    SEPTEMBER 30, 2003 AND DECEMBER 31, 2002
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                       SEPTEMBER 30,   DECEMBER 31,
                                                                           2003            2002
                                                                       ------------    ------------
                           ASSETS
<S>                                                                    <C>             <C>
Current Assets:
  Cash and cash equivalents.....................................       $  2,178,000    $  1,163,000
  Accounts receivable, less allowance for doubtful accounts
     of $847,000 and $1,388,000 at September 30, 2003 and
     December 31, 2002, respectively............................         16,226,000      17,745,000
  Unbilled services.............................................         10,177,000       6,818,000
  Prepaid income taxes..........................................            448,000         624,000
  Deferred tax assets...........................................          1,271,000       1,088,000
  Other current assets..........................................          3,900,000       2,858,000
  Note receivable - SeraNova....................................                 --       4,000,000
  Assets held for sale..........................................                 --       3,069,000
                                                                       ------------    ------------
         Total current assets...................................         34,200,000      37,365,000

  Property and equipment, net...................................          4,432,000       5,725,000
  Deferred tax asset............................................            152,000         118,000
  Other assets..................................................          1,066,000         911,000
                                                                       ------------    ------------
                                                                       $ 39,850,000    $ 44,119,000
                                                                       ============    ============
             LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
  Accounts payable..............................................       $  3,936,000    $  5,229,000
  Accrued payroll and related taxes.............................          8,380,000       5,891,000
  Accrued expenses and other current liabilities................          5,712,000       3,491,000
  Deferred revenue..............................................          1,697,000       1,280,000
  Income taxes payable..........................................            588,000         356,000
  Current portion of long-term debt and obligations under
     capital leases.............................................          6,168,000       6,374,000
  Liabilities held for sale.....................................                 --       1,681,000
                                                                       ------------    ------------
         Total current liabilities.............................         26,481,000       24,302,000
                                                                       ------------    ------------
Obligations under capital leases, less current portion..........             69,000          63,000
Other long-term liabilities.....................................          1,248,000       1,028,000
                                                                       ------------    ------------
         Total long-term liabilities............................          1,317,000       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,
     16,683,000 and 16,630,000 shares issued and outstanding
     at September 30, 2003 and December 31, 2002, respectively..            167,000         166,000
  Additional paid-in capital....................................         41,425,000      41,366,000
  Accumulated deficit...........................................        (26,994,000)    (19,168,000)
  Accumulated other comprehensive loss..........................         (2,546,000)     (3,638,000)
                                                                       ------------    ------------
        Total shareholders' equity .............................         12,052,000      18,726,000
                                                                       ------------    ------------
                                                                       $ 39,850,000    $ 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 AND NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                            THREE MONTHS                   NINE MONTHS
                                                            ------------                   -----------
                                                         ENDED SEPTEMBER 30,            ENDED SEPTEMBER 30,
                                                         -------------------            -------------------
                                                          2003           2002            2003           2002
                                                     ------------   ------------    ------------   ------------

<S>                                                  <C>            <C>             <C>             <C>
Revenue...........................................   $ 31,035,000   $ 26,668,000    $ 86,275,000    $ 74,479,000
Cost of sales.....................................     22,211,000     18,634,000      61,030,000      51,581,000
                                                     ------------   ------------    ------------    ------------
    Gross profit..................................      8,824,000      8,034,000      25,245,000      22,898,000
                                                     ------------   ------------    ------------    ------------
Selling, general and administrative expenses......      7,130,000      6,324,000      20,937,000      18,791,000
Depreciation and amortization.....................        719,000        615,000       2,130,000       1,942,000
SeraNova receivable impairment and other charges..             --             --       5,060,000       8,362,000
Proxy contest charges.............................        868,000        412,000       1,461,000         876,000
Provision for guarantee of SeraNova debt..........       (107,000)            --         474,000              --
                                                     ------------   ------------    ------------    ------------
    Total operating expenses......................      8,610,000      7,351,000      30,062,000      29,971,000
                                                     ------------   ------------    ------------    ------------
    Operating income (loss).......................        214,000        683,000      (4,817,000)     (7,073,000)
Interest income...................................         47,000          4,000          72,000          22,000
Interest expense..................................        (91,000)       (97,000)       (323,000)       (297,000)
Other (expense) income............................        (21,000)        (9,000)       (254,000)         48,000
                                                     ------------   ------------    ------------    ------------
Income (loss) from continuing operations
    before income tax provision ..................        149,000        581,000      (5,322,000)     (7,300,000)
Income tax provision..............................        132,000        181,000         370,000         492,000
                                                     ------------   ------------    ------------    ------------
Income (loss) from continuing operations..........         17,000        400,000      (5,692,000)     (7,792,000)
Loss from discontinued operations (including
    loss on sale of $1,706,000 in 2003), net
    of tax provision (benefit) of $0,
    $(21,000), $15,000, $9,000, respectively......             --       (387,000)     (2,134,000)       (745,000)
                                                     ------------   ------------    ------------    ------------
Net income (loss).................................   $     17,000   $     13,000    $ (7,826,000)   $ (8,537,000)
                                                     ============   ============    ============    ============

Earnings (loss) per share:
  Basic income (loss) per share:
   Income (loss) per share from continuing
        operations................................   $       0.00   $       0.02    $      (0.34)   $      (0.47)
   Loss per share from discontinued operations....             --          (0.02)          (0.13)          (0.04)
                                                     ------------   ------------    ------------    ------------
       Net income (loss) per share................   $       0.00    $      0.00    $      (0.47)   $      (0.51)
                                                     ============   ============    ============    ============
   Weighted average number of common shares -
        basic.....................................     16,683,000     16,630,000      16,656,000      16,630,000
                                                     ============   ============    ============    ============
  Diluted income (loss) per share:
   Income (loss) per share from continuing
        operations................................   $       0.00   $       0.02    $      (0.34)   $      (0.47)
   Loss per share from discontinued operations....             --          (0.02)          (0.13)          (0.04)
                                                     ------------   ------------    ------------    ------------
       Net income (loss) per share................   $       0.00   $       0.00    $      (0.47)   $      (0.51)
                                                     ============   ============    ============    ============
   Weighted average number of common shares -
        diluted...................................     17,132,000     16,633,000      16,656,000      16,630,000
                                                     ============   ============    ============    ============
Comprehensive (Loss) Income
---------------------------
Net income (loss).................................   $     17,000   $     13,000    $ (7,826,000)   $ (8,537,000)
Other comprehensive (loss) income -
      Currency translation adjustments............        (89,000)        80,000       1,092,000          67,000
                                                     ------------   ------------    ------------    ------------
Comprehensive (loss) income.......................   $    (72,000)  $     93,000    $ (6,734,000)   $ (8,470,000)
                                                     ============   ============    ============    ============
</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 NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                             NINE MONTHS ENDED SEPTEMBER 30,
                                                                                   2003             2002
                                                                              ------------     ------------
<S>                                                                           <C>              <C>
Cash flows from operating activities:
  Net loss..............................................................      $ (7,826,000)    $ (8,537,000)
  Less: loss from discontinued operations, net of tax...................        (2,134,000)        (745,000)
                                                                              ------------     ------------
  Loss from continuing operations.......................................        (5,692,000)      (7,792,000)
  Adjustments to reconcile net loss to net cash provided by
     operating activities of continuing operations:
      Depreciation and amortization.....................................         3,077,000        2,581,000
      Provision for doubtful accounts...................................           125,000          309,000
      SeraNova receivable impairment and other charges..................         5,060,000        8,362,000
      Provision for guarantee of SeraNova debt..........................           474,000               --
      Deferred income taxes.............................................          (217,000)         361,000
  Changes in operating assets and liabilities:
    Accounts receivable.................................................         1,394,000       (3,048,000)
    Unbilled services...................................................        (3,359,000)        (403,000)
    Prepaid income taxes................................................           176,000         (121,000)
    Other current assets................................................        (1,042,000)         (35,000)
    Other assets........................................................          (155,000)         (19,000)
    Accounts payable....................................................        (1,293,000)         719,000
    Accrued payroll and related taxes...................................         2,489,000          407,000
    Accrued expenses and other liabilities..............................         1,280,000          (15,000)
    Accrued restructuring charges.......................................           (93,000)        (529,000)
    Deferred revenue....................................................           417,000          172,000
    Income taxes payable................................................           232,000          283,000
                                                                              ------------     ------------
  Net cash provided by operating activities of continuing
    operations...........................................................        2,873,000        1,232,000
                                                                              ------------     ------------

Cash flows from investing activities:
    Purchase of equipment...............................................        (1,784,000)      (1,042,000)
                                                                              ------------     ------------
  Net cash used in investing activities of continuing operations........        (1,784,000)      (1,042,000)
                                                                              ------------     ------------

Cash flows from financing activities:
    Principal payments under capital leases.............................          (307,000)        (509,000)
    Proceeds from exercise of stock options.............................            60,000               --
    Other repayments....................................................          (274,000)         (48,000)
    Net change in line of credit borrowings.............................           101,000        1,033,000
                                                                              ------------     ------------
  Net cash (used in) provided by financing activities of
    continuing operations...............................................          (420,000)         476,000
                                                                              ------------     ------------
  Effect of foreign currency exchange rate changes on cash..............         1,095,000           67,000
                                                                              ------------     ------------
Net increase in cash and cash equivalents from continuing operations....         1,764,000          733,000
Net decrease in cash and cash equivalents from discontinued operations..          (749,000)        (767,000)
                                                                              ------------     ------------
Net increase (decrease) in cash and cash equivalents....................         1,015,000          (34,000)
Cash and cash equivalents at beginning of period........................         1,163,000        1,620,000
                                                                              ------------     ------------
Cash and cash equivalents at end of period..............................      $  2,178,000     $  1,586,000
                                                                              ============     ============
Supplemental disclosures of cash flow information:
  Cash paid for income taxes............................................      $    473,000     $    864,000
                                                                              ============     ============
  Cash paid for interest................................................      $    323,000     $    297,000
                                                                              ============     ============
</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  September  30, 2003 and for the three and nine months  ended
September  30, 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 consolidated  financial  statements.  Such annual consolidated  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  consolidated  balance sheet included
the   Company's   Annual   Report  on  Form  10-K,   adjusted  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  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 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 loss and 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    FOR THE NINE MONTHS ENDED
                                                     --------------------------    -------------------------
                                                            SEPTEMBER 30,                 SEPTEMBER 30,
                                                            -------------                 -------------
                                                        2003          2002            2003            2002
                                                     ---------     ----------     ------------    ------------
<S>                                                  <C>           <C>            <C>             <C>
Net income (loss), as reported.....................  $  17,000     $   13,000     $ (7,826,000)   $ (8,537,000)
Deduct: total stock-based employee compensation
expense determined under fair-value-based method
for all awards, net of related tax effects.........    (49,000)      (797,000)      (1,896,000)     (4,073,000)
                                                     ---------     ----------     ------------    ------------
Pro forma net loss.................................  $ (32,000)    $ (784,000)    $ (9,722,000)   $(12,610,000)
                                                     =========     ==========     ============    ============

Basic earnings (loss) per share:
    As reported....................................  $    0.00     $     0.00     $      (0.47)   $      (0.51)
                                                     =========     ==========     ============    ============
    Pro forma......................................  $   (0.00)    $    (0.05)    $      (0.58)   $      (0.76)
                                                     =========     ==========     ============    ============

Diluted earnings (loss) per share:
    As reported....................................  $    0.00     $     0.00     $      (0.47)   $      (0.51)
                                                     =========     ==========     ============    ============
    Pro forma......................................  $   (0.00)    $    (0.05)    $      (0.58)   $      (0.76)
                                                     =========     ==========     ============    ============
</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 108% and 110%,  risk-free
interest rate of 1.61% and 1.80% and expected  lives of 2.2 years and 2.2 years,
in 2003 and 2002, respectively.

