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 June 30, 2002
                           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  Issuer's
classes of common stock, as of August 14, 2002:

             Class                                       Number of Shares
             -----                                       ----------------
  Common Stock, $.01 par value                               16,630,125


<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, 2002 (unaudited)
             and December 31, 2001........................................    2

             Consolidated Statements of Operations and Comprehensive
             Income (Loss) for the Three Months and Six Months Ended
             June 30, 2002and 2001 (unaudited)............................    3

             Consolidated Statements of Cash Flows for the Six Months
             Ended June 30, 2002 and 2001 (unaudited).....................    4

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

    Item 2.  Management's Discussion and Analysis of
             Financial Condition and Results of Operations................   14

    Item 3.  Quantitative and Qualitative Disclosures About Market Risk...   34

PART II.  OTHER INFORMATION

    Item 1.  Legal Proceedings............................................   35

    Item 4.  Submission of Matters to a Vote of Security Holders..........   37

    Item 5.  Other Information............................................   37

    Item 6.  Exhibits and Reports on Form 8-K.............................   38

SIGNATURES................................................................   40





                                      - i -
<PAGE>


                          PART I. FINANCIAL INFORMATION

                    ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS




                                      - 1 -
<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                       JUNE 30, 2002 AND DECEMBER 31, 2001

<TABLE>
<CAPTION>
                                                                   JUNE 30,         DECEMBER 31,
                                                                     2002               2001
                                                                ------------       -------------
                          ASSETS                                 (UNAUDITED)
<S>                                                             <C>                <C>
Current Assets:
  Cash and cash equivalents..............................       $   1,375,000      $   2,138,000
  Accounts receivable, less allowance for doubtful
     accounts of $1,645,000 and $2,073,000 at June 30,
     2002 and December 31, 2001, respectively............          17,173,000         13,519,000
  Unbilled services......................................           4,673,000          7,536,000
  Prepaid income taxes...................................             463,000            342,000
  Deferred tax assets....................................           1,736,000          1,736,000
  Other current assets...................................           2,620,000          3,548,000
  Note receivable - SeraNova.............................           4,000,000          9,140,000
                                                                -------------      -------------

        Total current assets.............................          32,040,000         37,959,000
  Property and equipment, net............................           7,178,000          8,099,000
  Other assets...........................................           1,003,000          1,036,000
                                                                -------------      -------------
                                                                $  40,221,000      $  47,094,000
                                                                =============      =============

           LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
  Accounts payable.......................................       $   3,796,000      $   3,548,000
  Accrued payroll and related taxes......................           6,200,000          5,465,000
  Accrued expenses and other liabilities.................           4,603,000          4,414,000
  Deferred revenue.......................................             854,000          1,211,000
  Income taxes payable...................................             586,000            427,000
  Current portion of long term debt and obligations
     under capital leases................................           4,570,000          4,712,000
                                                                -------------      -------------

         Total current liabilities.......................          20,609,000         19,777,000

Deferred tax liabilities.................................             154,000            164,000
                                                                -------------      -------------
Obligations under capital leases, less current portion...             156,000            371,000
                                                                -------------      -------------
Other long-term liabilities..............................           1,082,000                 --
                                                                -------------      -------------

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, 16,630,125 shares issued and
     outstanding at June 30, 2002 and December 31, 2001..             166,000            166,000
  Additional paid-in capital.............................          41,366,000         41,366,000
  Accumulated deficit....................................         (19,234,000)       (10,685,000)
  Currency translation adjustments.......................          (4,078,000)        (4,065,000)
                                                                -------------      -------------
        Total shareholders' equity ......................          18,220,000         26,782,000
                                                                -------------      -------------
                                                                $  40,221,000      $  47,094,000
                                                                =============      =============
</TABLE>


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


                                     - 2 -
<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  AND COMPREHENSIVE INCOME (LOSS) FOR THE THREE
               MONTHS AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED JUNE 30,                SIX MONTHS ENDED JUNE 30,
                                                     -----------------------------------      ----------------------------------
                                                           2002                2001                 2002               2001
                                                     ---------------    ----------------      --------------     ---------------

<S>                                                   <C>                <C>                  <C>                 <C>
Revenue..........................................     $  26,476,000      $   28,734,000       $   51,085,000      $   59,523,000
Cost of sales....................................        18,212,000          19,347,000           35,400,000          40,971,000
                                                      -------------      --------------       --------------      --------------
     Gross profit................................         8,264,000           9,387,000           15,685,000          18,552,000
                                                      -------------      --------------       --------------      --------------
Selling, general and administrative expenses.....         7,042,000           8,061,000           13,546,000          16,179,000
Depreciation and amortization....................           676,000             917,000            1,383,000           1,862,000
SeraNova receivable impairment and other charges.         8,362,000                  --            8,362,000                  --
Proxy contest charges............................           464,000                  --              464,000                  --
                                                      -------------      --------------       --------------      --------------
     Total operating expenses....................        16,544,000           8,978,000           23,755,000          18,041,000
                                                      -------------      --------------       --------------      --------------
     Operating (loss) income.....................        (8,280,000)            409,000           (8,070,000)            511,000
Other expense, net...............................           (70,000)           (132,000)            (138,000)            (11,000)
                                                      -------------      --------------       --------------      --------------
(Loss) income before provision for income taxes..        (8,350,000)            277,000           (8,208,000)            500,000
Provision for income taxes.......................           210,000              98,000              341,000             133,000
                                                      -------------      --------------       --------------      --------------
Net (loss) income................................     $  (8,560,000)     $      179,000       $   (8,549,000)     $      367,000
                                                      =============      ==============       ==============      ==============

Earnings per share:
     Basic earnings per share:
       Net (loss) income per share...............     $       (0.51)     $         0.01       $        (0.51)     $         0.02
                                                      =============      ==============       ==============      ==============
       Weighted average number of
       Common shares - Basic.....................        16,630,000          16,630,000           16,630,000          16,630,000
                                                      =============      ==============       ==============      ==============

     Diluted earnings per share:
       Net (loss) income per share...............     $       (0.51)     $         0.01       $        (0.51)     $         0.02
                                                      =============      ==============       ==============      ==============
       Weighted average number of
       Common shares - Diluted...................        16,630,000          16,631,000           16,630,000          16,649,000
                                                      =============      ==============       ==============      ==============

Comprehensive Income (Loss)
Net (loss) income................................     $  (8,560,000)     $      179,000       $   (8,549,000)     $      367,000
Other comprehensive income (loss) -
       Currency translation adjustments..........           412,000             565,000              (13,000)           (921,000)
                                                      -------------      --------------       --------------      --------------
Comprehensive (loss) income .....................     $  (8,148,000)     $      744,000       $   (8,562,000)     $     (554,000)
                                                      =============      ==============       ==============      ==============
</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, 2002 and 2001
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                  SIX MONTHS ENDED JUNE 30,
                                                                                  2002                 2001
                                                                             -------------        -------------
<S>                                                                          <C>                  <C>
Cash flows from operating activities:
   Net (loss) income....................................................     $  (8,549,000)       $     367,000
   Adjustments to reconcile net (loss) income to net cash provided by
      operating activities:
       Depreciation and amortization....................................         1,826,000            2,270,000
       Provision for doubtful accounts..................................           247,000            1,042,000
       SeraNova receivable impairment and other charges.................         8,362,000                   --
       Deferred income taxes............................................           (10,000)                  --
   Changes in operating assets and liabilities:
     Accounts receivable................................................        (3,901,000)           2,991,000
     Unbilled services..................................................         2,863,000              (54,000)
     Other current assets...............................................          (477,000)            (136,000)
     Other assets.......................................................            33,000              666,000
     Accounts payable...................................................           248,000           (2,169,000)
     Accrued payroll and related taxes..................................           735,000             (899,000)
     Accrued expenses and other liabilities.............................          (213,000)            (604,000)
     Accrued restructuring charges......................................          (454,000)            (117,000)
     Deferred revenue...................................................          (357,000)             (27,000)
     Income taxes payable...............................................           159,000               (2,000)
                                                                             -------------        -------------
   Net cash provided by operating activities............................           512,000            3,328,000
                                                                             -------------        -------------

Cash flows from investing activities:
     Purchase of equipment .............................................          (905,000)          (2,651,000)
     Purchase of software licenses......................................                --           (2,678,000)
                                                                             -------------        -------------
   Net cash used in investing activities................................          (905,000)          (5,329,000)
                                                                             -------------        -------------

Cash flows from financing activities:
   Principal payments under capital leases..............................          (334,000)            (279,000)
   Other borrowings (repayments)........................................             3,000              (89,000)
   Net change in line of credit borrowings..............................           (26,000)           1,427,000
   Repayment of note receivable-SeraNova subsequent to spin-off date....                --            2,060,000
                                                                             -------------        -------------
     Net cash (used in) provided by financing activities................          (357,000)           3,119,000
                                                                             -------------        -------------
     Effect of foreign currency exchange rate changes on cash...........           (13,000)            (921,000)
                                                                             -------------        -------------
Net (decrease) increase in cash and cash equivalents ...................          (763,000)             197,000
Cash and cash equivalents at beginning of period........................         2,138,000            1,327,000
                                                                             -------------        -------------
Cash and cash equivalents at end of period..............................     $   1,375,000        $   1,524,000
                                                                             =============        =============
Supplemental disclosures of cash flow information:
   Cash paid for income taxes...........................................     $     572,000        $     426,000
                                                                             =============        =============
   Cash paid for interest...............................................     $     201,000        $     430,000
                                                                             =============        =============
</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)

NOTE 1 - BASIS OF PRESENTATION

     The   consolidated   financial   statements  and   accompanying   financial
information  as of June 30, 2002 and for the three  months and six months  ended
June 30, 2002 and 2001 are unaudited and, in the opinion of management,  include
all adjustments  (consisting  only of normal  recurring  adjustments)  which the
Company considers necessary for a fair presentation of the financial position of
the  Company at such dates and the  operating  results  and cash flows for those
periods.  The  consolidated  financial  statements  included  herein  have  been
prepared in accordance  with  accounting  principles  generally  accepted in the
United  States and the  instructions  of Form 10-Q and Rule 10-01 of  Regulation
S-X. Accordingly, certain information and footnote disclosures normally included
in  consolidated  financial  statements  prepared in accordance  with accounting
principles  generally  accepted  in the United  States  have been  condensed  or
omitted.  These consolidated  financial statements should be read in conjunction
with the Company's audited consolidated  financial statements for the year ended
December 31, 2001, which were included as part of the Company's Form 10-K.

     In November 2001, the Emerging  Issues Task Force ("EITF") of the Financial
Accounting Standards Board ("FASB") concluded that reimbursable  "out-of-pocket"
expenses should be classified as revenue,  and correspondingly cost of services,
in the statement of operations.  Most service  companies,  whose employees incur
incidental expenses such as airfare,  mileage, hotel and out-of-town meals while
working on behalf of customers, previously reported reimbursable "out-of-pocket"
expenses on a "net" basis in the statement of operations. Accordingly, effective
January 1, 2002,  the Company has reported  gross  reimbursable  "out-of-pocket"
expenses  incurred  as both  revenue  and  cost of  sales  in the  statement  of
operations. The Company has also reclassified prior period financial information
for presentation consistent with the new EITF accounting guidance. The impact of
this  reclassification  was an  increase  to both  revenue  and cost of sales of
$542,000  and  $707,000  for the  three  months  ended  June 30,  2002 and 2001,
respectively,  and  $1,039,000  and $1,459,000 for the six months ended June 30,
2002 and 2001, respectively.

     The Company's 2002 operating plan contains  assumptions  regarding  revenue
and  expenses.  The  achievement  of the operating  plan depends  heavily on the
timing of work performed by the Company on existing  projects and the ability of
the Company to gain and perform  work on new  projects.  Project  cancellations,
delays in the timing of work  performed  by the Company on existing  projects or
the inability of the Company to gain and perform work on new projects could have
an adverse  impact on the Company's  ability to execute its  operating  plan and
maintain  adequate  cash  flow.  In the  event  actual  results  do not meet the
operating  plan,  management  believes  it could  execute  contingency  plans to
mitigate such effects.  Such plans include additional cost reductions or seeking
additional  financing.  Considering  the cash on hand,  the credit  facility and
based on the achievement of the operating plan and management's actions taken to
date,  management believes it has the ability to continue to generate sufficient
cash to


                                     - 5 -
<PAGE>

satisfy its operating requirements in the normal course of business. However, no
assurance can be given that sufficient cash will be generated from operations.

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

NOTE 2 - EARNINGS PER SHARE

     Basic earnings per share is computed by dividing income 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 could
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,
                                       ---------------------------    -------------------------
                                            2002           2001           2002           2001
                                            ----           ----           ----           ----

<S>                                       <C>            <C>            <C>           <C>
Weighted average number of common
shares...............................     16,630,000     16,630,000     16,630,000    16,630,000

Common share equivalents of
outstanding stock options............             --          1,000             --        19,000
                                          ----------     -----------    ----------    ----------
Weighted average number of common
shares assuming dilution.............     16,630,000     16,631,000     16,630,000    16,649,000
                                          ==========     ==========     ==========    ==========
</TABLE>

     Stock options,  which would be antidilutive  (2,747,000 and 2,929,000 as of
June 30, 2002 and 2001, respectively),  have been excluded from the calculations
of diluted shares outstanding and diluted earnings per share.

