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 March 31, 1998
                           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)

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

                                 (732) 750-1600
                         ------------------------------
                         (Registrant's Telephone Number,
                              Including Area Code)


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

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

     Indicate  the  number of  shares  outstanding  of each of the  Registrant's
classes of common stock, as of April 30, 1998:

Class                                                           Number of Shares
-----                                                           ----------------
Common Stock, $.01 par value                                       12,025,029

--------
* Prior to this filing,  the Registrant was a "small business issuer" filing all
reports  required to be filed by Section 13 or 15(d) of the Securities  Exchange
Act of 1934  pursuant  to  Regulation  S-B.  Commencing  with this  filing,  the
Registrant is filing such reports in compliance with Regulation S-K.

<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES

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

                                                                         Page
                                                                         ----
PART I.  FINANCIAL INFORMATION

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

               Consolidated Balance Sheets
               as of March 31, 1998 (unaudited)
               and December 31, 1997 ..................................    2

               Consolidated Statements of Income
               for the Three Months Ended
               March 31, 1998 and 1997 (unaudited).....................    3

               Consolidated Statements of Cash Flows
               for the Three Months Ended
               March 31, 1998 and 1997 (unaudited).....................    4

               Notes to Consolidated Financial Statements (unaudited)..    5

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

PART II.  OTHER INFORMATION

       Item 1. Legal Proceedings.......................................   13

       Item 5. Other Information.......................................   14

       Item 6. Exhibits and Reports on Form 8-K........................   15

SIGNATURES.............................................................   16


                                   - i -
<PAGE>



                          PART I. FINANCIAL INFORMATION

                    Item 1. Consolidated Financial Statements


                                     - 1 -
<PAGE>
<TABLE>
                                                 INTELLIGROUP, INC. AND SUBSIDIARIES

                                                     CONSOLIDATED BALANCE SHEETS
                                                March 31, 1998 and December 31, 1997

<CAPTION>

                                                                                     March 31,    December 31,
                                                                                       1998           1997
                                                                                    ----------    ------------
                                                                                    (unaudited)

                                 Assets
<S>                                                                              <C>             <C>    

Current Assets:
     Cash and cash equivalents ...............................................   $  3,425,000    $  8,391,000
     Accounts receivable, less allowance for doubtful accounts of $1,088,000
         at March 31, 1998 and $799,000 at December 31, 1997, respectively ...     21,424,000      17,668,000
     Unbilled services .......................................................      9,339,000       7,834,000
     Deferred income taxes ...................................................        404,000         404,000
     Other current assets ....................................................      1,164,000         668,000
                                                                                 ------------    ------------

         Total current assets ................................................     35,756,000      34,965,000
Equipment, net ...............................................................      5,153,000       3,366,000
Other assets .................................................................      1,219,000         337,000
                                                                                 ------------    ------------
                                                                                 $ 42,128,000    $ 38,668,000
                                                                                 ============    ============

                  Liabilities and Shareholders' Equity
Current Liabilities:
     Accounts payable ........................................................   $  1,974,000    $  1,353,000
     Accrued payroll and related taxes .......................................      3,076,000       2,636,000
     Accrued expenses and other liabilities ..................................      1,605,000       1,074,000
     Income taxes payable ....................................................        697,000         901,000
     Current portion of obligations under capital leases .....................         20,000          20,000
                                                                                 ------------    ------------

         Total current liabilities ...........................................      7,372,000       5,984,000
                                                                                 ------------    ------------
Obligations under capital leases, less current portion .......................         51,000          51,000
                                                                                 ------------    ------------

Deferred income taxes ........................................................        171,000         171,000
                                                                                 ------------    ------------

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;
         12,022,498 and 11,987,981 shares issued and outstanding at
         March 31, 1998 and December 31, 1997, respectively ..................        120,000         120,000
     Additional paid-in capital ..............................................     30,477,000      30,175,000
     Retained earnings .......................................................      4,167,000       2,325,000
     Currency translation adjustments ........................................       (230,000)       (158,000)
                                                                                 ------------    ------------
         Total shareholders' equity ..........................................     34,534,000      32,462,000
                                                                                 ------------    ------------
                                                                                 $ 42,128,000    $ 38,668,000
                                                                                 ============    ============

                                    See accompanying notes to consolidated financial statements.