NOTE 3 - EARNINGS (LOSS) PER SHARE

     Basic  income  (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 income (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
income (loss) per share and diluted income (loss) per share were as follows:

<TABLE>
<CAPTION>
                                                        FOR THE THREE MONTHS ENDED            FOR THE NINE MONTHS ENDED
                                                              SEPTEMBER 30,                         SEPTEMBER 30,
                                                          2003               2002              2003              2002
                                                     --------------     --------------     -------------      -------------

<S>                                                  <C>                <C>                <C>                <C>
Income (loss) from continuing operations......       $       17,000     $      400,000     $  (5,692,000)     $  (7,792,000)
Loss from discontinued operations.............                   --           (387,000)       (2,134,000)          (745,000)
                                                     --------------     --------------     -------------      -------------
Net income (loss).............................       $       17,000     $       13,000     $  (7,826,000)    $   (8,537,000)
                                                     ==============     ==============     =============      =============
Basic income (loss) per share:
   Weighted average number of common shares -
     basic ...................................           16,683,000         16,630,000        16,656,000         16,630,000
                                                     --------------     --------------     -------------      -------------
   Basic income (loss) per share from
     continuing operations....................       $         0.00     $         0.02     $       (0.34)     $       (0.47)
   Basic loss per share from discontinued
     operations...............................                   --              (0.02)            (0.13)             (0.04)
                                                     --------------     --------------     -------------      -------------
   Basic net income (loss) per share..........       $         0.00     $         0.00     $       (0.47)     $       (0.51)
                                                     ==============     ==============     =============      =============
Diluted income (loss) per share:
   Weighted average number of common shares -
     diluted..................................           17,132,000         16,633,000        16,656,000         16,630,000
                                                     --------------     --------------     -------------      -------------
   Diluted income (loss) per share from
     continuing operations....................       $         0.00     $         0.02     $       (0.34)     $       (0.47)
   Diluted loss per share from discontinued
     operations...............................                   --              (0.02)            (0.13)             (0.04)
                                                     --------------     --------------     -------------      -------------
   Diluted net income (loss) per share........       $         0.00     $         0.00     $       (0.47)     $       (0.51)
                                                     ==============     ==============     =============      =============
</TABLE>

     Stock options, which would be antidilutive (1,703,000 and 2,450,000 for the
three months ended September 30, 2003 and 2002, respectively,  and 1,743,000 and
2,419,000 for the nine months ended  September 30, 2003 and 2002,  respectively)
have been excluded  from the  calculations  of diluted  shares  outstanding  and
diluted income (loss) per share.



                                     - 7 -
<PAGE>

NOTE 4 - LINES OF CREDIT

     On May 31, 2000, the Company and PNC Bank, N.A. (the "Bank") entered into a
three-year  revolving  credit  facility.  In July 2003, the credit  facility was
extended  until May 31, 2006.  The credit  facility is currently  comprised of a
revolving  line of credit  pursuant  to which  the  Company  could  borrow up to
$15,000,000  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.

     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 total shareholders'  equity and unconsolidated  shareholders' equity
(for purposes of computing  related  covenant  compliance) and a modification to
the  computation of minimum EBITDA 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.  In July
2003, the Company  executed with the Bank an amendment to the credit  agreement.
The terms of the amendment included,  among other things, (1) a 3-year extension
of the credit facility to May 31, 2006, (2) a reduction of the maximum revolving
advance  amount under the credit  facility to  $15,000,000,  (3) a waiver of the
covenant  defaults  existing as of March 31,  2003,  (4) a  modification  to the
definitions  of total  shareholders'  equity  and  unconsolidated  shareholders'
equity  (for  purposes  of  computing   related   covenant   compliance)  and  a
modification  to the  computation  of minimum  EBITDA to exclude  Proxy  Contest
charges of $297,000 for the quarter ended March 31, 2003 only,  (5), an increase
in the minimum EBITDA covenants to $1,290,000, $1,778,000 and $1,880,000 for the
second, third and fourth quarters of 2003, respectively,  and (6) 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  $13,600,000  of the note due from
SeraNova.


                                     - 8 -
<PAGE>

NOTE 4 - LINES OF CREDIT (CONTINUED)

     As a result of the charge  incurred  during the quarter ended June 30, 2003
related to the  guarantee of SeraNova  debt,  the Company was not in  compliance
with the EBITDA  covenant as of  June 30,  2003.  In October  2003,  the Company
executed  with the Bank an amendment to the credit  agreement.  The terms of the
amendment  included,  among other things,  (1) a waiver of the covenant  default
existing as of June 30, 2003,  (2) a  modification  to the  definitions of total
shareholders'  equity and unconsolidated  shareholders'  equity (for purposes of
computing related covenant  compliance) and a modification to the computation of
minimum  EBITDA to exclude the guarantee of SeraNova debt charge of $581,000 for
the quarter ended June 30, 2003 only, and a modification  to the  definitions of
total shareholders' equity and unconsolidated shareholders' equity (for purposes
of computing related covenant  compliance) and a modification to the computation
of minimum  EBITDA to exclude Proxy Contest  charges of $750,000 for the quarter
ended  September  30,  2003 only.  As of  September  30,  2003,  the Company had
outstanding  borrowings  under the credit  facility of  $6,160,000.  The Company
estimates undrawn  availability under the credit facility to be $6,126,000 as of
September  30,  2003.  As of December  31,  2002,  the  Company had  outstanding
borrowings  under  the  credit  facility  of  $6,059,000.  The  Company  was  in
compliance with all covenants as of September 30, 2003.

     Interest expense on debt and obligations  under capital leases was $323,000
and  $297,000  for  the  nine  months  ended   September   30,  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  "Former
Subsidiaries"),  to Soltius  Global  Solutions PTE Ltd, a Singapore  corporation
("Soltius").  As consideration,  the Company received a 5% minority shareholding
in Soltius  and a $650,000  note to be paid by  Soltius  to the  Company  over a
period of 12 months.  The Company has received a total of $350,000  from Soltius
toward the note balance as of September 30, 2003.

     The Consolidated Financial Statements of the Company have been reclassified
to reflect the Sale of the Former  Subsidiaries to Soltius as of March 31, 2003.
Accordingly,  the assets, liabilities,  results of operations, and cash flows of
the  Former  Subsidiaries  prior to April 2, 2003 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  Former
Subsidiaries have been reported as discontinued operations.



                                     - 9 -
<PAGE>

NOTE 5 - DISCONTINUED OPERATIONS (CONTINUED)

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

<TABLE>
<CAPTION>
                                           FOR THE THREE MONTHS         FOR THE NINE MONTHS
                                           --------------------         -------------------
                                            ENDED SEPTEMBER 30,          ENDED SEPTEMBER 30,
                                           --------------------         -------------------
                                                  2002                  2003              2002
                                           --------------------    -------------     -------------

<S>                                         <C>                    <C>               <C>
Revenue..................................   $   1,690,000          $  1,691,000      $  4,964,000
Pre-tax loss.............................        (408,000)             (413,000)         (736,000)
Income tax (benefit) provision...........         (21,000)               15,000             9,000
Loss from discontinued operations,
   excluding loss on sale................        (387,000)             (428,000)         (745,000)


                                           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 deficit of discontinued operations...      (2,231,000)
</TABLE>

     Additionally,  the  Company  reported  a loss  on the  sale  of the  Former
Subsidiaries of $1,706,000 for the nine months ended September 30, 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%.

     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 compensatory damages in excess of $5,500,000 and punitive damages in
the amount of  $10,000,000.  After  completion  of the  discovery  process,  the
Company moved for summary judgment. On April 17, 2003, the Court granted partial
summary  judgment.  On July  11,  2003,  the  Court  dismissed  the  defendant's
counterclaims  seeking  compensatory  and punitive  damages.  On August 8, 2003,
SeraNova  and  Silverline  Technologies,  Inc.  filed for Chapter 7  Bankruptcy,
thereby  staying  this action as to these  defendants.  There has been no notice
that Silverline Technologies Limited is insolvent.  Shortly thereafter,  counsel
for  defendants  asked the Court and was  granted  permission  to be relieved as
counsel.  On September 22, 2003, the Company moved for entry of default  against
Silverline.


                                     - 10 -
<PAGE>

NOTE 6 - NOTE RECEIVABLE - SERANOVA (CONTINUED)

     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 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.  Thereafter,  the  Company  and HSBC  entered  into a  settlement
agreement  only as to the  $626,247  being  held in trust  whereby  the  Company
remitted $570,228 to HSBC, and the remaining funds were released to the Company.
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.


                                     - 11 -
<PAGE>

NOTE 6 - NOTE RECEIVABLE - SERANOVA (CONTINUED)

     Accordingly,   the  Company  recorded  $8,362,000  of  SeraNova  receivable
impairment  and other charges  during the nine months ended  September 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.
Also, the Company  recorded a charge of $1,501,000 for certain lease exit costs.
Such charge  represents  primarily an accrued  liability  for certain  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  remained  outstanding,  of which  $1,028,000  was  included  in other
long-term liabilities.

     The Company subsequently believed there had 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.

     Although the Company  expects to pursue the full legal  prosecution  of the
SeraNova Group, the Company recorded $5,060,000 of additional charges associated
with the Note and certain  other  related  issues  during the three months ended
March 31,  2003.  The Company  recognized  an  additional  impairment  charge of
$4,000,000 related to the Note,  approximately $321,000 related to other assets,
approximately  $474,000 in costs required to exit certain lease  obligations and
$265,000 in legal fees.  The Company  has  determined  that due to the  apparent
financial  condition of the SeraNova Group that recovery of the SeraNova Note is
not probable.

<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.................               --              --        (896,000)       (265,000)    (1,161,000)
Non-cash items.........................       (4,000,000)             --              --              --     (4,000,000)
                                           -------------    ------------   -------------    ------------   ------------

Accrued costs as of September 30, 2003.    $          --    $         --   $   1,039,000    $    146,000   $  1,185,000
                                           =============    ============   =============    ============   ============
</TABLE>

        As  of  September  30,  2003,   $1,185,000  of  the  liability  remained
outstanding, of which $748,000 was included in other long-term liabilities.  The
Company expects to pay out this liability through 2008.


                                     - 12 -
<PAGE>

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.

     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....................           (89,000)              --             (4,000)         (93,000)
                                               -------------     ------------       -------------    ------------
Accrued costs as of September 30, 2003....     $          --     $         --       $     79,000     $     79,000
                                               =============     ============       ============     ============
</TABLE>

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


                                     - 13 -
<PAGE>

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 group  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 transitioned its operations
          in Sweden to Denmark 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.

     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.


                                     - 14 -
<PAGE>

NOTE 8 - SEGMENT DATA AND GEOGRAPHIC INFORMATION (CONTINUED)

     Accordingly, the Company's operating results and financial position for its
continuing operations are presented in the following geographic segments for the
three and nine months ended September 30, 2003 and 2002.