NOTE 3 - LINES OF CREDIT

     On May 31, 2000, the Company and PNC Bank, N.A. (the "Bank") entered into a
three-year  revolving  credit  facility.  Such credit facility 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 Euro Rate plus
1.75% to 2.5%  based  upon the  Company's  ratio of debt to  EBITDA.  The credit
facility is  collateralized  by substantially all of the assets of the Company's
United States based  operations.  The maximum borrowing  availability  under the
line of credit is based  upon a  percentage  of  eligible  billed  and  unbilled
accounts  receivable,  as  defined.  As  of  June  30,  2002,  the  Company  had
outstanding  borrowings  under the credit  facility of  $4,040,000.  The Company
estimates undrawn  availability under the credit facility to be $8,375,000 as of
June 30, 2002. As of December 31, 2001, the Company had  outstanding  borrowings
under the credit facility of $4,066,000.



                                     - 6 -
<PAGE>

NOTE 3 - LINES OF CREDIT (CONTINUED)

     The credit facility provides for the following financial  covenants,  among
other things,  (1) the Company must maintain  consolidated net worth, as defined
("consolidated   net  worth")  of  (a)  not  less  than  95%  of  the  Company's
consolidated  net worth of the immediately  preceding fiscal year-end as at each
such  fiscal  quarter  after  December  31,  2000;  and (b) at least 105% of the
Company's 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  $5,000,000  and  (2)  the  Company  must  maintain
unconsolidated  net worth,  as defined  ("unconsolidated  net worth") of (a) not
less  than 95% of the  Company's  unconsolidated  net  worth of the  immediately
preceding  fiscal  year-end as at each such fiscal  quarter  after  December 31,
2000; and (b) at least 105% of the Company's  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 $5,000,000. Additionally,
the credit facility  contains material adverse change clauses with regard to the
financial condition of the assets, liabilities and operations of the Company.

     As of  December  31,  2001,  the  Company  was not in  compliance  with the
consolidated  net worth and  unconsolidated  net worth financial  covenants.  In
March  2002,  the  Company  finalized  with the Bank the  terms of a waiver  and
amendment  to the  credit  agreement.  The  terms of the  waiver  and  amendment
included,  among  other  things,  (1) a waiver of the  covenant  defaults  as of
December 31, 2001, (2) a modification to the financial covenants to require that
consolidated net worth and  unconsolidated  net worth as of December 31, 2002 be
not less than 102% of  consolidated  net worth  and  unconsolidated  net  worth,
respectively,  as of December 31, 2001, (3) a modification  to the  consolidated
net worth and  unconsolidated  net worth  covenants  to exclude  any  changes to
consolidated  net  worth  and   unconsolidated  net  worth  resulting  from  the
write-down or write-off of up to $10,833,000 of the note due from SeraNova,  and
(4) a new financial covenant requiring that the Company generate earnings before
interest, taxes, depreciation and amortization ("EBITDA") of at least 90% of the
prior year's EBITDA.

     As a result of the  charges  incurred  for the  proxy  contest  during  the
quarter ended June 30, 2002,  the Company was not in compliance  with the EBITDA
covenant as of June 30, 2002. The Company is currently negotiating with the Bank
and expects to receive a waiver of the covenant  default existing as of June 30,
2002.  There can be no  assurance,  however,  that the  Company  will be able to
obtain a waiver and appropriate  amendment to the agreement on terms  acceptable
to the Company.

     Interest expense on debt and obligations under capital leases  approximated
$201,000  and  $430,000  for the six  months  ended  June  30,  2002  and  2001,
respectively.




                                     - 7 -
<PAGE>

NOTE 4 - NOTE RECEIVABLE - SERANOVA

     On May 31, 2000, SeraNova,  Inc.  ("SeraNova") and the Company formalized a
$15,100,000 unsecured promissory note (the "Note") relating to net borrowings by
SeraNova  from the Company  through  such date.  The Note bears  interest at the
prime rate plus 1/2%.  The  Company  has  recorded  total  accrued  interest  of
$940,000 as of June 30, 2002 and December 31, 2001. The Company has not recorded
any accrued  interest on the balance of the Note subsequent to the maturity date
of July 31, 2001. A payment of  $3,000,000  was made on September  29, 2000 with
the balance being due on July 31, 2001.

     In September  2000,  SeraNova  consummated  an $8,000,000  preferred  stock
financing  with  two  institutional   investors.   According  to  the  mandatory
prepayment provisions of the Note, SeraNova was required to make a prepayment of
$3,000,000  on the Note as a result of the stock  financing.  Subsequently,  the
Company finalized, with SeraNova, the terms of an agreement to waive, subject to
certain conditions, certain of the mandatory prepayment obligations arising as a
result of the financing.  The terms of the new agreement  included,  among other
things,  that  SeraNova  pay the  Company (i)  $500,000  upon  execution  of the
agreement;  (ii)  $500,000 on or before each of January 31,  2001,  February 28,
2001,  March 31, 2001, April 30, 2001 and May 31, 2001; and (iii) $400,000 on or
before  December 15, 2000 to be applied either as (a) an advance payment towards
a  contemplated  services  arrangement  for  hosting  services to be provided to
SeraNova by Company (the "Hosting Agreement");  or (b) in the event that no such
Hosting  Agreement is executed on or before  December 15,  2000,  an  additional
advance prepayment toward the principal of the Note.

     The Company  received from SeraNova the $500,000  payment that was due upon
execution of the agreement and a $400,000 payment in December 2000 as an advance
payment  towards  the  principal  of the Note  since no  Hosting  Agreement  was
executed before December 15, 2000.

     In 2001, the Company received principal  payments totaling  $2,060,000 from
SeraNova.  However,  SeraNova  failed to make final  payment of all  amounts due
under the Note to the  Company  as of July 31,  2001.  On August 16,  2001,  the
Company filed a complaint against SeraNova and Silverline  Technologies  Limited
("Silverline"), which acquired SeraNova in March 2001. As of such date, SeraNova
was  obligated  to pay to the Company  the  remaining  principal  (approximately
$9,140,000) and accrued interest  (approximately  $940,000),  or an aggregate of
$10,080,000.  SeraNova  then  filed  a  counterclaim  against  the  Company  for
unspecified  damages as a set-off against the Company's  claims.  In response to
the Company's request for a statement of damages, SeraNova stated that it was in
the process of calculating its damages,  but for informational  purposes claimed
compensatory  damages in excess of $5,500,000 and punitive damages in the amount
of $10,000,000.



                                     - 8 -
<PAGE>

NOTE 4 - NOTE RECEIVABLE - SERANOVA (CONTINUED)

     In addition,  during late 2001,  SeraNova failed to pay certain outstanding
lease obligations to the Company's landlords. Accordingly, on March 4, 2002, the
Company filed an arbitration  demand with the American  Arbitration  Association
against  SeraNova,  Silverline and Silverline  Technologies,  Inc. (see Part II,
Item 1, Legal  Proceedings).  The demand for arbitration,  which sought damages,
alleged  among  other  things  that  SeraNova,   Silverline   and/or  Silverline
Technologies,  Inc. failed to pay outstanding lease obligations to the Company's
landlords and to reimburse the Company for all rent payments made by the Company
on their behalf.  An  arbitration  hearing was held on June 25 and June 28, 2002
seeking $525,000 in outstanding lease  obligations.  On August 9, 2002, an award
was  issued in the  amount  of  $616,905.26  (including  attorney's  fees)  plus
reimbursement  of  administrative  fees,  in favor of the  Company  and  against
SeraNova,  Silverline  and  Silverline  Technologies,  Inc.  (collectively,  the
"SeraNova  Group")  jointly and  severally.  The award also includes a provision
that jurisdiction is retained by the tribunal, and the Company may seek from the
tribunal any additional rents and other fees due and owing on a quarterly basis.
On August 12, 2002, an action was commenced in the Superior  Court of New Jersey
to confirm the award,  seek a writ of  execution  against the  SeraNova  Group's
assets,  restrain the disposal of the SeraNova  Group's  assets,  and enjoin the
distribution  of proceeds  from any sale of the  SeraNova  Group's  assets among
other emergency relief. On August 13, 2002, the Court,  among other things,  (i)
confirmed  the award and  entered  judgment  against  SeraNova  in the amount of
$616,905.26 plus $7,100 in administrative  fees, (ii) authorized the issuance of
a writ of execution against SeraNova's bank accounts and other assets to satisfy
the judgment,  (iii) restrained the SeraNova Group from disposing of any assets,
including  funds in their bank accounts,  (iv)  authorized the attachment of all
net proceeds from the sale of any assets of the SeraNova  Group up to the amount
of the  arbitration  award  to be held in an  interest  bearing  escrow  account
pending further court order and (v) scheduled a hearing for September 3, 2002 in
order for the SeraNova  Group to show cause why the relief  granted by the Court
to the Company  against  SeraNova  should not be applied to the  SeraNova  Group
jointly and  severally.  The Company  does not believe  that the outcome of this
claim will have a materially adverse effect on the Company's business, financial
condition or results of operations.

     Although the Company has aggressively  pursued its various legal options to
obtain  payment  from the  SeraNova  Group on the  Note  and  outstanding  lease
obligations, the Company believes that the current liquidity issues plaguing the
SeraNova Group requires a reassessment of the realizability of these outstanding
amounts.  During this time, the Company has also actively engaged in discussions
with management of the SeraNova  Group,  with the objective of seeking an out of
court  resolution to all  outstanding  matters  involving the Note,  and certain
other receivables and lease  obligations.  Although no final resolution has been
reached, the Company believes that the substance of these discussions provides a
basis for  determining the  approximate  realizable  value of the Note and other
receivables,  as well as an estimate of the costs required to exit certain lease
obligations.  Accordingly, the Company recorded the following charges during the
quarter ended June 30, 2002:


                                     - 9 -
<PAGE>

NOTE 4 - NOTE RECEIVABLE - SERANOVA (CONTINUED)

<TABLE>
<CAPTION>
                                          WRITE-DOWN      WRITE-OFF       ASSUMPTION
                                            OF NOTE        OF OTHER       OF CERTAIN
                                          RECEIVABLE     RECEIVABLES -       LEASE           OTHER
                                          - SERANOVA       SERANOVA       OBLIGATIONS       CHARGES          TOTAL
                                        -----------------------------------------------------------------------------

<S>                                     <C>             <C>              <C>             <C>             <C>
Charges to operations during 2002...    $   5,140,000   $  1,257,000     $  1,501,000    $    464,000    $  8,362,000
Costs paid during 2002..............               --             --               --        (118,000)       (118,000)
Non-cash items......................       (5,140,000)    (1,257,000)              --              --      (6,397,000)
                                        -------------   ------------     ------------    ------------    ------------
Accrued costs as of June 30, 2002...    $          --   $         --     $  1,501,000    $    346,000    $  1,847,000
                                        =============   ============     ============    ============    ============
</TABLE>

     The Company  recorded a $5,140,000  charge to write-down the carrying value
of the Note to  $4,000,000.  The Company also  recorded a  $1,257,000  charge to
write-off  the  carrying  value of the other  SeraNova  receivables  (primarily,
accrued  interest  on the Note  and a  receivable  for a  system  implementation
project).  Additionally,  the Company  recorded a liability  of  $1,501,000  for
certain  lease exit costs,  $1,082,000  of which is included in other  long-term
liabilities,  as of June 30, 2002. Such liability represents primarily obligated
space costs for which the Company  currently  believes it cannot use or sublease
and the  differential  between  certain  Company lease  obligations and sublease
amounts to be received.

     If the Company were to collect less than $4,000,000 on the Note recorded as
of June 30,  2002,  or incur  additional  obligations  or  costs,  the  SeraNova
receivable impairment and/or charges would be increased in future periods.

NOTE 5 - RESTRUCTURING AND OTHER SPECIAL CHARGES

     In connection with the Company's plan to reduce costs and improve operating
efficiencies,   the  Company   incurred  a  charge  of  $5,628,000   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 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.

     During the quarter ended  December 31, 2001, in an effort to further refine
the Company's  business  strategy around its core competencies and to refocus on
more active markets, the Company recorded a $13,261,000  restructuring and other
special charges  provision.  The charges,  which were mainly non-cash in nature,
were related primarily to the ASP business in the United States, the termination
of an agreement to build and operate a technology development and support center
in  Puerto  Rico,  and to the  restructuring  and  downsizing  of the  Company's
operations in the United Kingdom.


