SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                                    FORM 10-Q

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

                For the quarterly period ended September 30, 1999
                           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
                         -------------------------------
                           (Issuer's Telephone Number,
                              Including Area Code)

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

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

Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of November 4, 1999:

             Class                                       Number of Shares
             -----                                       ----------------
  Common Stock, $.01 par value                              15,558,751


<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, 1999 (unaudited)
             and December 31, 1998 ......................................     2

             Consolidated Statements of Operations and Comprehensive
             Income (Loss) for the Three Months and Nine Months Ended
             September 30, 1999 and 1998 (unaudited).....................     3

             Consolidated Statements of Cash Flows
             for the Nine Months Ended
             September 30, 1999 and 1998 (unaudited).....................     4

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

    Item 2.  Management's Discussion and Analysis of
             Results of Operations and Financial Condition...............     9

PART II.  OTHER INFORMATION

        Item 1.  Legal Proceedings.......................................    19

        Item 3.  Defaults Upon Senior Securities.........................    19

        Item 4.  Submission of Matters to a Vote of Security Holders.....    20

        Item 5.  Other Events............................................    21

        Item 6.  Exhibits and Reports on Form 8-K........................    22

SIGNATURES...............................................................    23



                                          - i -
<PAGE>


                          PART I. FINANCIAL INFORMATION

                    Item 1. Consolidated Financial Statements



                                          - 1 -
<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                    September 30, 1999 and December 31, 1998

<TABLE>
<CAPTION>
                                                                      September 30,    December 31,
                                                                        1999               1998
                                                                      ------------     -----------
                                                                      (unaudited)
               ASSETS
<S>                                                                   <C>             <C>
Current Assets:
   Cash and cash equivalents....................................      $  8,550,000    $  4,245,000
   Accounts receivable, less allowance for doubtful accounts
      of $2,322,000 at September 30, 1999 and $1,053,000
      at December 31, 1998......................................        36,922,000      33,622,000
   Unbilled services............................................        13,548,000      10,842,000
   Deferred income taxes........................................           825,000         808,000
   Other current assets.........................................         3,752,000       4,197,000
                                                                       -----------      ----------
        Total current assets....................................        63,597,000      53,714,000

Property and equipment, net.....................................        10,501,000       9,506,000
Cost in excess of fair value of net assets acquired, net........         6,850,000       5,629,000
Other assets....................................................         1,290,000         716,000
                                                                       -----------      ----------
                                                                      $ 82,238,000    $ 69,565,000
                                                                       ===========     ===========

               LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
   Accounts payable.............................................      $  3,838,000    $  5,347,000
   Accrued payroll and related taxes............................         9,731,000       6,254,000
   Accrued expenses and other liabilities.......................         7,280,000       2,999,000
   Accrued restructuring costs..................................         1,742,000              --
   Accrued acquisition costs....................................           460,000       3,302,000
   Income taxes payable.........................................                --       3,160,000
   Line of credit...............................................        10,575,000              --
   Current portion of long-term debt and obligations under
      capital leases............................................           131,000          11,000
                                                                       -----------      ----------
        Total current liabilities...............................        33,757,000      21,073,000
                                                                       -----------      ----------

Long-term debt and obligations under capital leases,
   less current portion.........................................           653,000          60,000
                                                                       -----------      ----------

Deferred income taxes...........................................           533,000         483,000
                                                                       -----------      ----------

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;
      15,558,751 and 15,393,000 shares issued and outstanding at
      September 30, 1999 and December 31, 1998, respectively....           156,000         154,000
   Additional paid-in capital...................................        37,770,000      35,263,000
   Retained earnings............................................        10,493,000      13,077,000
   Currency translation adjustments.............................        (1,124,000)       (545,000)
                                                                       -----------      ----------
      Total shareholders' equity ...............................        47,295,000      47,949,000
                                                                       -----------      ----------
                                                                      $ 82,238,000    $ 69,565,000
                                                                       ===========     ===========
</TABLE>


          See accompanying notes to consolidated financial statements.

                                     - 2 -
<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                         AND COMPREHENSIVE INCOME (LOSS)
     For the Three Months and Nine Months Ended September 30, 1999 and 1998
                                   (unaudited)

<TABLE>
<CAPTION>
                                           Three Months Ended September 30,   Nine Months Ended September 30,
                                           --------------------------------   -------------------------------
                                                 1999           1998             1999             1998
                                             -----------     -----------      -----------      -----------
<S>                                         <C>             <C>              <C>              <C>
Revenue.................................    $ 48,350,000    $ 43,315,000     $141,528,000     $116,639,000
Cost of sales...........................      30,630,000      27,363,000       91,562,000       73,165,000
                                             -----------     -----------     ------------     ------------
    Gross Profit........................      17,720,000      15,952,000       49,966,000       43,474,000
                                             -----------     -----------     ------------     ------------

Selling, general and administrative
 expenses...............................      15,036,000      10,751,000       43,091,000       28,563,000
Acquisition expenses....................              --              --        2,115,000          434,000
Restructuring and other special charges.              --              --        7,328,000               --
                                             -----------     -----------     ------------     ------------
    Total operating expenses............      15,036,000      10,751,000       52,534,000       28,997,000
                                             -----------     -----------     ------------     ------------

    Operating income (loss).............       2,684,000       5,201,000       (2,568,000)      14,477,000
Other income (expense), net.............          64,000         176,000          110,000          121,000
Interest income (expense), net..........        (241,000)          4,000         (508,000)         100,000
                                             -----------     -----------     ------------     ------------

Income (loss) before provision for
 income taxes...........................       2,507,000       5,381,000       (2,966,000)      14,698,000

Provision (benefit) for income taxes....         802,000       1,623,000         (552,000)       3,529,000
                                             -----------     -----------     ------------     ------------

Net income (loss).......................    $  1,705,000    $  3,758,000    $  (2,414,000)   $  11,169,000
                                             ===========     ===========     ============     ============

Earnings per share:
     Basic earnings per share:
         Net income (loss) per share....    $       0.11    $       0.24    $       (0.16)   $        0.73
                                             ===========     ===========     ============     ============
       Weighted average number of
       common shares - Basic............      15,549,000      15,371,000      15,549,000       15,205,000
                                             ===========     ===========     ============     ============

     Diluted earnings per share:
         Net income (loss) per share....    $       0.11    $       0.24    $       (0.16)   $       0.71
                                             ===========     ===========     ============     ============

       Weighted average number of
       common shares - Diluted..........      15,551,000      15,881,000       15,549,000       15,702,000
                                             ===========     ===========     ============     ============


Comprehensive Income (Loss)
---------------------------

Net income (loss).......................    $  1,705,000    $  3,758,000    $  (2,414,000)   $  11,169,000

Other comprehensive income -
     Currency translation adjustments...         (15,000)       (439,000)        (578,000)      (1,271,000)
                                             -----------     -----------     ------------     ------------

Comprehensive income (loss).............    $  1,690,000    $  3,319,000    $   2,992,000    $   9,898,000
                                             ===========     ===========     ============     ============
</TABLE>


          See accompanying notes to consolidated financial statements.

