SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                             ----------------------
                                   FORM 10-QSB

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

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

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

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

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

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

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

              Yes:  X                               No:
                   ---                                  ---

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

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

Common Stock, $.01 par value                              11,976,983

                 Transitional Small Business Disclosure Format:

              Yes:                                  No:  X
                   ---                                  ---


<PAGE>


                       INTELLIGROUP, INC. AND SUBSIDIARIES

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

                                                                         Page
                                                                         ----
PART I.  FINANCIAL INFORMATION

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

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

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

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

               Notes to Consolidated Financial Statements (unaudited)..    5

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

PART II.  OTHER INFORMATION

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

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

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

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


                                   - i -
<PAGE>








                          PART I. FINANCIAL INFORMATION

                    Item 1.  Consolidated Financial Statements








                                     - 1 -
<PAGE>
<TABLE>


                                          INTELLIGROUP, INC. AND SUBSIDIARIES

                                              CONSOLIDATED BALANCE SHEETS
                                        September 30, 1997 and December 31, 1996
<CAPTION>

                                                                                         September 30,    December 31,
                                                                                            1997            1996
                                                                                         ------------     ------------
                                                                                         (unaudited)
                                  Assets

<S>                                                                                      <C>            <C>         
Current Assets:
        Cash and cash equivalents ....................................................   $ 11,176,000   $  7,479,000
        Accounts receivable, less allowance for doubtful accounts of $886,000
               at September 30, 1997 and $546,000 at December 31, 1996 ...............     14,186,000      8,538,000
        Unbilled services ............................................................      8,027,000      2,916,000
        Deferred income taxes ........................................................        331,000        331,000
        Other current assets .........................................................        591,000        492,000
                                                                                         ------------   ------------

               Total current assets ..................................................     34,311,000     19,756,000

Property and equipment, less accumulated depreciation of $530,000
        at September 30, 1997 and $243,000 at December 31, 1996 ......................      3,062,000      1,281,000
Other assets .........................................................................        293,000        225,000
                                                                                         ------------   ------------
                                                                                         $ 37,666,000   $ 21,262,000
                                                                                         ============   ============

                                        Liabilities and Shareholders' Equity

Current Liabilities:
        Accounts payable .............................................................   $  1,613,000   $    406,000
        Accrued payroll and related taxes ............................................      2,596,000      1,814,000
        Accrued expenses and other liabilities .......................................      1,107,000      1,268,000
        Income taxes payable .........................................................        909,000        535,000
        Current portion of obligations under capital leases ..........................         20,000         20,000
                                                                                         ------------   ------------
               Total current liabilities .............................................      6,245,000      4,043,000
                                                                                         ------------   ------------

Obligations under capital leases, less current portion ...............................         51,000         57,000
                                                                                         ------------   ------------

Commitments and contingencies

Shareholders' Equity
        Preferred stock, $.01 par value, 5,000,000 shares authorized, none outstanding           --             --
        Common stock, $.01 par value, 25,000,000 shares authorized;
               11,976,983 and 10,735,600 shares issued and outstanding
               at September 30, 1997 and December 31, 1996, respectively .............        120,000        107,000
        Additional paid-in capital ...................................................     29,809,000     19,201,000
        Retained earnings (deficit) ..................................................      1,441,000     (2,146,000)
                                                                                         ------------   ------------
               Total shareholders' equity ............................................     31,370,000     17,162,000
                                                                                         ------------   ------------
                                                                                         $ 37,666,000   $ 21,262,000
                                                                                         ============   ============



                              See accompanying notes to consolidated financial statements.


