SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                                    FORM 10-Q

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

                For the quarterly period ended September 30, 2001
                           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 November 13, 2001:

          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 September 30, 2001
            (unaudited) and December 31, 2000...........................      2

            Consolidated Statements of Operations and Comprehensive
            Income (Loss) for the Three Months and Nine Months Ended
            September 30, 2001 and 2000 (unaudited).....................      3

            Consolidated Statements of Cash Flows for the Nine Months
            Ended September 30, 2001 and 2000 (unaudited)...............      4

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

   Item 2.  Management's Discussion and Analysis of
            Financial Condition and Results of Operations...............     15

   Item 3.  Quantitative and Qualitative Disclosures About Market Risk..     28

PART II. OTHER INFORMATION

   Item 1.  Legal Proceedings............................................    29

   Item 4.  Submission of Matters to a Vote of Security Holders..........    30

   Item 6.  Exhibits and Reports on Form 8-K.............................    31

SIGNATURES...............................................................    32




                                      -i-
<PAGE>

                          PART I. FINANCIAL INFORMATION

                    Item 1. Consolidated Financial Statements



                                     - 1 -
<PAGE>

                       INTELLIGROUP, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                 AS OF SEPTEMBER 30, 2001 AND DECEMBER 31, 2000
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                            SEPTEMBER 30, 2001   DECEMBER 31, 2000
                                                            ------------------   -----------------
                     ASSETS
<S>                                                           <C>                  <C>
Current Assets:
  Cash and cash equivalents............................        $   1,914,000        $   1,327,000
  Accounts receivable, less allowance for doubtful
      accounts of $1,895,000 and $2,061,000 at
      September 30, 2001 and December 31, 2000,
      respectively.....................................           17,019,000           22,438,000
  Unbilled services....................................            5,856,000            5,933,000
  Prepaid income tax...................................              697,000              384,000
  Deferred tax asset...................................            1,348,000            1,348,000
  Other current assets.................................            5,874,000            5,530,000
  Note receivable - SeraNova...........................            9,140,000           11,200,000
                                                               -------------        -------------

        Total current assets...........................           41,848,000           48,160,000
  Property and equipment, net..........................            9,508,000            9,650,000
  Intangible assets, net...............................            4,390,000            4,732,000
  Other assets.........................................            7,128,000            4,826,000
                                                               -------------        -------------
                                                               $  62,874,000        $  67,368,000
                                                               =============        =============

         LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
  Accounts payable.....................................        $   4,394,000        $   6,849,000
  Accrued payroll and related taxes....................            5,582,000            6,480,000
  Accrued expenses and other liabilities...............            4,017,000            5,345,000
  Income taxes payable.................................              296,000              288,000
  Current portion of long term debt and obligations
      under capital leases.............................            6,573,000            5,623,000
                                                          .    -------------        -------------

         Total current liabilities.....................           20,862,000           24,585,000
Deferred tax liability.................................              692,000              545,000
                                                               -------------        -------------
Obligations under capital leases, less current portion.              455,000            1,037,000
                                                               -------------        -------------

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 September 30, 2001 and
      December 31, 2000................................              166,000              166,000
  Additional paid-in capital...........................           41,366,000           41,366,000
  Retained earnings....................................            2,420,000            1,908,000
  Currency translation adjustments.....................           (3,087,000)          (2,239,000)
                                                               -------------        -------------
        Total shareholders' equity ....................           40,865,000           41,201,000
                                                               -------------        -------------
                                                               $  62,874,000        $  67,368,000
                                                               =============        =============
</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 NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                        THREE MONTHS                    NINE MONTHS
                                                        ------------                    -----------
                                                     ENDED SEPTEMBER 30,            ENDED SEPTEMBER 30,
                                                     -------------------            -------------------
                                                    2001            2000            2001             2000
                                               -------------   -------------   -------------    -------------