                                     - 3 -
<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              For the Nine Months Ended September 30, 1999 and 1998
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                      September 30,    September 30,
                                                                          1999             1998
                                                                     --------------    -------------
<S>                                                                  <C>              <C>
Cash flows from operating activities:
   Net income (loss)............................................     $ (2,414,000)    $  11,169,000
   Adjustments to reconcile net income (loss) to net cash
     used in operating activities:
       Depreciation and amortization............................        2,559,000           405,000
       Provision for doubtful accounts..........................        2,912,000           610,000
       Deferred income taxes....................................         (278,000)         (184,000)
   Changes in operating assets and liabilities:
       Accounts receivable......................................       (5,301,000)      (10,184,000)
       Unbilled services........................................       (2,706,000)       (6,431,000)
       Other current assets.....................................          502,000        (1,225,000)
       Other assets.............................................         (574,000)         (590,000)
       Accounts payable.........................................       (1,514,000)        2,206,000
       Accrued payroll and related taxes........................        3,404,000         6,086,000
       Accrued restructuring charges............................        1,742,000                --
       Accrued expenses and other liabilities...................        1,078,000         1,926,000
       Income taxes payable.....................................       (3,348,000)        1,151,000
                                                                      -----------       -----------
           Net cash provided by (used in) operating activities..       (3,938,000)        4,939,000
                                                                      -----------       -----------

Cash flows from investing activities:
   Purchase of equipment........................................       (2,528,000)       (4,037,000)
   Acquisition of businesses....................................       (1,682,000)       (4,398,000)
                                                                      -----------       -----------
           Net cash used in investing activities................       (4,210,000)       (8,435,000)
                                                                      -----------       -----------

Cash flows from financing activities:
   Proceeds from issuance of common stock.......................        2,509,000         4,462,000
   Proceeds from line of credit borrowings, net.................       10,695,000                --
   Repayments of other loans....................................               --          (461,000)
   Principal payments under capital leases......................           (3,000)           (9,000)
   Shareholder dividends........................................         (170,000)         (627,000)
                                                                      -----------       -----------
           Net cash provided by financing activities............       13,031,000         3,365,000
                                                                      -----------       -----------

   Effect of foreign currency exchange rate changes on cash.....         (578,000)       (1,271,000)
                                                                      -----------       -----------
           Net decrease in cash and cash equivalents ...........        4,305,000        (1,402,000)
Cash and cash equivalents at beginning of period................        4,245,000         8,825,000
                                                                      -----------       -----------
Cash and cash equivalents at end of period......................     $  8,550,000     $   7,423,000
                                                                      ===========      ============

Supplemental disclosures of cash flow information:
   Cash paid for income taxes...................................     $  2,636,000     $   2,494,000
   Cash paid for interest.......................................          569,000            35,000
</TABLE>



          See accompanying notes to consolidated financial statements.

                                     - 4 -
<PAGE>

                       INTELLIGROUP, INC. and SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)


(1) BASIS OF PRESENTATION

     The   consolidated   financial   statements  and   accompanying   financial
information  as of  September  30, 1999 and for the three and nine months  ended
September  30, 1999 and 1998 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-Q 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, 1998,
which were included as part of the Company's Form S-3 declared  effective by the
Securities and Exchange Commission on June 14, 1999.

     The Company's 1998 Financial  Statements  have been restated to include the
results of the acquisitions of each of (i) CPI Resources  Limited;  (ii) Azimuth
Consulting Limited,  Azimuth Holdings Limited,  Braithwaite Richmond Limited and
Azimuth Corporation Limited; and (iii) Empower Solutions,  LLC and its affiliate
Empower,  Inc. (the "Empower Companies") in accordance with pooling of interests
accounting.

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

(2) EARNINGS PER SHARE

     Basic earnings per share is computed by dividing income (loss) available to
common  shareholders by the weighted average number of common stock  outstanding
for the period.  Diluted earnings per share reflects the potential dilution that
would  occur  if  securities  or other  contracts  to issue  common  stock  were
exercised or converted into common stock, unless they are antidilutive.





                                     - 5 -
<PAGE>

     A reconciliation of weighted average number of common shares outstanding to
weighted average common shares outstanding assuming dilution is as follows:
<TABLE>
<CAPTION>
                                          Three Months Ended September 30,    Nine Months Ended September 30,
                                          --------------------------------    -------------------------------
                                             1999               1998              1999              1998
                                             ----               ----              ----              ----
<S>                                       <C>               <C>                 <C>              <C>
Weighted average number of
common shares                             15,549,000        15,371,000          15,549,000       15,205,000

Common share equivalents of
outstanding stock options                      2,000           510,000                  --          497,000
                                         -----------       -----------         -----------      -----------
Weighted average number of common
shares assuming dilution                  15,551,000        15,881,000          15,549,000       15,702,000
                                         ===========       ===========         ===========      ===========
</TABLE>


     For the nine months ended September 30, 1999, all stock options outstanding
as of September  30, 1999 were  excluded  from the  computation  of net loss per
common share,  as they are  antidilutive.  Certain stock options  outstanding at
September 30, 1998 were not included in the  computations  of earnings per share
assuming  dilution  because the options'  exercise  prices were greater than the
average price of the common shares.