                                                         - 2 -
</TABLE>
<PAGE>
<TABLE>


                                      INTELLIGROUP, INC. AND SUBSIDIARIES

                                       CONSOLIDATED STATEMENTS OF INCOME
                    For the Three Months and Nine Months Ended September 30, 1997 and 1996
                                                  (unaudited)
<CAPTION>

                                             Three Months Ended September 30, Nine Months Ended September 30,
                                             -------------------------------- -------------------------------
                                                  1997            1996            1997            1996
                                              ------------    ------------    ------------    ------------
<S>                                           <C>             <C>             <C>             <C>

Revenue ....................................  $ 21,903,000    $ 13,845,000    $ 56,797,000    $ 33,471,000
Cost of sales ..............................    14,338,000       9,825,000      38,631,000      23,972,000
                                              ------------    ------------    ------------    ------------

            Gross profit ...................     7,565,000       4,020,000      18,166,000       9,499,000

Selling, general and administrative
      expenses .............................     5,197,000       2,831,000      12,670,000       6,896,000
                                              ------------    ------------    ------------    ------------

            Operating income ...............     2,368,000       1,189,000       5,496,000       2,603,000
                                              ------------    ------------    ------------    ------------

Other expenses (income):
      Interest expense (income), net .......      (143,000)        181,000        (266,000)        310,000
      Factor charges .......................          --           381,000            --           954,000
                                              ------------    ------------    ------------    ------------
                                                  (143,000)        562,000        (266,000)      1,264,000
                                              ------------    ------------    ------------    ------------

Income before provision for income taxes ...     2,511,000         627,000       5,762,000       1,339,000

Provision for income taxes .................       930,000         193,000       2,175,000         410,000
                                              ------------    ------------    ------------    ------------

Income before extraordinary charge .........     1,581,000         434,000       3,587,000         929,000

Extraordinary charge-loss on early
      extinguishment of debt, net of
      income tax benefit of $410,000 .......          --        (1,034,000)           --        (1,034,000)
                                              ------------    ------------    ------------    ------------

Net income (loss) ..........................  $  1,581,000    $   (600,000)   $  3,587,000    $   (105,000)
                                              ============    ============    ============    ============

Earnings (loss) per share:
      Income before extraordinary charge ...  $       0.13    $       0.05    $       0.31    $       0.09
      Extraordinary charge, net of
            income tax benefit .............          --             (0.12)           --             (0.10)
                                              ------------    ------------    ------------    ------------

      Net income (loss) per share ..........  $       0.13    $      (0.07)   $       0.31    $      (0.01)
                                              ============    ============    ============    ============

      Shares used in per share calculation .    12,327,000       8,877,000      11,555,000      10,825,000
                                              ============    ============    ============    ============
                                                                                                



                         See accompanying notes to consolidated financial statements.
</TABLE>


                                                     - 3 -
<PAGE>


<TABLE>
                                    INTELLIGROUP, INC. AND SUBSIDIARIES

                                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                             For the Nine Months Ended September 30, 1997 and
                                            September 30, 1996
                                                (unaudited)
<CAPTION>

                                                                            September 30,   September 30,
                                                                                1997            1996
                                                                            -------------   -------------

<S>                                                                         <C>             <C> 
Cash flows from operating activities:
     Net income (loss) ..................................................  $  3,587,000    $   (105,000)
     Adjustments to reconcile net income (loss)  to net cash
         used in operating activities:
         Depreciation and amortization ..................................       287,000         160,000
         Provision for doubtful accounts ................................       340,000         515,000
         Extraordinary charge ...........................................          --         1,444,000
     Changes in assets and liabilities:
         Restricted cash deposited in escrow ............................          --           100,000
         Accounts receivable ............................................    (5,988,000)     (5,347,000)
         Unbilled services ..............................................    (5,111,000)     (1,890,000)
         Other current assets ...........................................       (99,000)       (148,000)
         Other assets ...................................................       (68,000)       (179,000)
         Cash overdraft .................................................          --         1,003,000
         Accounts payable ...............................................     1,207,000         391,000
         Accrued payroll and related taxes ..............................       782,000        (694,000)
         Income taxes payable ...........................................       374,000            --
         Accrued expenses and other liabilities .........................      (161,000)         29,000
                                                                           ------------    ------------ 
             Net cash used in operating activities ......................    (4,850,000)     (4,721,000)
                                                                           ------------    ------------ 
Cash flows from investing activities:
     Purchase of property and equipment .................................    (2,068,000)       (524,000)
                                                                           ------------    ------------ 