                                     - 10 -
<PAGE>

NOTE 5 - RESTRUCTURING AND OTHER SPECIAL CHARGES (CONTINUED)

     Activity in accrued costs for restructuring and other special charges is as
follows:

<TABLE>
<CAPTION>
                                                 SEVERANCE AND        ASSET
                                                 RELATED COSTS     IMPAIRMENTS        EXIT COSTS          TOTAL
                                                -------------------------------------------------------------------

<S>                                              <C>               <C>               <C>              <C>
Charges to operations during 1999.........       $   5,027,000     $         --      $    601,000     $  5,628,000
Costs paid during 1999....................          (4,162,000)              --          (517,000)      (4,679,000)
                                                 -------------     ------------      ------------     ------------
Accrued costs as of December 31, 1999.....             865,000               --            84,000          949,000

Costs paid during 2000....................            (608,000)              --                --         (608,000)
                                                 -------------     ------------      ------------     ------------
Accrued costs as of December 31, 2000.....             257,000               --            84,000          341,000

Charges to operations during 2001.........             530,000       10,999,000         1,732,000       13,261,000
Costs paid during 2001....................            (402,000)              --          (172,000)        (574,000)
Non-cash utilization during 2001..........                  --      (10,999,000)       (1,177,000)     (12,176,000)
                                                 -------------      -----------      ------------     ------------
Accrued costs as of December 31, 2001.....             385,000               --           467,000          852,000

Costs paid during 2002....................            (218,000)              --          (236,000)        (454,000)
                                                 -------------     ------------      ------------     ------------
Accrued costs as of June 30, 2002.........       $     167,000     $         --      $    231,000     $    398,000
                                                 =============     ============      ============     ============
</TABLE>

     The Company expects to pay out the remaining costs above within the next 12
months.

NOTE 6 - SEGMENT DATA AND GEOGRAPHIC INFORMATION

     The Company operates in one industry,  information technology solutions and
services.  The  Company  has  four  reportable  operating  segments,  which  are
organized and managed on a geographical basis, as follows:

     o    United  States  ("US") - the  largest  segment  of the  Company,  with
          operations  in  the  United  States  and  Puerto  Rico.  Includes  the
          operations  of the Company's US  subsidiary,  Empower,  Inc.,  and all
          corporate functions and activities.  The US and corporate headquarters
          are located in Edison, New Jersey;

     o    Asia-Pacific  ("APAC") - includes  the  operations  of the  Company in
          Australia, Hong Kong, Indonesia, Japan, New Zealand and Singapore. The
          APAC headquarters are located in Wellington, New Zealand;

     o    Europe - includes the operations of the Company in Denmark, Sweden and
          the United Kingdom. The European  headquarters are located in Norfolk,
          United Kingdom; and

     o    India - includes the  operations  of the Company in India and Jamaica.
          The Indian headquarters are located in Hyderabad, India.



                                     - 11 -
<PAGE>

NOTE 6 - SEGMENT DATA AND GEOGRAPHIC INFORMATION (CONTINUED)

     Each of the  operating  segments  has a Managing  Director,  or  equivalent
position,   which  reports  directly  to  the  Chief  Executive  Officer  (CEO).
Currently,  the CEO is fulfilling the  requirements  of this position in the US.
The CEO has been identified as the Chief Operating Decision Maker (CODM) because
he has final  authority  over  resource  allocation  decisions  and  performance
assessment.  The CODM regularly receives certain discrete financial  information
about the  geographical  operating  segments,  including  primarily  revenue and
operating income, to evaluate segment performance.

     Accordingly,  the Company's  operating  results and financial  position are
presented  in the  following  geographic  segments  for the three months and six
months ended June 30, 2002 and 2001.

<TABLE>
<CAPTION>
                                    UNITED STATES    ASIA-PACIFIC        EUROPE            INDIA              TOTAL
                                    -------------    ------------        ------            -----              -----
<S>                                 <C>              <C>              <C>                <C>              <C>
THREE MONTHS ENDED
------------------
JUNE 30, 2002
-------------
Revenue.......................      $ 19,269,000     $  2,220,000     $  1,444,000       $3,543,000       $  26,476,000
Depreciation & amortization...           450,000           56,000           58,000          112,000             676,000(1)
Operating income (loss).......        (8,150,000)        (640,000)        (352,000)         862,000          (8,280,000)(2)
Total assets..................        28,463,000        4,276,000        1,738,000        5,744,000          40,221,000

THREE MONTHS ENDED
------------------
JUNE 30, 2001
-------------
Revenue.......................      $ 18,982,000     $  3,406,000     $  2,745,000       $3,601,000       $  28,734,000
Depreciation & amortization...           536,000           85,000          182,000          114,000             917,000(3)
Operating income (loss).......            30,000          375,000       (1,173,000)       1,177,000             409,000
Total assets..................        45,799,000        6,282,000        7,663,000        4,311,000          64,055,000

SIX MONTHS ENDED
----------------
JUNE 30, 2002
-------------
Revenue.......................      $ 36,738,000     $  4,721,000     $  3,029,000       $6,597,000       $  51,085,000
Depreciation & amortization...           924,000           83,000          115,000          261,000           1,383,000(1)
Operating income (loss).......        (8,035,000)        (839,000)        (541,000)       1,345,000          (8,070,000)(2)

SIX MONTHS ENDED
----------------
JUNE 30, 2001
-------------
Revenue.......................      $ 38,977,000     $  7,109,000     $  6,632,000       $6,805,000       $  59,523,000
Depreciation & amortization...         1,074,000          169,000          365,000          254,000           1,862,000(3)
Operating income (loss).......            20,000          106,000       (1,906,000)       2,291,000             511,000
</TABLE>

-------------
     (1)  Excludes  $182,000  and  $443,000  of  depreciation  and  amortization
          included  in cost of sales for the three  months and six months  ended
          June 30, 2002.
     (2)  Includes  $8.4  million of SeraNova  receivable  impairment  and other
          charges and $464,000 of proxy contest charges for the three months and
          six months ended June 30, 2002.
     (3)  Excludes  $215,000  and  $408,000  of  depreciation  and  amortization
          included  in cost of sales for the three  months and six months  ended
          June 30, 2001.

     Included  above  are  application   management  and  support   revenues  of
$6,529,000  and  $6,107,000  for the three  months ended June 30, 2002 and 2001,
respectively. The application management and support revenues for the six months
ended June 30,  2002 and 2001 are  $12,946,000  and  $11,210,000,  respectively.
Other information related to the application  management and support business is
not  maintained  and the  Company  determined  that it would be  impractical  to
calculate such data.


                                     - 12 -
<PAGE>

NOTE 7 - NEW ACCOUNTING PRONOUNCEMENT

     In June 2002, the Financial  Accounting Standards Board (the "FASB") issued
SFAS  No.  146,   "Accounting  for  Costs   Associated  with  Exit  or  Disposal
Activities." SFAS No. 146 addresses financial accounting and reporting for costs
associated with exit or disposal  activities and nullifies  Emerging Issues Task
Force  (EITF)  Issue No.  94-3,  "Liability  Recognition  for  Certain  Employee
Termination  Benefits  and Other  Costs to Exit an Activity  (including  Certain
Costs Incurred in a Restructuring)." The Company is evaluating the impact of the
adoption of SFAS No. 146,  which is  effective  for the Company as of January 1,
2003,  but does not  believe  it will have a  material  impact on the  Company's
financial position or results of operations.



                                     - 13 -
<PAGE>

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

OVERVIEW

     The  Company  provides  a  wide  range  of   high-quality,   cost-effective
information  technology  solutions  and services.  These  services and solutions
include the development, integration, implementation,  management and support of
enterprise,  e-commerce  and  m-commerce  software  applications.  The Company's
onsite/offshore    delivery   model,    comprehensive   suite   of   tools   and
industry-specific  solutions provide customers with a faster  time-to-market and
lower total cost of ownership.

     In October 1987, the Company first began to provide systems integration and
custom software development services to customers. In 1994, the Company began to
diversify its customer  base by expanding  the scope of its systems  integration
and custom development  services to include Enterprise Resource Planning ("ERP")
software.  ERP software products are pre-packaged  solutions for a wide-range of
business  areas,  including  financial  information,   manufacturing  and  human
resources.  For  prospective  customers,  ERP products are an alternative to the
custom design and development of their own  applications.  Although ERP products
are  pre-packaged  solutions,  there is a significant  amount of technical  work
involved  in  implementing  them  and  tailoring  their  use  for  a  particular
customer's needs.

     Throughout  the  mid-to-late  1990s,  the  Company  grew  significantly  by
capitalizing  on  the  business   opportunity  to  provide   implementation  and
customization services work to the expanding ERP market. The Company first began
to provide  these  technical  services to  customers  implementing  SAP software
before  expanding  its service  offerings to include ERP  products  developed by
Oracle in 1995 and PeopleSoft in 1997.

     In late 1999,  the Company  made the  strategic  decision  to leverage  its
traditional  application  integration  and consulting  experience and reposition
Intelligroup for future growth by focusing on the emerging  Application  Service
Provider  ("ASP")  market.  At the same time,  the  Company  made the  strategic
decision  to  spin-off  its  Internet  services  business  to its  shareholders.
Accordingly,   on  January  1,  2000,  the  Company   transferred  its  Internet
applications  services and management  consulting  businesses to SeraNova,  Inc.
("SeraNova"),  a wholly owned subsidiary of the Company on such date. On July 5,
2000, the Company  distributed all of the outstanding shares of the common stock
of  SeraNova  then held by the  Company to  holders  of record of the  Company's
common stock as of the close of business on May 12, 2000 (or to their subsequent
transferees) in accordance  with the terms of a Distribution  Agreement dated as
of January 1, 2000 between the Company and SeraNova.

     During the second half of 2000,  finding  that the market for ASP  services
had not  developed  and grown as  projected  by  market  analysts,  the  Company
significantly reduced its investment in the ASP business model. Expenditures for
marketing and direct selling initiatives were significantly  decreased,  as were
the infrastructure and personnel that supported the Company's ASP services.  The
Company  renewed  it  focus  and  efforts  on  pursuing   shorter-term   success
opportunities of implementing and enhancing  application solutions based on SAP,
Oracle and PeopleSoft products.


                                     - 14 -
<PAGE>

     At the same time, the Company redirected some of its ASP infrastructure and
personnel towards Application  Management  Services.  Additionally,  the Company
introduced  Power Up Services.  Finally,  in 2001, the Company  developed Pharma
Express  and  Contractor  Express.  Pharma  Express,  a  solution  designed  for
small-to-medium   sized  life   sciences   companies,   improves   manufacturing
efficiencies and helps control the total cost of production.  Contractor Express
assists   companies  in  improving   operational   efficiency  and   controlling
manufacturing project schedules.

     The  majority  of the  Company's  revenues  are derived  from  professional
services rendered to customers.  Revenue is typically recognized as services are
performed.  The Company's services range from providing  customers with a single
consultant  to  multi-personnel  full-scale  projects.  Although the Company has
contracts with many of its customers to provide its services,  in general,  such
contracts are terminable upon relatively  short notice,  typically not more than
30 days. There can be no assurance that the Company's customers will continue to
enter into  contracts  with the Company or that existing  contracts  will not be
terminated.  The  Company  provides  its  services  either  directly to end-user
organizations,  or  as a  member  of a  consulting  team  assembled  by  another
information  technology  consulting firm. Where contractual  provisions  permit,
customers also are billed for  reimbursement of expenses incurred by the Company
on the customers' behalf.

     The Company has provided  services on certain  projects in which it, at the
request of the  clients,  offered a fixed price for its  services.  For the year
ended  December  31, 2001,  revenues  derived  from  projects  under fixed price
contracts  represented  approximately 17% of the Company's total revenue.  Fixed
price  contracts,  in the  aggregate,  represented  24% of the  Company's  total
revenue during the six months ended June 30, 2002. No single fixed price project
was in excess of 10% of revenue  during 2001 or during the six months ended June
30, 2002.  The Company  believes  that,  as it pursues its strategy of providing
Application  Management  Services to customers,  it will continue to offer fixed
price  projects.  The Company  believes  that there are certain risks related to
fixed  price  arrangements  and thus  prices  such  arrangements  to reflect the
associated  risk.  There can be no  assurance  that the Company  will be able to
complete such projects within the fixed price timeframes. The failure to perform
within  such  fixed  price  contracts,  if entered  into,  could have a material
adverse  effect on the Company's  business,  financial  condition and results of
operations.

     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, 2002 and the year ended December 31,
2001,  the  Company's ten largest  customers  accounted  for, in the  aggregate,
approximately  39% and 33% of revenue,  respectively.  For the six months  ended
June 30, 2002, one customer accounted for approximately 10% of revenue.  For the
year ended December 31, 2001, no single customer  accounted for more than 10% of
revenue.  For the six months ended June 30, 2002 and the year ended December 31,
2001,  36% and 42%,  respectively,  of the  Company's  revenue was  generated by
serving  as  a  member  of  consulting  teams  assembled  by  other  information
technology  consulting  firms.  There can be no assurance that such  information
technology consulting firms will continue to engage the Company in the future at
current levels of retention, if at all.