(3) ACQUISITIONS

     On January 8, 1999, the Company  consummated  the acquisition of all of the
shares of outstanding capital stock of Network Publishing,  Inc. The acquisition
was accounted for utilizing purchase accounting.  The purchase price included an
initial cash payment in the aggregate of $1,800,000 together with a cash payment
of $200,000 to be held in escrow,  and resulted in costs in excess of fair value
of net assets acquired of $1.6 million. In addition, the purchase price includes
an earn-out  payment of up to $2,212,650  in restricted  shares of the Company's
Common Stock,  payable on or before April 15, 2000 and a potential lump sum cash
payment of $354,024,  payable no later than March 31, 2000.  Pro-forma financial
information has not been presented as this acquisition was deemed  immaterial to
the Company's operations as a whole.

     On  February  16,  1999,  the  Company,  by  way  of  merger  transactions,
consummated  the  acquisition  of  the  Empower  Companies.  Such  mergers  were
accounted  for as a pooling of  interests.  The Company  issued an  aggregate of
1,831,091  restricted  shares of the Company's  Common Stock. The Company may be
required to issue additional  shares of its restricted Common Stock which may be
issued in connection  with the net worth  adjustment as of the closing date. The
results of the Empower  Companies  were revenues of $24.6 million and net income
of $7.9  million for the nine months  ended  September  30, 1999 and revenues of
$12.1 million and net income of $4.6 million for the nine months ended September
30, 1998. In connection with this merger,  acquisition  expenses of $2.1 million
were expensed  during 1999.  These costs primarily  relate to professional  fees
incurred in connection with the merger.



                                     - 6 -
<PAGE>

(4) RESTRUCTURING AND OTHER SPECIAL CHARGES

     In connection with the Company's plan to reduce costs and improve operating
efficiencies,  the Company incurred a non-recurring charge of approximately $5.6
million  related  to  restructuring  initiatives  during the nine  months  ended
September 30, 1999. The restructuring  charge included  settlement of the former
Chief Executive Officer's employment agreement and additional severance payment,
expenses  associated  with the  termination  of certain  employees in the United
States and the United Kingdom,  the closing of certain  satellite offices in the
United  States and an  additional  office in Belgium,  and costs to exit certain
contractual obligations.

     Activity  in accrued  costs for  restructuring  and other  special  charges
during the nine month period ended September 30, 1999 is as follows:

<TABLE>
<CAPTION>
                                             Charges to        Costs          Accrued Costs
                                             Operations        Paid        September 30, 1999
                                             ----------        ----        ------------------
<S>                                         <C>             <C>                <C>
Severance and related costs............     $ 5,027,000     $ 3,382,000        $  1,645,000

Other costs primarily to exit
facilities, contracts, and certain
activities.............................         601,000         504,000              97,000
                                            -----------     -----------        ------------
                                            $ 5,628,000     $ 3,886,000        $  1,742,000
                                            ===========     ===========        ============
</TABLE>


     Additionally,  the Company recorded a reserve of approximately $1.7 million
against an outstanding receivable from a large account, whose parent corporation
filed for protection under Chapter 11 of the U.S. bankruptcy laws.

(5) CREDIT FACILITY

     On January 29, 1999, the Company  entered into an unsecured  three-year $30
million  Revolving  Credit Loan Agreement (the "Loan  Agreement") with PNC Bank,
N.A.  (the  "Bank").  The  proceeds  of the credit  facility  may be used by the
Company for  financing  acquisitions  and  general  corporate  purposes.  At the
Company's option, for each loan, interest shall be computed either at the Bank's
prime rate per annum or the Adjusted Libor Rate plus the Applicable  Margin,  as
such terms are defined in the Loan Agreement.  The Company's  obligations  under
the credit  agreement are payable at the  expiration of such facility on January
29, 2002. Approximately $10.6 million was outstanding under this credit facility
at September 30, 1999.

     The credit agreement contains financial covenants which require the Company
to (i) maintain a  consolidated  cash flow leverage  ratio equal to or less than
2.5 to 1.0  for the  period  of  four  fiscal  quarters  preceding  the  date of
determination  taken together as one accounting period  ("Consolidated Cash Flow
Leverage  Ratio"),  (ii)  maintain  a  consolidated  net  worth of not less than
consolidated  net worth of the prior fiscal year plus 50% of positive net income
for such  fiscal  year  ("Consolidated  Net  Worth"),  (iii) not enter  into any
agreement  to purchase  and/or pay for, or become  obligated  to pay for capital
expenditures, long term leases, capital leases or sale lease-backs, in an amount
at any time outstanding aggregating in excess of $5,000,000 during

                                     - 7 -
<PAGE>

any fiscal year,  provided,  however,  in a one year  carry-forward  basis,  the
Company  may incur  capital  expenditures  not to exceed  $8,000,000  during any
fiscal  year,  and (iv) not cause or permit the minimum  fixed  charge  coverage
ratio, calculated on the basis of a rolling four quarters to be less than 1.4 to
1.0 as at the  end of  each  fiscal  quarter  ("Minimum  Fixed  Charge  Coverage
Ratio").

     As a result of the  restructuring and other special charges incurred during
the quarter  ended June 30,  1999,  the Company was not in  compliance  with the
Consolidated  Cash Flow  Leverage  Ratio and  Consolidated  Net Worth  financial
covenants at June 30, 1999.  On August 12, 1999,  the Bank  notified the Company
that  such  non-compliance  constituted  an  Event  of  Default  under  the Loan
Agreement.  At September 30, 1999,  while the Company was in compliance with the
Consolidated  Net Worth  financial  covenant,  it was not in compliance with the
Consolidated  Cash Flow Leverage  Ratio and Minimum Fixed Charge  Coverage Ratio
financial covenants. As of the date of this filing, the Company and the Bank are
in the process of finalizing the proposed terms of a waiver and amendment to the
Loan  Agreement  to remedy the  defaults  which  currently  exist under the Loan
Agreement.  The terms of such proposed  waiver and amendment may include,  among
other  things,  (i) a $15  million  reduction  in  availability  under  the Loan
Agreement,  (ii) a  requirement  that the loan be  secured  by a first  priority
perfected security interest on all of the assets of the Company and its domestic
subsidiaries  and (iii) certain  revised  financial  covenants.  There can be no
assurance  that the  Company  will obtain  such  waiver and  amendment  on terms
acceptable to the Company, if at all.





