SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 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 June 30, 2000
                           Commission File No. 0-20943

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


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

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


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


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

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

Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of August 10, 2000:

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

  Common Stock, $.01 par value                       16,629,625


<PAGE>

                       INTELLIGROUP, INC. and SUBSIDIARIES

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

                                                                            Page
                                                                            ----
PART I.  FINANCIAL INFORMATION

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

             Consolidated Balance Sheets
             as of June 30, 2000 and December 31, 1999 (unaudited) ........    2

             Consolidated Statements of Operations and Comprehensive
             Income (Loss) for the Three Months and Six Months Ended
             June 30, 2000 and 1999 (unaudited)............................    3

             Consolidated Statements of Cash Flows
             for the Six Months Ended
             June 30, 2000 and 1999 (unaudited)............................    4

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

    Item 2.  Management's Discussion and Analysis of
             Results of Operations and Financial Condition.................   12

    Item 3.  Quantitative and Qualitative Disclosures About Market Risk....   21

PART II.  OTHER INFORMATION

    Item 1.  Legal Proceedings.............................................   22

    Item 3.  Defaults Upon Senior Securities...............................   22

    Item 4.  Submission of Matters to a Vote of Security Holders...........   23

    Item 5.  Other Information.............................................   23

    Item 6.  Exhibits and Reports on Form 8-K..............................   25

SIGNATURES.................................................................   26


                                      - i -

<PAGE>

                          PART I. FINANCIAL INFORMATION

                    Item 1. Consolidated Financial Statements



                                     - 1 -
<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                       June 30, 2000 and December 31, 1999
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                  June 30,     December 31,
               ASSETS                                                               2000           1999
                                                                                ----------    -------------
<S>                                                                           <C>             <C>
Current Assets:
   Cash and cash equivalents...............................................   $  1,799,000    $  5,510,000
   Accounts receivable, less allowance for doubtful accounts of $3,022,000
      at June 30, 2000 and $2,939,000 at December 31, 1999.................     18,749,000      27,607,000
   Unbilled services.......................................................      6,162,000       7,692,000
   Income tax receivable...................................................      2,533,000       3,612,000
   Deferred tax asset......................................................      2,481,000       2,481,000
   Other current assets....................................................      4,617,000       2,699,000
   Note receivable - SeraNova..............................................      3,000,000              --
   Net current assets of discontinued operations...........................      1,036,000       7,621,000
                                                                               -----------     -----------
        Total current assets...............................................     40,377,000      57,222,000

Note receivable - SeraNova.................................................     12,059,000       8,397,000
Property and equipment, net................................................      8,076,000       7,744,000
Capitalized software solutions, net........................................      2,376,000         813,000
Intangible assets, net.....................................................      4,960,000       5,189,000
Deferred tax asset.........................................................      1,049,000              --
Other assets...............................................................      1,092,000         835,000
Net non-current assets of discontinued operations..........................      9,668,000              --
                                                                               -----------     -----------
                                                                              $ 79,657,000    $ 80,200,000
                                                                               ===========     ===========

               LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
   Accounts payable........................................................   $  2,858,000    $  3,800,000
   Accrued payroll and related taxes.......................................      9,152,000       5,527,000
   Accrued expenses and other liabilities..................................      7,456,000       4,273,000
   Income taxes payable....................................................        600,000       3,904,000
     Current portion of long-term debt and obligations under capital leases      5,261,000      10,585,000
                                                                               -----------     -----------
        Total current liabilities..........................................     25,327,000      28,089,000

Deferred income taxes......................................................             --         806,000
Net non-current liabilities of discontinued operations.....................             --       2,651,000

Commitments and contingencies

Shareholders' Equity:
   Preferred stock, $.01 par value, 5,000,000 shares authorized, none
      issued or outstanding................................................             --              --
   Common stock, $.01 par value, 25,000,000 shares authorized;
      16,630,000 and 15,949,000 shares issued and outstanding at
      June 30, 2000 and December 31, 1999, respectively....................        166,000         160,000
   Additional paid-in capital..............................................     59,092,000      43,356,000
   Retained earnings (deficit).............................................     (3,615,000)      6,317,000
   Currency translation adjustments........................................     (1,313,000)     (1,179,000)
                                                                               -----------     -----------
      Total shareholders' equity ..........................................     54,330,000      48,654,000
                                                                               -----------     -----------
                                                                              $ 79,657,000    $ 80,200,000
                                                                               ===========     ===========
</TABLE>

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

                                     - 2 -
<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                         AND COMPREHENSIVE INCOME (LOSS)
        For the Three Months and Six Months Ended June 30, 2000 and 1999
                                   (unaudited)

<TABLE>
<CAPTION>
                                             Three Months Ended June 30,     Six Months Ended June 30,
                                             ---------------------------     -------------------------
                                               2000            1999            2000            1999
                                             ---------      ---------      -----------     ------------
<S>                                         <C>            <C>             <C>              <C>
Revenue.................................    $ 27,689,000   $ 37,820,000    $ 56,740,000     $ 76,627,000
Cost of sales...........................      18,490,000     24,953,000      37,674,000       51,479,000
                                              ----------     ----------      ----------       ----------
      Gross profit......................       9,199,000     12,867,000      19,066,000       25,148,000
                                              ---------      ----------      ----------       ----------
Selling, general and administrative
   expenses.............................      12,050,000     10,851,000      24,140,000       20,283,000
Depreciation and amortization...........         723,000        750,000       1,570,000        1,388,000
Acquisition expenses....................              --             --              --        2,115,000
Restructuring and other special charges.              --      7,328,000              --        7,328,000
                                              ----------     ----------      ----------       ----------
      Total operating expenses..........      12,773,000     18,929,000      25,710,000       31,114,000
                                              ----------     ----------      ----------       ----------
      Operating loss....................      (3,574,000)    (6,062,000)     (6,644,000)      (5,966,000)
Other income, net.......................          49,000        107,000          24,000           46,000
Interest income (expense), net..........         164,000       (194,000)        160,000         (230,000)
                                              ----------     ----------      ----------       ----------
Loss from continuing operations before
   income tax benefit...................      (3,361,000)    (6,149,000)     (6,460,000)      (6,150,000)
Income tax benefit......................        (470,000)    (1,964,000)     (1,461,000)      (1,599,000)
                                              ----------     ----------      ----------       ----------
Loss from continuing operations.........      (2,891,000)    (4,185,000)     (4,999,000)      (4,551,000)
Income (loss) from discontinued
   operations, net of tax expense
   (benefit) of $(986,000), $65,000,
   $(2,095,000) and $244,000,
   respectively ........................      (1,812,000)       152,000      (4,891,000)         432,000
                                              ----------     ----------      ----------       ----------
Net loss ...............................    $ (4,703,000)  $ (4,033,000)   $ (9,890,000)    $ (4,119,000)
                                              ==========     ==========      ==========       ==========