Cash flows from financing activities:
     Proceeds from issuance of common stock, net of issuance costs ......     9,900,000            --
     Proceeds from subordinated debt and warrants, net of issuance costs.          --         5,888,000
     Repurchase of common stock .........................................          --        (1,500,000)
     Proceeds from the exercise of stock options ........................       721,000            --
     Loans from factor, net .............................................          --           976,000
     Repayments of lines of credit, net .................................          --            (5,000)
     Principal payments under capital leases ............................        (6,000)        (16,000)
                                                                           ------------    ------------ 
             Net cash provided by financing activities ..................    10,615,000       5,343,000
                                                                           ------------    ------------ 

             Net increase  in cash and cash equivalents .................     3,697,000          98,000

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

Cash and cash equivalents at end of period ..............................  $ 11,176,000    $    169,000
                                                                           ============    ============

Supplemental disclosures of cash flow information:
     Cash paid for interest .............................................  $       --      $     15,000
                                                                           ============    ============

     Cash paid for income taxes .........................................  $       --      $       --
                                                                           ============    ============
Noncash transactions:
     Subscriptions receivable ...........................................  $       --      $ 19,065,000
                                                                           ============    ============



                       See accompanying notes to consolidated financial statements.


                                                   - 4 -
</TABLE>
<PAGE>


                       INTELLIGROUP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)


(1) BASIS OF PRESENTATION
-------------------------

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

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


(2) EARNINGS PER SHARE
----------------------

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

     On March 31, 1997, the Financial Accounting Standards Board issued SFAS No.
128,  "Earnings  Per Share"  ("Statement  128").  Statement 128 is effective for
fiscal years ending after December 15, 1997, and, when adopted,  it will require
restatement  of prior  years'  earnings  per share.  If the  Company had adopted
Statement 128 for the period ending September 30, 1997, there would have been no
effect on earnings per share, on either the basic or diluted basis, except basic
earnings per share would have been $0.32 for the nine months ended September 30,
1997.


                                     - 5 -
<PAGE>


(3) FOLLOW-ON PUBLIC OFFERING
-----------------------------

     On July 2, 1997, the Company  consummated a follow-on  public offering (the
"Offering") of 1,000,000  shares of its Common Stock at a price to the public of
$9.50 per share.  On July 15, 1997 and as part of the  Offering,  an  additional
150,000  shares at a price to the public of $9.50 per share were issued and sold
by the Company to cover overallotments. The net proceeds to the Company from the
Offering, after underwriting discounts and commissions and other expenses of the
Offering, were approximately $9.9 million.


                                     - 6 -
<PAGE>


Item 2.  Management's  Discussion  And Analysis Of Financial  Condition And
         Results Of Operations.


OVERVIEW
--------

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

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

     The Company recently has provided services on certain projects in which it,
at the request of the clients, offered a fixed price for its services,  however,
none of  these  projects  are  currently  material  to the  Company's  business,
financial condition and results of operations.  The Company believes that, as it
pursues its strategy of making  turnkey  project  management a larger portion of
its  business,  it will likely be  required  to offer fixed price  projects to a
greater  degree.  The Company has had limited  prior  experience  in pricing and
performing  under fixed price  arrangements  and believes that there are certain
risks related  thereto.  There can be no assurance that the Company will be able
to complete such projects within fixed price timeframes. The


                                     - 7 -
<PAGE>


failure to perform  within such fixed price  contracts,  if entered into,  could
have a material adverse effect on the Company's  business,  financial  condition
and results of operations.