<S>                                             <C>             <C>             <C>             <C>
Revenue....................................     $25,112,000     $27,599,000     $83,176,000     $ 84,340,000
Cost of sales..............................      16,471,000      18,159,000      55,983,000       55,834,000
                                                -----------     -----------     -----------     ------------
    Gross profit...........................       8,641,000       9,440,000      27,193,000       28,506,000
                                                -----------     -----------     -----------     ------------
Selling, general and administrative
expenses...................................       7,125,000       9,406,000      23,305,000       33,546,000
Depreciation and amortization..............         992,000         836,000       2,854,000        2,406,000
                                                -----------     -----------     -----------     ------------
    Total operating expenses...............       8,117,000      10,242,000      26,159,000       35,952,000
                                                -----------     -----------     -----------     ------------
    Operating income (loss)................         524,000        (802,000)      1,034,000       (7,446,000)
Other income (expense), net................         (31,000)        216,000         (42,000)         400,000
                                                -----------     -----------     -----------     ------------
Income (loss) from continuing operations
  before income tax provision (benefit)....         493,000        (586,000)        992,000       (7,046,000)
Provision (benefit) for income taxes.......         347,000         596,000         480,000         (865,000)
                                                -----------     -----------     -----------     ------------
Income (loss) from continuing operations...         146,000      (1,182,000)        512,000       (6,181,000)
Loss from discontinued operations, net of
  income tax benefit of $0, $0,
  $0 and $(2,095,000), respectively........              --              --              --       (4,891,000)
                                                -----------     -----------     -----------     ------------
Net income (loss) .........................     $   146,000     $(1,182,000)    $   512,000     $(11,072,000)
                                                ===========     ===========     ===========     ============

Earnings per share:
    Basic earnings per share:
        Income (loss) from continuing
         operations........................     $      0.01     $     (0.07)    $      0.03     $      (0.38)
        Discontinued operations............              --              --              --            (0.30)
                                                -----------     -----------     -----------     ------------
        Net income (loss) per share........     $      0.01     $     (0.07)    $      0.03     $      (0.68)
                                                ===========     ===========     ===========     ============
      Weighted average number of
      common shares - Basic................      16,630,000      16,630,000      16,630,000       16,441,000
                                                ===========     ===========     ===========     ============

    Diluted earnings per share:
        Income (loss) from continuing
         operations .......................     $      0.01     $     (0.07)    $      0.03     $      (0.38)
        Discontinued operations ...........              --              --              --            (0.30)
                                                -----------     -----------     -----------     ------------
        Net income (loss) per share........     $      0.01     $     (0.07)    $      0.03     $      (0.68)
                                                ===========     ===========     ===========     ============
      Weighted average number of
      common shares - Diluted..............      16,630,000      16,630,000      16,631,000       16,441,000
                                                ===========     ===========     ===========     ============

Comprehensive Income (Loss)
Net income (loss)..........................     $   146,000     $(1,182,000)    $   512,000     $(11,072,000)

Other comprehensive income (loss) -
      Currency translation adjustments.....          73,000        (708,000)       (848,000)        (842,000)
                                                -----------     -----------     -----------     ------------
Comprehensive income (loss)................     $   219,000     $(1,890,000)    $  (336,000)    $(11,914,000)
                                                ===========     ===========     ===========     ============
</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 NINE
                    MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                 NINE MONTHS ENDED SEPTEMBER 30,
                                                                 -------------------------------
                                                                      2001              2000
                                                                  -----------      -------------
<S>                                                               <C>              <C>
Cash flows from operating activities:
  Net income (loss)...........................................    $   512,000      $(11,072,000)
  Less: Loss from discontinued operations, net of tax.........             --        (4,891,000)
                                                                  -----------      ------------
  Income (loss) from continuing operations....................        512,000        (6,181,000)
  Adjustments to reconcile income (loss) from continuing
    operations to net cash provided by operating
    activities of continuing operations:
      Depreciation and amortization...........................      3,480,000         2,406,000
      Provision for doubtful accounts.........................      1,423,000         2,725,000
      Deferred income taxes...................................        147,000        (2,176,000)
  Changes in operating assets and liabilities:
    Accounts receivable.......................................      3,996,000         6,556,000
    Unbilled services.........................................         77,000         1,919,000
    Other current assets......................................       (657,000)         (147,000)
    Other assets..............................................        376,000          (290,000)
    Accounts payable..........................................     (2,455,000)        2,207,000
    Accrued payroll and related taxes.........................       (898,000)        4,017,000
    Accrued expenses and other liabilities....................     (1,328,000)          996,000
    Income taxes payable......................................          8,000        (2,634,000)
                                                                  -----------      ------------
  Net cash provided by operating activities of continuing
    operations................................................      4,681,000         9,398,000
                                                                  -----------      ------------

Cash flows from investing activities:
    Purchase of equipment ....................................     (2,996,000)       (2,443,000)
    Purchase of software licenses.............................     (2,678,000)       (2,996,000)
                                                                  -----------      ------------
  Net cash used in investing activities of continuing
    operations................................................     (5,674,000)       (5,439,000)
                                                                  -----------      ------------