<TABLE>
<CAPTION>
                                      UNITED STATES        INDIA           EUROPE            JAPAN              TOTAL
                                      -------------        -----           ------            -----              -----
<S>                                   <C>              <C>              <C>                <C>              <C>
THREE MONTHS ENDED SEPTEMBER 30, 2003
-------------------------------------
Revenue.......................        $ 24,288,000     $  4,117,000     $  1,677,000       $  953,000       $  31,035,000
Depreciation & amortization...             440,000          182,000           90,000            7,000             719,000 (1)
Operating income (loss).......            (312,000)         423,000           (5,000)         108,000             214,000 (2)
Total assets..................          28,892,000        6,935,000        2,830,000        1,193,000          39,850,000

THREE MONTHS ENDED SEPTEMBER 30, 2002
-------------------------------------
Revenue.......................        $ 21,121,000     $  3,348,000     $  1,419,000       $  780,000       $  26,668,000
Depreciation & amortization...             433,000          118,000           48,000           16,000             615,000 (3)
Operating income (loss).......             772,000          381,000         (389,000)         (81,000)            683,000 (4)
Total assets..................          28,791,000        6,997,000        1,817,000        1,577,000          39,182,000 (5)

NINE MONTHS ENDED SEPTEMBER 30, 2003
------------------------------------
Revenue.......................        $ 67,498,000     $ 11,347,000     $  4,742,000       $2,688,000       $  86,275,000
Depreciation & amortization...           1,340,000          606,000          162,000           22,000           2,130,000 (6)
Operating income (loss).......          (6,331,000)       1,121,000           76,000          317,000          (4,817,000)(7)

NINE MONTHS ENDED SEPTEMBER 30, 2002
------------------------------------
Revenue.......................        $ 57,859,000     $  9,945,000     $  4,448,000       $2,227,000       $  74,479,000
Depreciation & amortization...           1,356,000          378,000          163,000           45,000           1,942,000 (8)
Operating income (loss).......          (7,263,000)       1,726,000         (930,000)        (606,000)         (7,073,000)(9)
</TABLE>
-------------

     (1)  Excludes $212,000 of depreciation and amortization included in cost of
          sales.
     (2)  Includes  $868,000 of proxy contest  charges and $(107,000) of charges
          related to the guarantee of SeraNova debt.
     (3)  Excludes $194,000 of depreciation and amortization included in cost of
          sales.
     (4)  Includes $412,000 of proxy contest charges.
     (5)  Excludes $2,833,000 of assets held for sale.
     (6)  Excludes $947,000 of depreciation and amortization included in cost of
          sales.
     (7)  Includes  $5,060,000  of  SeraNova  receivable  impairment  and  other
          charges,  $1,461,000 of proxy contest  charges and $474,000 of charges
          related to the guarantee of SeraNova debt.
     (8)  Excludes $639,000 of depreciation and amortization included in cost of
          sales.
     (9)  Includes  $8,362,000  of  SeraNova  receivable  impairment  and  other
          charges and $876,000 of proxy contest charges.

     Included  in the revenue  line item above are  application  management  and
support  revenues of  $10,803,000  and  $6,734,000  for the three  months  ended
September 30, 2003 and 2002, respectively.  In addition,  application management
and support  revenues for the nine months ended September 30, 2003 and 2002 were
$25,908,000 and  $19,015,000,  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

Guarantee of SeraNova Debt

     By letter dated May 12, 2003, Zions First National Bank ("Zions")  informed
the Company that Network Publishing,  Inc., a former wholly-owned  subsidiary of
the  Company,  which  became a  wholly-owned  subsidiary  of  SeraNova  upon the
spin-off of SeraNova by the Company in 2000,  was  delinquent  on a loan made by
Zions and  guaranteed by the Company.  Zions was  demanding  payment of $535,608
from the Company,  plus interest  accrued from April 1, 2002.  Accordingly,  the
Company  recorded  $581,000 in the provision for guarantee of SeraNova debt line
item in second  quarter  2003 to cover this  contingency.  Subsequently,  in the
third quarter 2003, the Company  negotiated a settlement  with Zions for a total
sum of  $430,000,  to be paid out in  installments  through  January  2004.  The
Company has recorded the reversal of the $151,000 excess provision, less related
legal costs of $44,000,  in the  provision  for  guarantee of SeraNova debt line
item in the third quarter 2003.

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. Should the spin-off be ultimately construed to be taxable, there is a
risk that if  SeraNova  and/or  Silverline  are unable or  unwilling  to pay the
resultant tax liability pursuant to SeraNova's indemnification obligations under
its Tax Sharing Agreement with the Company, the Company would bear the liability
to pay such resultant tax liability.


                                     - 16 -
<PAGE>

NOTE 9 - CONTINGENCIES (CONTINUED)

Tax Contingency in India

     The Company's  Indian  subsidiary has received  assessments 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, 2000. The
assessments are for 28 million rupees,  or approximately  $600,000.  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 September 30, 2003. If the Company were not successful with
its appeals, which were filed in 2001 and 2002, a future charge of approximately
$600,000 would be recorded and reflected in the Company's consolidated statement
of operations.

Proxy Contest

     Since the second  quarter 2002,  the Company has continued to incur charges
related  to the  Proxy  Contest.  The Proxy  Contest  resulted  directly  from a
shareholder  of the Company  ("Mr.  Pandey")  launching a proxy  contest to take
control of the Company's  Board of Directors.  However,  on August 7, 2003,  the
Company and Mr. Pandey executed a settlement  agreement relating to, among other
things,  the  litigation  matters  including the Proxy  Contest.  As part of the
settlement agreement the Company agreed to pay to Mr. Pandey an aggregate amount
of $750,000 in three equal installments over two years, commencing October 2003.
Accordingly, the Company has recorded a $750,000 provision for such liability in
the consolidated statement of operations during the three months ended September
30, 2003.  Prior to the  settlement,  the Company  incurred  related  additional
litigation  expenses  of  $118,000 in the third  quarter  2003.  During the nine
months ended  September 30, 2003, the Company  incurred Proxy Contest charges of
$1,461,000.



                                     - 17 -
<PAGE>

NOTE 9 - CONTINGENCIES (CONTINUED)

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.  The  Company  paid its  portion of the  settlement  amount  equal to an
aggregate amount of $50,000 in April 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.

NOTE 10 - NEW ACCOUNTING PRONOUNCEMENTS

     In May  2003,  the  FASB  issued  SFAS No.  150,  "Accounting  for  Certain
Financial Instruments with Characteristics of Both Liabilities and Equity." SFAS
No. 150 establishes  standards for how an issuer classifies and measures certain
financial  instruments with characteristics of both liabilities and equity. SFAS
No. 150 requires that an issuer  classify a financial  instrument that is within
its scope as a liability (or an asset in some  circumstances).  The requirements
of  this  statement  apply  to  issuers'   classification   and  measurement  of
freestanding financial instruments,  including those that comprise more than one
option or forward contract.  SFAS No. 150 is effective for financial instruments
entered into or modified  after May 31, 2003,  and otherwise is effective at the
beginning  of the first  interim  period  beginning  after  June 15,  2003.  The
Company's  initial  adoption  did not have a  material  effect on the  Company's
consolidated   results  of  operations,   consolidated   financial  position  or
consolidated cash flows.



                                     - 18 -
<PAGE>

NOTE 10 - NEW ACCOUNTING PRONOUNCEMENTS (CONTINUED)

     In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation
of Variable  Interest  Entities"  ("FIN No. 46").  FIN No. 46 addresses  whether
certain types of entities,  referred to as variable  interest  entities  ("VIE")
should be consolidated in a company's financial  statements.  A VIE is an entity
that either (1) has equity investors that lack certain essential characteristics
of a  controlling  financial  interest  (including  the  ability to control  the
entity,  the obligation to absorb the entity's  expected losses and the right to
receive the entity's expected residual returns),  or (2) lacks sufficient equity
to finance  its own  activities  without  financial  support  provided  by other
entities,  which in turn  would  be  expected  to  absorb  at least  some of the
expected  losses of the VIE. An entity should  consolidate a VIE if it stands to
absorb a majority of the VIE's  expected  losses or to receive a majority of the
VIE's expected residual  returns.  In October 2003, the FASB issued a Final FASB
Staff  Position  deferring  the  effective  date  of FIN No.  46 for all  public
entities  until the first  interim or annual  period  ending after  December 15,
2003. As such, FIN No. 46 is effective for the Company as of March 31, 2004.

     In November  2002,  the  Emerging  Issues Task Force of the FASB  reached a
consensus on EITF No. 00-21,  "Accounting for Revenue Arrangements with Multiple
Deliverables"  ("EITF No.  00-21").  EITF No. 00-21 addresses how to account for
arrangements  that  may  involve  multiple  revenue-generating  activities.  The
consensus  guidance will be  applicable  to agreements  entered into in quarters
beginning after June 15, 2003. The Company adopted EITF No. 00-21 effective July
1,  2003 and is  applying  it on a  prospective  basis.  The  Company's  initial
adoption did not have a material effect on the Company's consolidated results of
operations, consolidated financial position or consolidated cash flows.



                                     - 19 -
<PAGE>

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

OVERVIEW

     HISTORY
     -------

     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.


                                     - 20 -
<PAGE>

     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 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 "Former  Subsidiaries"),  to Soltius Global Solutions PTE Ltd, a
Singapore corporation ("Soltius").  As consideration,  the Company received a 5%
minority  shareholding  in Soltius and a $650,000  note to be paid by Soltius to
the Company  over a period of 12 months.  The  Company  has  received a total of
$350,000 from Soltius toward the note balance as of September 30, 2003.

     The Consolidated Financial Statements of the Company have been reclassified
to reflect the Sale of the Former  Subsidiaries to Soltius as of March 31, 2003.
Accordingly,  the assets, liabilities,  results of operations, and cash flows of
the  Former  Subsidiaries  prior to April 2, 2003 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.

     REVENUES
     --------

     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


                                     - 21 -
<PAGE>

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.

     EXPENSES
     --------

     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/daily  rate  less  the  cost  to  the  Company  of  a  consultant  on  an
hourly/daily  basis) and personnel  utilization rates (billable hours divided by
paid hours).

     FIXED PRICE PROJECTS
     --------------------

     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 nine
months ended  September 30, 2003 and the year ended December 31, 2002,  revenues
derived  from  projects  under fixed price  contracts  represented  37% and 33%,
respectively,  of the Company's total revenue. No single fixed price project was
material to the Company's  business  during the nine months ended  September 30,
2003 or during 2002.  The Company  believes  that, as it pursues its strategy of
providing  application  management  services to  customers,  it will continue to
offer fixed price  projects.  The Company  believes that there are certain risks
related to fixed price arrangements and thus prices such arrangements to reflect
the associated  risk. There can be no assurance that the Company will be able to
complete such projects within the fixed price timeframes. The failure to perform
within  such  fixed  price  contracts,  if entered  into,  could have a material
adverse  effect on the Company's  business,  financial  condition and results of
operations.

     CUSTOMER CONCENTRATION
     ----------------------

     The  Company has derived  and  believes  that it will  continue to derive a
significant  portion  of its  revenue  from a limited  number of  customers  and
projects.  For the nine  months  ended  September  30,  2003 and the year  ended
December 31, 2002,  the  Company's  ten largest  customers  accounted for in the
aggregate,  approximately 46% and 42% of its revenue, respectively. For the nine
months ended September 30, 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 nine months ended  September 30, 2003 and the
year ended  December  31,  2002,  12% 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.