</TABLE>

                                                               - 2 -
<PAGE>


<TABLE>

                                                INTELLIGROUP, INC. AND SUBSIDIARIES

                                     CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                                         For the Three Months Ended March 31, 1998 and 1997
                                                            (unaudited)
<CAPTION>

                                                                                     Three Months Ended March 31,
                                                                                         1998            1997
                                                                                     ------------    -----------

<S>                                                                                  <C>             <C>        
Revenue ..........................................................................   $ 27,323,000    $15,738,000

Cost of sales ....................................................................     17,943,000     11,336,000
                                                                                     ------------    -----------

     Gross profit ................................................................      9,380,000      4,402,000

Selling, general and administrative expenses                                            6,891,000      3,086,000
                                                                                      -----------    -----------

     Operating income ............................................................      2,489,000      1,316,000

Interest income ..................................................................         80,000         79,000
                                                                                     ------------    -----------

Income before provision for income taxes .........................................      2,569,000      1,395,000

Provision for income taxes .......................................................        727,000        558,000
                                                                                     ------------    -----------

Net income .......................................................................   $  1,842,000    $   837,000
                                                                                     ============    ===========

Earnings per share:

     Basic earnings per share:
          Net income per share ...................................................   $       0.15    $      0.08
                                                                                     ============    ===========

          Weighted average number of common shares - Basic .......................     11,997,000     10,736,000
                                                                                     ============    ===========

     Diluted earnings per share:
          Net income per share ...................................................   $       0.15    $      0.08
                                                                                     ============    ===========

          Weighted average number of common shares - Diluted .....................     12,419,000     10,889,000
                                                                                     ============    ===========

Comprehensive Income
--------------------
Net income .......................................................................   $  1,842,000    $   837,000

Other comprehensive income -
Currency translation adjustments .................................................        (72,000)            --
                                                                                     ------------    -----------

Comprehensive income .............................................................   $  1,770,000    $   837,000
                                                                                     ============    ===========

</TABLE>

                                                               - 3 -
<PAGE>
<TABLE>
                                                 INTELLIGROUP, INC. AND SUBSIDIARIES

                                                CONSOLIDATED STATEMENTS OF CASH FLOWS
                                         For the Three Months Ended March 31, 1998 and 1997
                                                             (unaudited)
<CAPTION>

                                                                                         March 31,             March 31,
                                                                                           1998                  1997
                                                                                      -------------         -------------
<S>                                                                                   <C>                   <C>    
Cash flows from operating activities:
     Net income...................................................................... $   1,842,000         $     837,000
     Adjustments to reconcile net income to net cash
         used in operating activities:
         Depreciation and amortization................................................      195,000                56,000
         Provision for doubtful accounts..............................................      250,000                    --
     Changes in operating assets and liabilities:
         Accounts receivable..........................................................   (4,006,000)            1,647,000
         Unbilled services............................................................   (1,505,000)           (3,113,000)
         Other current assets.........................................................     (496,000)             (137,000)
         Other assets.................................................................     (882,000)             (149,000)
         Accounts payable.............................................................      621,000               247,000
         Accrued payroll and related taxes............................................      440,000               265,000
         Accrued expenses and other liabilities.......................................      531,000              (720,000)
         Income taxes payable......................................................        (204,000)              (31,000)
                                                                                      --------------        --------------
             Net cash used in operating activities.................................      (3,214,000)           (1,098,000)
                                                                                      --------------        -------------

Cash flows from investing activities:
     Purchase of equipment........................................................       (1,982,000)           (1,047,000)
                                                                                      --------------        -------------

Cash flows from financing activities:
     Proceeds from exercise of stock options..........................................      302,000                    --
     Principal payments under capital leases.......................................              --                (4,000)
                                                                                      -------------         -------------
             Net cash provided by (used in) financing activities...................         302,000                (4,000)
                                                                                      -------------         -------------
     Effect of foreign currency exchange rate changes on cash......................         (72,000)                   --
                                                                                      --------------        -------------
             Net decrease in cash and cash equivalents ...............................   (4,966,000)           (2,149,000)
Cash and cash equivalents at beginning of period...................................       8,391,000             7,479,000
                                                                                      -------------         -------------
Cash and cash equivalents at end of period............................................  $ 3,425,000         $   5,330,000
                                                                                        ===========         =============

Supplemental disclosures of cash flow information:

     Cash paid for income taxes.......................................................  $   933,000         $     586,000
                                                                                        ===========         =============


                                    See accompanying notes to consolidated financial statements.