                                     - 15 -
<PAGE>

     During the six months  ended June 30, 2002 and the year ended  December 31,
2001,  approximately 66% and 69%,  respectively,  of the Company's total revenue
was  derived  from  projects  in  which  the  Company   implemented,   extended,
maintained,  managed or supported  software developed by SAP. For the six months
ended June 30, 2002 and the year ended December 31, 2001,  approximately 20% and
17%,  respectively,  of the Company's total revenue was derived from projects in
which the  Company  implemented,  extended,  maintained,  managed  or  supported
software developed by PeopleSoft. For the six months ended June 30, 2002 and the
year ended December 31, 2001,  approximately  8% and 9%, of the Company's  total
revenue was derived from  projects in which the Company  implemented,  extended,
maintained, managed or supported software developed by Oracle.

     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  currently  maintains its  headquarters in Edison (New Jersey),
and branch  offices in Atlanta  (Georgia)  and  Foster  City  (California).  The
Company  also  maintains  offices  in Europe  (Denmark,  Sweden  and the  United
Kingdom), and Asia-Pacific (Australia,  Hong Kong, India, Indonesia,  Japan, New
Zealand,  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.

CRITICAL ACCOUNTING POLICIES, ESTIMATES AND RISKS

     The  Company's  critical  accounting  policies  are set forth in its Annual
Report on Form 10-K for the year  ended  December  31,  2001.  There has been no
change,  update  or  revision  to the  Company's  critical  accounting  policies
subsequent to the filing of the Company's  Form 10-K for the year ended December
31, 2001.

FORWARD-LOOKING STATEMENTS

     This Form 10-Q contains  forward-looking  statements  within the meaning of
Section 21E of the  Securities  Exchange  Act of 1934,  as  amended,  including,
without limitation,  statements  regarding the Company's intention to shift more
of its focus  towards  the  management  and  support of  customers'  enterprise,
e-commerce and m-commerce applications.  Such forward-looking statements include
risks and uncertainties, including, but not limited to:

     o    the continued  uncertainty  associated  with the slowdown in economies
          worldwide, including its impact on IT spending habits by customers;

     o    the  continued  uncertainty  of the  outsourcing  market and  revenues
          derived from anticipated application management and support business;


                                     - 16 -
<PAGE>

     o    the failure to maintain the minimum bid price of $1.00 per share for a
          period of 30  consecutive  business days or other criteria as required
          for continued listing by the Nasdaq National Market;

     o    the  substantial  variability  of the  Company's  quarterly  operating
          results  caused by a variety of factors,  many of which are not within
          the Company's control, including (a) patterns of software and hardware
          capital spending by customers,  (b) information technology outsourcing
          trends,  (c) the timing,  size and stage of  projects,  (d) timing and
          impact of acquisitions,  (e) new service  introductions by the Company
          or its competitors and the timing of new product  introductions by the
          Company's  ERP  partners,  (f)  levels  of market  acceptance  for the
          Company's services, (g) general economic conditions, (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 business  effectively,  which will
          require  the  Company (a) to continue  developing  and  improving  its
          operational,  financial  and other  internal  systems,  as well as its
          business  development  capabilities,  (b) to attract,  train,  retain,
          motivate and manage its  employees,  (c) to continue to maintain  high
          rates of employee  utilization  at profitable  billing  rates,  (d) to
          successfully  integrate the personnel and  businesses  acquired by the
          Company, and (e) to maintain project quality, particularly if the size
          and scope of the Company's projects increase;

     o    the Company's limited operating history within the outsourcing line of
          business;

     o    the Company's  reliance on continued  relationships  with SAP America,
          Oracle and PeopleSoft, and the Company's present partnership status;

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

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

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

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

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

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

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


                                     - 17 -
<PAGE>

          outstanding  liability of SeraNova to the Company under the promissory
          note dated May 31, 2000, as amended; and

     o    in  addition,  in March 2001,  SeraNova  and  Silverline  Technologies
          Limited  ("Silverline")  consummated  the  acquisition  of SeraNova by
          Silverline.   SeraNova's   management   has   represented   that  such
          acquisition  was  not  contemplated  at the  time of the  spin-off  of
          SeraNova  by the  Company,  and  accordingly  should  not  impact  the
          tax-free  nature of the  spin-off.  Should the spin-off be  ultimately
          construed  to be  taxable,  there is a risk  that if  SeraNova  and/or
          Silverline  are unable or unwilling to pay the resultant tax liability
          pursuant  to  SeraNova's  indemnification  obligations  under  its Tax
          Sharing  Agreement  with  the  Company,  the  Company  would  bear the
          liability to pay such resultant tax liability.

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

RESULTS OF OPERATIONS - CONSOLIDATED

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

<TABLE>
<CAPTION>
                                                                    PERCENTAGE OF REVENUE
                                                ---------------------------------------------------------------
                                                THREE MONTHS ENDED JUNE 30,           SIX MONTHS ENDED JUNE 30,
                                                ---------------------------           -------------------------
                                                 2002                2001              2002               2001
                                                 ----                ----              ----               ----

<S>                                              <C>                 <C>               <C>                <C>
Revenue....................................      100.0%              100.0%            100.0%             100.0%
Cost of sales..............................       68.8                67.3              69.3               68.8
                                                ------              ------            ------             ------
     Gross profit..........................       31.2                32.7              30.7               31.2
Selling, general and administrative
   expenses................................       26.6                28.0              26.5               27.2
Depreciation and amortization expenses.....        2.5                 3.2               2.7                3.1
SeraNova settlement and related charges....       31.6                  --              16.4                 --
Proxy contest charges......................        1.8                  --               0.9                 --
                                                ------              ------            ------             ------
     Total operating expenses..............       62.5                31.2              46.5               30.3
                                                ------              ------            ------             ------
     Operating (loss) income...............      (31.3)                1.5             (15.8)               0.9
Other expense, net.........................       (0.2)               (0.5)             (0.3)              (0.0)
                                                ------              ------            ------             ------
(Loss) income before provision for
     income taxes..........................      (31.5)                1.0             (16.1)               0.9
Provision for income taxes.................        0.8                 0.4               0.6                0.3
                                                ------              ------            ------             ------
Net (loss) income..........................      (32.3)%               0.6%            (16.7)%              0.6%
                                                ======              ======            ======             ======
</TABLE>

     Three  Months  Ended June 30, 2002  Compared to Three Months Ended June 30,
2001

     The following  discussion  compares the consolidated  results for the three
months ended June 30, 2002 and the three months ended June 30, 2001.

     Revenue.  Total  revenue  decreased by 7.9%,  or $2.2  million,  from $28.7
million for the three months ended June 30, 2001, to $26.5 million for the three
months ended June 30, 2002.  This  decrease  was  attributable  primarily to the
continued weakness in the global economy and


                                     - 18 -
<PAGE>

the resulting impact on the IT services market. Throughout the year, the effects
of the  uncertain  and  weakened  economic  climate  impacted  the  Company,  as
customers delayed and/or decreased the scope of IT projects,  and as the Company
experienced  competitive  pricing  pressures  in  the  provision  of  consulting
services.

     In November 2001, the Emerging  Issues Task Force ("EITF") of the Financial
Accounting Standards Board ("FASB") concluded that reimbursable  "out-of-pocket"
expenses should be classified as revenue,  and correspondingly cost of services,
in the statement of operations.  Most service  companies,  whose employees incur
incidental expenses such as airfare,  mileage, hotel and out-of-town meals while
working on behalf of customers, previously reported reimbursable "out-of-pocket"
expenses on a "net" basis in the statement of operations. Accordingly, effective
January 1, 2002,  the Company has reported  gross  reimbursable  "out-of-pocket"
expenses  incurred  as both  revenue  and  cost of  sales  in the  statement  of
operations. The Company has also reclassified prior period financial information
for presentation consistent with the new EITF accounting guidance. The impact of
this  reclassification  was an  increase  to both  revenue  and cost of sales of
$542,000  and  $707,000  for the  three  months  ended  June 30,  2002 and 2001,
respectively.

     Gross profit.  The Company's cost of sales  primarily  includes the cost of
salaries to consultants  and related  employee  benefits and payroll taxes.  The
Company's cost of sales  decreased by 5.9%, or $1.1 million,  from $19.3 million
for the three months ended June 30, 2001,  to $18.2 million for the three months
ended June 30, 2002.  The  Company's  gross profit  decreased by 12.0%,  or $1.1
million,  from $9.4 million for the three  months  ended June 30, 2001,  to $8.3
million for the three months ended June 30, 2002. This decrease was attributable
primarily  to lower  revenues.  Gross  margin  decreased  to 31.2% for the three
months ended June 30, 2002, from 32.7% for the three months ended June 30, 2001.
The decrease in gross margin results from an increase in non-billable consultant
time and other related costs, primarily in Europe and Asia Pacific.

     Selling,  general  and  administrative   expenses.   Selling,  general  and
administrative  expenses  primarily  consist  of  administrative  salaries,  and
related benefits costs,  occupancy costs, sales person compensation,  travel and
entertainment  and  professional  fees.  Selling,   general  and  administrative
expenses  decreased  by 12.6% or $1.0  million,  to $7.0  million  for the three
months  ended June 30,  2002,  from $8.1 million for the three months ended June
30,  2001,  and  decreased  as a  percentage  of revenue  to 26.6%  from  28.0%,
respectively.  The decrease in selling,  general and administrative expenses, in
absolute  dollars and as a percentage of revenue,  was related  primarily to the
further containment of discretionary spending throughout the Company, as well as
the downsizing initiative completed in Europe during the fourth quarter 2001.

     Depreciation  and  amortization.  Depreciation  and  amortization  expenses
decreased  26.3% to $676,000 for the three months ended June 30, 2002,  compared
to  $917,000  for the three  months  ended June 30,  2001.  The  decrease is due
primarily to the amortization  and  depreciation  associated with the intangible
assets and  long-lived  assets that were  written-down  as part of the Company's
restructuring  and other  special  charges  provision  during the quarter  ended
December 31, 2001.


                                     - 19 -
<PAGE>

     SeraNova receivable  impairment and other charges.  During the three months
ended June 30, 2002, the Company recorded  approximately $8.4 million in special
charges associated with the note receivable from SeraNova, Inc. ("SeraNova") and
certain other related issues.  Although the Company has aggressively pursued its
various legal options to obtain payment from SeraNova,  Silverline  Technologies
Inc. and Silverline Technologies Ltd. (collectively the "SeraNova Group") on the
Note and outstanding  lease  obligations,  the Company believes that the current
liquidity  issues  plaguing the SeraNova Group  requires a  reassessment  of the
realizability of these  outstanding  amounts.  During this time, the Company has
also actively engaged in discussions with management of the SeraNova Group, with
the objective of seeking an out of court  resolution to all outstanding  matters
involving  the Note,  and  certain  other  receivables  and  lease  obligations.
Although no final  resolution  has been reached,  the Company  believes that the
substance of these discussions  provides a basis for determining the approximate
realizable  value of the Note and other  receivables,  as well as an estimate of
the costs required to exit certain lease obligations.  Accordingly,  the Company
has recognized an impairment charge in the amount of $5.1 million related to the
note. In addition,  the Company  recorded a write-off of $1.3 million related to
interest on the note and other  receivables  due from the  SeraNova  Group.  The
Company  also  recorded  $1.5 million in costs  required to exit  certain  lease
obligations related to the SeraNova Group.

     Proxy  contest  charges.  During the three months ended June 30, 2002,  the
Company  incurred  approximately  $464,000 in charges  associated with the proxy
contest.  The  charges  resulted  directly  from a  shareholder  of the  Company
launching a hostile and costly proxy  contest to take  control of the  Company's
Board of Directors.  The charges included legal fees of approximately  $324,000,
proxy solicitation services of approximately $100,000, and printing, mailing and
other costs of approximately $40,000.

     Other expense,  net. The Company  earned $26,000 in interest  income during
the three  months ended June 30, 2002,  compared  with $75,000  during the three
months ended June 30, 2001. The decrease in interest income is related primarily
to the  Company  not  recording  accrued  interest  on the  balance  of the note
receivable with SeraNova subsequent to the maturity date of the note of July 31,
2001. Such note receivable is currently in default and the Company has commenced
litigation  against  SeraNova  (see Part II,  Item 1,  Legal  Proceedings).  The
Company  incurred  $96,000 and  $207,000 in  interest  expense  during the three
months  ended  June 30,  2002  and  2001,  respectively,  related  primarily  to
borrowings  under its line of credit.  Borrowings  under the line of credit were
used to fund operating activities. The decrease in interest expense results from
a combination of lower outstanding borrowings under the line of credit and lower
interest rates charged on outstanding  borrowings  during the three months ended
June 30, 2002.

     Provision for income taxes. The Company's effective rate was 2.5% and 35.4%
for the three  months ended June 30, 2002 and 2001,  respectively.  The tax rate
for the three  months ended June 30, 2002 and 2001,  results from the  valuation
allowances  provided for the losses  generated in the United States,  Europe and
Asia-Pacific.  The  Company's net deferred tax asset as of June 30, 2002 relates
primarily to the US operations.  Based on anticipated  profitability in the near
future,  management  believes it is more likely than not,  that the deferred tax
asset of $1.7 million will be realized.