Earnings per share:
    Basic earnings per share:
      Loss from continuing operations...    $      (0.17)  $      (0.27)   $      (0.31)    $      (0.29)
      Discontinued operations...........           (0.11)          0.01           (0.30)            0.03
                                              ----------     ----------      ----------       ----------
      Net loss per share................    $      (0.28)  $      (0.26)   $      (0.61)    $      (0.26)
                                              ==========     ==========      ==========       ==========
     Weighted average number of
     Common shares - Basic..............      16,575,000     15,549,000      16,360,000       15,548,000
                                              ==========     ==========      ==========       ==========
    Diluted earnings per share:
      Loss from continuing operations...    $      (0.17)  $      (0.27)   $      (0.31)    $      (0.29)
      Discontinued operations ..........           (0.11)          0.01           (0.30)            0.03
                                              ----------     ----------      ----------       ----------
      Net loss per share................    $      (0.28)  $      (0.26)   $      (0.61)    $      (0.26)
                                              ==========     ==========      ==========       ==========
     Weighted average number of
     Common shares - Diluted............      16,575,000     15,549,000      16,360,000       15,548,000
                                              ==========     ==========      ==========       ==========

Comprehensive Income (Loss)
---------------------------
Net loss................................    $ (4,703,000)  $ (4,033,000)   $ (9,890,000)    $ (4,119,000)
Other comprehensive loss -
        Currency translation adjustments        (155,000)      (234,000)       (134,000)        (563,000)
                                              ---------      ---------       ---------        ---------
Comprehensive loss......................    $ (4,858,000)  $ (4,267,000)   $(10,024,000)    $ (4,682,000)
                                              ==========     ==========      ==========       ==========
</TABLE>
                The accompanying notes to consolidated financial
              statements are an integral part of these statements.

                                     - 3 -
<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 For the Six Months Ended June 30, 2000 and 1999
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                        For the Six Months Ended
                                                                        ------------------------
                                                                        June 30,         June 30,
                                                                         2000              1999
                                                                     ------------     ------------
<S>                                                                  <C>              <C>
Cash flows from operating activities:
   Net loss.....................................................     $ (9,890,000)    $ (4,119,000)
   Adjustments to reconcile net loss to net cash provided by
     (used in) operating activities:
       Loss (income) from discontinued operations, net of tax...        4,891,000         (432,000)
       Depreciation and amortization............................        1,571,000        1,388,000
       Provision for doubtful accounts..........................        2,109,000        2,410,000
       Deferred income taxes....................................       (1,855,000)        (639,000)
   Changes in operating assets and liabilities:
     Accounts receivable........................................        6,749,000       (1,949,000)
     Unbilled services..........................................        1,530,000       (2,575,000)
     Other current assets.......................................         (839,000)      (1,820,000)
     Other assets...............................................         (257,000)       2,165,000
     Accounts payable...........................................         (942,000)      (1,187,000)
     Accrued payroll and related taxes..........................        3,625,000        1,577,000
     Accrued restructuring charges..............................         (414,000)       3,351,000
     Accrued expenses and other liabilities.....................        3,597,000        2,591,000
     Income taxes payable.......................................       (3,304,000)      (3,649,000)
                                                                       ----------       ----------
   Cash provided by (used in) operating activities of
     continuing operations......................................        6,571,000       (2,888,000)
   Cash used in operating activities of discontinued operations..      (6,504,000)      (2,313,000)
                                                                       ----------       ----------
         Net cash provided by (used in) operating activities ...           67,000       (5,201,000)
                                                                       ----------       ----------

Cash flows from investing activities:
   Purchase of equipment and capitalized software solutions
     by continuing operations...................................       (3,237,000)      (1,267,000)
   Purchase of equipment by discontinued operations.............       (5,270,000)        (209,000)
   Acquisition of businesses by discontinued operations ........               --       (1,682,000)
                                                                       ----------       ----------
         Net cash used in investing activities..................       (8,507,000)      (3,158,000)
                                                                       ----------       ----------

Cash flows from financing activities:
   Principal payments under capital leases......................           (6,000)          (6,000)
   Proceeds from exercise of stock options......................        5,742,000            9,000
   Shareholder dividends .......................................               --         (170,000)
   Net change in line of credit borrowings......................       (5,318,000)      11,322,000
   Net change in note receivable-SeraNova.......................       (6,662,000)      (1,353,000)
                                                                       ----------       ----------
    Net cash (used in) provided by financing activities of
       continuing operations....................................       (6,244,000)       9,802,000
    Net cash provided by (used in) financing activities of
       discontinued operations..................................       11,149,000         (798,000)
                                                                       ----------       ----------
         Net cash provided by financing activities..............        4,905,000        9,004,000
                                                                       ----------       ----------
   Effect of foreign currency exchange rate changes on cash.....         (176,000)        (563,000)
                                                                       ----------       ----------
         Net (decrease) increase in cash and cash equivalents ..       (3,711,000)          82,000
Cash and cash equivalents at beginning of period................        5,510,000        3,568,000
                                                                       ----------       ----------
Cash and cash equivalents at end of period......................     $  1,799,000     $  3,650,000
                                                                       ==========       ==========
Supplemental disclosures of cash flow information:
   Cash paid for income taxes...................................     $  2,432,000     $  2,308,000
   Cash paid for interest.......................................          169,000          272,000
</TABLE>

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

                                     - 4 -
<PAGE>

                       INTELLIGROUP, INC. and SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

(1) BASIS OF PRESENTATION

     The   consolidated   financial   statements  and   accompanying   financial
information  as of June 30, 2000 and for the three and six months ended June 30,
2000 and 1999 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, 1999,
which were included as part of the Company's Form 10-K.

     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.

     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 June 30,    Six Months Ended June 30,
                                       ---------------------------    -------------------------
                                           2000           1999           2000           1999
                                           ----           ----           ----           ----
<S>                                     <C>            <C>            <C>            <C>
Weighted average number of
common shares                           16,575,000     15,549,000     16,360,000     15,548,000
Common share equivalents of
outstanding stock options                       --             --             --             --
                                        ----------     ----------     -----------    ----------
Weighted average number of common
shares assuming dilution                16,575,000     15,549,000     16,360,000     15,548,000
                                        ==========     ==========     ==========     ==========
</TABLE>


                                     - 5 -
<PAGE>

     Stock options,  which would be  antidilutive  (3,981,000  outstanding as of
June 30,  2000) have been  excluded  from the  calculations  of  diluted  shares
outstanding and diluted earnings per share.