                                     - 22 -
<PAGE>

     SOFTWARE PARTNERS
     -----------------

     For the nine months ended  September  30, 2003 and the year ended  December
31, 2002,  the Company  derived the following  percentages of total revenue from
projects  in which the Company  implemented,  extended,  maintained,  managed or
supported software developed by SAP, PeopleSoft and Oracle:

                                           PERCENTAGE OF REVENUE
                                    ----------------------------------------
                                    NINE MONTHS ENDED         YEAR ENDED
                                    SEPTEMBER 30, 2003     DECEMBER 31, 2002
                                    ------------------     -----------------
     SAP.......................            67%                   62%
     PeopleSoft................            24%                   22%
     Oracle....................             6%                    9%

     COMPETITORS
     -----------

     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, Accenture 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.

     OFFICES
     -------

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



                                     - 23 -
<PAGE>

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;

     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,  and (h) the
          hiring of additional staff;

     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;


                                     - 24 -
<PAGE>

     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 Company's  ability to manage fixed price projects  effectively and
          efficiently;

     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;

     o    uncertainties  resulting  from  pending  litigation  matters  and from
          potential  administrative  and  regulatory  immigration  and  tax  law
          matters; 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.

STRATEGIC TRANSACTIONS

     The  Company   considers   strategic   transactions  such  as  mergers  and
acquisitions  in the ordinary  course.  At the present time,  the Company is not
actively considering any such transactions. The foregoing statement is made only
as of the date of this  filing and should not be relied  upon on any  subsequent
date. While we may elect to update such information at some point in the future,
we  specifically  disclaim any  obligation  to do so, until such  disclosure  is
required under applicable securities laws.

                                     - 25 -
<PAGE>

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                        NINE MONTHS
                                                            ENDED SEPTEMBER 30,               ENDED SEPTEMBER 30,
                                                          ------------------------            ---------------------
                                                            2003              2002             2003            2002
                                                          ------             -----            -----           -----
<S>                                                        <C>               <C>              <C>             <C>
Revenue............................................        100.0%            100.0%           100.0%          100.0%
Cost of sales......................................         71.6              69.9             70.7            69.3
                                                          ------             -----            -----           -----
     Gross profit..................................         28.4              30.1             29.3            30.7
Selling, general and administrative
   expenses........................................         23.0              23.7             24.3            25.2
Depreciation and amortization......................          2.3               2.3              2.5             2.6
SeraNova receivable impairment and other charges...           --                --              5.9            11.2
Proxy contest charges..............................          2.8               1.5              1.7             1.2
Provision for guarantee of SeraNova debt...........         (0.4)               --              0.5              --
                                                          ------             -----            -----           -----
     Total operating expenses......................         27.7              27.5             34.9            40.2
                                                          ------             -----            -----           -----
     Operating income (loss).......................          0.7               2.6             (5.6)           (9.5)
Interest income....................................          0.2               0.0              0.1             0.0
Interest expense...................................         (0.3)             (0.4)            (0.4)           (0.4)
Other (expense) income.............................         (0.1)             (0.0)            (0.3)            0.1
                                                          ------             -----            -----           -----
Income (loss) from continuing operations before
    income tax provision...........................          0.5               2.2             (6.2)           (9.8)
Income tax provision...............................          0.4               0.7              0.4             0.7
                                                          ------             -----            -----           -----
Income (loss) from continuing operations...........          0.1 %             1.5%            (6.6)%         (10.5)%
                                                          ======             =====            =====           =====
</TABLE>

     Three  months  ended  September  30, 2003  Compared to Three  Months  Ended
     September 30, 2002

     The following  discussion compares the consolidated results from continuing
operations  for the three months ended  September  30, 2003 and the three months
ended September 30, 2002.

     Revenue.  Total revenue  increased by 16.4%,  or $4.4  million,  from $26.7
million for the three months ended  September 30, 2002, to $31.0 million for the
three months ended September 30, 2003. The increase was  attributable  primarily
to growth in  revenue  generated  in the  United  States  (an  increase  of $3.2
million), India (an increase of $770,000),  Europe (an increase of $258,000) and
Japan (an increase of $173,000).  In 2002, the demand for the Company's services
was negatively  impacted by the challenging and uncertain  economic  conditions,
which  precluded  many  companies  from  spending   resources  on  IT  projects.
Subsequently,  beginning in mid-to-late 2002, the Company began to experience an
increase  in demand  for  services.  Accordingly,  the  revenue  growth  results
directly  from  increased  demand for the  majority of the  Company's  services,
including traditional  consulting service offerings,  application management and
support services and offshore development services.



                                     - 26 -
<PAGE>

     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 19.2%, or $3.6 million,  from $18.6 million
for the three months ended  September  30, 2002,  to $22.2 million for the three
months ended September 30, 2003. The Company's  gross profit  increased by 9.8%,
or $790,000, from $8.0 million for the three months ended September 30, 2002, to
$8.8 million for the three months ended September 30, 2003. The increase in cost
of sales and gross profit  results  from the  increase in revenue.  Gross margin
decreased to 28.4% for the three months ended September 30, 2003, from 30.1% for
the three months ended  September 30, 2002.  The decline in gross margin results
from general  pricing  pressures,  volume  discounts  provided to certain of the
Company's  largest customers and the impact of milestone timing on certain fixed
price engagements.

     Selling,  general  and  administrative   expenses.   Selling,  general  and
administrative  expenses  primarily  consist of salaries,  and related  benefits
costs, occupancy costs, sales person compensation,  travel and entertainment and
professional  fees.  Additionally,  the  Company  created  a  new  strategy  and
solutions  group in 2003.  This group,  which is comprised of a number of highly
skilled consultants,  is responsible for the design and development of solutions
as  well as  supporting  the  sales  organization  by  preparing  and  providing
technical presentations to customers. The costs of such group of consultants are
reported  within the  selling,  general  and  administrative  expense  category.
Selling,  general and administrative expenses increased by 12.7% or $806,000, to
$7.1 million for the three months ended  September  30, 2003,  from $6.3 million
for the three months ended  September 30, 2002, but decreased as a percentage of
revenue to 23.0% from 23.7%, respectively.  The increase in selling, general and
administrative  expenses,  in absolute  dollars,  was related  primarily  to the
creation of the new strategy and  solutions  group and  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 $719,000 for the three months ended September 30, 2003, compared to
$615,000  for the three  months  ended  September  30,  2002.  The  increase was
primarily due to  depreciation on additional  computers,  equipment and software
placed in service since September 30, 2002.

     Proxy  contest  charges.  Since the second  quarter  2002,  the Company has
continued  to incur  charges  related to the  contested  2002 Annual  Meeting of
Shareholders  ("Proxy  Contest").  The Proxy  Contest  resulted  directly from a
shareholder  of the Company  ("Mr.  Pandey")  launching a proxy  contest to take
control of the Company's  Board of Directors.  However,  on August 7, 2003,  the
Company and Mr. Pandey executed a settlement  agreement relating to, among other
things,  the  litigation  matters  including the Proxy  Contest.  As part of the
settlement agreement the Company agreed to pay to Mr. Pandey an aggregate amount
of $750,000 in three equal installments over two years, commencing October 2003.
Accordingly, the Company has recorded a $750,000 provision for such liability in
the consolidated statement of operations during the three months ended September
30, 2003.  Prior to the  settlement,  the Company  incurred  related  additional
litigation expenses of $118,000 in the third quarter 2003. During the


                                     - 27 -
<PAGE>

three months ended  September 30, 2002, the Company  incurred  $412,000 in legal
fees and other charges related to the Proxy Contest.

     Provision  for  guarantee of SeraNova  debt.  By letter dated May 12, 2003,
Zions  First  National  Bank   ("Zions")   informed  the  Company  that  Network
Publishing,  Inc., a former wholly-owned subsidiary of the Company, which became
a  wholly-owned  subsidiary  of  SeraNova  upon the  spin-off of SeraNova by the
Company in 2000,  was  delinquent on a loan made by Zions and  guaranteed by the
Company. Zions was demanding payment of $535,608 from the Company, plus interest
accrued  from  April 1,  2002.  Accordingly,  the  Company  recorded  a $581,000
provision in second quarter 2003 to cover this contingency. Subsequently, in the
third quarter 2003, the Company  negotiated a settlement  with Zions for a total
sum of  $430,000,  to be paid out in  installments  through  January  2004.  The
Company has recorded the reversal of the $151,000 excess provision, less related
legal costs of $44,000,  in the  provision  for  guarantee of SeraNova debt line
item in the third quarter 2003.

     Interest  income.  The Company earned $47,000 in interest income during the
three months ended  September  30, 2003,  compared  with $4,000 during the three
months ended  September 30, 2002.  The interest  income is related  primarily to
certain interest-bearing bank accounts. The change results from a higher average
balance of invested cash during the three months ended September 30, 2003.

     Interest  expense.  The  Company  incurred  $91,000 and $97,000 in interest
expense during the three months ended September 30, 2003 and 2002, respectively,
related  primarily to borrowings under its line of credit.  Borrowings under the
line of credit were used primarily to fund operating  activities and the charges
associated with the proxy contest.

     Other  (expense)  income.  Other  (expense)  income results  primarily from
realized  (losses) gains  associated with changes in foreign  currency  exchange
rates.  The Company  reported  other expense of $21,000  during the three months
ended September 30, 2003, compared with other expense of $9,000 during the three
months ended September 30, 2002.

     Provision for income taxes. The Company's  effective tax rate was 88.6% for
the three months ended  September 30, 2003. The large provision for income taxes
results from 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  September  30, 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 $1.4 million
will be realized.  The Company's  effective  rate was 31.1% for the three months
ended September 30, 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  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 was


                                     - 28 -
<PAGE>

restricted to 90% of such income.  Further,  domestic  revenue from software and
related  services  is taxable  in India.  Effective  April 1, 2003,  the 90% tax
deduction  incentive  restriction  was repealed  and the tax  incentive is again
available  for the  entire  amount of income  from the  export of  software  and
related  services.  For the three months ended  September 30, 2003 and 2002, the
tax holiday and tax deduction  favorably  impacted the  Company's  effective tax
rate.

     The Company's  Indian  subsidiary has received  assessments 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, 2000. The
assessments are for 28 million rupees,  or approximately  $600,000.  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 September 30, 2003. If the Company were not successful with
its appeals, which were filed in 2001 and 2002, a future charge of approximately
$600,000 would be recorded and reflected in the Company's consolidated statement
of operations.

     Nine  months  ended  September  30,  2003  Compared  to Nine  Months  Ended
     September 30, 2002

     The following  discussion compares the consolidated results from continuing
operations  for the nine  months  ended  September  30, 2003 and the nine months
ended September 30, 2002.

     Revenue.  Total revenue  increased by 15.8%,  or $11.8 million,  from $74.5
million for the nine months ended  September  30, 2002, to $86.3 million for the
nine months ended September 30, 2003. The increase was attributable primarily to
growth in revenue  generated in the United States (an increase of $9.6 million),
India (an increase of $1.4 million),  Japan (an increase of $461,000) and Europe
(an increase of $294,000).  In 2002,  the demand for the Company's  services was
negatively impacted by the challenging and uncertain economic conditions,  which
precluded many companies from spending  resources on IT projects.  Subsequently,
beginning in  mid-to-late  2002,  the Company began to experience an increase in
demand for  services.  Accordingly,  the revenue  growth  results  directly from
increased  demand  for  the  majority  of  the  Company's  services,   including
traditional  consulting  service offerings,  application  management and support
services and offshore development services.