     The  Company has derived  and  believes  that it will  continue to derive a
significant  portion  of its  revenue  from a limited  number of  customers  and
projects.  For the nine  months  ended  September  30,  1997 and the year  ended
December  31,  1996,   the  Company's  ten  largest   customers   accounted  for
approximately 62% and 66% of its revenue,  respectively.  During the nine months
ended  September  30, 1997,  two customers  each  accounted for more than 10% of
revenue. During 1996, two customers each accounted for more than 10% of revenue.
For the nine months  ended  September  30, 1997 and the year ended  December 31,
1996,  38% and 44%  respectively,  of the  Company's  revenue was  generated  by
serving  as  a  member  of  consulting  teams  assembled  by  other  information
technology  consulting  firms.  There can be no assurance that such  information
technology consulting firms will continue to engage the Company in the future at
current levels of retention,  if at all.  During the nine months ended September
30, 1997 and the year ended December 31, 1996, 69% and 74%, respectively, of the
Company's  total  revenue  was  derived  from  projects  in  which  the  Company
implemented  software  developed by SAP.  During the nine months ended September
30,  1997,  approximately  31%  of  the  Company's  revenue  was  derived   from
engagements  at which  the  Company  had  project  management  responsibilities,
compared to 16% during the year ended December 31, 1996.

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

     Since  late 1994,  the  Company  has made  substantial  investments  in its
infrastructure in order to support its rapid growth.  For example,  in 1994, the
Company  established and funded an affiliated  operation in India,  the Advanced
Development  Center (the  "ADC"),  and in 1995,  established  a sales  office in
California. In addition, from 1994 to date, the Company has incurred expenses to
develop   proprietary   development  tools  and  4SIGHT  and  4SIGHT  Plus,  its
proprietary accelerated  implementation  methodology and toolset.  Commencing in
1995,  the  Company  has been  increasing  its sales  force  and its  marketing,
finance,  accounting  and  administrative  staff.  The Company  employed 93 such
personnel  as of  September  30,  1997 as compared  to 41 such  personnel  as of
September 30, 1996.  Most recently,  during the quarter ended June 30, 1997, the
Company  opened  sales and  operations  offices  and sales  offices in  Atlanta,
Boston, and Dallas. In addition to the Advanced Development Center in India, the
Company also has offices


                                     - 8 -
<PAGE>


in New Zealand and the United Kingdom.  The Company is reviewing the adequacy of
its leased facilities in light of its expanded staff and expects to increase the
size of its leased facilities.

     This Form 10-QSB contains forward-looking  statements within the meaning of
Section 21E of the  Securities  Exchange  Act of 1934,  as  amended,  including,
without  limitation,  statements  regarding the Company's  intention to shift to
higher margin turnkey  management  assignments and more complex  projects and to
utilize its proprietary  implementation  methodology in an increasing  number of
projects.  Such  forward-looking  statements  include  risks and  uncertainties,
including,  but not limited to: (i) the substantial variability of the Company's
quarterly  operating  results caused by a variety of factors,  many of which are
not within the Company's  control,  including (a) seasonal  patterns of hardware
and  software  capital  spending  by  customers,   (b)  information   technology
outsourcing trends, (c) the timing, size and stage of projects,  (d) new service
introductions  by the Company or its  competitors  and the timing of new product
introductions by the Company's ERP partners, (e) levels of market acceptance for
the Company's services,  (f) the hiring of additional staff; (ii) changes in the
Company's billing and employee utilization rates; (iii) the Company's ability to
manage its growth  effectively,  which will  require the Company (a) to continue
developing and improving its operational,  financial and other internal systems,
as well as its business development capabilities, (b) to attract, train, retain,
motivate  and manage its  employees,  (c) to continue to maintain  high rates of
employee  utilization at profitable  billing rates and, (d) to maintain  project
quality,  particularly if the size and scope of the Company's projects increase;
(iv) the Company's ability to maintain an effective  internal control structure;
(v) the Company's limited operating history within its current line of business;
(vi) the Company's reliance on a continued relationship with SAP America and the
Company's  present  status as a SAP National Logo  Partner;  (vii) the Company's
substantial  reliance on key  customers  and large  projects;  (viii) the highly
competitive nature of the markets for the Company's services; (ix) the Company's
ability  to   successfully   address  the  continuing   changes  in  information
technology,  evolving industry  standards and changing  customer  objectives and
preferences;  (x) the Company's  reliance on the  continued  services of its key
executive officers and leading technical  personnel;  (xi) the Company's ability
to attract and retain a  sufficient  number of highly  skilled  employees in the
future;  (xii) the progress the Company may have at  continuing to diversify its
offerings,  including growth in its Oracle,  Baan and PeopleSoft  services;  and
(xiii) the Company's  ability to protect its intellectual  property rights.  The
Company's  actual results may differ  materially  from the results  disclosed in
such forward-looking statements.