                                     - 20 -
<PAGE>

     In  1996,  the  Company  elected  a five  year tax  holiday  in  India,  in
accordance with a local tax incentive  program whereby no income tax will be due
in such period.  Such tax holiday was extended an additional five years in 1999.
Effective  April 1, 2000 pursuant to changes  introduced  by the Indian  Finance
Act, 2000,  the tax holiday  previously  granted is no longer  available and has
been  replaced  in the form of a tax  deduction  incentive.  The  impact of this
change is not expected to be material to the consolidated  financial  statements
of the  Company.  For the three  months  ended June 30,  2002 and 2001,  the tax
holiday and new tax deduction  favorably  impacted the  Company's  effective tax
rate.

     The Company's Indian  subsidiary has received an assessment from the Indian
taxing  authority  denying tax  exemptions  claimed for certain  revenue  earned
during the fiscal years ended March 31, 1998 and March 31, 1999.  The assessment
is  for  25  million  rupees,  or  approximately  $520,000.   Management,  after
consultation  with its  advisors,  believes  the  Company is entitled to the tax
exemption  claimed and thus has not recorded a provision  for taxes  relating to
these items as of June 30,  2002.  If the Company were not  successful  with its
appeal, which was filed in 2001, a future charge of approximately $520,000 would
be recorded and reflected in the Company's consolidated statement of operations.

     Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001

     The  following  discussion  compares the  consolidated  results for the six
months ended June 30, 2002 and the six months ended June 30, 2001.

     Revenue.  Total revenue  decreased by 14.2%,  or $8.4  million,  from $59.5
million for the six months  ended June 30,  2001,  to $51.1  million for the six
months ended June 30, 2002.  This  decrease  was  attributable  primarily to the
continued  weakness  in the global  economy and the  resulting  impact on the IT
services market.  Throughout the year, the effects of the uncertain and weakened
economic climate impacted the Company, as customers delayed and/or decreased the
scope  of IT  projects,  and  as the  Company  experienced  competitive  pricing
pressures in the provision of consulting services.

     In November 2001, the Emerging  Issues Task Force ("EITF") of the Financial
Accounting Standards Board ("FASB") concluded that reimbursable  "out-of-pocket"
expenses should be classified as revenue,  and correspondingly cost of services,
in the statement of operations.  Most service  companies,  whose employees incur
incidental expenses such as airfare,  mileage, hotel and out-of-town meals while
working on behalf of customers, previously reported reimbursable "out-of-pocket"
expenses on a "net" basis in the statement of operations. Accordingly, effective
January 1, 2002,  the Company has reported  gross  reimbursable  "out-of-pocket"
expenses  incurred  as both  revenue  and  cost of  sales  in the  statement  of
operations. The Company has also reclassified prior period financial information
for presentation consistent with the new EITF accounting guidance. The impact of
this  reclassification was an increase to both revenue and cost of sales of $1.0
million  and $1.5  million  for the six  months  ended  June 30,  2002 and 2001,
respectively.

     Gross  profit.  The  Company's  cost of sales  decreased by 13.6%,  or $5.6
million,  from $41.0  million for the six months ended June 30,  2001,  to $35.4
million for the six months  ended June 30,  2002.  The  Company's  gross  profit
decreased by 15.5%, or $2.9 million, from $18.6


                                     - 21 -
<PAGE>

million for the six months  ended June 30,  2001,  to $15.7  million for the six
months ended June 30, 2002.  This decrease was  attributable  primarily to lower
revenues. Gross margin decreased slightly to 30.7% for the six months ended June
30, 2002,  from 31.2% for the six months  ended June 30,  2001.  The decrease in
gross margin results from an increase in non-billable  consultant time and other
related costs.

     Selling,  general  and  administrative   expenses.   Selling,  general  and
administrative  expenses  decreased by 16.2%, or $2.6 million,  to $13.6 million
for the six months  ended June 30, 2002,  from $16.2  million for the six months
ended June 30, 2001,  and  decreased  as a  percentage  of revenue to 26.5% from
27.2%,  respectively.  The  decrease  in  selling,  general  and  administrative
expenses,  in absolute  dollars  and as a  percentage  of  revenue,  was related
primarily to the further  containment of discretionary  spending  throughout the
Company,  as well as the  downsizing  initiative  completed in Europe during the
fourth quarter 2001.

     SeraNova  receivable  impairment and other  charges.  During the six months
ended June 30, 2002, the Company recorded  approximately $8.4 million in special
charges  associated with the note  receivable  from SeraNova,  and certain other
related issues.  Although the Company has aggressively pursued its various legal
options to obtain  payment from the SeraNova  Group on the Note and  outstanding
lease  obligations,  the  Company  believes  that the current  liquidity  issues
plaguing the SeraNova  Group  requires a reassessment  of the  realizability  of
these  outstanding  amounts.  During this time,  the  Company has also  actively
engaged in discussions with management of the SeraNova Group, with the objective
of seeking an out of court resolution to all outstanding  matters  involving the
Note, and certain other  receivables  and lease  obligations.  Although no final
resolution  has been reached,  the Company  believes that the substance of these
discussions provides a basis for determining the approximate realizable value of
the Note and other receivables,  as well as an estimate of the costs required to
exit certain  lease  obligations.  Accordingly,  the Company has  recognized  an
impairment  charge  in the  amount  of $5.1  million  related  to the  note.  In
addition,  the Company  recorded a write-off of $1.3 million related to interest
on the note and other  receivables due from the SeraNova Group. The Company also
recorded  $1.5  million in costs  required  to exit  certain  lease  obligations
related to the SeraNova Group.

     Proxy  contest  charges.  During the six months  ended June 30,  2002,  the
Company  incurred  approximately  $464,000 in charges  associated with the proxy
contest.  The  charges  resulted  directly  from a  shareholder  of the  Company
launching a hostile and costly proxy  contest to take  control of the  Company's
Board of Directors.  The charges included legal fees of approximately  $324,000,
proxy solicitation services of approximately $100,000, and printing, mailing and
other costs of approximately $40,000.

     Depreciation  and  amortization.  Depreciation  and  amortization  expenses
decreased 25.7% to $1.4 for the six months ended June 30, 2002, compared to $1.9
million for the six months ended June 30, 2001. The decrease is due primarily to
the  amortization  and  depreciation  associated with the intangible  assets and
long-lived assets that were written-down as part of the Company's  restructuring
and other special charges provision during the quarter ended December 31, 2001.


                                     - 22 -
<PAGE>

     Other expense,  net. The Company  earned $63,000 in interest  income during
the six months ended June 30, 2002, compared with $419,000 during the six months
ended June 30, 2001. The decrease in interest income is related primarily to the
Company not  recording  accrued  interest on the balance of the note  receivable
with SeraNova subsequent to the maturity date of the note of July 31, 2001. Such
note receivable is currently in default and the Company has commenced litigation
against SeraNova (see Part II, Item 1, Legal Proceedings).  The Company incurred
$201,000 and $430,000 in interest  expense  during the six months ended June 30,
2002 and 2001,  respectively,  related primarily to borrowings under its line of
credit.  Borrowings  under  the  line of  credit  were  used  to fund  operating
activities. The decrease in interest expense results from a combination of lower
outstanding borrowings under the line of credit and lower interest rates charged
on outstanding borrowings during the six months ended June 30, 2002.

     Provision for income taxes. The Company's effective rate was 4.1% and 26.6%
for the six months ended June 30, 2002 and 2001, respectively.  The tax rate for
the six  months  ended  June  30,  2002 and  2001,  results  from the  valuation
allowances  provided for the losses  generated in the United States,  Europe and
Asia-Pacific.  The  Company's net deferred tax asset as of June 30, 2002 relates
primarily to the US operations.  Based on anticipated  profitability in the near
future,  management  believes it is more likely than not,  that the deferred tax
asset of $1.7 million will be realized.

     In  1996,  the  Company  elected  a five  year tax  holiday  in  India,  in
accordance with a local tax incentive  program whereby no income tax will be due
in such period.  Such tax holiday was extended an additional five years in 1999.
Effective  April 1, 2000 pursuant to changes  introduced  by the Indian  Finance
Act, 2000,  the tax holiday  previously  granted is no longer  available and has
been  replaced  in the form of a tax  deduction  incentive.  The  impact of this
change is not expected to be material to the consolidated  financial  statements
of the Company. For the six months ended June 30, 2002 and 2001, the tax holiday
and new tax deduction favorably impacted the Company's effective tax rate.

     The Company's Indian  subsidiary has received an assessment from the Indian
taxing  authority  denying tax  exemptions  claimed for certain  revenue  earned
during the fiscal years ended March 31, 1998 and March 31, 1999.  The assessment
is  for  25  million  rupees,  or  approximately  $520,000.   Management,  after
consultation  with its  advisors,  believes  the  Company is entitled to the tax
exemption  claimed and thus has not recorded a provision  for taxes  relating to
these items as of June 30,  2002.  If the Company were not  successful  with its
appeal, which was filed in 2001, a future charge of approximately $520,000 would
be recorded and reflected in the Company's consolidated statement of operations.

RESULTS OF OPERATIONS BY BUSINESS SEGMENT

     The Company has four reportable operating segments, which are organized and
managed on a geographical basis, as follows:

     o    United  States  ("US") - the  largest  segment  of the  Company,  with
          operations  in  the  United  States  and  Puerto  Rico.  Includes  the
          operations  of the Company's US  subsidiary,  Empower,  Inc.,  and all
          corporate functions and activities.  The US and corporate headquarters
          are located in Edison, New Jersey;


                                     - 23 -
<PAGE>

     o    Asia-Pacific  ("APAC") - includes  the  operations  of the  Company in
          Australia, Hong Kong, Indonesia, Japan, New Zealand and Singapore. The
          APAC headquarters are located in Wellington, New Zealand;

     o    Europe - includes the operations of the Company in Denmark, Sweden and
          the United Kingdom. The European  headquarters are located in Norfolk,
          United Kingdom; and

     o    India - includes the  operations  of the Company in India and Jamaica.
          The Indian headquarters are located in Hyderabad, India.

     Each of the operating segments has a Managing Director,  or manager with an
equivalent position,  who reports directly to the Chief Executive Officer (CEO).
Currently,  the CEO is fulfilling the  requirements  of this position in the US.
The CEO has been identified as the Chief Operating Decision Maker (CODM) because
he has final  authority  over  resource  allocation  decisions  and  performance
assessment.  The CODM regularly receives certain discrete financial  information
about the  geographical  operating  segments,  including  primarily  revenue and
operating income, to evaluate segment performance.

     Three  months  Ended June 30, 2002  Compared to Three months Ended June 30,
2001

     The following  discussion compares the segment results for the three months
ended June 30, 2002 and the three months ended June 30, 2001.

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

                                     THREE MONTHS ENDED JUNE 30
                        ------------------------------------------------------
                                 2002                         2001
                        -------------------------    -------------------------
                                    PERCENTAGE OF                PERCENTAGE OF
                         DOLLARS        TOTAL        DOLLARS         TOTAL
                        --------    -------------    -------     -------------
United States........   $19,269          72.8%       $18,982           66.1%
Asia-Pacific.........     2,220           8.4          3,406           11.8
Europe...............     1,444           5.5          2,745            9.6
India................     3,543          13.3          3,601           12.5
                        -------         ------       -------          ------
Total................   $26,476         100.0%       $28,734          100.0%
                        =======         ======       =======          ======

     US revenue increased by 1.5%, or $287,000, from $19.0 million for the three
months ended June 30, 2001, to $19.3 million for the three months ended June 30,
2002. The increase was  attributable  primarily to the operating  performance of
Empower, Inc.

     APAC revenue decreased by 34.8% or $1.2 million,  from $3.4 million for the
three  months  ended June 30,  2001,  to $2.2 million for the three months ended
June 30, 2002. The decrease was due primarily to challenging economic conditions
throughout the  Asia-Pacific  region,  including Japan (a decrease of $762,000),
Australia  (a decrease of  $220,000),  Indonesia  (a decrease of  $125,000)  and
Singapore (a decrease of $116,000).

     Europe revenue  decreased by 47.4%, or $1.3 million,  from $2.7 million for
the three months ended June 30, 2001, to $1.4 million for the three months ended
June 30, 2002.  The


                                     - 24 -
<PAGE>

decrease was attributable  primarily to the United Kingdom ("UK")  operations (a
decrease of $1.2 million), while the consolidated Nordic operations (Denmark and
Sweden) decreased slightly (a decrease of $130,000).  As a result of the decline
in operating performance, the Company executed a plan to reorganize and downsize
the  Company's  operations  in the UK in the  fourth  quarter  of  2001.  The UK
operations  now consist of a much  smaller  core group of billable  consultants,
focused  primarily on providing  application  management and support services in
the PeopleSoft market.

     India  revenue  decreased  by 1.6%,  or $58,000,  from $3.6 million for the
three  months  ended June 30,  2001,  to $3.5 million for the three months ended
June 30, 2002. The slight decrease was attributable primarily to the weakness in
the global  economy,  as a majority of the total  revenue  generated in India is
derived from providing  offshore  development and support  services to customers
sourced through the Company's affiliated entities in other parts of the world.