                                     - 8 -
<PAGE>

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

GENERAL

     The  Company  provides a wide  range of  information  technology  services,
including  management  consulting,  enterprise-wide  business process solutions,
Internet applications services,  applications  outsourcing and maintenance,  web
site design and customization,  IT training  solutions,  systems integration and
custom software development based on leading technologies. The Company has grown
rapidly  since 1994 when it made a strategic  decision to diversify its customer
base by expanding the scope of its integration  and development  services and to
utilize software developed by SAP as a primary tool to implement enterprise-wide
business  process  solutions.  In 1995, the Company achieved the status of a SAP
National  Implementation  Partner.  In the same year,  the Company also began to
utilize Oracle's ERP application products to diversify its service offerings. In
1997,  the  Company  enhanced  its partner  status with SAP, by first  achieving
National Logo Partner status and then  AcceleratedSAP  Partner Status.  Also, in
1997,  the Company  further  diversified  its ERP-based  service  offerings,  by
beginning to provide PeopleSoft and Baan implementation  services. In July 1997,
the  Company  was  awarded  PeopleSoft  implementation  partnership  status.  In
September   1997,  the  Company  was  awarded  Baan   international   consulting
partnership  status.  In  June  1998,  the  Company  also  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.

     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  has  provided  and  continues  to provide  services on certain
projects in which it, at the request of the  clients,  offered a fixed price for
its  services.  For the year ended  December  31,  1998,  revenues  derived from
projects  under  fixed-price  contracts  represented  approximately  4%  of  the
Company's  total  revenue.  No single  fixed-price  contract was material to the
Company's business during 1998.  However,  one fixed price project,  which began
late  in 1998  and is  expected  to be  completed  in  early  2000,  represented
approximately 3% of the Company's revenue during the quarter ended September 30,
1999. Fixed price contracts, in the aggregate,  represented  approximately 8% of
the Company's total revenue during such quarter.  The Company  believes that, as
it pursues its strategy of making turnkey project management a larger portion of
its business,  it will continue to offer fixed price  projects.  The Company has
had  limited  prior  experience  in pricing  and  performing  under  fixed price
arrangements and believes


                                     - 9 -
<PAGE>

that there are certain risks related  thereto and thus prices such  arrangements
to reflect the associated  risk. There can be no assurance that the Company will
be able to complete such projects within the fixed price timeframes. The failure
to perform  within such fixed price  contracts,  if entered  into,  could have a
material  adverse  effect on the  Company's  business,  financial  condition and
results of operations.

     The  Company has derived  and  believes  that it will  continue to derive a
significant  portion  of its  revenue  from a limited  number of  customers  and
projects.  For the nine  months  ended  September  30,  1999 and the year  ended
December 31, 1998,  the  Company's  ten largest  customers  accounted for in the
aggregate,  approximately 26% and 38% of its revenue, respectively. For the nine
months  ended  September  30,  1999 and the year ended  December  31,  1998,  no
customer  accounted  for more than 10% of revenue.  During the nine months ended
September  30,  1999  and the  year  ended  December  31,  1998,  43%  and  52%,
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, 1999 and the year ended  December 31, 1998,  approximately  8% and
11%,  respectively,  of the Company's total revenue was derived from projects in
which the Company  implemented  software  developed  by Oracle.  During the nine
months  ended  September  30,  1999  and  the  year  ended  December  31,  1998,
approximately  26% and 19%,  respectively,  of the  Company's  total revenue was
derived from engagements in which the Company implemented  software developed by
PeopleSoft.

     The Company's most significant cost is project  personnel  expenses,  which
consist of consultant salaries, benefits and payroll-related expenses. Thus, the
Company's financial performance is based primarily upon billing margin (billable
hourly rate less the cost to the Company of a consultant on an hourly basis) and
personnel  utilization rates (billable hours divided by paid hours). The Company
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 its shift to
higher-margin  turnkey  management  assignments  and more  complex  projects may
adversely impact the Company's future growth.

     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 operations  facility in India,  the Advanced
Development Center (the "ADC"). In addition,  from 1994 to date, the Company has
incurred expenses to develop  proprietary  development tools and its proprietary
accelerated  implementation methodology and toolset. Since 1995, the Company has
also been increasing its sales force and its marketing,  finance, accounting and
administrative staff, in order to manage its growth. Most recently, in September
1999, the Company created an Internet  Development  Center in Hyderabad,  India.
The Company  currently  maintains its  headquarters in Edison,  New Jersey,  and
branch offices in Chicago, Detroit, Foster City (California), Reston (Virginia),
Dallas,  Atlanta,  Phoenix,  and  Washington,  D.C. The Company  also  currently
maintains  offices in Europe (the United Kingdom and Denmark),  and Asia Pacific
(Australia,  India,  New Zealand,  the  Philippines,  Japan and Singapore).  The
Company leases its headquarters in Edison,  New Jersey,  totaling  approximately
48,475  square  feet.  Such lease has an initial  term of ten (10) years,  which
commenced in September 1998.


                                     - 10 -
<PAGE>

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 to
higher margin turnkey  management  assignments and more complex  projects and to
utilize its proprietary  implementation  methodology in an increasing  number of
projects.  In addition,  statements  regarding the Company's plans to expand its
service   offerings   through   internal  growth  and   acquisitions   are  also
forward-looking  statements.  Such forward-looking  statements include risks and
uncertainties, including, but not limited to:

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

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

     o    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,  (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  ability to  maintain  an  effective  internal  control
          structure;

     o    the Company's  reliance on a continued  relationship  with SAP America
          and the Company's present status as a SAP National Logo Partner;

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

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

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

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

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



                                     - 11 -
<PAGE>

     o    the  Company's   ability  to  continue  to  diversify  its  offerings,
          including  growth in its  Oracle,  Baan and  PeopleSoft  and  Internet
          services;

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

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

     o    Year  2000  compliance  of  vendors'   products  and  related  issues,
          including impact of the Year 2000 problem on customer buying patterns.

     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.

     Further,  the  Company's  statements  regarding  the  proposed  waiver  and
amendment to its credit facility and related statements concerning the Company's
liquidity are forward-looking  statements. In the event the Company and the Bank
are unable to reach  agreement  and the Bank  calls the  outstanding  loan,  the
Company will be required to find a substitute  source of working capital quickly
in order to meet its cash needs. There can be no assurance,  in such event, that
the Company will be able to reach agreement with an alternative lender.