(3) LINES OF CREDIT

     On January 29, 1999, the Company entered into a three-year revolving credit
facility  agreement with PNC Bank, N.A. (the "Bank").  The credit agreement with
the Bank was  comprised  of a  revolving  line of credit  pursuant  to which the
Company could borrow up to $30,000,000 either at the Bank's prime rate per annum
or the EuroRate plus 2% (at the Company's option).

     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  credit
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.  On January 26, 2000, the Company  finalized with the Bank
the terms of a waiver and amendment to the credit  agreement to remedy  defaults
which existed under the credit agreement.  The terms of the waiver and amendment
included,  among other things, (i) a $15,000,000 reduction in availability under
the credit agreement,  (ii) a first priority  perfected security interest on all
assets of the Company and its domestic  subsidiaries  and (iii)  modification of
certain financial covenants and a waiver of prior covenant defaults.

     As a result of the first quarter's operating losses, the Company was not in
compliance  with the minimum  consolidated  net worth  covenant  and the minimum
consolidated  earnings before  interest,  taxes,  depreciation  and amortization
("EBITDA")  financial  covenant as of March 31, 2000.  On May 9, 2000,  the Bank
issued to the Company a waiver of the defaults  which  existed  under the credit
agreement for the quarter ended March 31, 2000.

     On May 31, 2000, the Company entered into a new three-year revolving credit
facility  agreement with the Bank. The credit facility agreement is comprised of
a  revolving  line of credit  pursuant  to which the  Company  can  borrow up to
$20,000,000  either at the Bank's prime rate per annum or the EuroRate plus 2.5%
to 1.75% based upon the Company's  ratio of debt to EBITDA.  The credit facility
is  collateralized by substantially all of the assets of the United States based
operations. The maximum borrowing availability under the line of credit is based
upon a percentage of eligible billed and unbilled accounts receivable.



                                     - 6 -
<PAGE>

(3) LINES OF CREDIT (CONTINUED)

     The  credit  agreement  provides  for  the  following  financial  covenants
(exclusive  of  SeraNova),  among other  things,  (1) the Company must  maintain
consolidated net worth of (a) $42.0 million at each of June 30, 2000,  September
30, 2000, and December 31, 2000; (b) not less than 95% of consolidated net worth
of the  immediately  preceding  fiscal  year-end as at each such fiscal  quarter
after December 31, 2000; and (c) at least 105% of  consolidated  net worth as of
the  immediately  preceding  fiscal  year-end  as at each such  fiscal  year-end
subsequent to December 31, 2000; provided, however, the foregoing covenant shall
not be tested for any  quarter so long as the  Company  maintains,  at all times
during such fiscal quarter,  undrawn  availability of more than $5.0 million and
(2) the Company must maintain  unconsolidated  net worth of (a) $39.0 million at
each of June 30, 2000,  September 30, 2000,  and December 31, 2000; (b) not less
than  95% of  unconsolidated  net  worth  of the  immediately  preceding  fiscal
year-end as at each such fiscal  quarter  after  December 31,  2000;  and (c) at
least 105% of  unconsolidated  net worth as of the immediately  preceding fiscal
year-end as at each such  fiscal  year-end  subsequent  to  December  31,  2000;
provided, however, the foregoing covenant shall not be tested for any quarter so
long as the Company maintains, at all times during such fiscal quarter,  undrawn
availability  of more than  $5.0  million.  Additionally,  the  credit  facility
contains  standard material adverse change clauses with regards to the financial
condition of the assets,  liabilities and operations of the Company.  As of June
30, 2000, the Company was in compliance with all financial covenants.

(4) ACQUISITIONS

     On  January  8,  1999,  the  Company  acquired  Network  Publishing,   Inc.
("NetPub"),  based in Provo,  Utah.  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.  In  addition,  the  purchase  price  included 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 not later than March 31,  2000.  The value of the earn-out was
determined to be  $2,430,000  which was payable by the issuance of an additional
99,558  shares of the Company's  Common Stock and $340,000 in cash.  The Company
issued such shares on January 11, 2000. This  acquisition has been accounted for
utilizing the purchase  method of  accounting.  The excess of the purchase price
over the fair value of the net assets  acquired  was  attributed  to  intangible
assets  amounting to $4,061,471.  Pro-forma  financial  information has not been
presented as this acquisition was immaterial to the Company's operations.

     On January 1, 2000,  the  Company  transferred  the net assets of NetPub to
SeraNova,  Inc. ("SeraNova"),  a wholly-owned  subsidiary of the Company on such
date.



                                     - 7 -
<PAGE>

(5) DISCONTINUED OPERATIONS

     In November  1999,  the Company  announced  its  intention  to spin off its
Internet  services  business  to the  shareholders  of the  Company,  subject to
certain  conditions.  On January 1, 2000, the Company  transferred  its Internet
applications  services and  management  consulting  businesses  to SeraNova.  On
January 27, 2000,  SeraNova filed a  Registration  Statement with the Securities
and  Exchange  Commission  (the  "SEC")  relating  to the  proposed  spin-off of
SeraNova from the Company.  On June 29, 2000, the SEC declared the  Registration
Statement  effective.  Accordingly,  the  assets,  liabilities  and  results  of
operations  of SeraNova have been reported as  discontinued  operations  for all
periods presented.

     The following  unaudited  selected financial data for SeraNova is presented
for informational purposes only:

<TABLE>
<CAPTION>
                                    THREE MONTHS ENDED JUNE 30,       SIX MONTHS ENDED JUNE 30,
                                    ----------------------------      -------------------------
                                       2000              1999            2000          1999
                                       ----              ----            ----          ----
<S>                                <C>               <C>              <C>            <C>
Revenue                            $19,843,000       $8,614,000       $36,019,000    $16,602,000
Pre-tax income/(loss)               (2,797,000)         217,000        (6,986,000)       676,000
Income tax expense/(benefit)          (985,000)          65,000        (2,095,000)       244,000
Net income/(loss)                   (1,812,000)         152,000        (4,891,000)       432,000

                                          JUNE 30, 2000      DECEMBER 31, 1999
                                          -------------      -----------------

<S>                                       <C>                   <C>
Accounts receivable, net                  $13,052,000           $7,456,000
Unbilled services                           7,419,000            3,680,000
Property and equipment, net                 7,408,000            2,863,000
Intangible assets,  net                     3,365,000            3,492,000
All other assets                            5,630,000            1,389,000
Note payable-Intelligroup                  15,059,000            8,397,000
All other liabilities                      11,111,000            5,513,000
Total shareholders' equity                 10,704,000            4,970,000
</TABLE>

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

(6) NOTE RECEIVABLE - SERANOVA

     On May 31,  2000,  SeraNova  and the  Company  formalized  a $15.1  million
unsecured  promissory  note  relating to net  borrowings  by  SeraNova  from the
Company  through such date. The promissory note bears interest at the prime rate
plus 1/2%.  A payment  of $3.0  million is due by  September  30,  2000 with the
balance  due on July  31,  2001.  The  promissory  note  has  certain  mandatory
prepayment provisions based on future debt or equity financings by SeraNova.