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

                                                 THREE MONTHS ENDED JUNE 30
                                               ----------------------------
                                                  2002               2001
                                               ---------          ---------

United States.......................            $(8,150)           $    30
Asia-Pacific........................               (640)               375
Europe..............................               (352)            (1,173)
India...............................                862              1,177
                                               ---------          ---------
Total...............................            $(8,280)           $   409
                                               =========          =========

     US operating  performance  decreased by $8.2 million, from operating income
of $30,000 for the three  months ended June 30,  2001,  to an operating  loss of
$8.2 million for the three months ended June 30, 2002. The  significant  decline
in  operating  performance  was a  result  of the  charges  associated  with the
SeraNova receivable impairment and other charges and the proxy contest ("Special
Charges").  Excluding  these Special  Charges,  the US operating  income for the
three  months  ended June 30, 2002 was  $676,000,  or an  increase of  $646,000,
compared to the same period of the prior year. The increase in operating  income
was attributable  primarily to the  aforementioned  growth in revenue as well as
further containment of discretionary expenditures,  such as employee bonuses and
travel and entertainment expenses.

     APAC operating performance decreased by $1.0 million, from operating income
of $375,000 for the three months  ended June 30, 2001,  to an operating  loss of
$640,000 for the three months ended June 30, 2002. The decrease was attributable
primarily  to the  operating  performance  in Japan (a  decrease  of  $602,000),
Australia (a decrease of $194,000) and  Singapore (a decrease of  $222,000),  as
gross margins declined as a result of local market conditions.

     Europe operating  performance improved by $821,000,  from an operating loss
of $1.2 million for the three months ended June 30, 2001,  to an operating  loss
of $352,000  for the three  months  ended June 30,  2002.  The  improvement  was
attributable  primarily to an improvement in the operating performance of the UK
of  $1.0  million,  while  the  Nordic  operations  declined  by  $218,000.  The
improvement  in  the  UK  operating  performance  resulted  primarily  from  the


                                     - 25 -
<PAGE>

restructuring  program initiated in the UK during late 2001. As noted above, the
UK operations now consist of a much smaller core group of billable  consultants,
focused  primarily on providing  application  management and support services in
the PeopleSoft market. The decline in the Nordic operating  performance resulted
from competitive local conditions, primarily within the SAP software market.

     India operating income  decreased by 26.8%, or $315,000,  from $1.2 million
for the three months ended June 30, 2001, to $862,000 for the three months ended
June  30,  2002.  The  decrease  was  attributable   primarily  to  an  increase
non-billable consultant time and other related costs.

     Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001

     The following  discussion  compares the segment  results for the six months
ended June 30, 2002 and the six months ended June 30, 2001.

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

                                      SIX MONTHS ENDED JUNE 30
                        ------------------------------------------------------
                                 2002                         2001
                        -------------------------    -------------------------
                                    PERCENTAGE OF                PERCENTAGE OF
                         DOLLARS        TOTAL        DOLLARS         TOTAL
                         -------    -------------    -------     -------------
United States.........   $36,738         71.9%       $38,977          65.5%
Asia-Pacific..........     4,721          9.3          7,109          11.9
Europe................     3,029          5.9          6,632          11.2
India.................     6,597         12.9          6,805          11.4
                         -------       -------       -------        -------
Total.................   $51,085        100.0%       $59,523         100.0%
                         =======       =======       =======        =======

     US revenue  decreased by 5.7%, or $2.2 million,  from $39.0 million for the
six months ended June 30, 2001,  to $36.7  million for the six months ended June
30,  2002.  The decrease  was  attributable  primarily to the weakness in the US
economy and the resulting impact on the IT services market.

     APAC revenue decreased by 33.6%, or $2.4 million, from $7.1 million for the
six months  ended June 30,  2001,  to $4.7 million for the six months ended June
30, 2002.  The decrease was due  primarily to  challenging  economic  conditions
throughout  the  Asia-Pacific  region,  including  Japan  (a  decrease  of  $1.1
million),  New  Zealand (a  decrease  of  $530,000),  Australia  (a  decrease of
$309,000),  Indonesia  (a decrease of  $241,000)  and  Singapore  (a decrease of
$173,000).

     Europe  revenue  decreased by 54.3% or $3.6 million,  from $6.6 million for
the six months  ended June 30,  2001,  to $3.0  million for the six months ended
June 30, 2002.  The decrease was  attributable  primarily to the United  Kingdom
("UK")  operations (a decrease of $3.4 million),  while the consolidated  Nordic
operations (Denmark and Sweden) decreased slightly (a decrease of $238,000).  As
a result of the decline in operating performance, the Company executed a plan to
reorganize and downsize the Company's operations in the UK in the fourth quarter
of 2001.  The UK operations now consist of a much smaller core group of billable
consultants,  focused primarily on providing application  management and support
services in the PeopleSoft market.


                                     - 26 -
<PAGE>

     India revenue decreased by 3.1%, or $208,000, from $6.8 million for the six
months  ended June 30,  2001,  to $6.6 million for the six months ended June 30,
2002. The decrease was attributable primarily to weakness in the global economy,
as a majority of the total revenue  generated in India is derived from providing
offshore  development  and support  services to  customers  sourced  through the
Company's affiliated entities in other parts of the world.

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

                                                SIX MONTHS ENDED JUNE 30
                                              -----------------------------
                                                2002                  2001
                                              --------              --------

United States.......................          $(8,035)              $    20
Asia-Pacific........................             (839)                  106
Europe..............................             (541)               (1,906)
India...............................            1,345                 2,291
                                              --------              --------
Total...............................          $(8,070)              $   511
                                              ========              ========

     US operating  performance  decreased by $8.1 million, from operating income
of $20,000 for the six months ended June 30, 2001, to an operating  loss of $8.0
million  for the six months  ended June 30,  2002.  The  significant  decline in
operating  performance was a result of the charges  associated with the SeraNova
receivable  impairment  and  other  charges  and  the  proxy  contest  ("Special
Charges").  Excluding these Special Charges, the US operating income for the six
months ended June 30, 2002 was $791,000, or an increase of $771,000, compared to
the same period of the prior year.  The  increase in operating  income  resulted
primarily from the containment of discretionary  expenditures,  such as employee
bonuses and travel and entertainment expenses.

     APAC operating  performance declined by $945,000,  from operating income of
$106,000  for the six  months  ended  June 30,  2001,  to an  operating  loss of
$839,000 for the six months ended June 30, 2002.  The decrease was  attributable
primarily  to the  operating  performance  in Japan (a  decrease  of  $468,000),
Singapore (a decrease of $245,000) and  Australia (a decrease of  $200,000),  as
gross margins declined as a result of local market conditions.

     Europe operating  performance  improved by $1.4 million,  from an operating
loss of $1.9  million for the six months  ended June 30,  2001,  to an operating
loss of $541,000  for the six months ended June 30, 2002.  The  improvement  was
attributable  primarily to an improvement in the operating performance of the UK
of  $1.7  million,  while  the  Nordic  operations  declined  by  $304,000.  The
improvement  in  the  UK  operating  performance  resulted  primarily  from  the
restructuring  program initiated in the UK during late 2001. As noted above, the
UK operations now consist of a much smaller core group of billable  consultants,
focused  primarily on providing  application  management and support services in
the PeopleSoft market. The decline in the Nordic operating  performance resulted
from competitive local conditions, primarily within the SAP software market.

     India operating income  decreased by 41.3%, or $946,000,  from $2.3 million
for the six months ended June 30, 2001, to $1.3 million for the six months ended
June 30,  2002.  The decrease  was  attributable  to a decline in revenues (as a
result of the weakness in the global


                                     - 27 -
<PAGE>

economy)  and a  decline  in  gross  margins  (as a  result  of an  increase  in
non-billable consultant time and other related costs).

LIQUIDITY AND CAPITAL RESOURCES

     The Company had cash and cash  equivalents of $1.4 million at June 30, 2002
and $2.1 million at December 31, 2001. The Company had working  capital of $11.4
million at June 30, 2002 and $18.2 million at December 31, 2001.

     Cash provided by operating activities was $512,000 for the six months ended
June  30,  2002,   resulting  primarily  from  the  net  loss  being  offset  by
depreciation  and  amortization  of $1.8  million,  the  provision  for doubtful
accounts of $247,000,  the SeraNova  receivable  impairment and other charges of
$8.4 million, a decrease in unbilled services of $2.9 million,  and increases in
accounts payable of $248,000,  accrued payroll and related taxes of $735,000 and
income  taxes  payable of  $159,000.  These  amounts  were  partially  offset by
increases in accounts  receivable  of $3.9 million and other  current  assets of
$477,000 and decreases in accrued  expenses and other  liabilities  of $213,000,
accrued restructuring charges of $454,000 and deferred revenue of $357,000.  The
changes  in  accounts  receivable,  unbilled  services,  other  current  assets,
accounts payable,  accrued payroll and related taxes, accrued expenses and other
liabilities,  deferred  revenue and income taxes payable  result  primarily from
timing differences.  The decrease in accrued  restructuring charges results from
the payment of  severance  and related  costs and exit costs.  Cash  provided by
operating activities during the six months ended June 30, 2001 was $3.3 million.

     The Company  invested  $905,000  and $2.7  million in  computer  equipment,
internal-use  computer software and office furniture and fixtures during the six
months ended June 30, 2002 and 2001,  respectively.  The  decrease  results from
concerted   efforts  by  management  to  closely  monitor  and  curtail  capital
expenditures.

     In  conjunction  with the  strategic  decision to focus on the emerging ASP
market,  the  Company  invested  $2.7  million in  purchased  computer  software
licenses during the six months ended June 30, 2001. The computer software was to
be re-sold to customers as part of the Company's ASPPlus solutions and services.
However, during the three months ended December 31, 2001, the Company recorded a
write-down  of the  purchased  computer  software,  as  management  believed the
recoverability  of the value of the assets  acquired  for use in the ASP service
offering was unlikely given current and future expected market conditions.

     On May 31, 2000, the Company and PNC Bank, N.A. (the "Bank") entered into a
three-year  revolving  credit  facility.  Such credit facility is comprised of a
revolving  line of credit  pursuant  to which the Company can borrow up to $20.0
million either at the Bank's prime rate per annum or the Euro Rate plus 1.75% to
2.5% based upon the Company's  ratio of debt to EBITDA.  The credit  facility is
collateralized by substantially all of the assets of the Company's United States
based operations. The maximum borrowing availability under the line of credit is
based upon a percentage of eligible billed and unbilled accounts receivable,  as
defined.  As of June 30, 2002, the Company had outstanding  borrowings under the
credit  facility of $4.0 million.  The Company  estimates  undrawn  availability
under the credit facility to be $8.4 million as of


                                     - 28 -
<PAGE>

June 30, 2002. As of December 31, 2001, the Company had  outstanding  borrowings
under the credit facility of $4.1 million.

     The credit facility provides for the following financial  covenants,  among
other things,  (1) the Company must maintain  consolidated net worth, as defined
("consolidated   net  worth")  of  (a)  not  less  than  95%  of  the  Company's
consolidated  net worth of the immediately  preceding fiscal year-end as at each
such  fiscal  quarter  after  December  31,  2000;  and (b) at least 105% of the
Company's 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,  as defined  ("unconsolidated  net worth") of (a) not
less  than 95% of the  Company's  unconsolidated  net  worth of the  immediately
preceding  fiscal  year-end as at each such fiscal  quarter  after  December 31,
2000; and (b) at least 105% of the Company's  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 material adverse change clauses with
regard to the financial  condition of the assets,  liabilities and operations of
the Company.

     As of  December  31,  2001,  the  Company  was not in  compliance  with the
consolidated  net worth and  unconsolidated  net worth financial  covenants.  In
March  2002,  the  Company  finalized  with the Bank the  terms of a waiver  and
amendment  to the  credit  agreement.  The  terms of the  waiver  and  amendment
included,  among  other  things,  (1) a waiver of the  covenant  defaults  as of
December 31, 2001, (2) a modification to the financial covenants to require that
consolidated net worth and  unconsolidated  net worth as of December 31, 2002 be
not less than 102% of  consolidated  net worth  and  unconsolidated  net  worth,
respectively,  as of December 31, 2001, (3) a modification  to the  consolidated
net worth and  unconsolidated  net worth  covenants  to exclude  any  changes to
consolidated  net  worth  and   unconsolidated  net  worth  resulting  from  the
write-down  or write-off of up to $10.8  million of the note due from  SeraNova,
and (4) a new financial  covenant  requiring that the Company generate  earnings
before interest, taxes, depreciation and amortization ("EBITDA") of at least 90%
of the prior year's EBITDA.