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,
                                              ---------------------        -----------------------
                                               1999           1998           1999           1998
                                               ----           ----           ----           ----
<S>                                            <C>            <C>            <C>            <C>
Revenue................................        100.0%         100.0%         100.0%         100.0%
Cost of sales..........................         63.4           63.2           64.7           62.7
                                              ------         ------         ------         ------
    Gross profit.......................         36.6           36.8           35.3           37.3
Selling, general and administrative
  expenses.............................         31.0           24.8           30.4           24.5
Acquisition expenses...................           --             --            1.5            0.4
Restructuring and other special
charges................................           --             --            5.2             --
                                              ------         ------         ------         ------
    Operating income (loss)............          5.6           12.0           (1.8)          12.4
Interest and other income
    (expense), net.....................         (0.4)           0.4           (0.3)           0.2
                                              ------         ------         ------         ------
Income (loss) before provision for
   income taxes........................          5.2           12.4           (2.1)          12.6
Provision (benefit) for income taxes...          1.7            3.7           (0.4)           3.0
                                              ------         ------         ------         ------
Net income (loss)......................          3.5%           8.7%          (1.7)%          9.6%
                                              ======         ======         ======         ======
</TABLE>


                                     - 12 -
<PAGE>

THREE MONTHS ENDED  SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED  SEPTEMBER
30, 1998

     Revenue.  Revenue  increased by 11.6%, or $5.0 million,  from $43.3 million
during the three months ended  September  30, 1998 to $48.3  million  during the
three months ended September 30, 1999. This increase was attributable  primarily
to increased  demand for the  Company's  PeopleSoft  implementation  services as
compared  with the same period in the prior year,  and, to a lesser  extent,  an
increase  in  management  consulting  revenues,  as well as growth  in  internet
development services,  partially related to the Company's acquisition of Network
Publishing,  Inc. on January 8, 1999.  Revenue for the three month  period ended
September  30,  1999,  included  a  fixed  price  project  which  accounted  for
approximately 3% of revenue.

     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 11.9%, or $3.2 million,  from $27.4 million
during the three months ended  September  30, 1998 to $30.6  million  during the
three  months  ended  September  30,  1999.  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 11.1%, or $1.7 million,  from $16.0 million during the three months
ended  September  30,  1998 to $17.7  million  during  the  three  months  ended
September 30, 1999. Gross profit margin decreased slightly from 36.8% of revenue
during the three months ended  September 30, 1998 to 36.6% of revenue during the
three  months  ended  September  30, 1999.  While  revenue  from  implementation
services  increased  from the same  period in 1998,  the  Company  continued  to
experience  a decline  in its  consultant  staff  utilization  during  the third
quarter of 1999, a result of changing  ERP market  dynamics.  As a  consequence,
gross margins were adversely affected during the current period.

     Selling,  general  and  administrative   expenses.   Selling,  general  and
administrative  expenses  consist  primarily  of  administrative  salaries,  and
related benefits costs,  occupancy costs, sales person compensation,  travel and
entertainment,  costs associated with the ADC and related  development costs and
professional fees.  Selling,  general and  administrative  expenses increased by
39.9%,  or $4.2  million,  from  $10.8  million  during the three  months  ended
September 30, 1998 to $15.0 million during the three months ended  September 30,
1999,   and   increased  as  a  percentage  of  revenue  from  24.8%  to  31.0%,
respectively.  The  increases  in such  expenses  in  absolute  dollars and as a
percentage of revenue were due primarily to the increase in salaries and related
benefits,  reflecting  headcount  increases in the Company's sales force and its
marketing, finance, accounting and administrative staff through acquisitions and
in order to manage its growth.  The  Company's  occupancy  costs  increased as a
result of the relocation of our corporate headquarters into approximately 48,000
square  feet of office  space,  from our  former  location  which  consisted  of
approximately 17,000 square feet. In addition, the Company experienced increases
in sales and management recruiting costs,  occupancy costs as additional offices
were  opened in the  United  States,  support  services  and the  provision  for
doubtful  accounts.  The Company  anticipates  continued  increases  in selling,
general and  administrative  expenses during the fourth quarter of 1999 relative
to its Internet Services business.

     Interest  income  (expense).  Interest  income has been  earned on interest
bearing cash accounts and short term investments.  In accordance with investment
guidelines approved by the Company's Board of Directors, cash balances in excess
of those required to fund operations have


                                     - 13 -
<PAGE>

been invested in short-term U.S. Treasury securities and commercial paper with a
credit rating no lower than A1/P1. The Company incurred  approximately  $230,000
in interest expense during the three months ended September 30, 1999,  primarily
related to its borrowings under its line of credit. Borrowings under the line of
credit were used to fund operating activities.

     Provision  (benefit) for income taxes. The Company's effective tax rate was
32% and 30% for the three months ended  September  30, 1999,  and  September 30,
1998,  respectively.  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.  For the three months ended  September 30, 1999, the
tax holiday  impacted the  Company's  effective tax rate by  approximately  11%,
while the favorable effect in the three months ended September 30, 1998 was 6%.


NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1998

     Revenue.  Revenue increased by 21.3%, or $24.9 million, from $116.6 million
during the nine months ended  September  30, 1998 to $141.5  million  during the
nine months ended September 30, 1999. This increase was  attributable  primarily
to increased  demand for the  Company's  PeopleSoft  implementation  services as
compared  with the same period in the prior year,  and, to a lesser  extent,  an
increase  in  management  consulting  revenues,  as well as growth  in  internet
development services,  partially related to the Company's acquisition of Network
Publishing,  Inc. on January 8, 1999.  Revenue for the nine month  period  ended
September  30,  1999,  included  a  fixed  price  project  which  accounted  for
approximately 4% of revenue.

     Gross profit.  The  Company's  cost of sales  increased by 25.1%,  or $18.4
million,  from $73.2 million during the nine months ended  September 30, 1998 to
$91.6 million during the nine months ended  September 30, 1999. 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 14.9% or $6.5 million,  from $43.5 million
during the nine months ended September 30, 1998 to $50.0 million during the nine
months ended  September 30, 1999.  Gross profit margin  decreased  from 37.3% of
revenue  during the nine  months  ended  September  30, 1998 to 35.3% of revenue
during  the  nine  months  ended   September   30,  1999.   While  revenue  from
implementation  services  increased  from the same  period in 1998,  the Company
continued to experience a decline in its consultant staff utilization during the
nine months  ended  September  30,  1999,  a result of the  changing  ERP market
dynamics.  As a consequence,  gross margins were adversely  affected  during the
nine months ended September 30, 1999.