</TABLE>

                                                               - 4 -
<PAGE>



                       INTELLIGROUP, INC. and SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)


(1) BASIS OF PRESENTATION

         The  consolidated   financial  statements  and  accompanying  financial
information  as of March 31, 1998 and for the three  months ended March 31, 1998
and  1997  are  unaudited  and,  in  the  opinion  of  management,  include  all
adjustments  (consisting only of normal recurring adjustments) which the Company
considers  necessary for a fair  presentation  of the financial  position of the
Company  at such  dates  and the  operating  results  and cash  flows  for those
periods.  The  financial  statements  included  herein  have  been  prepared  in
accordance with generally accepted accounting principles and the instructions of
Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and
footnote  disclosures  normally  included in  financial  statements  prepared in
accordance with generally accepted accounting  principles have been condensed or
omitted.  These  financial  statements  should be read in  conjunction  with the
Company's  audited  financial  statements  for the year ended December 31, 1997,
which were included as part of the Company's Form 10-KSB.

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

(2) EARNINGS PER SHARE

         In 1997,  the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial  Accounting Standards No. 128 "Earnings per Share" ("SFAS
128") which has replaced  the former rules for earnings per share  computations,
presentation  and disclosure.  Under the new standard,  basic earnings per share
excludes  dilution  and 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.

         The Company has adopted SFAS 128 and, as required by the standard,  has
restated all prior period  earnings per share data.  The  Company's new earnings
per share amounts as calculated under SFAS 128 are not materially different from
those computed under the former accounting standard.

                                     - 5 -
<PAGE>

         A   reconciliation   of  weighted   average  number  of  common  shares
outstanding to weighted average common shares  outstanding  assuming dilution is
as follows as of March 31-

                                                      1998               1997
                                                      ----               ----
Weighted average number of common shares           11,997,000         10,736,000
Common share equivalents of outstanding               422,000            153,000
stock options                                      ----------         ----------

Weighted average number of common shares           12,419,000         10,889,000
assuming dilution                                  ==========         ==========

         Stock options  outstanding at March 31, 1998 to purchase  30,000 shares
of common  stock were not  included in the  computation  of  earnings  per share
assuming  dilution  because the options'  exercise  prices were greater than the
average price of the common shares.

(3) COMPREHENSIVE INCOME

         Effective  January 1, 1998, the Company  adopted the provisions of SFAS
No. 130,  "Reporting  Comprehensive  Income,"  which  establishes  standards for
reporting comprehensive income and its components. In June 1997, the FASB issued
SFAS  No.  131,  "Disclosures  about  Segments  of  an  Enterprise  and  Related
Information,"  which establishes  revised reporting and disclosure  requirements
for operating segments. These standards increase financial reporting disclosures
and  have  no  impact  on the  Company's  financial  position  or  results  from
operations.

(4) LEGAL PROCEEDINGS

         The Company is engaged in certain legal and administrative proceedings.
Management  believes the outcome of these  proceedings  will not have a material
adverse effect on the Company's financial position or results of operations.