                                     - 9 -
<PAGE>


RESULTS OF OPERATIONS
---------------------

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

<TABLE>
<CAPTION>
                                                  Percentage of Revenue

                                    --------------------------------------------------
                                       Three Months Ended        Nine Months Ended
                                           September 30,            September 30,
                                    -----------------------   -------------------------

                                        1997       1996         1997        1996
                                        ----       ----         ----        ----
<S>                                     <C>        <C>          <C>         <C>   
Revenue............................     100.0%     100.0%       100.0%      100.0%
Cost of sales......................      65.5       71.0         68.0        71.6
                                        -----      -----        -----       -----
   Gross profit....................      34.5       29.0         32.0        28.4
Selling, general and
administrative expenses............      23.7       20.4         22.3        20.6
                                        -----      -----        -----       -----
   Operating income................      10.8        8.6          9.7         7.8
Factor fees / Interest expense
(income)...........................      (0.7)       4.1         (0.4)        3.8
                                        -----      -----        -----       -----
Income before provision for income
   taxes
  and extraordinary charge.........      11.5        4.5        10.1          4.0
Provision for income taxes.........       4.3        1.4         3.8          1.2
                                        -----      -----       -----        -----
Income before extraordinary charge.       7.2         3.1        6.3          2.8
Extraordinary charge, net of
income tax benefit.................        --        (7.4)        --         (3.1)
                                        -----      ------       -----       -----
Net income (loss)..................       7.2%       (4.3)%      6.3%        (0.3)%
                                        =====       =====       =====       =====

</TABLE>


THREE MONTHS ENDED  SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1996

     Revenue.  Revenue  increased by 58.2%, or $8.1 million,  from $13.8 million
during the three months ended  September  30, 1996 to $21.9  million  during the
three months ended September 30, 1997. This increase was attributable  primarily
to increased demand for the Company's implementation consulting services and, to
a lesser  extent,  to increased  demand for the Company's  systems  integration,
custom software development services and training services.

     Gross profit.  The Company's cost of sales  includes  primarily the cost of
salaries to consultants  and related  employee  benefits and payroll taxes.  The
Company's cost of sales increased by 45.9%,  or $4.5 million,  from $9.8 million
during the three months ended  September  30, 1996 to $14.3  million  during the
three  months  ended  September  30,  1997.  The  increase  was due to increased
personnel costs  resulting from the hiring of additional  consultants to support
the increase in demand for the Company's  services.  The Company's  gross profit
increased by 88.2%,  or $3.6 million,  from $4.0 million during the three months
ended September 30, 1996 to $7.6 million during the three months ended September
30, 1997.  Gross profit margin  increased from 29.0% of revenue during the three
months  ended  September  30, 1996 to 34.5% of revenue  during the three  months
ended  September  30,  1997.  The  increase  in such  gross  profit  margin  was
attributable  to the increase in  implementation  services  projects,  including
certain  performance  incentives earned by the  Company,  and a  combination  of
improved billing margins and greater consultant utilization.