     Selling,  general  and  administrative   expenses.   Selling,  general  and
administrative  expenses increased by 50.9% or $14.5 million, from $28.6 million
during the nine months ended September 30, 1998 to $43.1 million during the nine
months ended  September 30, 1999,  and increased as a percentage of revenue from
24.5% to 30.4%, respectively. The increases in such expenses in absolute dollars
and as a percentage  of revenue  were due  primarily to the increase in salaries
and related  benefits,  reflecting  headcount  increases in the Company's  sales
force and its marketing,  finance,  accounting and administrative  staff through
acquisitions  and in order to manage its growth.  The Company's  occupancy costs
increased  as a result of the  relocation  of our  corporate  headquarters  into
approximately 48,000 square feet of office space, from our former


                                     - 14 -
<PAGE>

location which consisted of approximately  17,000 square feet. In addition,  the
Company  experienced   increases  in  sales  and  management  recruiting  costs,
occupancy costs as additional offices were opened in the United States,  support
services and the provision for doubtful accounts.

     Acquisition  expense.  During the nine months ended September 30, 1999, the
Company incurred costs of $2.1 million in connection with the acquisition of the
Empower Companies.

     Restructuring  and other special charges.  In connection with  management's
plan to reduce costs and improve operating efficiencies,  the Company incurred a
non-recurring charge of $5.6 million related to restructuring initiatives during
the nine months ended  September 30, 1999.  The  restructuring  charge  included
settlement  of the former Chief  Executive  Officer's  employment  agreement and
additional  severance  payment,  expenses  associated  with the  termination  of
certain  employees in the United States and the United  Kingdom,  the closing of
certain  satellite  offices in the United  States  and an  additional  office in
Belgium, and costs to exit certain contractual  obligations.  Additionally,  the
Company recorded a reserve of approximately  $1.7 million against an outstanding
receivable  from a  large  ERP  account,  whose  parent  corporation  filed  for
protection under Chapter 11 of the U.S. bankruptcy laws.

     Interest  income  (expense).  Interest  income has been  earned on interest
bearing cash accounts and short term investments.  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 incurred  approximately  $502,000 in interest expense during
the nine months ended  September 30, 1999,  primarily  related to its borrowings
under its line of credit.  Borrowings under the line of credit were used to fund
operating  activities,  purchases of computer equipment and office furniture and
fixtures, as well as for acquisitions.

     Provision  (benefit) for income taxes. The Company's effective tax rate was
(19%) and 24% for the nine months ended  September  30, 1999,  and September 30,
1998,  respectively.  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.  For the nine months ended  September 30, 1999,  the
tax holiday  impacted the  Company's  effective tax rate by  approximately  22%,
while the favorable effect in the nine months ended September 30, 1998 was 6%.

BACKLOG

     The Company  normally  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.


                                     - 15 -
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

     The Company had cash and cash  equivalents of $8.6 million at September 30,
1999, and $4.2 million at December 31, 1998. The Company had working  capital of
$29.8 million at September 30, 1999, and $32.6 million at December 31, 1998.

     Cash used in operating  activities  was $3.9 million during the nine months
ended  September  30, 1999,  resulting  primarily  from the net loss, as well as
growth in accounts  receivable and unbilled services.  This was offset partially
by  increases in accrued  payroll,  accrued  expenses and accrued  restructuring
costs. Cash provided by operating activities for the nine months ended September
30, 1998 was $4.9 million.

     The Company  invested  $2.5 million and $4.0 million in computer  equipment
and  furniture  during  the nine  months  ended  September  30,  1999 and  1998,
respectively. This reflects both the purchases of computer and telecommunication
equipment for consultants and  administrative  staff,  and office  furniture and
fixtures.

     On January 29, 1999, the Company  entered into an unsecured  three-year $30
million  Revolving  Credit Loan Agreement (the "Loan  Agreement") with PNC Bank,
N.A.  (the  "Bank").  The  proceeds  of the credit  facility  may be used by the
Company for  financing  acquisitions  and  general  corporate  purposes.  At the
Company's option, for each loan, interest shall be computed either at the Bank's
prime rate per annum or the Adjusted Libor Rate plus the Applicable  Margin,  as
such terms are defined in the Loan Agreement.  The Company's  obligations  under
the credit  agreement are payable at the  expiration of such facility on January
29, 2002. Approximately $10.6 million was outstanding under this credit facility
at September 30, 1999.

     The credit agreement contains financial covenants which require the Company
to (i) maintain a  consolidated  cash flow leverage  ratio equal to or less than
2.5 to 1.0  for the  period  of  four  fiscal  quarters  preceding  the  date of
determination  taken together as one accounting period  ("Consolidated Cash Flow
Leverage  Ratio"),  (ii)  maintain  a  consolidated  net  worth of not less than
consolidated  net worth of the prior fiscal year plus 50% of positive net income
for such  fiscal  year  ("Consolidated  Net  Worth"),  (iii) not enter  into any
agreement  to purchase  and/or pay for, or become  obligated  to pay for capital
expenditures, long term leases, capital leases or sale lease-backs, in an amount
at any time  outstanding  aggregating in excess of $5,000,000  during any fiscal
year,  provided,  however,  in a one year  carry-forward  basis, the Company may
incur capital  expenditures not to exceed $8,000,000 during any fiscal year, and
(iv) not cause or permit the minimum fixed charge coverage ratio,  calculated on
the basis of a rolling four quarters to be less than 1.4 to 1.0 as at the end of
each fiscal quarter ("Minimum Fixed Charge Coverage Ratio").