                                     - 6 -
<PAGE>


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

GENERAL

         The Company provides a wide range of information  technology  services,
including  enterprise-wide  business process  solutions,  internet  applications
services,  systems integration and custom software  development based on leading
technologies.  The Company has grown rapidly since 1994 when it made a strategic
decision  to  diversify  its  customer  base  by  expanding  the  scope  of  its
integration  and  development  services and to utilize SAP software as a primary
tool to implement  enterprise-wide  business  process  solutions.  In 1995,  the
Company became a SAP National  Implementation  Partner and also began to utilize
Oracle  products  to  diversify  its  service  offerings.  In 1997,  the Company
achieved  National Logo Partner status with SAP. The Company's  current contract
with SAP expires on December 31, 1998 and  provides  for an  automatic  one-year
renewal  period  unless  either party  provides at least six weeks prior written
notice of its intention not to renew. This agreement contains no minimum revenue
requirements or cost sharing  arrangements  and does not provide for commissions
or royalties to either party. In July 1997, the Company achieved  AcceleratedSAP
Partner Status with SAP by meeting certain performance  criteria  established by
SAP.  Also,  in 1997,  the Company began to provide  implementation  services to
PeopleSoft and Baan licensees to further  diversify its service  offerings.  The
Company  recently  expanded  its  Oracle  applications  implementation  services
practice and added  upgrade  services to meet market demand of mid-size to large
companies that are implementing or upgrading Oracle applications.  In July 1997,
the Company was awarded an implementation  partnership status by PeopleSoft.  In
September 1997, the Company was awarded an international  consulting partnership
status by Baan.

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

         The Company recently has provided services on certain projects in which
it, at the  request  of the  clients,  offered a fixed  price for its  services,
however, none of these projects is currently material to the Company's business,
financial condition and results of operations.  The Company believes that, as it
pursues its strategy of making  turnkey  project  management a larger portion of
its  business,  it will likely be  required  to offer fixed price  projects to a
greater  degree.  The Company has had limited  prior  experience  in pricing and
performing  under fixed price  



                                     - 7 -
<PAGE>

arrangements  and believes that there are certain risks related  thereto.  There
can be no  assurance  that the Company  will be able to complete  such  projects
within 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 three months ended March 31, 1998 and the year ended December
31, 1997, the Company's ten largest customers  accounted for in the aggregate of
approximately 45% and 54% of its revenue, respectively.  During the three months
ended  March  31,  1998,  Bristol-Myers  Squibb  accounted  for more than 10% of
revenue.  During the year ended  December 31,  1997,  Price  Waterhouse  LLP and
Bristol-Myers  Squibb each accounted for more than 10% of revenue. For the three
months ended March 31, 1998 and the year ended December 31, 1997, 35% and 38% of
the Company's  revenue was generated by serving as a member of consulting  teams
assembled by other  information  technology  consulting  firms.  There can be no
assurance that such  information  technology  consulting  firms will continue to
engage the  Company in the future at  current  levels of  retention,  if at all.
During the three  months  ended March 31, 1998 and the year ended  December  31,
1997, 68% of the Company's  total revenue was derived from projects in which the
Company  implemented  software  developed by SAP.  During the three months ended
March 31, 1998 and the year ended December 31, 1997, 14% of the Company's  total
revenue was derived  from  projects  in which the Company  implemented  software
developed by Oracle. During the three months ended March 31, 1998, approximately
42% of the Company's  revenue was derived from  engagements in which the Company
had project management  responsibilities,  compared to 33% during the year ended
December 31, 1997.

         The Company's  most  significant  cost is project  personnel  expenses,
which consist of consultant  salaries,  benefits and  payroll-related  expenses.
Thus, the Company's financial performance is based primarily upon billing margin
(billable  hourly rate less the cost to the Company of a consultant on an hourly
basis) and personnel  utilization  rates (billable hours divided by paid hours).
The Company believes that turnkey project management assignments typically carry
higher  margins.  The Company has been  shifting to such  higher-margin  turnkey
management  assignments and more complex  projects by leveraging its reputation,
existing capabilities, proprietary implementation methodology, development tools
and offshore development  capabilities with expanded sales and marketing efforts
and new service  offerings to develop turnkey project sales  opportunities  with
both new and existing  customers.  The Company's inability to continue its shift
to higher-margin  turnkey  management  assignments and more complex projects may
adversely impact the Company's future growth.