                                     - 8 -
<PAGE>

(7) EQUITY INVESTMENT IN SERANOVA, INC.

     On March 14, 2000,  SeraNova,  a  wholly-owned  subsidiary  of the Company,
entered into an agreement with four  institutional  investors  pursuant to which
such investors purchased an aggregate of 50 shares of SeraNova's common stock at
a price per share of $200,000, for an aggregate purchase price of $10.0 million.
The  investment  represented  approximately  4.8% of SeraNova's  then issued and
outstanding  shares of common stock.  In connection with such sale of its common
stock, SeraNova granted certain demand and piggyback registration rights to such
investors.

(8) 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 approximately $5.6
million related to restructuring  initiatives during the year ended December 31,
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 six month period ended June 30, 2000 is as follows:

<TABLE>
<CAPTION>
                                 Charges to                  Accrued Costs
                                 Operations    Costs Paid    December 31,     Costs Paid     Accrued Costs
                                 during 1999   during 1999       1999         during 2000    June 30, 2000
                                 -----------   -----------       ----         -----------    -------------
<S>                               <C>           <C>            <C>              <C>            <C>
 Severance and related costs..    $5,027,000    $4,162,000     $865,000         $414,000       $451,000

 Other costs primarily to
 exit facilities, contracts,
 and certain activities.......       601,000       517,000       84,000               --          84,000
                                  ----------    ----------     --------         --------        --------
                                  $5,628,000    $4,679,000     $949,000         $414,000        $535,000
                                  ==========    ==========     ========         ========        ========
</TABLE>

     Additionally,  in 1999 the  Company  recorded  a  reserve  of $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.

(9) SEGMENT DATA AND GEOGRAPHIC INFORMATION

     The Company operates in one industry,  information technology services. The
Company had been reporting two business segments as follows:

     o    Enterprise  Applications  Services  group - the largest  business
          segment  of  the   Company's   operations   which   includes  the
          implementation,  integration,  development,  and customization of
          solutions for clients  utilizing a class of application  products
          known as Enterprise  Resource  Planning  software.  This class of
          products includes software developed by such companies as SAP,


                                - 9 -
<PAGE>

          Oracle,   PeopleSoft,   and  Baan.   The  segment  also  includes
          application service provider offerings including the development,
          customization,  and  integration  of  enterprise  and  e-commerce
          applications, hosted externally, and made accessible to customers
          over a secure  network,  on a  monthly,  per  seat,  subscription
          basis.

     o    Internet   Applications   Services  group  -  provides   Internet
          professional services to businesses. Such services enable clients
          to  communicate  and conduct  commerce  between a company and its
          customers, suppliers, and partners over the Internet.

     The  Internet   Applications   Services  group   represented   the  assets,
liabilities  and results of operations  of SeraNova,  which has been reported as
discontinued  operations for all periods presented.  Accordingly,  the Company's
Enterprise  Applications  Services group is presented as one business segment in
the following  geographic areas for the three and six months ended June 30, 2000
and 1999.

<TABLE>
<CAPTION>
                           UNITED
                           STATES      ASIA-PACIFIC      EUROPE         INDIA         TOTAL
                           ------      ------------      ------         -----         -----

QUARTER ENDED JUNE 30, 2000
---------------------------
<S>                     <C>             <C>            <C>           <C>            <C>
Revenue                 $19,626,000     $2,447,000     $4,481,000    $1,135,000     $27,689,000
Depreciation and
  amortization              401,000         28,000        169,000       125,000         723,000
Operating income
  (loss)                 (2,590,000)         6,000       (305,000)     (685,000)     (3,574,000)
Total assets             47,623,000      4,337,000     10,243,000     6,750,000      68,953,000

QUARTER ENDED JUNE 30, 1999
---------------------------
Revenue                 $27,590,000     $2,278,000     $6,576,000    $1,376,000     $37,820,000
Depreciation and
  amortization              606,000         30,000         51,000        63,000         750,000
Operating income
  (loss)                 (5,759,000)      (426,000)      (358,000)      481,000      (6,062,000)
Total assets             62,090,000      4,706,000      7,882,000     2,090,000      76,768,000

SIX MONTHS ENDED JUNE 30, 2000
------------------------------
Revenue                 $40,632,000     $4,567,000     $9,293,000    $2,248,000     $56,740,000
Depreciation and
  amortization              972,000         56,000        343,000       199,000       1,570,000
Operating income
  (loss)                 (5,043,000)      (280,000)      (730,000)     (591,000)     (6,644,000)

SIX MONTHS ENDED JUNE 30, 1999
------------------------------
Revenue                 $57,027,000     $4,500,000    $12,443,000    $2,657,000     $76,627,000
Depreciation and
  amortization            1,105,000         54,000        102,000       127,000       1,388,000
Operating income
  (loss)                 (6,153,000)      (307,000)      (622,000)    1,116,000      (5,966,000)
</TABLE>


                                     - 10 -
<PAGE>

     Included above are  application  maintenance  and support  revenues of $6.3
million  and  $437,000  for the  three  months  ended  June 30,  2000 and  1999,
respectively.  The  application  maintenance  and support  revenues  for the six
months  ended  June  30,  2000  and  1999,   are  $11.2  million  and  $437,000,
respectively.  Other  information  related to the  application  maintenance  and
support  business is not available and the Company  determined  that it would be
impractical to calculate such data.



                                     - 11 -
<PAGE>

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

OVERVIEW

     The  Company  provides a wide  range of  information  technology  services,
including  enterprise-wide  business process solutions,  IT training  solutions,
systems integration and applications support based on leading technologies. Such
services  include the  implementation,  integration and development of solutions
for  clients  utilizing  a class of  application  products  known as  Enterprise
Resource Planning  software.  This class of products includes software developed
by such companies as SAP, Oracle, PeopleSoft, and Baan.

     The  Company   recently  made  the  strategic   decision  to  leverage  its
"traditional"   application   integration  and  consulting   experience  and  by
refocusing its business on the emerging  application  service  provider  ("ASP")
market.  Operating  as an  "aggregator"  ASP,  the  Company  bundles the key ASP
components - software and  technology  infrastructure  - with the Company's core
competency of application implementation,  management and support. The resulting
service is  delivered  to  customers  over a secure  network,  on a  predictable
subscription  basis.  As the single  point of  interface  to the  customer,  the
Company  takes  responsibility  for  service  level  agreements  related  to the
technology  infrastructure  and  applications  support,  assuring  the  on-going
reliability of security, performance, service, and support for the customer.