     As a result of the  restructuring and other special charges incurred during
the  quarter  ended June 30,  1999,  at June 30,  1999,  the  Company was not in
compliance with the  Consolidated  Cash Flow Leverage Ratio and Consolidated Net
Worth  financial  covenants.  On August 12, 1999,  the Bank notified the Company
that  such  non-compliance  constituted  an  Event  of  Default  under  the Loan
Agreement.  At September 30, 1999,  while the Company was in compliance with the
Consolidated  Net Worth  financial  covenant,  it was not in compliance with the
Consolidated  Cash Flow Leverage  Ratio and Minimum Fixed Charge  Coverage Ratio
financial covenants. As of the date of this filing, the Company and the Bank are
in the process of


                                     - 16 -
<PAGE>

finalizing the proposed terms of a waiver and amendment to the Loan Agreement to
remedy the defaults which currently exist under the Loan Agreement. The terms of
such proposed  waiver and amendment may include,  among other things,  (i) a $15
million reduction in availability  under the Loan Agreement,  (ii) a requirement
that the loan be secured by a first priority  perfected security interest on all
of the assets of the Company and its  domestic  subsidiaries  and (iii)  certain
revised  financial  covenants.  There can be no assurance  that the Company will
obtain such waiver and amendment on terms acceptable to the Company, if at all.

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

YEAR 2000 COMPLIANCE

     Historically,  certain computer programs have been written using two digits
rather  than four to define  the  applicable  year,  which  could  result in the
computer  recognizing a date using "00" as the year 1900 rather than 2000.  This
in turn,  could  result in major  system  failures  or  miscalculations,  and is
generally  referred to as the "Year 2000 Problem".  The Company believes that it
has  sufficiently  assessed its state of readiness with respect to its Year 2000
compliance. Based on its assessment, the Company does not believe that Year 2000
compliance  will result in material  investments  by the  Company,  nor does the
Company  anticipate  that the Year 2000 Problem will have any adverse effects on
the business  operations or financial  performance  of the Company.  The Company
does not believe that it has any material exposure to the Year 2000 Problem with
respect  to  its  own   information   systems  and  believes  that  all  of  its
business-critical  systems  correctly define the Year 2000 and subsequent years.
Based upon its assessment, the Company has established no reserve nor instituted
any contingency  plans. There can be no assurance,  however,  that the Year 2000
problem will not adversely affect the Company's  business  operating results and
financial condition.

     However,  the purchasing  patterns of customers and potential customers may
be affected by issues associated with the Year 2000 Problem. As companies expend
significant  resources to correct  their current data storage  solutions,  these
expenditures  may result in reduced  funds to  purchase  products  or  undertake
projects  such as those offered by the Company.  There can be no assurance  that
the Year 2000 Problem, as it relates to customers, potential customers and other
third-parties,  will not  adversely  affect the  Company's  business,  operating
results and  financial  condition.  Conversely,  the Year 2000 Problem may cause
other  companies  to  accelerate  purchases,  thereby  causing  an  increase  in
short-term  demand  and a  consequent  decrease  in  long-term  demand  for  the
Company's products.

EUROPEAN MONETARY UNION (EMU)

     The euro was  introduced  on  January  1,  1999,  at which  time the eleven
participating  EMU member countries  established  fixed conversion rates between
their  existing   currencies  (legacy  currencies)  and  the  euro.  The  legacy
currencies  will  continue to be used as legal tender  through  January 1, 2002;
thereafter, the legacy currencies will be canceled and euro bills and coins will
be used for cash  transactions  in the  participating  countries.  The Company's
European  sales and  operations  offices  affected by the euro  conversion  have
established  plans to address the  systems  issues  raised by the euro  currency
conversion and are cognizant of the potential business


                                     - 17 -
<PAGE>

implications  of  converting  to a common  currency.  The  Company  is unable to
determine the ultimate financial impact of the conversion on its operations,  if
any,  given that the impact will be dependent  upon the  competitive  situations
which exist in the various  regional  markets in which the Company  participates
and the  potential  actions  which  may or may  not be  taken  by the  Company's
competitors and suppliers.




                                     - 18 -
<PAGE>

PART II.  OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS.

     On February 13, 1998,  Russell  Schultz,  a former employee of the Company,
filed a complaint in the Superior  Court of New Jersey,  Law Division,  Monmouth
County, naming the Company as a defendant.  The complaint,  which seeks damages,
alleges,  among other things,  that the Company  misrepresented  plaintiff's job
description in order to induce plaintiff to leave his prior employer,  failed to
provide  stock  options  to  the  plaintiff  and  violated  plaintiff's  written
employment  contract.  The Company was served  with the  complaint  on March 16,
1998.  Subsequently,  on July 10,  1998,  upon the  Company's  Motion  to Compel
Arbitration,  the court dismissed the plaintiff's  complaint without  prejudice.
Subsequently, the plaintiff's motion to reconsider the dismissal was denied. The
plaintiff  filed  his  demand  for  Arbitration  with the  American  Arbitration
Association  on February  17, 1999 and the Company  filed its answer on February
26, 1999. On October 12, 1999, the parties negotiated a settlement to dispose of
all claims  asserted in this lawsuit.  The Company is in the process of drafting
and finalizing a settlement agreement.  The settlement  agreement,  if executed,
will  dispose of the  lawsuit.  The Company does not believe that the outcome of
the claims will have a material  effect upon the Company's  business,  financial
condition or results of operations.

     On January 20, 1999, Tony Knight, a former employee of the Company, filed a
complaint in the Superior  Court of the State of  California,  San Mateo County,
naming the Company,  among others,  as a defendant.  The complaint,  which seeks
damages,  alleges,  among other things, that the Company  discriminated  against
plaintiff because of his race, ancestry, religious creed and national origin and
thereafter  wrongfully  terminated the plaintiff's  employment with the Company.
The  Company,  through  its  counsel,  acknowledged  receipt of the  summons and
complaint on April 20, 1999.  On May, 19, 1999,  the Company  removed the action
from the California  Superior Court to the United States  District Court for the
Northern District of California. A case-management conference has been scheduled
to be held on December  2, 1999.  It is too early in the  litigation  process to
determine the impact,  if any, that such litigation will have upon the Company's
business, financial condition or results of operations.

     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 January 29, 1999, the Company  entered into an unsecured  three-year $30
million  Revolving  Credit Loan Agreement (the "Loan  Agreement") with PNC Bank,
N.A.  (the  "Bank").  The  proceeds  of the credit  facility  may be used by the
Company for  financing  acquisitions  and  general  corporate  purposes.  At the
Company's option, for each loan, interest shall be computed either at the Bank's
prime rate per annum or the Adjusted Libor Rate plus the Applicable  Margin,  as
such terms are defined in the Loan Agreement.  The Company's  obligations  under
the credit  agreement are payable at the  expiration of such facility on January
29, 2002. Approximately $10.6 million was outstanding under this credit facility
at September 30, 1999.