         Since late 1994,  the Company has made  substantial  investments in its
infrastructure in order to support its rapid growth.  For example,  in 1994, the
Company  established  and funded an Advanced  Development  Center (the "ADC") in
India, and in 1995 established a sales office in California.  In addition,  from
1994  to  date,  the  Company  has  incurred  expenses  to  develop  proprietary
development  tools  and  4SIGHT  and  4SIGHTplus,  its  proprietary  accelerated
implementation methodology and toolset. Commencing in 1995, the Company has been
increasing  its  sales  force  and  its  marketing,   finance,   accounting  and
administrative  staff.  The 


                                     - 8 -
<PAGE>

Company employed 144 such personnel as of March 31, 1998, as compared to 59 such
personnel  as of March 31,  1997.  During  1997,  the Company  opened  sales and
operations  offices in Atlanta,  Boston and  Dallas.  In addition to the ADC and
sales offices in India, the Company also has offices in, Australia, Denmark, New
Zealand, Singapore and the United Kingdom. The Company has reviewed the adequacy
of its  leased  facilities  in light of its  expanded  staff.  The  Company  has
executed a lease for approximately 48,475 square feet, in Edison, New Jersey for
an initial term of 10 years.  The Company  expects to move its  headquarters  to
such  location in the summer of 1998.  The Company  expects to be able to sublet
its current  headquarters  for the remainder of the term of its sublease,  which
expires November 15, 1999; however,  there is no assurance that the Company will
be able to find a subtenant.

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




                                     - 9 -
<PAGE>


Results of Operations

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

<TABLE>
<CAPTION>
                                                                                       Percentage of Revenue
                                                                                    Three Months Ended March 31,
                                                                                      1998               1997
                                                                                      ----               ----
<S>                                                                                  <C>                <C>   
Revenue......................................................................           100%              100.0%
Cost of sales................................................................           65.7               72.0
                                                                                     -------            -------
    Gross profit.............................................................           34.3               28.0
Selling, general and administrative expenses.................................           25.2               19.6
                                                                                     -------            -------
    Operating income.........................................................            9.1                8.4
Interest income..............................................................            0.3                0.5
                                                                                     -------            -------
Income before provision for income taxes.....................................            9.4                8.9
Provision for income taxes...................................................            2.7                3.6
                                                                                     -------            -------
Net income                                                                               6.7%               5.3%
                                                                                     =======            =======
</TABLE>

Three Months Ended March 31, 1998 Compared to Three Months Ended March 31, 1997

         Revenue.  Revenue  increased  by 73.9%,  or $11.6  million,  from $15.7
million during the three months ended March 31, 1997 to $27.3 million during the
three months ended March 31, 1998. This increase was  attributable  primarily to
increased  demand  for  the  Company's  SAP-related   implementation  consulting
services and, to a lesser extent,  to increased demand for the Company's systems
integration and custom software development services.

         Gross profit.  The Company's cost of sales includes  primarily the cost
of salaries to consultants and related employee  benefits and payroll taxes. The
Company's cost of sales  increased by 58.4%,or $6.6 million,  from $11.3 million
during the three months ended March 31, 1997 to $17.9  million  during the three
months ended March 31, 1998. The increase was due to increased  personnel  costs
resulting  from the hiring of additional  consultants to support the increase in
demand for the  Company's  services.  The  Company's  gross profit  increased by
113.6%,  or $5.0 million,  from $4.4 million during the three months ended March
31, 1997 to $9.4 million  during the three  months  ended March 31, 1998.  Gross
profit  margin  increased  from 28.0% of revenue  during the three  months ended
March 31, 1997 to 34.3% of revenue during the three months ended March 31, 1998.
The increase in such gross  profit  margin was  attributable  to the increase in
implementation  service  projects,  an  increase in  utilization  of the ADC and
improved billing margins.

         Selling,  general and  administrative  expenses.  Selling,  general and
administrative  expenses consist  primarily of  administrative  salaries,  sales
personnel compensation,  travel and entertainment,  some of the costs associated
with the ADC and  related  development  costs and  professional  fees.  Selling,
general and administrative  expenses increased by 122.6%, or $3.8 million,  from
$3.1 million during the three months ended March 31, 1997 to $6.9 million during
the three months ended March 31, 1998,  and increased as a percentage of revenue
from 19.6% to 25.2% of  revenue.  The  increases  in such  expenses  in absolute
dollars and as a percentage  of 


                                     - 10 -
<PAGE>

revenue were due primarily to the expansion of the Company's sales and marketing
activities, and increased travel and entertainment expenses due to the growth of
the business and the employee base.  These expenses were incurred to support the
continued  revenue  growth of the Company in the United  States and  abroad.  In
addition,  such  expenses  increased  due  to  increased  sales  and  management
recruiting costs, support services and an increase in the provision for doubtful
accounts.