     Through  its  ASPPlusSM  Hosting  business,   the  Company  customizes  and
integrates  back-and-front  office software  applications and delivers them over
the secure global network of AT&T's  Ecosystem for ASPs, which provides the data
center,   hardware  and  operating   systems,   and   requisite   bandwidth  and
communications  capabilities.  Through  its  strategic  hosting  alliances,  the
Company  provides   companies  with  access  to  best-of-breed   e-commerce  and
enterprise  software,  including SAP, Niku,  MicroStrategy,  Onyx,  Vignette and
Ariba.

     Key  to  the  Company's  strategy  is  the  Company's   ASPPlusSM  Advanced
Development  Center in Hyderabad,  India which provides 24 x 365 development and
support using the technical  expertise of its developers and technical staff. In
May 2000,  the center was  awarded  Level 2 of the  People  Capability  Maturity
Model(R) (P-CMM(R)) by the Carnegie Mellon Software Engineering Institute (SEI).
The  achievement  recognizes  the Company  for its ability to attract,  develop,
motivate,  organize  and retain the talent  needed to  continuously  improve its
software  development  capability.  The  Company  is among  the  first in the IT
industry  to  integrate  SEI  workforce   improvement   with  software   process
improvement,  for which the company has  achieved  the SEI  Capability  Maturity
Model for Software (CMM)(SM) Level 3 certification for continuous improvement of
its software  engineering.  In addition,  the Company is ISO  9001-certified for
software development, support and optimization.

     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-


                                     - 12 -
<PAGE>

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  services on certain  projects in which it, at the
request of the  clients,  offers a fixed  price for its  services.  For the year
ended  December  31, 1999,  revenues  derived  from  projects  under fixed price
contracts  represented  approximately  9% of the Company's total revenue.  Fixed
price  contracts,  in the  aggregate,  represented  13% of the  Company's  total
revenue during the six months ended June 30, 2000. No single fixed price project
was material to the Company's  business during 1999. During the six months ended
June 30, 2000, one fixed price  customer  represented  approximately  11% of the
Company's total revenue.  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
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 six months ended June 30, 2000,  and the year ended  December
31, 1999,  the  Company's ten largest  customers  accounted for in the aggregate
approximately 40% and 43% of its revenue, respectively. For the six months ended
June 30, 2000, one customer accounted for approximately 13% of revenue.  For the
year ended December 31, 1999, one customer  accounted for  approximately  14% of
revenue.  During the six months ended June 30, 2000, and the year ended December
31,  1999,  approximately  62% and 53%,  respectively,  of the  Company's  total
revenue was derived  from  projects  in which the Company  implemented  software
developed by SAP.  During the six months ended June 30, 2000, and the year ended
December 31, 1999,  approximately  8% and 9% of the Company's  total revenue was
derived from  projects in which the Company  implemented  software  developed by
Oracle.  During the six months ended June 30, 2000,  and the year ended December
31,  1999,  approximately  28% and 33%,  respectively,  of the  Company's  total
revenue was derived  from  projects  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 and upgrade 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.



                                     - 13 -
<PAGE>

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.

     The Company currently maintains its headquarters in Edison, New Jersey, and
branch offices in Houston,  Rosemont  (Illinois),  Foster City  (California) and
Atlanta.  The Company  also  currently  maintains  offices in Europe (the United
Kingdom,  Denmark and Sweden),  and Asia Pacific  (Australia,  India, Japan, New
Zealand,  Hong Kong and  Singapore).  The  Company  leases its  headquarters  in
Edison,  New Jersey.  Such lease has an initial  term of ten (10)  years,  which
commenced in September 1998.

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 and upgrade methodology in an increasing
number of projects.  In addition,  statements  regarding the Company's intent 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  limited  operating  history  within  its  current  line  of
     business;

  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;


                                     - 14 -
<PAGE>

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

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

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

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

  o  the  Company's  ability to continue to diversify its  offerings,  including
     growth in its Oracle, Baan and PeopleSoft 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  the continued  uncertainty  of the  application  service  provider  ("ASP")
     market and revenues derived from anticipated ASP business.

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

RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
                                                           Percentage of Revenue
                                         ----------------------------------------------------------
                                         Three Months Ended June 30,     Six Months Ended June 30,
                                         ----------------------------   ---------------------------
                                             2000           1999             2000           1999
                                             ----           ----             ----           ----
<S>                                          <C>            <C>             <C>            <C>
Revenue..................................    100.0%         100.0%          100.0%         100.0%

Cost of sales............................     66.8           66.0            66.4           67.2
                                            ------         ------          ------         ------
    Gross profit.........................     33.2           34.0            33.6           32.8

Selling, general and administrative
  expenses...............................     43.5           28.7            42.5           26.4

Depreciation and amortization expenses...      2.6            2.0             2.8            1.8

Acquisition expenses.....................       --             --              --            2.8

Restructuring and other special charges..       --           19.4              --            9.6
                                            ------         ------          ------         ------

    Operating loss.......................    (12.9)         (16.1)          (11.7)          (7.8)

Interest and other income (expense), net.      0.8           (0.2)            0.3           (0.2)
                                            ------         ------          ------         ------
Loss from continuing operations
   before income tax benefit ............    (12.1)         (16.3)          (11.4)          (8.0)

Income tax benefit.......................     (1.7)          (5.2)           (2.6)          (2.1)
                                            ------         ------          ------         ------
Loss from continuing operations..........    (10.4)%        (11.1)%          (8.8)%         (5.9)%
                                            ======         ======          ======         ======
</TABLE>

                                     - 15 -
<PAGE>

THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999

     The following discussion compares the quarters ended June 30, 2000 and June
30, 1999, in each case without SeraNova,  which has been treated as discontinued
during this quarter.

     Revenue.  Total revenue  decreased by 26.8%,  or $10.1 million,  from $37.8
million during the three months ended June 30, 1999, to $27.7 million during the
three months ended June 30, 2000.  This decrease was primarily  attributable  to
the  anticipated  decline  in  sales  of  traditional   implementation  services
offerings and slower than expected growth in outsourcing and hosting revenues as
the Company  refocuses  resources into the application  service provider market.
Total  revenue for the three months  ended June 30, 2000  included a fixed price
project, which accounted for approximately 7% 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 decreased by 26.0%, or $6.5 million,  from $25.0 million
during the three  months ended June 30, 1999 to $18.5  million  during the three
months ended June 30, 2000. The Company's  gross profit  decreased by 28.5%,  or
$3.7 million,  from $12.9 million during the three months ended June 30, 1999 to
$9.2 million during the three months ended June 30, 2000.  These  decreases were
attributable to lower revenues. Gross margin decreased to 33.2% during the three
months  ended June 30, 2000 from 34.0%  during the three  months  ended June 30,
1999.  The  Company  was able to  maintain  gross  margins  comparable  to prior
quarters as a result of the previously implemented variable cost of sales model.