                                     - 19 -
<PAGE>

     The credit agreement contains financial covenants which require the Company
to (i) maintain a  consolidated  cash flow leverage  ratio equal to or less than
2.5 to 1.0  for the  period  of  four  fiscal  quarters  preceding  the  date of
determination  taken together as one accounting period  ("Consolidated Cash Flow
Leverage  Ratio"),  (ii)  maintain  a  consolidated  net  worth of not less than
consolidated  net worth of the prior fiscal year plus 50% of positive net income
for such  fiscal  year  ("Consolidated  Net  Worth"),  (iii) not enter  into any
agreement  to purchase  and/or pay for, or become  obligated  to pay for capital
expenditures, long term leases, capital leases or sale lease-backs, in an amount
at any time  outstanding  aggregating in excess of $5,000,000  during any fiscal
year,  provided,  however,  in a one year  carry-forward  basis, the Company may
incur capital  expenditures not to exceed $8,000,000 during any fiscal year, and
(iv) not cause or permit the minimum fixed charge coverage ratio,  calculated on
the basis of a rolling four quarters to be less than 1.4 to 1.0 as at the end of
each fiscal quarter ("Minimum Fixed Charge Coverage Ratio").

     As a result of the  restructuring and other special charges incurred during
the  quarter  ended June 30,  1999,  at June 30,  1999,  the  Company was not in
compliance with the  Consolidated  Cash Flow Leverage Ratio and Consolidated Net
Worth  financial  covenants.  On August 12, 1999,  the Bank notified the Company
that  such  non-compliance  constituted  an  Event  of  Default  under  the Loan
Agreement.  At September 30, 1999,  while the Company was in compliance with the
Consolidated  Net Worth  financial  covenant,  it was not in compliance with the
Consolidated  Cash Flow Leverage  Ratio and Minimum Fixed Charge  Coverage Ratio
financial covenants. As of the date of this filing, the Company and the Bank are
in the process of finalizing the proposed terms of a waiver and amendment to the
Loan  Agreement  to remedy the  defaults  which  currently  exist under the Loan
Agreement.  The terms of such proposed  waiver and amendment may include,  among
other  things,  (i) a $15  million  reduction  in  availability  under  the Loan
Agreement,  (ii) a  requirement  that the loan be  secured  by a first  priority
perfected security interest on all of the assets of the Company and its domestic
subsidiaries  and (iii) certain  revised  financial  covenants.  There can be no
assurance  that the  Company  will obtain  such  waiver and  amendment  on terms
acceptable to the Company, if at all.

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

     The Annual  Meeting of  Shareholders  of the  Company  was held on July 19,
1999.

     There  were  present  at the  meeting  in person  or by proxy  shareholders
holding an aggregate of 10,007,596  shares of Common  Stock.  The results of the
vote taken at such meeting  with  respect to each  nominee for director  were as
follows:

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

     Ashok Pandey                         9,960,525             47,044
     Rajkumar Koneru                      9,960,525             47,044
     Nagarjun Valluripalli                9,960,525             47,044
     Klaus P. Besier                      9,959,525             48,044
     Maxine Ballen                        9,959,525             48,044


                                     - 20 -
<PAGE>

     In addition,  a vote was taken on the proposal to amend the Company's  1996
Stock Plan (the "Plan") to increase the maximum number of shares of Common Stock
available for issuance under the Plan from 2,200,000 to 4,700,000  shares and to
reserve  an  additional  2,500,000  shares of Common  Stock of the  Company  for
issuance upon the exercise of stock options granted or for the issuance of stock
purchase  rights under the Plan. Of the shares  present at the meeting in person
or by  proxy,  9,769,379  shares  of Common  Stock  were  voted in favor of such
proposal,  230,957  shares of Common Stock were voted  against such proposal and
7,233 shares of Common Stock abstained from voting.

     Finally,  a vote was taken on the  proposal  to ratify the  appointment  of
Arthur  Andersen LLP as the  independent  auditors of the Company for the fiscal
year ending December 31, 1999. Of the shares present at the meeting in person or
by proxy, 9,998,936 shares of Common Stock were voted in favor of such proposal,
5,500 shares of Common Stock were voted  against such  proposal and 3,133 shares
of Common Stock abstained from voting.

ITEM 5.   OTHER EVENTS.

     On September 30, 1999,  following the resignation of Gerard E. Dorsey,  the
Company's former Executive Vice  President-Finance  and Administration and Chief
Financial Officer,  Nicholas Visco was appointed Vice  President-Finance  of the
Company.  Mr. Visco, 39, has served as the Company's Corporate  Controller since
1998.  Prior to that,  he served  as the  Director  of  Financial  Planning  and
Corporate Controller at Xpedite Systems,  Inc., a provider of enhanced messaging
services.

     Subsequent  to the end of the  quarter,  on November  4, 1999,  the Company
announced  its  intention  to  spin  off its  Internet  Solutions  Group  to its
shareholders, in order to address the rapidly growing eBusiness services market.
The Company further announced that it would effect a strategic shift of its core
business  into  the  broader  Application   Service  Provider   opportunity  for
customized e-commerce and enterprise  applications  implementation,  management,
support and hosting.





                                     - 21 -
<PAGE>

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K.

   (a)    Exhibits.

               27.1  Financial  Data  Schedule for the  nine-month  period ended
          September 30, 1999.

               27.2  Financial  Data Schedule for the  three-month  period ended
          September 30, 1999.

               27.3  Financial  Data  Schedule for the  nine-month  period ended
          September 30, 1998.

               27.4  Financial  Data Schedule for the  three-month  period ended
          September 30, 1999.

   (b)    Reports on Form 8-K.

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




                                     - 22 -
<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 15, 1999                  By: /s/ Ashok Pandey
                                             -----------------------------------
                                             Ashok Pandey,
                                             Co-Chief Executive Officer
                                             (Principal Executive Officer)


DATE:  November 15, 1999                  By: /s/ Nicholas Visco
                                             -----------------------------------
                                             Nicholas Visco,
                                             Vice President-Finance
                                             (Principal Financial and Accounting
                                             Officer)







                                     - 23 -