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

Backlog

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

Liquidity and Capital Resources

         The Company funds its  operations  primarily  from cash flow  generated
from operations,  and to a lesser extent,  from cash balances generated from the
Company's initial and follow-on public offerings consummated in October 1996 and
July 1997, respectively.

         Cash used in operating  activities  was $3.2  million  during the three
months ended March 31,  1998,  resulting  primarily  from the growth in accounts
receivable  and unbilled  services.  Cash used in operating  activities  for the
three months ended March 31, 1997 was $1.1 million.

         The Company had working  capital of $28.4 million at March 31, 1998 and
$29.0 million at December 31, 1997.

         The  Company  invested  $2.0  million  and  $1.0  million  in  computer
equipment and  furniture  during the three months ended March 31, 1998 and 1997,
respectively.  The Company has  outstanding  commitments of $800,000  related to
furniture and fixtures for the new headquarters in Edison,  New Jersey.  Of this
amount, $200,000 was paid subsequent to March 31, 1998.

         In January 1997,  and as later amended on August 18, 1997,  the Company
entered into a two-year  credit  agreement with a bank (the "Bank").  The credit
facility with the Bank has two  components  comprised of (i) a revolving line of
credit pursuant to which the Company may 


                                     - 11 -
<PAGE>

borrow up to $7.5  million  either  at the  Bank's  prime  rate per annum or the
EuroRate  plus 2% (at the  Company's  option),  and (ii)  equipment  term  loans
pursuant to which the Company may borrow up to an  aggregate of $350,000 (at the
Bank's  prime rate plus 1/4 of 1% per annum) to purchase  equipment.  The credit
agreement  contains  covenants  which  require the Company to (i)  maintain  its
working  capital  during the year at no less than 90% of the working  capital at
the end of the immediately  preceding  fiscal year and at the end of each fiscal
year at no less than 105% of its working  capital at the end of the  immediately
preceding  fiscal year; and (ii) maintain its tangible net worth during the year
at no less  than 95% of its  tangible  net  worth at the end of the  immediately
preceding fiscal year and at the end of each fiscal year at no less than 108% of
tangible net worth at the end of the  immediately  preceding  fiscal year. As of
March 31, 1998, the Company is in compliance with debt covenants.  The Company's
obligations  under the credit agreement are  collateralized by substantially all
of the Company's  assets,  including its accounts  receivable  and  intellectual
property. The Company's obligations under the credit facility are payable at the
expiration of such facility on January 22, 1999.  These terms are subject to the
Company  maintaining  an  unsubordinated  debt to tangible net worth ratio of no
greater  than one to one and an earnings  before  interest and taxes to interest
expense ratio of no less than three to one.

         As of March 31,  1998,  there  were no  amounts  outstanding  under the
revolving line of credit and no equipment term loans outstanding.

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




                                     - 12 -
<PAGE>

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings.