     Selling,  general  and  administrative   expenses.   Selling,  general  and
administrative  expenses consist  primarily of  administrative  salaries,  sales
person compensation, travel and entertainment, the costs associated with the ADC
and related development costs and professional


                                     - 10 -
<PAGE>


fees. Selling,  general and administrative  expenses increased by 83.6%, or $2.4
million,  from $2.8 million during the three months ended  September 30, 1996 to
$5.2 million during the three months ended  September 30, 1997, and increased as
a percentage of revenue from 20.4% to 23.7%.  Such  expenses  were  increased to
support the  continued  revenue  growth of the Company in the United  States and
abroad.  In  addition,  such  expenses  increased  due to  increased  sales  and
management recruiting costs, support services,  incentive  compensation,  and an
increase in the provision for doubtful accounts.

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

     Provision for income taxes. The Company's effective income tax rate was 37%
and 30.8% for the three months ended September 30, 1997 and 1996,  respectively.
Such tax rates were favorably impacted in 1997 by the Company's Indian affiliate
where the Company is not  obligated to pay tax for the next five years and plans
to  permanently  reinvest such funds and a reduction of the Company's  valuation
allowance in 1996.


NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1996

     Revenue.  Revenue increased by 69.7%, or $23.3 million,  from $33.5 million
during the nine months ended September 30, 1996 to $56.8 million during the nine
months ended  September 30, 1997.  This increase was  attributable  primarily to
increased demand for the Company's implementation  consulting services and, to a
lesser extent,  to increased  demand for the Company's  systems  integration and
custom software development services.

     Gross profit.  The  Company's  cost of sales  increased by 61.1%,  or $14.7
million,  from $24.0 million during the nine months ended  September 30, 1996 to
$38.6 million during the nine months ended  September 30, 1997. The increase was
due to  increased  personnel  costs  resulting  from the  hiring  of  additional
consultants  to support the increase in demand for the Company's  services.  The
Company's gross profit  increased by 91.2%,  or $8.7 million,  from $9.5 million
during the nine months ended September 30, 1996 to $18.2 million during the nine
months ended  September 30, 1997.  Gross profit margin  increased  from 28.4% of
revenue  during the nine  months  ended  September  30, 1996 to 32.0% of revenue
during the nine months  ended  September  30,  1997.  The increase in such gross
profit  margin was  attributable  to the  increase  in  implementation  services
projects and a combination of improved  billing  margins and greater  consultant
utilization.

     Selling,  general  and  administrative   expenses.   Selling,  general  and
administrative  expenses increased by 83.7%, or $5.8 million,  from $6.9 million
during the nine months ended September 30, 1996 to $12.7 million during the nine
months ended  September 30, 1997,  and increased as a percentage of revenue from
20.6% to 22.3%.  Such expenses were  increased to support the continued  revenue
growth of the Company in the United States and abroad. In


                                     - 11 -
<PAGE>


addition,  such  expenses  increased  due  to  increased  sales  and  management
recruiting costs, support services,  incentive compensation,  and an increase in
the provision for doubtful accounts.

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

     Provision for income taxes.  The  Company's  effective  income tax rate was
37.8%  and  30.6%  for the  nine  months  ended  September  30,  1997  and  1996
respectively.  Such tax rates were  favorably  impacted in 1997 by the Company's
Indian affiliate where the Company is not obligated to pay tax for the next five
years and plans to  permanently  reinvest  such  funds  and a  reduction  of the
Company's valuation allowance in 1997 and 1996.


BACKLOG
-------

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


LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

     The Company funds its  operations  primarily  from cash flow generated from
operations,  and to a lesser  extent,  from  cash  balances  generated  from the
Company's initial and follow-on public  offerings.  In October 1996, the Company
consummated  its initial  public  offering of its common stock  resulting in net
proceeds to the Company of  approximately  $17.8  million.  On July 2, 1997, the
Company  consummated a follow-on  public offering (the  "Offering") of 1,000,000
shares of its Common Stock at a price to the public of $9.50 per share.  On July
15, 1997 and as part of the Offering, an additional 150,000 shares at a price to
the  public of $9.50  per share  were  issued to cover  overallotments.  The net
proceeds to the Company from the  Offering,  after  underwriting  discounts  and
commissions and other expenses of the Offering, were approximately $9.9 million.