     Gross  profit.  The  Company's  cost of sales  increased by 18.3%,  or $9.4
million,  from $51.6  million for the nine months ended  September  30, 2002, to
$61.0 million for the nine months ended  September 30, 2003. The Company's gross
profit  increased by 10.2%, or $2.3 million,  from $22.9 million for nine months
ended  September 30, 2002, to $25.2 million for the nine months ended  September
30,  2003.  The  increase  in cost of sales and gross  profit  results  from the
increase in revenue.  Gross margin  decreased to 29.3% for the nine months ended
September 30, 2003,  from 30.7% for nine months ended  September  30, 2002.  The
decline in gross margin  results  primarily from pricing  pressures,  due to the
increased competition for new projects.

     Selling,  general  and  administrative   expenses.   Selling,  general  and
administrative expenses increased by 11.4% or $2.1 million, to $20.9 million for
the nine months ended  September  30, 2003,  from $18.8  million for nine months
ended September 30, 2002, but


                                     - 29 -
<PAGE>

decreased  as a  percentage  of revenue to 24.3% from 25.2%,  respectively.  The
increase in selling,  general and administrative  expenses, in absolute dollars,
was related primarily to the creation of the new strategy and solutions group in
2003 as well as an increase in discretionary  sales and marketing  expenditures.
In early 2003, the Company  created a new strategy and solutions  group to focus
on the design and  development  of solutions as well as the support of the sales
organization by preparing and providing technical presentations to customers. In
2003,  the  Company  also  invested  in  certain  targeted  sales and  marketing
initiatives, such as participation in a number of conferences and trade shows as
well  as  a  new  branding  roll-out.  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 $2.1 million for the nine months ended September 30, 2003, compared
to $1.9  million for nine months  ended  September  30,  2002.  The increase was
primarily due to  depreciation on additional  computers,  equipment and software
placed in service since September 30, 2002.

     SeraNova  receivable  impairment and other charges.  During the nine months
ended  September 30, 2002, the Company  recorded  approximately  $8.4 million in
special charges  associated with the note receivable from SeraNova (the "Note"),
and certain other related issues.  Although the Company had aggressively pursued
its various legal options to obtain  payment from the SeraNova Group on the Note
and  outstanding  lease  obligations,  the  Company  believed  that the  current
liquidity  issues  plaguing the SeraNova Group  required a  reassessment  of the
realizability of these  outstanding  amounts.  During this time, the Company had
also actively 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.
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
recognized  an  impairment  charge in the amount of $5.1 million  related to the
note during the nine months ended September 30, 2002. Additionally,  the Company
recorded a write-off of $1.3  million  related to interest on the note and other
receivables  due from the SeraNova  Group.  Finally,  the Company  recorded $1.5
million in costs  required  to exit  certain  lease  obligations  related to the
SeraNova Group.

     During the nine months ended September 30, 2003, the Company  recorded $5.1
million of additional  charges associated with the note receivable from SeraNova
and  certain  other  related  issues.   The  Company  recognized  an  additional
impairment charge of $4.0 million related to the Note, $321,000 related to other
assets,  $474,000  in costs  required  to exit  certain  lease  obligations  and
$265,000 in legal fees.  The Company  has  determined  that due to the  apparent
financial  condition of the SeraNova Group that recovery of the SeraNova Note is
not probable.

     Proxy  contest  charges.  Since the second  quarter  2002,  the Company has
continued  to incur  charges  related to the Proxy  Contest.  The Proxy  Contest
resulted  directly from Mr. Pandey  launching a proxy contest to take control of
the Company's  Board of Directors.  However,  on August 7, 2003, the Company and
Mr. Pandey executed a settlement  agreement relating to, among other things, the
litigation  matters  including  the  Proxy  Contest.  As part of the  settlement

                                     - 30 -
<PAGE>

agreement  the  Company  agreed  to pay to Mr.  Pandey  an  aggregate  amount of
$750,000 in three equal  installments over two years,  commencing  October 2003.
Accordingly, the Company has recorded a $750,000 provision for such liability in
the consolidated  statement of operations during the nine months ended September
30, 2003.  Prior to the  settlement,  the Company  incurred  related  additional
litigation expenses of $711,000 during the nine months ended September 30, 2003.
During the nine months ended September 30, 2002, the Company  incurred  $876,000
in legal fees and other charges related to the Proxy Contest.

     Provision  for  Guarantee of SeraNova  debt.  By letter dated May 12, 2003,
Zions informed the Company that Network Publishing,  Inc., a former wholly-owned
subsidiary of the Company,  which became a  wholly-owned  subsidiary of SeraNova
upon the spin-off of SeraNova by the Company in 2000,  was  delinquent on a loan
made by Zions and  guaranteed  by the Company.  Zions was  demanding  payment of
$535,608  from  the  Company,   plus  interest   accrued  from  April  1,  2002.
Accordingly,  the Company  recorded  $581,000 in the  provision for guarantee of
SeraNova  debt line  item in  second  quarter  2003 to cover  this  contingency.
Subsequently,  in the third  quarter 2003,  the Company  negotiated a settlement
with Zions for a total sum of $430,000,  to be paid out in installments  through
January  2004.  The Company has recorded  the  reversal of the  $151,000  excess
provision,  less related legal costs of $44,000,  in the provision for guarantee
of SeraNova debt line item in the third quarter 2003.

     Interest  income.  The Company earned $72,000 in interest income during the
nine months ended  September  30, 2003,  compared  with $22,000  during the nine
months ended  September 30, 2002.  The interest  income is related  primarily to
certain interest-bearing bank accounts. The change results from a higher average
balance of invested cash during the nine months ended September 30, 2003.

     Interest  expense.  The Company incurred  $323,000 and $297,000 in interest
expense during the nine months ended September 30, 2003 and 2002,  respectively,
related  primarily to borrowings under its line of credit.  Borrowings under the
line of credit were used primarily 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 nine months ended September 30, 2003.

     Other  (expense)  income.  Other  (expense)  income results  primarily from
realized  (losses) gains  associated with changes in foreign  currency  exchange
rates.  The Company  reported  other expense of $254,000  during the nine months
ended September 30, 2003,  compared with other income of $48,000 during the nine
months ended September 30, 2002.

     Provision  for income  taxes.  Despite an operating  loss, a provision  for
income taxes of was required  for the nine months ended  September  30, 2003 and
2002, 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  September  30, 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 $1.4 million
will be realized.


                                     - 31 -
<PAGE>

     In  1996,  the  Company  elected  a five  year tax  holiday  in  India,  in
accordance with a local tax incentive  program whereby no income tax will be due
in such period.  Such tax holiday was extended an additional five years in 1999.
Effective  April 1, 2000 pursuant to changes  introduced  by the Indian  Finance
Act, 2000,  the tax holiday  previously  granted is no longer  available and has
been  replaced  in the form of a tax  deduction  incentive.  The  impact of this
change is not expected to be material to the consolidated  financial  statements
of the Company.  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.  Effective April 1, 2003, the 90% tax deduction incentive  restriction
was repealed and the tax  incentive is again  available for the entire amount of
income from the export of software  and  related  services.  For the nine months
ended  September 30, 2003 and 2002, the tax holiday and tax deduction  favorably
impacted the Company's effective tax rate.

     The Company's  Indian  subsidiary has received  assessments 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, 2000. The
assessments are for 28 million rupees,  or approximately  $600,000.  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 September 30, 2003. If the Company were not successful with
its appeals, which were filed in 2001 and 2002, a future charge of approximately
$600,000 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 transitioned its operations
          in Sweden to Denmark as of January 1, 2003. The European  headquarters
          are located in Milton Keynes, United Kingdom; and


                                     - 32 -
<PAGE>

     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 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  September  30, 2003  Compared to Three  months  Ended
     September 30, 2002

     The  following  discussion  compares  the segment  results  for  continuing
operations  for the three months ended  September  30, 2003 and the three months
ended September 30, 2002.

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

                                   THREE MONTHS ENDED SEPTEMBER 30,
                        ------------------------------------------------------
                                  2003                         2002
                        ------------------------      ------------------------
                                      PERCENTAGE                    PERCENTAGE
                         DOLLARS       OF TOTAL         DOLLARS      OF TOTAL
                         -------      ----------        -------     ----------
United States........   $  24,288        78.3%         $  21,121       79.2%
India................       4,117        13.3              3,348       12.6
Europe...............       1,677         5.4              1,419        5.3
Japan................         953         3.0                780        2.9
                        ---------       ------         ---------      ------
Total................   $  31,035       100.0%         $  26,668      100.0%
                        =========       ======         =========      ======

     US revenue increased by 15.0%, or $3.2 million,  from $21.1 million for the
three months ended  September  30, 2002,  to $24.3  million for the three months
ended September 30, 2003. In 2002, the demand for the US services was negatively
impacted by the challenging and uncertain economic  conditions,  which precluded
many companies from spending resources on IT projects.  Subsequently,  beginning
in  mid-to-late  2002,  the US began to  experience  an  increase  in demand for
services. Accordingly, the revenue growth results directly from increased demand
for the  majority  of US  services,  including  traditional  consulting  service
offerings,  application management and support services and offshore development
services.

     India revenue  increased by 23.0%,  or $769,000,  from $3.3 million for the
three months  ended  September  30,  2002,  to $4.1 million for the three months
ended September 30, 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  increased by 18.2%, or $258,000,  from $1.4 million for the
three months  ended  September  30,  2002,  to $1.7 million for the three months
ended September 30, 2003. The


                                     - 33 -
<PAGE>

increase was attributable  primarily to the Company's  operations in Denmark (an
increase of $471,000), which was slightly offset by a decrease of revenue in the
Company's  operations in the United  Kingdom (a decrease of $200,000) and Sweden
(a decrease of $13,000).  The improvement in Denmark was attributable  primarily
to a general increase in demand for local SAP services, including a $2.0 million
implementation contract with a large agricultural-based company. The decrease in
the United  Kingdom  results  primarily  from  efforts to  maintain  the current
PeopleSoft  application management business while only targeting new engagements
that can be delivered  using India  resources.  The decrease in Sweden  resulted
primarily from challenging local economic conditions.  Accordingly,  the Company
transitioned its operations in Sweden to Denmark as of January 1, 2003.

     Japan revenue  increased by 22.2% or $173,000,  from $780,000 for the three
months  ended  September  30,  2002,  to  $953,000  for the three  months  ended
September 30, 2003.  The increase was due  primarily to stronger  demand for the
Company's consulting services within the local SAP market.

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

                                         THREE MONTHS ENDED SEPTEMBER 30,
                                         --------------------------------
                                            2003                 2002
                                         ----------           ----------

United States......................       $  (312)             $   772
India..............................           423                  381
Europe.............................           (5)                 (389)
Japan..............................           108                  (81)
                                         ----------            ---------
Total..............................      $    214              $   683
                                         ==========            =========

     US operating performance declined by $1.1 million, from operating income of
$772,000 for the three months ended  September 30, 2002, to an operating loss of
$312,000 for the three months ended September 30, 2003. The decline in operating
performance  was   attributable   to  the  increase  in  selling,   general  and
administrative  expenses and Proxy Contest related  charges  incurred during the
three months ended  September  30,  2003.  The increase in selling,  general and
administrative  expenses related primarily to discretionary  sales and marketing
expenditures, which vary in proportion to changes in revenue.