     As a result of the  charges  incurred  for the  proxy  contest  during  the
quarter ended June 30, 2002,  the Company was not in compliance  with the EBITDA
covenant as of June 30, 2002. The Company is currently negotiating with the Bank
and expects to receive a waiver of the covenant  default existing as of June 30,
2002.  There can be no  assurance,  however,  that the  Company  will be able to
obtain a waiver and appropriate  amendment to the agreement on terms  acceptable
to the Company.

     On May 31,  2000,  SeraNova  and the  Company  formalized  a $15.1  million
unsecured  promissory  note (the "Note")  relating to net borrowings by SeraNova
from the Company  through such date.  The Note bears  interest at the prime rate
plus 1/2%. The Company has recorded total accrued interest of $1.0 million as of
each of June 30, 2002 and December  31,  2001.  The Company has not recorded any
accrued interest on the balance of the Note subsequent to the


                                     - 29 -
<PAGE>

maturity date of July 31, 2001. On September  29, 2000,  the Company  received a
$3.0 million payment from SeraNova.

     In September  2000,  SeraNova  consummated an $8.0 million  preferred stock
financing  with  two  institutional   investors.   According  to  the  mandatory
prepayment provisions of the Note, SeraNova was required to make a prepayment of
$3.0 million on the Note as a result of the stock financing.  Subsequently,  the
Company  finalized with SeraNova the terms of an agreement to waive,  subject to
certain conditions, certain of the mandatory prepayment obligations arising as a
result of the financing.  The terms of the new agreement  included,  among other
things,  that  SeraNova  pay the  Company (i)  $500,000  upon  execution  of the
agreement;  (ii)  $500,000 on or before each of January 31,  2001,  February 28,
2001,  March 31, 2001, April 30, 2001 and May 31, 2001; and (iii) $400,000 on or
before  December 15, 2000 to be applied either as (a) an advance payment towards
a  contemplated  services  arrangement  for  hosting  services to be provided to
SeraNova by the Company (the "Hosting  Agreement");  or (b) in the event that no
such Hosting Agreement is executed on or before December 15, 2000, an additional
advance prepayment toward the principal of the Note.

     The Company  received from SeraNova the $500,000  payment that was due upon
execution of the agreement and a $400,000 payment in December 2000 as an advance
payment  towards  the  principal  of the Note  since no  Hosting  Agreement  was
executed before December 15, 2000.

     In 2001, the Company received principal payments totaling $2.1 million from
SeraNova.  However,  SeraNova  failed to make final  payment of all  amounts due
under the Note to the  Company  as of July 31,  2001.  On August 16,  2001,  the
Company filed a complaint against SeraNova and Silverline  Technologies  Limited
("Silverline"), which acquired SeraNova in March 2001. As of such date, SeraNova
was obligated to pay to the Company the remaining principal  (approximately $9.1
million) and accrued interest  (approximately $1.0 million),  or an aggregate of
$10.1  million.  SeraNova  then filed a  counterclaim  against  the  Company for
unspecified  damages as a set-off against the Company's  claims.  In response to
the Company's request for a statement of damages, SeraNova stated that it was in
the process of calculating its damages,  but for informational  purposes claimed
compensatory  damages  in excess of $5.5  million  and  punitive  damages in the
amount of $10.0 million.

     In addition,  during late 2001,  SeraNova failed to pay certain outstanding
lease obligations to the Company's landlords. Accordingly, on March 4, 2002, the
Company filed an arbitration  demand with the American  Arbitration  Association
against  SeraNova,  Silverline and Silverline  Technologies,  Inc. (see Part II,
Item 1, Legal  Proceedings).  The demand for arbitration,  which sought damages,
alleged  among  other  things  that  SeraNova,   Silverline   and/or  Silverline
Technologies,  Inc. failed to pay outstanding lease obligations to the Company's
landlords and to reimburse the Company for all rent payments made by the Company
on their behalf.  An  arbitration  hearing was held on June 25 and June 28, 2002
seeking $525,000 in outstanding lease  obligations.  On August 9, 2002, an award
was  issued in the  amount  of  $616,905.26  (including  attorney's  fees)  plus
reimbursement  of  administrative  fees,  in favor of  Intelligroup  and against
SeraNova,  Silverline  and  Silverline  Technologies,  Inc.  (collectively,  the
"SeraNova  Group")  jointly and  severally.  The award also includes a provision
that jurisdiction is retained by the tribunal, and the Company may seek from the
tribunal any additional rents and other fees due and


                                     - 30 -
<PAGE>

owing on a quarterly  basis.  On August 12, 2002, an action was commenced in the
Superior  Court of New Jersey to confirm  the  award,  seek a writ of  execution
against the  SeraNova  Group's  assets,  restrain  the  disposal of the SeraNova
Group's  assets,  and enjoin the  distribution  of proceeds from any sale of the
SeraNova  Group's assets among other emergency  relief.  On August 13, 2002, the
Court,  among other things, (i) confirmed the award and entered judgment against
SeraNova in the amount of $616,905.26 plus $7,100 in  administrative  fees, (ii)
authorized the issuance of a writ of execution against  SeraNova's bank accounts
and other assets to satisfy the judgment,  (iii)  restrained  the SeraNova Group
from  disposing  of any assets,  including  funds in their bank  accounts,  (iv)
authorized the attachment of all net proceeds from the sale of any assets of the
SeraNova  Group  up to the  amount  of the  arbitration  award  to be held in an
interest  bearing escrow account pending further court order and (v) scheduled a
hearing for September 3, 2002 in order for the SeraNova  Group to show cause why
the relief granted by the Court to the Company  against  SeraNova  should not be
applied to the  SeraNova  Group  jointly and  severally.  The  Company  does not
believe that the outcome of this claim will have a materially  adverse effect on
the Company's business, financial condition or results of operations.

     Although the Company has aggressively  pursued its various legal options to
obtain  payment  from the  SeraNova  Group on the  Note  and  outstanding  lease
obligations, the Company believes that the current liquidity issues plaguing the
SeraNova Group requires a reassessment of the realizability of these outstanding
amounts.  During this time, the Company has also actively engaged in discussions
with management of the SeraNova  Group,  with the objective of seeking an out of
court  resolution to all  outstanding  matters  involving the Note,  and certain
other receivables and lease  obligations.  Although no final resolution has been
reached, the Company believes that the substance of these discussions provides a
basis for  determining the  approximate  realizable  value of the Note and other
receivables,  as well as an estimate of the costs required to exit certain lease
obligations.  Accordingly, the Company recorded the following charges during the
quarter ended June 30, 2002:

<TABLE>
<CAPTION>
                                          WRITE-DOWN      WRITE-OFF       ASSUMPTION
                                            OF NOTE        OF OTHER       OF CERTAIN
                                          RECEIVABLE     RECEIVABLES -       LEASE           OTHER
                                          - SERANOVA       SERANOVA       OBLIGATIONS       CHARGES          TOTAL
                                        -----------------------------------------------------------------------------

<S>                                     <C>             <C>              <C>             <C>             <C>
Charges to operations during 2002...    $   5,140,000   $  1,257,000     $  1,501,000    $    464,000    $  8,362,000
Costs paid during 2002..............               --             --               --        (118,000)       (118,000)
Non-cash items......................       (5,140,000)    (1,257,000)              --              --      (6,397,000)
                                        -------------   ------------     ------------    ------------    ------------
Accrued costs as of June 30, 2002...    $          --   $         --     $  1,501,000    $    346,000    $  1,847,000
                                        =============   ============     ============    ============    ============
</TABLE>

     The Company recorded a $5.1 million charge to write-down the carrying value
of the Note to $4.0 million.  The Company also recorded a $1.3 million charge to
write-off  the  carrying  value of the other  SeraNova  receivables  (primarily,
accrued  interest  on the Note  and a  receivable  for a  system  implementation
project).  Additionally,  the Company  recorded a liability  of $1.5 million for
certain lease exit costs,  $1.1 million of which is included in other  long-term
liabilities,  as of June 30, 2002. Such liability represents primarily obligated
space costs for which the Company  currently  believes it cannot use or sublease
and the  differential  between  certain  Company lease  obligations and sublease
amounts to be received.


                                     - 31 -
<PAGE>

     If the Company were to collect less than $4.0 million on the Note  recorded
as of June 30, 2002,  or incur  additional  obligations  or costs,  the SeraNova
receivable impairment and/or charges would be increased in future periods.

     The Company's 2002 operating plan contains  assumptions  regarding  revenue
and  expenses.  The  achievement  of the operating  plan depends  heavily on the
timing of work performed by the Company on existing  projects and the ability of
the Company to gain and perform  work on new  projects.  Project  cancellations,
delays in the timing of work  performed  by the Company on existing  projects or
the inability of the Company to gain and perform work on new projects could have
an adverse  impact on the Company's  ability to execute its  operating  plan and
maintain  adequate  cash  flow.  In the  event  actual  results  do not meet the
operating  plan,  management  believes  it could  execute  contingency  plans to
mitigate such effects.  Such plans include additional cost reductions or seeking
additional financing.  Considering the cash on hand, the remaining  availability
under the credit facility and based on the achievement of the operating plan and
management's  actions taken to date,  management  believes it has the ability to
continue to generate  sufficient  cash to satisfy its operating  requirements in
the  normal  course  of  business.  However,  no  assurance  can be  given  that
sufficient cash will be generated from operations.

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

NASDAQ NATIONAL MARKET

     On April 4,  2002,  the  Company  received a letter  from the Nasdaq  Stock
Market   ("Nasdaq")   advising  the  Company  that  it  failed  to  meet  Nasdaq
requirements  for continued  listing as the closing "bid" price of the Company's
common  stock was less than  $1.00 for 30 trading  days.  On May 13,  2002,  the
Company  received a letter from Nasdaq advising the Company that it had regained
compliance with the continued listing requirements.

     In the future,  should the Company  fail to maintain a minimum  closing bid
price of $1.00 for a period of 30 consecutive  trading days, it would once again
be subject to notification by Nasdaq that it failed to meet Nasdaq  requirements
for continued listing. Upon such notice, the Company would have 90 days from the
notice date to regain  compliance  by having the bid price for its Common  Stock
close at $1.00 or greater for a minimum of 10  consecutive  trading  days during
the 90-day compliance  period. A delisting from the Nasdaq National Market could
severely  and  adversely  affect the market  liquidity of the  Company's  Common
Stock.

COMMITMENTS

     During  late  2001,  SeraNova  failed  to  pay  certain  outstanding  lease
obligations  to the  Company's  landlords.  Accordingly,  on March 4, 2002,  the
Company filed an arbitration  demand with the American  Arbitration  Association
against the SeraNova Group (see Part II, Item 1, Legal Proceedings).  The demand
for  arbitration,  which  sought  damages,  alleged  among other things that the
SeraNova  Group failed to pay  outstanding  lease  obligations  to the Company's
landlords and to reimburse the Company for all rent payments made by the Company
on their behalf.  An  arbitration  hearing was held on June 25 and June 28, 2002
seeking $525,000 in outstanding lease


                                     - 32 -
<PAGE>

obligations. On August 9, 2002, an award was issued in the amount of $616,905.26
(including  attorney's fees) plus reimbursement of administrative fees, in favor
of Intelligroup and against the SeraNova Group jointly and severally.  The award
also includes a provision that jurisdiction is retained by the tribunal, and the
Company may seek from the tribunal any  additional  rents and other fees due and
owing on a quarterly  basis.  On August 12, 2002, an action was commenced in the
Superior  Court of New Jersey to confirm  the  award,  seek a writ of  execution
against the  SeraNova  Group's  assets,  restrain  the  disposal of the SeraNova
Group's  assets,  and enjoin the  distribution  of proceeds from any sale of the
SeraNova  Group's assets among other emergency  relief.  On August 13, 2002, the
Court,  among other things, (i) confirmed the award and entered judgment against
SeraNova in the amount of $616,905.26 plus $7,100 in  administrative  fees, (ii)
authorized the issuance of a writ of execution against  SeraNova's bank accounts
and other assets to satisfy the judgment,  (iii)  restrained  the SeraNova Group
from  disposing  of any assets,  including  funds in their bank  accounts,  (iv)
authorized the attachment of all net proceeds from the sale of any assets of the
SeraNova  Group  up to the  amount  of the  arbitration  award  to be held in an
interest  bearing escrow account pending further court order and (v) scheduled a
hearing for September 3, 2002 in order for the SeraNova  Group to show cause why
the relief granted by the Court to the Company  against  SeraNova  should not be
applied to the  SeraNova  Group  jointly and  severally.  The  Company  does not
believe that the outcome of this claim will have a materially  adverse effect on
the Company's business, financial condition or results of operations.

NEW ACCOUNTING PRONOUNCEMENT

     In June 2002, the Financial  Accounting Standards Board (the "FASB") issued
SFAS  No.  146,   "Accounting  for  Costs   Associated  with  Exit  or  Disposal
Activities." SFAS No. 146 addresses financial accounting and reporting for costs
associated with exit or disposal  activities and nullifies  Emerging Issues Task
Force  (EITF)  Issue No.  94-3,  "Liability  Recognition  for  Certain  Employee
Termination  Benefits  and Other  Costs to Exit an Activity  (including  Certain
Costs Incurred in a Restructuring)." The Company is evaluating the impact of the
adoption of SFAS No. 146,  which is  effective  for the Company as of January 1,
2003,  but does not  believe  it will have a  material  impact on the  Company's
financial position or results of operations.