     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 Advanced Development Center and related
development costs and professional  fees.  Selling,  general and  administrative
expenses  increased by 11.0%,  or $1.2 million,  from $10.9  million  (excluding
restructuring  and other special charges) during the three months ended June 30,
1999 to $12.1 million  during the three months ended June 30, 2000 and increased
as a percentage  of revenue from 28.7% to 43.5%,  respectively.  The increase in
selling,  general and  administrative  expenses,  in  absolute  dollars and as a
percentage  of  revenue,  is  primarily  related to  additional  sales staff and
expanded  marketing efforts as the Company focuses resources around the emerging
application service provider market.

     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  three  months  ended  June 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.


                                     - 16 -
<PAGE>

     Depreciation  and  amortization.  Depreciation  and  amortization  expenses
decreased 3.6% to $723,000 during the three months ended June 30, 2000, compared
to $750,000  during the three months ended June 30, 1999.  The decrease  results
from the depreciation associated with certain software being recorded in cost of
sales during the three months ended June 30, 2000.

     Interest income  (expense).  The Company earned  approximately  $309,000 in
interest income during the three months ended June 30, 2000,  primarily  related
to the  note  receivable  with  SeraNova.  The  Company  incurred  approximately
$145,000  in  interest  expense  during the three  months  ended June 30,  2000,
primarily  related to borrowings under its line of credit.  Borrowings under the
line of credit were used to fund operating activities.

     (Benefit)  provision for income taxes. The Company's effective tax rate was
(14.0)%  and  (31.9)%  for the  three  months  ended  June 30,  2000  and  1999,
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.  Such tax holiday was extended an additional five years in 1999.
For the three months ended June 30, 2000, the tax holiday  unfavorably  impacted
the Company's  effective  tax rate by  approximately  6.7%,  while the favorable
effect in the three  months ended June 30, 1999 was 2.8%.  Based on  anticipated
profitability in the near future,  management believes all recorded net deferred
tax assets are more likely than not to be realized.

SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999

     The  following  discussion  compares the six months ended June 30, 2000 and
June 30,  1999,  in each  case  without  SeraNova,  which  has been  treated  as
discontinued during the quarter ended June 30, 2000.

     Revenue.  Total revenue  decreased by 26.0%,  or $19.9 million,  from $76.6
million  during the six months ended June 30, 1999, to $56.7 million  during the
six months ended June 30, 2000. This decrease was primarily  attributable to the
anticipated  decline in sales of traditional  implementation  services offerings
and slower than  expected  growth in  outsourcing  and  hosting  revenues as the
Company refocuses resources into the application service provider market.  Total
revenue for the six months ended June 30, 2000  included a fixed price  project,
which accounted for approximately 11% of revenue.

     Gross profit.  The  Company's  cost of sales  decreased by 26.8%,  or $13.8
million,  from $51.5 million  during the six months ended June 30, 1999 to $37.7
million  during the six months ended June 30, 2000.  The Company's  gross profit
decreased by 24.2%,  or $6.1 million,  from $25.1 million  during the six months
ended June 30, 1999 to $19.1 million  during the six months ended June 30, 2000.
These decreases were  attributable to lower revenues.  Gross margin increased to
33.6%  during the three  months  ended June 30, 2000 from 32.8% during the three
months  ended June 30,  1999.  The  Company  was able to improve  gross  margins
compared to prior  quarters as a result of the previously  implemented  variable
cost of sales model.

     Selling,  general  and  administrative   expenses.   Selling,  general  and
administrative  expenses increased by 19.0%, or $3.9 million, from $20.3 million
(excluding restructuring,  acquisition and other special charges) during the six
months ended June 30, 1999 to $24.1 million during the six months ended June 30,
2000 and increased as a percentage of revenue


                                     - 17 -
<PAGE>

from  26.4% to 42.5 %,  respectively.  The  increase  in  selling,  general  and
administrative  expenses, in absolute dollars and as a percentage of revenue, is
primarily  related to additional sales staff and expanded  marketing  efforts as
the Company focuses resources around the emerging  application  service provider
market.

     Acquisition expense. During the six months ended June 30, 1999, the Company
incurred  costs  of $2.1 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 six months ended June 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.

     Depreciation  and  amortization.  Depreciation  and  amortization  expenses
increased  13.1% to $1.6  million  during  the six months  ended June 30,  2000,
compared to $1.4 million during the six months ended June 30, 1999. The increase
is primarily  due to  additional  computers,  equipment  and software  placed in
service since June 30, 1999.

     Interest income  (expense).  The Company earned  approximately  $358,000 in
interest income during the six months ended June 30, 2000,  primarily related to
the note receivable with SeraNova.  The Company incurred  approximately $198,000
in interest expense during the six months ended June 30, 2000, primarily related
to borrowings under its line of credit. Borrowings under the line of credit were
used to fund operating activities.

     (Benefit)  provision for income taxes. The Company's effective tax rate was
(22.6)%  and  (26.0)%  for  the  six  months  ended  June  30,  2000  and  1999,
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.  Such tax holiday was extended an additional five years in 1999.
For the six months ended June 30, 2000, the tax holiday unfavorably impacted the
Company's  effective tax rate by approximately  2.9%, while the favorable effect
in the six months ended June 30, 1999 was 6.4%. Based on current and anticipated
profitability, management believes all recorded net deferred tax assets are more
likely than not to be realized.



                                     - 18 -
<PAGE>

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.

LIQUIDITY AND CAPITAL RESOURCES

     The Company had cash and cash equivalents of $1.8 million at June 30, 2000,
and $5.5 million at December 31, 1999. The Company had working  capital of $15.1
million at June 30, 2000 and $29.1 million at December 31, 1999.

     Cash provided by operating  activities of  continuing  operations  was $6.6
million during the six months ended June 30, 2000,  resulting primarily from the
decreases in accounts  receivable and unbilled services and increases in accrued
payroll and related taxes and accrued expenses and other liabilities,  partially
offset by the net loss from  continuing  operations.  The  decreases in accounts
receivable  and unbilled  services  result from enhanced  credit and  collection
efforts as well as a decrease in revenues.  The increase in accrued  payroll and
related taxes results from profit sharing,  bonus and commission  payment timing
differences. The increase in accrued expenses and other liabilities results from
accruals for costs associated with the Company's  strategic  hosting  alliances.
Cash used in operating  activities of continuing  operations  for the six months
ended June 30, 1999 was $2.9 million.

     The Company  invested $3.2 million and $1.3 million in computer  equipment,
office furniture and fixtures and capitalized  software solutions during the six
months ended June 30, 2000 and 1999,  respectively.  The  increase  reflects the
purchases  of  computer   equipment  and  office   furniture  and  fixtures  for
consultants  and  administrative  staff,  purchases  of software  solutions  and
internally-developed software costs for customers.