     India operating  income  increased by $42,000,  from $381,000 for the three
months  ended  September  30,  2002,  to  $423,000  for the three  months  ended
September 30, 2003.  The increase was  attributable  primarily to an increase in
revenue.

     Europe operating  performance improved by $384,000,  from an operating loss
of $389,000 for the three months ended  September 30, 2002, to an operating loss
of $5,000 for the three months ended  September 30, 2003.  The  improvement  was
attributable  primarily to an improvement in the operating performance of Sweden
(an  improvement  of  $239,000),  Denmark (an  improvement  of $112,000) and the
United Kingdom (an improvement of $33,000).



                                     - 34 -
<PAGE>

     Japan operating performance improved by $189,000, from an operating loss of
$81,000 for the three months ended  September 30, 2002,  to operating  income of
$108,000 for the three months ended  September  30, 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.

     Nine  months  ended  September  30,  2003  Compared  to Nine  months  Ended
September 30, 2002

     The  following  discussion  compares  the segment  results  for  continuing
operations  for the nine  months  ended  September  30, 2003 and the nine months
ended September 30, 2002.

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


                                    NINE MONTHS ENDED SEPTEMBER 30,
                        ------------------------------------------------------
                                  2003                         2002
                        ------------------------      ------------------------
                                      PERCENTAGE                    PERCENTAGE
                         DOLLARS       OF TOTAL         DOLLARS      OF TOTAL
                         -------      ----------       --------    ----------
United States.....      $ 67,498         78.2%         $ 57,859        77.7%
India.............        11,347         13.2             9,945        13.4
Europe............         4,742          5.5             4,448         6.0
Japan.............         2,688          3.1             2,227         2.9
                        ---------       ------         --------       -----
Total.............      $ 86,275        100.0%         $ 74,479       100.0%
                        =========       ======         ========       ======

     US revenue increased by 16.7%, or $9.6 million,  from $57.9 million for the
nine months ended September 30, 2002, to $67.5 million for the nine months ended
September  30,  2003.  In 2002,  the demand for the US services  was  negatively
impacted by the challenging and uncertain economic  conditions,  which precluded
many companies from spending resources on IT projects.  Subsequently,  beginning
in  mid-to-late  2002,  the US began to  experience  an  increase  in demand for
services. Accordingly, the revenue growth results directly from increased demand
for the  majority  of US  services,  including  traditional  consulting  service
offerings,  application management and support services and offshore development
services.

     India revenue  increased by 14.1%,  or $1.4 million,  from $9.9 million for
the nine months ended  September  30, 2002, to $11.3 million for the nine months
ended September 30, 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  increased by 6.6%, or $294,000,  from $4.4 million for the
nine months ended  September 30, 2002, to $4.7 million for the nine months ended
September  30,  2003.  The  Company's  operations  in Denmark  increased by $1.0
million,  while the  revenue  in the United  Kingdom  and  Sweden  decreased  by
$469,000 and $245,000, respectively. The improvement in Denmark was attributable
primarily to a general increase in demand for local SAP services,


                                     - 35 -
<PAGE>

including a $2.0 million implementation contract with a large agricultural-based
company.  The decrease in the United Kingdom  results  primarily from efforts to
maintain  the current  PeopleSoft  application  management  business  while only
targeting  new  engagements  that can be delivered  using India  resources.  The
decrease  in  Sweden  resulted   primarily  from   challenging   local  economic
conditions.  Accordingly,  the Company  transitioned its operations in Sweden to
Denmark as of January 1, 2003.

     Japan  revenue  increased by 20.7% or  $461,000,  from $2.2 million for the
nine months ended  September 30, 2002, to $2.7 million for the nine months ended
September 30, 2003.  The increase was due  primarily to stronger  demand for the
Company's consulting services within the local SAP market.

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

                                           NINE MONTHS ENDED SEPTEMBER 30,
                                          --------------------------------
                                             2003                  2002
                                          ---------             ---------
United States......................       $ (6,331)             $ (7,263)
India..............................          1,121                 1,726
 Europe............................             76                  (930)
Japan..............................            317                  (606)
                                          ---------             ---------
Total..............................       $ (4,817)             $ (7,073)
                                          =========             =========

     US operating  performance  improved by $932,000,  from an operating loss of
$7.3 million for the nine months ended  September 30, 2002, to an operating loss
of $6.3 million for the nine months ended  September 30, 2003.  The $7.3 million
operating  loss was  attributable  primarily  to the $8.4  million  of  SeraNova
receivable  impairment  and other charges and $876,000 of proxy contest  charges
recorded  during the nine months  ended  September  30,  2002.  The $6.3 million
operating  loss was  attributable  primarily  to the $5.1  million  of  SeraNova
receivable  impairment  and other  charges,  the $1.5  million of proxy  contest
charges and the $474,000  guarantee of SeraNova debt charge  recorded during the
nine months ended September 30, 2003.

     India  operating  income  decreased by $605,000,  from $1.7 million for the
nine months ended  September 30, 2002, to $1.1 million for the nine months ended
September 30, 2003.  The decrease was  attributable  primarily to an increase in
consultant  salaries (as a result of both  increased  headcount and local market
adjustments to base consultant salaries), non-billable consultant time and other
related costs as well as a decrease in average consultant billing rates.

     Europe operating  performance  improved by $1.0 million,  from an operating
loss of $930,000 for the nine months  ended  September  30,  2002,  to operating
income of $76,000 for the nine months ended  September 30, 2003. The improvement
was  attributable  primarily to an improvement  in the operating  performance of
Denmark (an  improvement of $478,000),  Sweden (an  improvement of $463,000) and
the UK (an improvement of $65,000).

     Japan operating performance improved by $923,000, from an operating loss of
$606,000 for the nine months ended  September 30, 2002,  to operating  income of
$317,000 for the nine


                                     - 36 -
<PAGE>

months ended September 30, 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 $2.2 million at September 30,
2003 and $1.2 million at December 31, 2002.  The Company had working  capital of
$7.7 million at September 30, 2003 and $13.1  million at December 31, 2002.  The
decrease  in  working  capital  resulted  primarily  from the sale of the Former
Subsidiaries  and the  write-down  of the  Note  during  the nine  months  ended
September 30, 2003.

     Cash provided by operating  activities of  continuing  operations  was $2.9
million for the nine months ended September 30, 2003, resulting primarily from a
decrease in accounts receivable of $1.4 million and increases in accrued payroll
and related taxes of $2.5 million and accrued expenses and other  liabilities of
$1.3  million.  These  amounts  were  partially  offset  by the net loss of $7.8
million (less the non-cash charges related to the SeraNova receivable impairment
and other  charges of $5.1 million and  depreciation  and  amortization  of $3.1
million) and  increases in unbilled  services of $3.4 million and other  current
assets of $1.0 million and a decrease in accounts  payable of $1.3 million.  The
changes in  operating  assets  and  liabilities  result  primarily  from  timing
differences.  Cash provided by operating activities of continuing operations for
the nine months ended September 30, 2002 was $1.2 million.

     The Company  invested $1.8 million and $1.0 million in computer  equipment,
internal-use computer software and office furniture and fixtures during the nine
months ended  September 30, 2003 and 2002,  respectively.  The increase  results
primarily  from the  replacement  of computer  equipment and the  development of
certain internal-use software.

     On May 31, 2000, the Company and PNC Bank, N.A. (the "Bank") entered into a
three-year  revolving  credit  facility.  In July 2003, the credit  facility was
extended  until May 31, 2006.  The credit  facility is currently  comprised of a
revolving line of credit  pursuant to which the Company could borrow up to $15.0
million either at the Bank's prime rate per annum or the Euro Rate plus 1.75% to
2.5% based upon the Company's ratio of debt to 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 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 shareholders' equity and unconsolidated shareholders' equity


                                     - 37 -
<PAGE>

(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.  In July
2003, the Company  executed with the Bank an amendment to the credit  agreement.
The terms of the amendment included,  among other things, (1) a 3-year extension
of the credit facility to May 31, 2006, (2) a reduction of the maximum revolving
advance amount under the credit  facility to $15.0 million,  (3) a waiver of the
covenant  defaults  existing as of March 31,  2003,  (4) a  modification  to the
definitions  of total  shareholders'  equity  and  unconsolidated  shareholders'
equity  (for  purposes  of  computing   related   covenant   compliance)  and  a
modification  to the  computation  of minimum  EBITDA to exclude  Proxy  Contest
charges of $297,000 for the quarter  ended March 31, 2003 only,  (5) an increase
in the minimum EBITDA  covenants to $1.3 million,  $1.8 million and $1.9 million
for  the  second,  third  and  fourth  quarters  2003,  respectively,  and (6) 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 $13.6 million of
the note due from SeraNova.

     As a result of the charge  incurred  during the quarter ended June 30, 2003
related to the  guarantee of SeraNova  debt,  the Company was not in  compliance
with the EBITDA  covenant as of  June 30,  2003.  In October  2003,  the Company
executed  with the Bank an amendment to the credit  agreement.  The terms of the
amendment  included,  among other things,  (1) a waiver of the covenant  default
existing as of June 30, 2003,  (2) a  modification  to the  definitions of total
shareholders'  equity and unconsolidated  shareholders'  equity (for purposes of
computing related covenant  compliance) and a modification to the computation of
minimum  EBITDA to exclude the guarantee of SeraNova debt charge of $581,000 for
the quarter ended June 30, 2003 only, and a modification  to the  definitions of
total shareholders' equity and unconsolidated shareholders' equity (for purposes
of computing related covenant  compliance) and a modification to the computation
of minimum  EBITDA to exclude Proxy Contest  charges of $750,000 for the quarter
ended  September  30,  2003 only.  As of  September  30,  2003,  the Company had
outstanding  borrowings  under the credit facility of $6.2 million.  The Company
estimates undrawn  availability  under the credit facility to be $6.1 million as
of September  30, 2003.  As of December  31, 2002,  the Company had  outstanding
borrowings  under the  credit  facility  of $6.1  million.  The  Company  was in
compliance with all covenants as of September 30, 2003.

     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%.



                                     - 38 -
<PAGE>

     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  compensatory  damages in excess of $5.5  million and
punitive  damages  in the  amount  of $10.0  million.  After  completion  of the
discovery  process,  the Company moved for summary judgment.  On April 17, 2003,
the  Court  granted  partial  summary  judgment.  On July 11,  2003,  the  Court
dismissed  the  defendant's  counterclaims  seeking  compensatory  and  punitive
damages. On August 8, 2003, SeraNova and Silverline Technologies, Inc. filed for
Chapter 7 Bankruptcy,  thereby staying this action as to these defendants. There
has been no notice that Silverline  Technologies  Limited is insolvent.  Shortly
thereafter, counsel for defendants asked the Court and was granted permission to
be relieved as counsel.  On September  22, 2003,  the Company moved for entry of
default against Silverline.

     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,  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.  Thereafter,  the  Company  and HSBC  entered  into a  settlement
agreement  only as to the  $626,247  being  held in trust  whereby  the  Company
remitted $570,228 to HSBC, and the remaining funds were released


                                     - 39 -
<PAGE>

to the Company. 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  $8.4  million of  SeraNova  receivable
impairment  and other  charges as of June 30,  2002.  Specifically,  the Company
recorded a $5.1 million  charge to write-down  the carrying value of the Note to
$4.0  million.  Additionally,  the  Company  recorded a $1.3  million  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 $1.5  million  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,  $1.3 million of the
liability  remains  outstanding,  of which  $1.0  million is  included  in other
long-term liabilities.