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


                                     - 33 -
<PAGE>

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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



                                     - 34 -
<PAGE>

PART II.   OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

     On February 7, 2001, NSA Investments II LLC filed a complaint in the United
States District Court for the District of  Massachusetts  naming,  among others,
SeraNova,  the Company and Rajkumar Koneru, a former director of the Company, as
defendants.  The  plaintiff  alleges that it invested  $4,000,000 in SeraNova as
part of a private placement of SeraNova common stock in March 2000, prior to the
spin-off of SeraNova by the Company. The complaint, which seeks compensatory and
punitive  damages,  alleges  that the  Company,  as a  "controlling  person"  of
SeraNova, is jointly and severally liable with and to the extent as SeraNova for
false and misleading statements constituting  securities laws violations.  After
being served with the complaint,  the Company made a request for indemnification
from  SeraNova  pursuant to the various  inter-company  agreements in connection
with the spin-off. By letter dated April 13, 2001,  SeraNova's counsel,  advised
the Company that SeraNova acknowledged liability for such indemnification claims
and has  elected to assume the  defense of the  plaintiff's  claims.  In October
2001,  the motion to dismiss,  filed on behalf of the  Company in May 2001,  was
denied  without  prejudice  to  refile  at the  close of the  discovery  period.
Court-ordered  mediation  between the plaintiff and SeraNova  during January and
February 2002 was  unsuccessful.  In January 2002,  plaintiff filed a motion for
partial  summary  judgment as to certain  claims  against  SeraNova.  No summary
judgment motion was filed against the Company.  SeraNova filed its opposition to
plaintiff's  motion for partial  summary  judgment in February  2002.  The court
heard argument on the motion for partial  summary  judgment on July 30, 2002 and
reserved its decision.  The Company denies the  allegations  made and intends to
defend  vigorously  the  claims  made by the  plaintiff.  It is too early in the
dispute  process to determine  the impact,  if any,  that such dispute will have
upon the Company's business, financial condition or results of operations.

     On August 16, 2001,  the Company filed a complaint in the Superior Court of
New Jersey, Middlesex County, against SeraNova, Inc. and Silverline Technologies
Limited,  which  acquired  SeraNova in March 2001.  The  complaint,  which seeks
damages,  alleges among other things that  SeraNova  failed to pay amounts owing
under (i) an unsecured promissory note totaling  $10,079,717,  and (ii) a system
implementation  project totaling $511,573.  On September 25, 2001,  SeraNova and
Silverline  filed  a joint  Answer  to the  Company's  complaint.  In  addition,
SeraNova filed a counterclaim  against the Company for unspecified  damages as a
set-off against the Company's claims.  Thereafter,  in response to the Company's
request for a statement of damages,  SeraNova  stated that it was in the process
of calculating its damages, but for informational  purposes claimed compensatory
damages  in  excess  of  $5,500,000  and  punitive  damages  in  the  amount  of
$10,000,000.  The parties are currently proceeding with the discovery process. A
non-binding  arbitration  proceeding  is scheduled  for  September 4, 2002.  The
Company  believes  that  there is no basis to  support  the  amounts  claimed by
SeraNova  in  its  counterclaim  for  compensatory  and  punitive  damages.  The
inability  of the  Company  to  collect  the  amount  due from  SeraNova  and/or
Silverline  or an adverse  decision  with  respect to the  Company  relating  to
SeraNova's   counterclaim  could  negatively  affect  the  Company's   business,
financial condition or results of operations.

     On March 4, 2002, the Company filed an arbitration demand with the American
Arbitration  Association against the SeraNova Group. The demand for arbitration,
which sought


                                     - 35 -
<PAGE>

damages,  alleged among other things that respondents  failed to pay outstanding
lease  obligations  to the Company's  landlords and to reimburse the Company for
all  rent  payments  made  by the  Company  on  behalf  of the  respondents.  An
arbitration  hearing was held on June 25 and June 28, 2002  seeking  $525,000 in
outstanding  lease  obligations.  On August 9, 2002,  an award was issued in the
amount  of  $616,905.26   (including  attorney's  fees)  plus  reimbursement  of
administrative  fees, in favor of  Intelligroup  and against the SeraNova  Group
jointly and severally.  The award also includes a provision that jurisdiction is
retained  by the  tribunal,  and the  Company  may seek  from the  tribunal  any
additional  rents and other fees due and owing on a quarterly  basis.  On August
12, 2002, an action was commenced in the Superior Court of New Jersey to confirm
the  award,  seek a writ of  execution  against  the  SeraNova  Group's  assets,
restrain the disposal of the SeraNova  Group's,  and enjoin the  distribution of
proceeds  from any sale of the SeraNova  Group's  assets  among other  emergency
relief.  On August 13, 2002,  the Court,  among other things,  (i) confirmed the
award and entered  judgment  against  SeraNova in the amount of $616,905.26 plus
$7,100  in  administrative  fees,  (ii)  authorized  the  issuance  of a writ of
execution  against  SeraNova's  bank  accounts  and other  assets to satisfy the
judgment,  (iii)  restrained  the SeraNova  Group from  disposing of any assets,
including  funds in their bank accounts,  (iv)  authorized the attachment of all
net proceeds from the sale of any assets of the SeraNova  Group up to the amount
of the  arbitration  award  to be held in an  interest  bearing  escrow  account
pending further court order and (v) scheduled a hearing for September 3, 2002 in
order for the SeraNova  Group to show cause why the relief  granted by the Court
to the Company  against  SeraNova  should not be applied to the  SeraNova  Group
jointly and  severally.  The Company  does not believe  that the outcome of this
claim will have a materially adverse effect on the Company's business, financial
condition or results of operations.

     On June 14, 2002,  the Company  filed a complaint in the Superior  Court of
New Jersey,  Mercer  County,  against  Ashok Pandey,  a  shareholder  and former
officer and  director of the  Company.  The  complaint,  which seeks  damages in
excess of $400,000,  alleges among other things that Mr. Pandey breached certain
terms and conditions of a separation  agreement he entered into with the Company
and that Mr. Pandey has been unjustly enriched in an amount of $350,000 from the
Company. Mr. Pandey has not yet filed an Answer to the Company's complaint.  The
Company  does not  believe  that the  outcome of this claim will have a material
adverse  effect on the  Company's  business,  financial  condition or results of
operations.

     On July 3,  2002,  the  Company  filed a  complaint  in the  United  States
District  Court for the  District  of New  Jersey,  naming  Ashok  Pandey,  TAIB
Securities,  Inc.,  Beechrock  Holdings  Limited and Braydon Holdings Limited as
defendants.  The  complaint  alleges,  among other things,  that the  defendants
violated  federal  securities laws in connection with the Company's recent proxy
contest.  The  defendants  have not yet filed an Answer  to the  complaint.  The
Company  does not  believe  that the  outcome of this claim will have a material
adverse  effect on 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.



                                     - 36 -
<PAGE>

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

     The Annual  Meeting of  Shareholders  of the  Company  was held on July 16,
2002.

     There  were  present  at the  meeting  in person  or by proxy  shareholders
holding an aggregate of 13,837,314  shares of Common  Stock.  The results of the
vote taken at such meeting  with  respect to each  nominee for Director  were as
follows:

        Common Stock Nominees                   For                 Withheld
        ---------------------                   ---                 --------
        Nagarjun Valluripalli                 7,178,024                 6,655
        Klaus P. Besier                       7,174,024                10,655
        Dennis McIntosh                       7,176,774                 7,905
        Alexander Graham Wilson               7,178,774                 5,905
        Prabhas Panigrahi                     7,177,024                 7,655
        Nick Di Iorio                         7,177,024                 7,655

        Ashok Pandey                          6,641,469                11,166
        Wendy Rayner                          6,641,469                11,166
        Stephen Savitt                        6,641,469                11,166
        John Supplee                          6,641,469                11,166
        Tarun Chandra                         6,641,469                11,166
        Yoshikazu "Jin" Nakamura              6,641,469                11,166

     Accordingly,  Nagarjun  Valluripalli,  Klaus P.  Besier,  Dennis  McIntosh,
Alexander Graham Wilson, Prabhas Panigrahi and Nic Di Iorio were duly elected as
Directors of the Company.

ITEM 5.  OTHER INFORMATION

     On May 22, 2002, Rajkumar Koneru resigned as a Director of the Company. Mr.
Koneru had served as a Director of the Company since 1994. Mr. Koneru  forwarded
a letter to the Company  stating  that his  resignation  was a result of (i) his
disagreement with the strategic direction of the Company, and (ii) the Board and
management's  failure to inform Mr. Koneru of certain  events and decisions made
by the Board and  management of the Company which made Mr. Koneru  uncomfortable
while representing the interests of all shareholders of the Company. The Company
disagreed with Mr. Koneru's  assertion that he had not been informed on a timely
basis of certain  events and decisions  made by the Board and  management of the
Company.  Additionally,  Mr.  Koneru  had not  presented  to the Board any plans
relating to the strategic direction of the Company.

     On June 3, 2002, Gregory S. Dimit resigned as a Director of the Company for
personal reasons. Mr. Dimit had served as a Director of the Company since 2001.

     On June 6, 2002, the Company's Board of Directors appointed each of Prabhas
Panigrahi and Alexander Graham Wilson to the Company's Board of Directors.



                                     - 37 -
<PAGE>

     In June  2002,  after a  review  of the  recent  events  concerning  Arthur
Andersen LLP  ("Andersen"),  the Company's  Board of Directors  delegated to its
Audit  Committee the  responsibility  to work with the  Company's  management to
review the qualification of the major national  accounting firms to serve as the
Company's independent public accountants for the fiscal year ending December 31,
2002.  On July 25,  2002,  the  Company  dismissed  Andersen,  as the  Company's
auditors.  Andersen's reports on the Company's consolidated financial statements
for each of the years ended December 31, 2001,  2000 and 1999 did not contain an
adverse opinion or disclaimer of opinion, nor were they qualified or modified as
to  uncertainty,  audit scope or accounting  principals.  During the years ended
December 31, 2001 and 2000 and the  subsequent  interim  period through July 25,
2002,  there were no  disagreements  with  Andersen on any matter of  accounting
principles or practices,  financial statement  disclosure,  or auditing scope or
procedure which, if not resolved to Andersen's  satisfaction,  would have caused
Andersen to make reference to the subject  matter in connection  with its report
on the Company's  consolidated  financial  statements  for such years.  Further,
there were no reportable  events as defined in Item  304(a)(1)(v)  of Regulation
S-K.

     On July 25, 2002, the Company's Board of Directors, upon the recommendation
of its Audit  Committee,  engaged  Deloitte  & Touche LLP as the  Company's  new
independent auditors.

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

         (a)   Exhibits.

               10.1 Employment  Agreement dated June 3, 2002 between the Company
                    and Nagarjun Valluripalli.

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

         (b)   Reports on Form 8-K.

               On April 12,  2002,  subsequent  to the  quarter  ended March 31,
               2002,  the  Company  filed a Current  Report on Form 8-K with the
               Securities and Exchange  Commission relating to the scheduling of
               the registrant's Annual Meeting of Shareholders.

               On May 2, 2002,  subsequent  to the quarter ended March 31, 2002,
               the  Company  filed  a  Current  Report  on  Form  8-K  with  the
               Securities and Exchange  Commission  relating to the rescheduling
               of the registrant's Annual Meeting of Shareholders.

               On May 23, 2002,  the Company filed a Current  Report on Form 8-K
               with  the   Securities  and  Exchange   Commission   relating  to
               resignation of Rajkumar Koneru as a Director of the Company.  Mr.
               Koneru had served as a Director of the Company since 1994.

               On July 2, 2002,  subsequent  to the quarter ended June 30, 2002,
               the Company  filed a Form 8-K with the  Securities  and  Exchange
               Commission  relating to the


                                     - 38 -
<PAGE>

               Company's adjournment of its Annual Meeting from Tuesday, July 2,
               2002 to Tuesday, July 16, 2002.

               On August 1, 2002, subsequent to the quarter ended June 30, 2002,
               the Company  filed a Form 8-K with the  Securities  and  Exchange
               Commission relating to the Company's dismissal of Arthur Andersen
               LLP as the  Company's  auditor and its  engagement  of Deloitte &
               Touche LLP as the Company's new independent auditor.



                                     - 39 -
<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 14, 2002            By: /s/ Nagarjun Valluripalli
                                    --------------------------------------------
                                    Nagarjun Valluripalli,
                                    Chairman of the Board, President and Chief
                                    Executive Officer
                                    (Principal Executive Officer)


DATE: August 14, 2002            By: /s/ Nicholas Visco
                                    --------------------------------------------
                                    Nicholas Visco,
                                    Senior Vice President-Finance and
                                    Administration and Chief Financial Officer
                                    (Principal Financial and Accounting Officer)





                                     - 40 -