         On February 16, 1996, the Company,  as plaintiff,  filed a complaint in
the Superior Court of New Jersey, Chancery Division, Middlesex County, against a
former  consultant  to the Company,  seven  former  employees of the Company and
Pegasus Systems, Inc. ("Pegasus"), a corporation which currently employs certain
of such individuals (collectively, the "Defendants"). The complaint, which seeks
damages and  injunctive  relief  against the  Defendants,  alleges,  among other
things,   misappropriation  of  proprietary  information,   unfair  competition,
tortious interference,  breach of employment agreements,  breach of a consulting
agreement between the Company and Pegasus,  and breach of duty of loyalty,  good
faith and fair dealing. Upon the filing of its complaint, the Company obtained a
temporary  restraining  order and in May 1996 obtained a preliminary  injunction
prohibiting  the Defendants  from using or disclosing the Company's  proprietary
information, prohibiting the Defendants from contacting or soliciting certain of
the Company's  customers  and  prohibiting  the  Defendants  from  recruiting or
attempting  to recruit  the  Company's  employees,  agents or  contractors.  The
preliminary  injunction  remains  in effect  and the  Company  intends to pursue
vigorously enforcement of the injunction against the Defendants.  The Defendants
have filed an answer and counterclaim. Pegasus has asserted a breach of contract
counterclaim  against the Company alleging that the Company owes it $129,000 for
consulting services.  Pegasus and two of the individual Defendants also asserted
claims against the Company and two of its officers for tortious interference and
defamation.  In addition, one of the individual Defendants has asserted that the
Company  owes him $70,000 in  commissions.  In addition to monetary  damages the
Defendants  seek  injunctive  relief.  The  Defendants  unsuccessfully  sought a
temporary  restraining  order  against  the  Company.  The  Company  denies  the
allegations made and intends to defend vigorously the counterclaims. The Company
does not believe that the outcome of these claims and counterclaims  will have a
material effect upon the Company's  business,  financial condition or results of
operations.

         Oxford Systems Inc. ("Oxford"), a New Jersey corporation and formerly a
wholly-owned  subsidiary  of the  Company  which was merged  into the Company in
December 1996,  was named as a defendant in a civil  complaint that was filed on
June 8, 1995, by Design Strategy Corp.  ("Design  Strategy"),  in New York State
Supreme Court in the County of New York.  Design  Strategy  alleges that another
named defendant, Citibank N.A. ("Citibank"), contracted with Design Strategy for
database  administration  services.  Design  Strategy  claims that  Citibank and
Oxford  conspired  to  deprive it of  commissions,  tortiously  interfered  with
contract,   engaged  in  unfair   competition,   damaged  its   reputation   and
misappropriated  services.  Design Strategy settled its claims against Citibank.
Design  Strategy then moved to amend its complaint to substitute the Company for
Oxford  and  to  join  Nagarjun   Valluripalli,   the  Company's   President  of
International  Operations,  as defendants.  At the same time, Oxford and another
defendant  cross-moved for summary judgment.  Thereafter,  on September 9, 1997,
the New York State  Supreme Court granted  Design  Strategy's  motion to add the
Company and Mr.  Valluripalli as defendants  while  simultaneously  granting the
Company's  cross-motion for summary  judgment.  On September 18, 1997, the Court
entered a decision  and order  dismissing  Design  Strategy's  complaint  in its
entirety.  Subsequently,  on October 17, 1997, Design Strategy filed a notice of
motion of  reargument  of the  Decision  and a notice of  appeal.  The appeal is
currently  scheduled to be heard 


                                     - 13 -
<PAGE>

in June 1998. The Company does not believe that the outcome of these claims will
have a material  effect upon the  Company's  business,  financial  condition  or
results of operations.

         On  February  13,  1998,  Russell  Schultz,  a former  employee  of the
Company,  filed a complaint in the Superior  Court of New Jersey,  Law Division,
Monmouth County, naming the Company as a defendant.  The complaint,  which seeks
damages,   alleges,   among  other  things,  that  the  Company   misrepresented
plaintiff's  job  description  in order to induce  plaintiff  to leave his prior
employer,  failed  to  provide  stock  options  to the  plaintiff  and  violated
plaintiff's  written  employment  contract.  The  Company  was  served  with the
complaint  on March 16,  1998,  and is still in the  process of  evaluating  the
merits of the claims.  The Company has obtained an extension of time in which to
file an answer to the plaintiff's  complaint.  It is too early in the litigation
process to determine the impact, if any, that such litigation will have upon the
Company's business, financial condition or results of operations.

         There is no other material litigation pending to which the Company is a
party or to which any of its property is subject.


Item 5.  Other Information.

         On February 27, 1998,  Robert M.  Olanoff  resigned as Chief  Financial
Officer and as an employee of the Company.

         On March 31, 1998,  Sophien Bennaceur resigned as Senior Vice President
- North American Operations and as an employee of the Company.