     On January 29, 1999, the Company entered into a three-year revolving credit
facility  agreement with PNC Bank, N.A. (the "Bank").  The credit agreement with
the Bank was  comprised  of a  revolving  line of credit  pursuant  to which the
Company could borrow up to $30,000,000 either at the Bank's prime rate per annum
or the EuroRate plus 2% (at the Company's option).

     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  credit
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. On

                                     - 19 -
<PAGE>

January 26, 2000, the Company  finalized with the Bank the terms of a waiver and
amendment to the credit  agreement to remedy  defaults  which  existed under the
credit agreement.  The terms of the waiver and amendment  included,  among other
things, (i) a $15,000,000  reduction in availability under the credit agreement,
(ii) a first priority  perfected  security interest on all assets of the Company
and its  domestic  subsidiaries  and (iii)  modification  of  certain  financial
covenants and a waiver of prior covenant defaults.

     As a result of the first quarter's operating losses, the Company was not in
compliance  with the minimum  consolidated  net worth  covenant  and the minimum
consolidated EBITDA financial covenant as of March 31, 2000. On May 9, 2000, the
Bank  issued to the Company a waiver of the  defaults  which  existed  under the
credit agreement for the quarter ended March 31, 2000.

     On May 31, 2000, the Company entered into a new three-year revolving credit
facility  agreement with the Bank. The credit facility agreement is comprised of
a  revolving  line of credit  pursuant  to which the  Company  can  borrow up to
$20,000,000  either at the Bank's prime rate per annum or the EuroRate plus 2.5%
to 1.75% based upon the Company's  ratio of debt to EBITDA.  The credit facility
is  collateralized by substantially all of the assets of the United States based
operations. The maximum borrowing availability under the line of credit is based
upon a percentage of eligible billed and unbilled accounts receivable.

     The  credit  agreement  provides  for  the  following  financial  covenants
(exclusive  of  SeraNova),  among other  things,  (1) the Company must  maintain
consolidated net worth of (a) $42.0 million at each of June 30, 2000,  September
30, 2000, and December 31, 2000; (b) not less than 95% of consolidated net worth
of the  immediately  preceding  fiscal  year-end as at each such fiscal  quarter
after December 31, 2000; and (c) at least 105% of  consolidated  net worth as of
the  immediately  preceding  fiscal  year-end  as at each such  fiscal  year-end
subsequent to December 31, 2000; provided, however, the foregoing covenant shall
not be tested for any  quarter so long as the  Company  maintains,  at all times
during such fiscal quarter,  undrawn  availability of more than $5.0 million and
(2) the Company must maintain  unconsolidated  net worth of (a) $39.0 million at
each of June 30, 2000,  September 30, 2000,  and December 31, 2000; (b) not less
than  95% of  unconsolidated  net  worth  of the  immediately  preceding  fiscal
year-end as at each such fiscal  quarter  after  December 31,  2000;  and (c) at
least 105% of  unconsolidated  net worth as of the immediately  preceding fiscal
year-end as at each such  fiscal  year-end  subsequent  to  December  31,  2000;
provided, however, the foregoing covenant shall not be tested for any quarter so
long as the Company maintains, at all times during such fiscal quarter,  undrawn
availability  of more than  $5.0  million.  Additionally,  the  credit  facility
contains  standard material adverse change clauses with regards to the financial
condition of the assets,  liabilities and operations of the Company.  As of June
30, 2000, the Company was in compliance with all financial covenants.


     On May 31,  2000,  SeraNova  and the  Company  formalized  a $15.1  million
unsecured  Promissory  Note  relating to net  borrowings  by  SeraNova  from the
Company  through such date. The Promissory Note bears interest at the prime rate
plus 1/2%. A payment of $3.0 million is due on the Promissory  Note by September
30, 2000 with the balance due on July 31, 2001. The Promissory  Note has certain
mandatory  prepayment  provisions  based  on  possible  future  debt  or  equity
financings by SeraNova.


                                     - 20 -
<PAGE>

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   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.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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




                                     - 21 -
<PAGE>

PART II.  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

     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 discovery scheduling order was entered at the
case  management  conference  held on December 2, 1999.  On April 12, 2000,  the
Company's  motion for summary  judgment,  dismissing  the complaint  against all
defendants, was granted.

     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 a three-year revolving credit
facility  agreement with PNC Bank, N.A. (the "Bank").  The credit agreement with
the Bank was  comprised  of a  revolving  line of credit  pursuant  to which the
Company could borrow up to $30,000,000 either at the Bank's prime rate per annum
or the EuroRate plus 2% (at the Company's option).

     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  credit
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.  On January 26, 2000, the Company  finalized with the Bank
the terms of a waiver and amendment to the credit  agreement to remedy  defaults
which existed under the credit agreement.  The terms of the waiver and amendment
included,  among other things, (i) a $15,000,000 reduction in availability under
the credit agreement,  (ii) a first priority  perfected security interest on all
assets of the Company and its domestic  subsidiaries  and (iii)  modification of
certain financial covenants and a waiver of prior covenant defaults.

     As a result of the first quarter's operating losses, the Company was not in
compliance  with the minimum  consolidated  net worth  covenant  and the minimum
consolidated EBITDA financial covenant as of March 31, 2000. On May 9, 2000, the
Bank  issued to the Company a waiver of the  defaults  which  existed  under the
credit agreement for the quarter ended March 31, 2000.


                                     - 22 -
<PAGE>

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

     The Annual Meeting of Shareholders of the Company was held on May 30, 2000.

     There  were  present  at the  meeting  in person  or by proxy  shareholders
holding an aggregate of 13,035,526  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                     12,857,715            177,811
    Nagarjun Valluripalli            12,857,715            177,811
    Rajkumar Koneru                  12,857,715            177,811
    Klaus P. Besier                  12,857,715            177,811
    Dennis McIntosh                  12,857,715            177,811

     In addition, 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, 2000. Of the shares present at the meeting in person or
by  proxy,  13,019,236  shares  of  Common  Stock  were  voted  in favor of such
proposal,  8,525  shares of Common Stock were voted  against  such  proposal and
7,765 shares of Common Stock abstained from voting.

ITEM 5.  OTHER INFORMATION.

     In November  1999,  the Company  announced  its  intentions to spin off its
Internet  services  business  ("SeraNova")  to the  shareholders of the Company,
subject to certain  conditions.  On January 1, 2000, the Company transferred its
Internet applications services and management consulting businesses to SeraNova,
Inc.,  a  wholly-owned  subsidiary  of the Company on such date.  On January 27,
2000,  SeraNova filed a Registration  Statement with the Securities and Exchange
Commission  (the "SEC")  relating to the proposed  spin-off of SeraNova from the
Company.  On  June  29,  2000,  the  SEC  declared  the  Registration  Statement
effective.  Accordingly,  the assets,  liabilities  and results of operations of
SeraNova  have  been  reported  as  discontinued   operations  for  all  periods
presented.