     Cash used in operating  activities  was $4.8 million during the nine months
ended  September  30,  1997,  resulting  primarily  from the growth in  accounts
receivable and unbilled services. Cash used in operating activities for the nine
months ended September 30, 1996 was $4.7 million.

     The Company had working  capital of $28.1 million at September 30, 1997 and
$15.7 million at December 31, 1996.


                                     - 12 -
<PAGE>


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

     The Company  invested  $2.1 million and $524,000 in computer  equipment and
furniture   during  the  nine  months  ended   September   30,  1997  and  1996,
respectively.  There  are  no  material  commitments  for  capital  expenditures
currently outstanding.

     In January  1997,  and as later  amended on August 18,  1997,  the  Company
entered into a two-year  credit  agreement with PNC Bank,  National  Association
(the "Bank").  The credit facility with the Bank has two components comprised of
(i) a  revolving  line of credit  pursuant to which the Company may borrow up to
$7.5 million  either at the Bank's prime rate per annum or the EuroRate  plus 2%
(at the Company's  option),  and (ii) equipment term loans pursuant to which the
Company may borrow up to an aggregate of $350,000 (at the Bank's prime rate plus
1/4 of 1% per  annum) to  purchase  equipment.  The  credit  agreement  contains
covenants  which require the Company to (i) maintain its working  capital during
the  year  at no  less  than  90%  of the  working  capital  at  the  end of the
immediately  preceding fiscal year and at the end of each fiscal year at no less
than 105% of its working capital at the end of the immediately  preceding fiscal
year;  and (ii)  maintain its tangible net worth during the year at no less than
95% of its tangible  net worth at the end of the  immediately  preceding  fiscal
year and at the end of each  fiscal  year at no less than 108% of  tangible  net
worth  at the  end of the  immediately  preceding  fiscal  year.  The  Company's
obligations  under the credit agreement are  collateralized by substantially all
of the Company's  assets,  including its accounts  receivable  and  intellectual
property. The Company's obligations under the credit facility are payable at the
expiration of such facility on January 22, 1999.  These terms are subject to the
Company  maintaining  an  unsubordinated  debt to tangible net worth ratio of no
greater  than one to one and an earnings  before  interest and taxes to interest
expense  ratio of no less than three to one. The Bank also agreed to release the
collateral  securing the  revolving  line of credit if the Company meets certain
financial criteria at December 31, 1997.

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

     The Company believes that its available funds, together with current credit
arrangements and the cash flows expected to be generated from  operations,  will
be adequate to satisfy its current and planned  operations  for the  foreseeable
future.


                                     - 13 -
<PAGE>


PART II.  OTHER INFORMATION


Item 1.   Legal Proceedings

     Oxford Systems Inc.  ("Oxford"),  a New Jersey  corporation  and formerly a
wholly-owned  subsidiary  of the  Company  which was merged  into the Company in
December 1996,  was named as a defendant in a civil  complaint that was filed on
June 8, 1995, by Design Strategy Corp.  ("Design  Strategy"),  in New York State
Supreme Court in the County of New York.  Design  Strategy  alleges that another
named defendant, Citibank N.A. ("Citibank"), contracted with Design Strategy for
database  administration  services.  Design  Strategy  claims that  Citibank and
Oxford  conspired  to  deprive it of  commissions,  tortiously  interfered  with
contract,   engaged  in  unfair   competition,   damaged  its   reputation   and
misappropriated  services.  Design Strategy settled its claims against Citibank.
Design  Strategy then moved to amend its complaint to substitute the Company for
Oxford  and  to  join  Nagarjun   Valluripalli,   the  Company's   President  of
International  Operations,  as defendants.  At the same time, Oxford and another
defendant  cross-moved for summary judgment.  Thereafter,  on September 9, 1997,
the New York State  Supreme Court granted  Design  Strategy's  motion to add the
Company and Mr.  Valluripalli as defendants  while  simultaneously  granting the
Company's  cross-motion for summary  judgment.  On September 18, 1997, the Court
entered a  decision  and order (the  "Decision")  dismissing  Design  Strategy's
complaint in its entirety.  Subsequently,  on October 17, 1997,  Design Strategy
filed a notice of motion of  reargument  of the Decision and a notice of appeal,
which will be pursued if the motion for reargument is not granted.