     The Company subsequently believed there had 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.

     Although the Company  expects to pursue the full legal  prosecution  of the
SeraNova  Group,  the  Company  recorded  $5.1  million  of  additional  charges
associated  with the Note and  certain  other  related  issues  during the three
months ended March 31, 2003.  The Company  recognized an  additional  impairment
charge of $4.0 million related to the Note,  approximately  $321,000  related to
other  assets,  approximately  $474,000 in costs  required to exit certain lease
obligations  and $265,000 in legal fees. The Company has determined  that due to
the apparent  financial  condition of the  SeraNova  Group that  recovery of the
SeraNova Note is not probable.


                                     - 40 -
<PAGE>

<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.................               --              --        (896,000)       (265,000)    (1,161,000)
Non-cash items.........................       (4,000,000)             --              --              --     (4,000,000)
                                           -------------    ------------   -------------    ------------   ------------

Accrued costs as of September 30, 2003.    $          --    $         --   $   1,039,000    $    146,000   $  1,185,000
                                           =============    ============   =============    ============   ============
</TABLE>

     As  of  September  30,  2003,  $1.2  million  of  the  liability   remained
outstanding, of which $748,000 was included in other long-term liabilities.  The
Company expects to pay out this liability through 2008.

CONTRACTUAL OBLIGATIONS AND OTHER COMMERCIAL COMMITMENTS

     The following  tables summarize the Company's  contractual  obligations and
other commercial commitments as of September 30, 2003:

<TABLE>
<CAPTION>
                                                    PAYMENTS DUE BY PERIOD
                               ------------------------------------------------------------------

DESCRIPTION OF                                 LESS THAN        1 - 3        3 - 5      MORE THAN
--------------                                 ---------        -----        -----      ---------
CONTRACTUAL OBLIGATION            TOTAL          1 YEAR         YEARS        YEARS       5 YEARS
----------------------            -----          ------         -----        -----       -------

<S>                            <C>            <C>           <C>           <C>           <C>
Revolving Credit Facility      $ 6,160,000    $6,160,000    $       --    $       --    $      --
Capital Lease Obligations           77,000         8,000        69,000            --           --
Operating Lease Obligations      7,872,000     2,078,000     4,638,000     1,156,000           --
Other Liabilities                2,215,000       967,000       939,000       309,000           --
                               -----------    ----------    ----------    ----------    ---------
Total Contractual Obligations  $16,324,000    $9,213,000    $5,646,000    $1,465,000    $      --
                               ===========    ==========    ==========    ==========    =========
</TABLE>

     The Company uses its $15.0 million  revolving credit facility with PNC Bank
to fund the working  capital needs of the business;  therefore,  the outstanding
borrowings under the credit facility fluctuate accordingly.  The credit facility
is  collateralized by substantially all of the assets of the 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 September 30, 2003, the Company had outstanding  borrowings under
the credit facility of $6.2 million.  The Company estimates undrawn availability
under the credit  facility to be $6.1  million as of September  30, 2003.  As of
December  31,  2002,  the Company had  outstanding  borrowings  under the credit
facility of $6.1 million.

     As a result of the charge  incurred  during the quarter ended June 30, 2003
related to the  guarantee of SeraNova  debt,  the Company was not in  compliance
with the EBITDA  covenant as of  June 30,  2003.  In October  2003,  the Company
executed  with the Bank an amendment to


                                     - 41 -
<PAGE>

the credit agreement.  The terms of the amendment included,  among other things,
(1) a  waiver  of the  covenant  default  existing  as of June 30,  2003,  (2) a
modification to the definitions of total shareholders' equity and unconsolidated
shareholders' equity (for purposes of computing related covenant compliance) and
a modification  to the computation of minimum EBITDA to exclude the guarantee of
SeraNova debt charge of $581,000 for the quarter ended June 30, 2003 only, and a
modification to the definitions of total shareholders' equity and unconsolidated
shareholders' equity (for purposes of computing related covenant compliance) and
a  modification  to the  computation  of minimum EBITDA to exclude Proxy Contest
charges of $750,000 for the quarter ended  September 30, 2003 only.  The Company
was in compliance with all covenants as of September 30, 2003.

     The Company has also  entered  into  various  contractual  arrangements  to
obtain  certain  office space,  office  equipment and vehicles under capital and
operating leases.

     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.

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


                                     - 42 -
<PAGE>

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. Thereafter, the Company and HSBC entered into a settlement agreement only
as to the $626,247 being held in trust whereby the Company remitted  $570,228 to
HSBC, and the remaining funds were released to the Company. 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 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.  All  defendants  have  answered  the
complaint  and  discovery  has  commenced.  On  August  8,  2003,  SeraNova  and
Silverline  Technologies,  Inc. filed for Chapter 7 Bankruptcy,  thereby staying
this action as to these  defendants.  There has been no notice  that  Silverline
Technologies Limited is insolvent.  Court-ordered mediation is in the process of
being scheduled.

     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 paid an  aggregate  of
$125,000  during the nine  months  ended  September  30,  2003.  The Company has
accrued the remaining balance of $35,000 in the consolidated balance sheet as of
September 30, 2003.

     By letter  dated May 12,  2003,  Zions  informed  the Company  that Network
Publishing,  Inc., a former wholly-owned subsidiary of the Company, which became
a  wholly-owned  subsidiary  of  SeraNova  upon the  spin-off of SeraNova by the
Company in 2000,  was  delinquent on a loan made by Zions and  guaranteed by the
Company. Zions was demanding payment of


                                     - 43 -
<PAGE>

$535,608  from  the  Company,   plus  interest   accrued  from  April  1,  2002.
Accordingly,  the Company  recorded  $581,000 in the  provision for guarantee of
SeraNova  debt line  item in  second  quarter  2003 to cover  this  contingency.
Subsequently,  in the third  quarter 2003,  the Company  negotiated a settlement
with Zions for a total sum of $430,000,  to be paid out in installments  through
January  2004.  The Company has recorded  the  reversal of the  $151,000  excess
provision,  less related legal costs of $44,000,  in the provision for guarantee
of SeraNova debt line item in the third quarter 2003.

NEW ACCOUNTING PRONOUNCEMENTS

     In May 2003,  the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial  Accounting  Standard  ("SFAS") No. 150,  "Accounting for
Certain  Financial  Instruments  with  Characteristics  of Both  Liabilities and
Equity." SFAS No. 150  establishes  standards for how an issuer  classifies  and
measures certain financial  instruments with characteristics of both liabilities
and equity. SFAS No. 150 requires that an issuer classify a financial instrument
that is within its scope as a liability (or an asset in some circumstances). The
requirements of this statement apply to issuers'  classification and measurement
of freestanding financial  instruments,  including those that comprise more than
one  option  or  forward  contract.  SFAS No.  150 is  effective  for  financial
instruments  entered  into or modified  after May 31,  2003,  and  otherwise  is
effective at the beginning of the first interim period  beginning after June 15,
2003.  The  Company's  initial  adoption  did not have a material  effect on the
Company's consolidated results of operations, consolidated financial position or
consolidated cash flows.

     In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation
of Variable  Interest  Entities"  ("FIN No. 46").  FIN No. 46 addresses  whether
certain types of entities,  referred to as variable  interest  entities  ("VIE")
should be consolidated in a company's financial  statements.  A VIE is an entity
that either (1) has equity investors that lack certain essential characteristics
of a  controlling  financial  interest  (including  the  ability to control  the
entity,  the obligation to absorb the entity's  expected losses and the right to
receive the entity's expected residual returns),  or (2) lacks sufficient equity
to finance  its own  activities  without  financial  support  provided  by other
entities,  which in turn  would  be  expected  to  absorb  at least  some of the
expected  losses of the VIE. An entity should  consolidate a VIE if it stands to
absorb a majority of the VIE's  expected  losses or to receive a majority of the
VIE's expected residual  returns.  In October 2003, the FASB issued a Final FASB
Staff  Position  deferring  the  effective  date  of FIN No.  46 for all  public
entities  until the first  interim or annual  period  ending after  December 15,
2003. As such, FIN No. 46 is effective for the Company as of March 31, 2004.

     In November  2002,  the  Emerging  Issues Task Force of the FASB  reached a
consensus on EITF No. 00-21,  "Accounting for Revenue Arrangements with Multiple
Deliverables"  ("EITF No.  00-21").  EITF No. 00-21 addresses how to account for
arrangements  that  may  involve  multiple  revenue-generating  activities.  The
consensus  guidance will be  applicable  to agreements  entered into in quarters
beginning after June 15, 2003. The Company adopted EITF No. 00-21 effective July
1,  2003 and is  applying  it on a  prospective  basis.  The  Company's  initial
adoption did not have a material effect on the Company's consolidated results of
operations, consolidated financial position or consolidated cash flows.


                                     - 44 -
<PAGE>

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.

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's management, with the participation of the Company's President
and Chief Executive Officer and Senior Vice President-Finance and Administration
and Chief  Financial  Officer,  evaluated  the  effectiveness  of the  Company's
disclosure  controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Exchange Act) as of September  30, 2003.  In designing and  evaluating
the Company's disclosure controls and procedures, management recognized that any
controls and procedures,  no matter how well designed and operated,  can provide
only  reasonable   assurance  of  achieving  their   objectives  and  management
necessarily applied its judgment in evaluating the cost-benefit  relationship of
possible  controls  and  procedures.  Based on this  evaluation,  the  Company's
President  and Chief  Executive  Officer and Senior Vice  President-Finance  and
Administration  and Chief Financial  Officer concluded that, as of September 30,
2003,  the Company's  disclosure  controls and  procedures  were (1) designed to
ensure  that  material  information  relating  to  the  Company,  including  its
consolidated  subsidiaries,  is made known to the Company's  President and Chief
Executive Officer and Senior Vice President-Finance and Administration and Chief
Financial  Officer by others  within  those  entities,  particularly  during the
period in which this report was being prepared and (2)  effective,  in that they
provide  reasonable  assurance that information  required to be disclosed by the
Company  in the  reports  that it files or  submits  under the  Exchange  Act is
recorded,  processed,  summarized and reported within the time periods specified
in the SEC's rules and forms.

     No change in the Company's  internal  control over financial  reporting (as
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during
the fiscal quarter ended September 30, 2003 that has materially affected,  or is
reasonably  likely to materially  affect,  the Company's  internal  control over
financial reporting.


                                     - 45 -
<PAGE>

PART II.   OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

     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  and   Silverline   Technologies,   Inc.   (collectively,
"Silverline"), 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  compensatory  damages in
excess of $5,500,000 and punitive  damages in the amount of  $10,000,000.  After
completion of the discovery process, the Company moved for summary judgment.  On
April 17, 2003, the Court granted  partial summary  judgment.  On July 11, 2003,
the Court  dismissed the  defendant's  counterclaims  seeking  compensatory  and
punitive damages. On August 8, 2003, SeraNova and Silverline Technologies,  Inc.
filed  for  Chapter  7  Bankruptcy,  thereby  staying  this  action  as to these
defendants.  There has been no notice that  Silverline  Technologies  Limited is
insolvent.  Shortly  thereafter,  counsel for defendants asked the Court and was
granted permission to be relieved as counsel. On September 22, 2003, the Company
moved for entry of default against Silverline Technologies Limited.