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

     Shares  of the  Company's  common  stock  continue  to trade on the  Nasdaq
National  Market under the ticker symbol ITIG.  Shares of SeraNova  common stock
trade on the Nasdaq National Market under the ticker symbol SERA.

     On May 31,  2000,  SeraNova  and the  Company  formalized  a $15.1  million
unsecured  Promissory  Note  relating to net  borrowings  by  SeraNova  from the
Company  through such date. The Promissory Note bears interest at the prime rate
plus 1/2%. A payment of $3.0 million is due on the Promissory  Note by September
30, 2000 with the balance due on July 31, 2001. The


                                     - 23 -
<PAGE>

Promissory Note has certain  mandatory  prepayment  provisions based on possible
future debt or equity financings by SeraNova.

     On May 31, 2000, the Company entered into a new three-year revolving credit
facility  agreement with the Bank. The credit facility agreement is comprised of
a  revolving  line of credit  pursuant  to which the  Company  can  borrow up to
$20,000,000  either at the Bank's prime rate per annum or the EuroRate plus 2.5%
to 1.75% based upon the Company's  ratio of debt to EBITDA.  The credit facility
is  collateralized by substantially all of the assets of the United States based
operations. The maximum borrowing availability under the line of credit is based
upon a percentage of eligible billed and unbilled accounts receivable.

     The  credit  agreement  provides  for  the  following  financial  covenants
(exclusive  of  SeraNova),  among other  things,  (1) the Company must  maintain
consolidated net worth of (a) $42.0 million at each of June 30, 2000,  September
30, 2000, and December 31, 2000; (b) not less than 95% of consolidated net worth
of the  immediately  preceding  fiscal  year-end as at each such fiscal  quarter
after December 31, 2000; and (c) at least 105% of  consolidated  net worth as of
the  immediately  preceding  fiscal  year-end  as at each such  fiscal  year-end
subsequent to December 31, 2000; provided, however, the foregoing covenant shall
not be tested for any  quarter so long as the  Company  maintains,  at all times
during such fiscal quarter,  undrawn  availability of more than $5.0 million and
(2) the Company must maintain  unconsolidated  net worth of (a) $39.0 million at
each of June 30, 2000,  September 30, 2000,  and December 31, 2000; (b) not less
than  95% of  unconsolidated  net  worth  of the  immediately  preceding  fiscal
year-end as at each such fiscal  quarter  after  December 31,  2000;  and (c) at
least 105% of  unconsolidated  net worth as of the immediately  preceding fiscal
year-end as at each such  fiscal  year-end  subsequent  to  December  31,  2000;
provided, however, the foregoing covenant shall not be tested for any quarter so
long as the Company maintains, at all times during such fiscal quarter,  undrawn
availability  of more than  $5.0  million.  Additionally,  the  credit  facility
contains  standard material adverse change clauses with regards to the financial
condition of the assets,  liabilities and operations of the Company.  As of June
30, 2000, the Company was in compliance with all financial covenants.

     On May 1,  2000,  the  Company  named  Matthew  Shocklee  as the  Company's
President of ASPPlusSM Solutions North America.

     As of July 6, 2000,  the Company has  adjusted  the  exercise  price of all
employee  and  director  stock  options to offset the  reduction in option value
caused by the  spin-off of  SeraNova.  The  exercise  price of each stock option
grant  outstanding  as of July 5, 2000,  was  adjusted  based on the  percentage
change in the closing price of the Company's stock on the  distribution  date of
July 5, 2000, and the ex-dividend  date of July 6, 2000. In accordance with FASB
Interpretation  No. 44,  Accounting  for Certain  Transactions  involving  Stock
Compensation,   the  Company  has   concluded   that  there  are  no  accounting
consequences  for changing the exercise price of outstanding  stock options as a
result of the spin-off.


                                     - 24 -
<PAGE>

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

   (a)    Exhibits.

   10.1   Employment  Agreement  dated November 18, 1998 between the Company and
          Matthew Shocklee.

   10.2   Change in Control  Severance Pay Agreement dated June 22, 1999 between
          the Company and Matthew Shocklee.

   10.3   First  Amendment  to  Employment  Agreement  dated  September  1, 1999
          between the Company and Matthew Shocklee.

   10.4   Second Amendment to Employment Agreement and First Amendment to Change
          in Control  Severance  Pay  Agreement  dated July 25, 2000 between the
          Company and Matthew Shocklee.

   10.5   Amendment  No. 1 to Services  Agreement by and between the Company and
          SeraNova effective as of June 14, 2000.

   10.6   Amendment  No. 2 to Services  Agreement by and between the Company and
          SeraNova effective as of July 1, 2000.

   10.7   Amended and Restated  Promissory Note between the Company and SeraNova
          dated May 31, 2000.

   10.8   Amended and  Restated  Revolving  Credit Loan and  Security  Agreement
          among the Company, Empower, Inc. and PNC Bank, National Association.

   27.1   Financial Data Schedule for the six-month period ended June 30, 2000.

   27.2   Financial  Data  Schedule  for the  three-month  period ended June 30,
          2000.

   27.3   Financial Data Schedule for the year ended December 31, 1999.

   27.4   Financial Data Schedule for the six-month period ended June 30, 1999.

   27.5   Financial  Data  Schedule  for the  three-month  period ended June 30,
          1999.

   (b)    Reports on Form 8-K.

          On July 17, 2000,  the Company  filed a report on Form 8-K relating to
          (i) the Company's distribution of all of the outstanding shares of the
          common  stock of SeraNova  held by the Company to holders of record of
          the Company's common stock as of the close of business on May 12, 2000
          (or to their  subsequent  transferees) in accordance with the terms of
          that  certain  Distribution  Agreement  dated as of  January  1,  2000
          between the Company and  SeraNova;  and (ii) a  $15,100,000  unsecured
          Promissory  Note dated May 31, 2000,  between the Company and SeraNova
          relating to net  borrowings by SeraNova from the Company  through such
          date.

                                     - 25 -
<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: August 11, 2000           By: /s/ Ashok Pandey
                                    -------------------------------------------
                                    Ashok Pandey,
                                    Co- Chief Executive Officer
                                    (Principal Executive Officer)


DATE: August 11, 2000           By: /s/ Nicholas Visco
                                    -------------------------------------------
                                    Nicholas Visco,
                                    Vice President-Finance and
                                    Chief Financial Officer
                                    (Principal Financial and Accounting Officer)



                                     - 26 -