                                     - 14 -
<PAGE>


Item 5.   Other Information


A.   Follow-On Offering
-----------------------

     On July 2, 1997, the Company  consummated a follow-on  public offering (the
"Offering") of 1,000,000  shares of its Common Stock at a price to the public of
$9.50 per share.  On July 15, 1997 and as part of the  Offering,  an  additional
150,000  shares at a price to the public of $9.50 per share were issued and sold
by the Company to cover overallotments. The net proceeds to the Company from the
Offering, after underwriting discounts and commissions and other expenses of the
Offering, were approximately $9.9 million.

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


B.   Intelligroup Asia Private, Ltd.
------------------------------------

     Intelligroup Asia Private Ltd.  ("Intelligroup Asia") operates the Advanced
Development  Center in Hyderabad,  India.  Intelligroup  Asia is wholly-owned by
Messrs.  Pandey,  Koneru,  and Valluripalli,  the principal  shareholders of the
Company. The Company and Messrs. Pandey, Koneru, and Valluripalli are parties to
a contract  pursuant  to which the Company  will,  subject to  necessary  Indian
government  approvals,  acquire  the  shares of  Intelligroup  Asia for  nominal
consideration.  Such Indian government approvals were received in September 1997
and the transfer of the shares to the Company is expected to be  consummated  by
year-end.  Upon  such  transfer,   Intelligroup  Asia  will  be  a  wholly-owned
subsidiary of the Company.


C.   Restructuring
------------------

     Effective  October 28, 1997,  Rajkumar Koneru was elected to the offices of
Chief Executive Officer and President of U.S. Operations for the Company.  Ashok
Pandey  remains  Chairman of the Board and was elected  President  of  Corporate
Services.   Nagarjun   Valluripalli  was  elected   President  of  International
Operations.


                                     - 15 -
<PAGE>


Item 6.   Exhibits And Reports On Form 8-K.

     (a)  Exhibits.

            10.1    ASAP Partner Addendum to R/3 National Logo Partner Agreement
                    between SAP America,  Inc. and the Company effective July 1,
                    1997 (amends  existing R/3 National Logo Partner  Agreement)
                    (incorporated  by  reference to the  Company's  registration
                    statement on Form SB-2 (Registration Statement No. 333-29119
                    declared effective on June 26, 1997)).

            10.2    Implementation  Partner Agreement between  PeopleSoft,  Inc.
                    and the Company effective July 15, 1997.

            10.3    Consulting  Alliance  Agreement with Baan International B.V.
                    and the Company effective September 29, 1997.

            10.4    Amendment to Loan and Security  Agreement dated as of August
                    18, 1997 by and between PNC Bank,  National  Association and
                    the Company (amends Loan and Security  Agreement dated as of
                    January 22, 1997 (incorporated by reference to the Company's
                    annual report on Form 10-KSB for the year ended December 31,
                    1996 filed with the SEC on March 28, 1997)).

            11      Statement re: Computation of Per Share Earnings.

            27      Financial Data Schedule.


     (b)  Reports on Form 8-K.

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


                                     - 16 -
<PAGE>


                                   SIGNATURES
                                   ----------


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


                               Intelligroup, Inc.




DATE: November 12, 1997             By:  /s/ Rajkumar Koneru
                                         --------------------------------
                                         Rajkumar Koneru,
                                         Chief Executive Officer and
                                         President, U.S. Operations
                                         (Principal Executive Officer)


DATE: November 12, 1997             By:  /s/ Robert Olanoff
                                         --------------------------------
                                        Robert Olanoff,
                                        Chief Financial Officer, Secretary
                                        and Treasurer
                                        (Principal Financial and
                                        Accounting Officer)


                                     - 17 -