         On April 29, 1998,  Stephen A. Carns was appointed  President and Chief
Executive  Officer of the Company.  Mr. Carns, 52, has approximately 30 years of
executive management  experience in professional  services companies.  He joined
the Company as General Manager in 1998. From 1995 until joining the Company, Mr.
Carns served as  President of TLB  Enterprises,  LLC.  Prior to that,  from 1994
until 1995, Mr. Carns served as Executive Vice President of Unisys  Corporation,
responsible  for world wide  operations at Unisys  Corporation . From 1992 until
1994, Mr. Carns served as President and Chief Operating  Officer of Systematics,
Inc., an international outsourcing firm. Prior to joining Systematics, from 1990
until 1992,  he served as President  and Chief  Operating  Officer of Cap Gemini
America, a computer services and business consultancy company.

         On April 29, 1998, Gerard E. Dorsey was appointed Senior Vice President
- Finance and Chief  Financial  Officer of the Company.  Mr. Dorsey,  51, has 25
years of CFO, treasury and accounting  experience.  Most recently,  he served as
Senior Vice  President-Finance and Chief Financial Officer of Ariel Corporation,
a data  communications  company.  Prior to joining Ariel Corporation,  from 1991
until  1995,  Mr.  Dorsey  served  as Chief  Financial  Officer  of  Information
Management Technologies Corporation,  a printing and office services outsourcing
company.   From  1987  until  1990,  Mr.Dorsey  served  as  Treasurer  of  Loral
Corporation.

         At  the  same  time,  Ashok   Pandey,  Rajkumar  Koneru   and  Nagarjun
Valluripalli  were named as Co-Chairmen of the Board.  Mr. Pandey will no longer
serve as President of Corporate Services and Acting Chief Financial Officer, but
instead, will be responsible for strategic 


                                     - 14 -
<PAGE>

planning, market research and methods and tools. Mr. Koneru will no longer serve
as  President  of  U.S.  Operations,   but  instead,   will  manage  application
outsourcing,  new  business  development  and  mergers  and  acquisitions.   Mr.
Valluripalli will continue to serve as President of International Operations.

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

         (a)      Exhibits.

                  10.1     Lease Agreement between  Alfieri-Parkway  Associates,
                           as Landlord and Intelligroup, Inc., as Tenant,  dated
                           March 17, 1998.

                  10.2     Employment Agreement dated April 22, 1998 between the
                           Company and Gerard E. Dorsey.

                  10.3     Employment Agreement dated April 27, 1998 between the
                           Company and Stephen A. Carns.

                  27.1     Financial  Data  Schedule for the  period ended March
                           31, 1998.
 
                  27.2     Restated  Financial  Data Schedule - EPS for the year
                           ended December 31, 1997.

                  27.3     Restated Financial Data Schedule - EPS for the period
                           ended September 30, 1997.

                  27.4     Restated Financial Data Schedule - EPS for the period
                           ended June 30, 1997.

                  27.5     Restated Financial Data Schedule - EPS for the period
                           ended March 31, 1997.

                  27.6     Restated  Financial  Data Schedule - EPS for the year
                           ended December 31, 1996.

                  27.7     Restated Financial Data Schedule - EPS for the period
                           ended September 30, 1996.

         (b)      Reports on Form 8-K.

                           No reports on Form 8-K were filed  during the quarter
                           for  which  this   report  on  Form  10-Q  is  filed.
                           Subsequent to the end of the quarter, however, on May
                           4, 1998,  the  Company  filed a report on Form 8-K to
                           disclose certain management changes.



                                     - 15 -
<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:      May 15, 1998                    By:      /s/ Stephen A. Carns
                                              --------------------------
                                           Stephen A. Carns,
                                           President and Chief Executive Officer
                                           (Principal Executive Officer)


DATE:      May 15, 1998                    By:      /s/ Gerard E. Dorsey
                                              --------------------------
                                           Gerard E. Dorsey,
                                           Senior Vice President - Finance 
                                           and Chief Financial Officer
                                           (Principal Financial and Accounting 
                                           Officer)





                                     - 16 -