     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,  sought damages in excess of
$400,000,  based on  allegations  that Mr.  Pandey  breached  certain  terms and
conditions  of a separation  agreement  he entered  into with the  Company.  Mr.
Pandey filed an Answer to the Company's  complaint denying the Company's claims.
On June 6, 2003, the Court granted  summary  judgment in favor of the Company on
all counts of the  complaint and the Company's  motion for  attorney's  fees was
unopposed.  On August 7, 2003, the Company and Mr. Pandey  executed a settlement
agreement relating to, among other things, the litigation matters between them.

     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


                                     - 46 -
<PAGE>

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.  On August 7, 2003, the Company and Mr. Pandey executed a
settlement  agreement  relating to, among other things,  the litigation  matters
between them.

     On July 2, 2002,  Ashok Pandey  filed a complaint in the Superior  Court of
New Jersey,  Middlesex  County,  in  connection  with the  Company's  2002 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. On November 6, 2002, the Company filed a Motion for
Summary  Judgment  and on January 7, 2003,  the Court  granted  Partial  Summary
Judgment.  On August 7, 2003,  the Company and Mr. Pandey  executed a settlement
agreement relating to, among other things, the litigation matters between them.

     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  alleged,  among other things,  that the  defendants
violated  federal  securities  laws in connection  with the Company's 2002 proxy
contest.  The defendants filed an Answer to the Company's  complaint denying the
Company's  claims.  On August 7, 2003,  the  Company and Mr.  Pandey  executed a
settlement  agreement  relating to, among other things,  the litigation  matters
between them.

     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.  All  defendants  have  answered  the
complaint  and  discovery  has  commenced.  On  August  8,  2003,  SeraNova  and
Silverline  Technologies,  Inc. filed for Chapter 7 Bankruptcy,  thereby staying
this action as to these  defendants.  There has been no notice  that  Silverline
Technologies Limited is insolvent.  Court-ordered mediation is in the process of
being scheduled.

     By letter dated May 12, 2003, Zions First National Bank ("Zions")  informed
the Company that Network Publishing,  Inc., a former wholly-owned  subsidiary of
the  Company,  which  became a  wholly-owned  subsidiary  of  SeraNova  upon the
spin-off of SeraNova by the


                                     - 47 -
<PAGE>

Company in 2000,  was  delinquent on a loan made by Zions and  guaranteed by the
Company. Zions was demanding payment of $535,608 from the Company, plus interest
accrued  from  April 1,  2002.  Accordingly,  the  Company  recorded  a $581,000
provision in second quarter 2003 to cover this contingency. Subsequently, in the
third quarter 2003, the Company  negotiated a settlement  with Zions for a total
sum of  $430,000,  to be paid out in  installments  through  January  2004.  The
Company has recorded the reversal of the $151,000 excess provision, less related
legal costs of $44,000,  in the  provision  for  guarantee of SeraNova debt line
item in the third quarter 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. In July 2003, the Company executed with the Bank an amendment to
the credit agreement.  The terms of the amendment included,  among other things,
(1) a 3-year  extension of the credit  facility to May 31, 2006, (2) a reduction
of the  maximum  revolving  advance  amount  under the credit  facility to $15.0
million,  (3) a waiver of the covenant  defaults  existing as of March 31, 2003,
(4) a  modification  to  the  definitions  of  total  shareholders'  equity  and
unconsolidated  shareholders' equity (for purposes of computing related covenant
compliance)  and a modification  to the computation of minimum EBITDA to exclude
Proxy Contest charges of $297,000 for the quarter ended March 31, 2003 only, (5)
an increase in the minimum  EBITDA  covenants to $1.3 million,  $1.8 million and
$1.9 million for the second, third and fourth quarters 2003,  respectively,  and
(6) 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 $13.6 million of
the note due from SeraNova.

     As a result of the charge  incurred  during the quarter ended June 30, 2003
related to the  guarantee of SeraNova  debt,  the Company was not in  compliance
with the EBITDA  covenant as of  June 30,  2003.  In October  2003,  the Company
executed  with the Bank an amendment to the credit  agreement.  The terms of the
amendment  included,  among other things,  (1) a waiver of the covenant  default
existing as of June 30, 2003,  (2) a  modification  to the  definitions of total
shareholders'  equity and unconsolidated  shareholders'  equity (for purposes of
computing related covenant  compliance) and a modification to the computation of
minimum  EBITDA to exclude the guarantee of SeraNova debt charge of $581,000 for
the quarter ended June 30, 2003 only, and a modification  to the  definitions of
total shareholders' equity and unconsolidated shareholders' equity (for purposes
of computing related covenant  compliance) and a modification to the computation
of minimum  EBITDA to exclude Proxy Contest  charges of $750,000 for the quarter
ended September 30, 2003 only.


                                     - 48 -
<PAGE>

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     The Annual Meeting of  Shareholders  of the Company was held on October 14,
2003.

     There  were  present  at the  meeting  in person  or by proxy  shareholders
holding an aggregate of 13,522,706  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
     ---------------------                   ---              --------
     Nagarjun Valluripalli                13,419,239           103,467
     Klaus P. Besier                      13,346,618           176,088
     Dennis McIntosh                      13,473,505            49,201
     Alexander Graham Wilson              13,486,006            36,700
     Nick Di Iorio                        13,425,005            97,701
     Ashok Pandey                         13,043,397           479,309

     In addition,  a vote was taken on the proposal to ratify the appointment of
Deloitte & Touche LLP as the independent  auditors of the Company for the fiscal
year ending December 31, 2003. Of the shares present at the meeting in person or
by  proxy,  13,514,366  shares  of  Common  Stock  were  voted  in favor of such
proposal,  6,690  shares of Common Stock were voted  against  such  proposal and
1,650 shares of Common Stock abstained from voting.

ITEM 5.    OTHER INFORMATION

     On May 30,  2003,  the Company  executed a letter  agreement  with PNC Bank
extending the term of the credit facility from May 31, 2003 to July 31, 2003. On
July 31, 2003,  the Company  executed a third  amendment to the loan  documents,
among other things, extending the term of the credit facility to May 31, 2006.

     On August 4, 2003,  Prabhas  Panigrahi,  a member of the Board of Directors
(the  "Board")  of the Company  since June 2002,  resigned  from the Board.  Mr.
Panigrahi's  resignation as a Director did not involve any disagreement with the
Company  on  any  matter  relating  to the  Company's  operations,  policies  or
practices, and Mr. Panigrahi has not requested that any matter be disclosed.

     On August 7, 2003,  the  Company  and Ashok  Pandey  executed a  settlement
agreement  pursuant to which,  among  other  things:  (1) the parties  agreed to
release  each other from any and all  claims and settle all  current  litigation
matters  between  them;  (2) the Company  agreed to pay an  aggregate  amount of
$750,000 to Pandey in three equal  installments  over two years; (3) the Company
waived all amounts due by Pandey to the Company pursuant to the award granted by
the Court in one of the actions  filed by the Company  against  Pandey;  (4) the
Company agreed to include Pandey or his designee who is reasonably acceptable to
the  Company's  Board of  Directors  (the  "Board") in its slate of nominees for
election to the Board at its Annual Meeting of  Shareholders to be held in 2003,
2004 and 2005; (5) Pandey agreed to certain  standstill  provisions  relating to
acquiring  shares of the Company's voting  securities,  solicitation of proxies,



                                     - 49 -
<PAGE>

waging  of a proxy  contest  or  tender  offer or  initiating  or  supporting  a
shareholder  proposal for a three-year period; (6) Pandey agreed to vote for the
slate of directors  proposed by the Board for a three-year  period;  and (7) the
parties agreed not to disparage each other.

     Nagarjun  Valluripalli,   the  Chairman  of  the  Board,  President,  Chief
Executive  Officer and a Director  of the  Company is an owner (the  "Owner") of
real estate located at 5-9-22, Secretariat Road in Hyderabad,  India. On October
2, 2003,  Intelligroup Asia Private,  Ltd., a 99.8% owned and  wholly-controlled
subsidiary of the Company and the Owner  executed a memorandum of  understanding
(the "MOA")  relating to a proposed  lease whereby the Owner would lease the 5th
and 6th floors of the property to the Company for certain of the Company's India
operations.  The MOA provides for, among other things, a minimum lease period of
three  years with a renewal  option for an  additional  three  years and monthly
payments  of  approximately  $45,500  per  month.  A  deposit  in the  amount of
approximately $326,087 was paid to the Owner in October 2003, with an additional
deposit of  approximately  $356,522  to be paid to the Owner in  December  2003.
Prior to the execution of the MOA, the Company's  Board of Directors  determined
that the terms and conditions set forth in the MOA were no less favorable to the
Company than could be obtained from unrelated third parties.

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

    (a)   Exhibits.

          10.1 Fourth  Amendment to Loan  Documents and Waiver  Agreement  dated
               October 22,  2003,  between the  Company,  Empower,  Inc. and PNC
               Bank, National Association.

          31.1 Certification  pursuant to Section 302 of the  Sarbanes-Oxley Act
               of 2002.

          31.2 Certification  pursuant to Section 302 of the  Sarbanes-Oxley Act
               of 2002.

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

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

    (b)   Reports on Form 8-K.

          On August 5, 2003,  the Company  filed a Form 8-K with the  Securities
          and Exchange Commission to report the following: (1) On July 31, 2003,
          the Company  executed a third amendment to the loan documents with PNC
          Bank and Empower,  Inc.,  a  wholly-owned  subsidiary  of the Company,
          among other things,  extending the term of the credit  facility to May
          31, 2006 and (2) On August 4, 2003, Prabhas Panigrahi, a member of the
          Board of Directors (the "Board") of Intelligroup, Inc. (the "Company")
          since June 2002, resigned from the Board. Mr. Panigrahi's  resignation
          as a Director did not involve any disagreement with the Company on any
          matter  relating to the Company's  operations,  policies or practices,
          and Mr. Panigrahi has not requested that any matter be disclosed.



                                     - 50 -
<PAGE>

          On August 12, 2003,  the Company filed a Form 8-K with the  Securities
          and Exchange  Commission to report that on August 7, 2003, the Company
          and Ashok Pandey ("Pandey") executed a settlement  agreement providing
          for,  among other things,  the  settlement  of all current  litigation
          between the parties,  payments to be made by the Company to Pandey and
          that Pandey abide by certain standstill  provisions relating to, among
          other matters,  participating in any proxy contests,  and vote for the
          Company slate of directors for a three-year period.

          On August 13,  2003,  the  Company  furnished a Form 8-K under Item 9,
          containing a copy of its earnings  release for the period  ending June
          30, 2003 (including financial statements) pursuant to Item 12 (Results
          of Operations and Financial Condition).

          On August 20, 2003,  the Company filed a Form 8-K, with the Securities
          and Exchange  Commission  to report that the Company had scheduled its
          Annual Meeting of Shareholders for Tuesday, October 14, 2003.

          On October 28, 2003,  the Company  furnished a Form 8-K under Item 12,
          containing  a copy  of its  earnings  release  for the  period  ending
          September 30, 2003 (including financial statements).



                                     - 51 -
<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: November 14, 2003          By: /s/ Nagarjun Valluripalli
                                    -----------------------------------------
                                    Nagarjun Valluripalli,
                                    Chairman of the Board, President and
                                    Chief Executive Officer
                                    (Principal Executive Officer)


DATE: November 14, 2003          By: /s/ Nicholas Visco
                                    -----------------------------------------
                                    Nicholas Visco,
                                    Senior Vice President-Finance and
                                    Administration and Chief Financial Officer
                                    (Principal Financial and Accounting Officer)



                                     - 52 -