Cash flows from financing activities:
  Principal payments under capital leases.....................       (434,000)          (19,000)
  Proceeds from exercise of stock options.....................             --         5,745,000
  Other borrowings (repayments)...............................        (90,000)           30,000
  Net change in line of credit borrowings.....................        892,000        (7,588,000)
  Net change in note receivable-SeraNova prior to
    spin-off date.............................................             --        (7,707,000)
  Repayment of note receivable-SeraNova subsequent to
    spin-off date.............................................      2,060,000         3,000,000
                                                                  -----------      ------------
    Net cash provided by (used in) financing activities of
      continuing operations...................................      2,428,000        (6,539,000)
                                                                  -----------      ------------
    Effect of foreign currency exchange rate changes on cash..       (848,000)       (1,184,000)
                                                                  -----------      ------------
Net cash provided by (used in) continuing operations .........        587,000        (3,764,000)
Net cash provided by discontinued operations .................             --           267,000
                                                                  -----------      ------------
Net increase (decrease) in cash and cash equivalents .........        587,000        (3,497,000)
Cash and cash equivalents at beginning of period..............      1,327,000         5,510,000
                                                                  -----------      ------------
Cash and cash equivalents at end of period....................    $ 1,914,000      $  2,013,000
                                                                  ===========      ============
Supplemental disclosures of cash flow information:
  Cash paid for income taxes..................................    $ 1,081,000      $  2,512,000
                                                                  ===========      ============
  Cash paid for interest......................................    $   581,000      $    409,000
                                                                  ===========      ============
</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  September  30, 2001 and for the three and nine months  ended
September  30, 2001 and 2000 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, 2000,
which were included as part of the Company's Form 10-K.

     On July 5, 2000, the Company  spun-off its Internet  applications  services
and management consulting businesses ("SeraNova").  This transaction resulted in
the distribution of SeraNova common stock to each holder of the Company's common
stock of  record  as of May 12,  2000.  As a  result  of this  transaction,  the
Consolidated  Financial Statements and related notes present the results of this
business as discontinued operations (See Note 4).

     As a result of the challenging  business  climate within the United Kingdom
("UK")  marketplace,  opportunities  within our UK operations have become highly
unpredictable  over the past 9  months.  As a  result,  our UK  operations  have
continued to produce significant  operating losses,  despite efforts to increase
revenue  and  control   expenditures.   The  Company  currently  estimates  that
undiscounted  future cash flows of the UK  operations  are in excess of the UK's
long-lived assets.  However, the Company is currently reviewing several options,
strategies and  alternatives to decrease its exposure in this region,  including
the  possibility  of winding down the UK  operations.  Based upon the outcome of
these options and alternatives,  it is reasonably  possible that the estimate of
undiscounted  cash  flows may change in the near term  resulting  in the need to
write-down certain of the UK assets,  including intangible assets,  deferred tax
assets and other long-lived assets, which have a carrying value of approximately
$5.2 million as of September 30, 2001.



                                     - 5 -
<PAGE>

NOTE 1 - BASIS OF PRESENTATION (CONTINUED)

     The Company's 2001 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 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 (loss) available to
common  shareholders by the weighted average number of common stock  outstanding
for the period.  Diluted earnings per share reflects the potential dilution that
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             Nine Months Ended
                                             ------------------             -----------------
                                               September 30,                  September 30,
                                               -------------                  -------------
                                             2001           2000           2001           2000
                                             ----           ----           ----           ----

<S>                                       <C>            <C>            <C>             <C>
Weighted average number of common
shares...............................     16,630,000     16,630,000     16,630,000      16,441,000

Common share equivalents of
outstanding stock options............             --             --          1,000              --
                                          ----------     ----------     ----------      ----------
Weighted average number of common
shares assuming dilution.............     16,630,000     16,630,000     16,631,000      16,441,000
                                          ==========     ==========     ==========      ==========
</TABLE>

     Stock options,  which would be antidilutive  (3,062,000 as of September 30,
2001),  have been excluded from the  calculations of diluted shares  outstanding
and diluted earnings per share.



                                     - 6 -
<PAGE>

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 September  30,  2001,  the Company had
outstanding  borrowings  under the credit  facility of  $5,905,000.  The Company
estimates undrawn  availability under the credit facility to be $5,080,000 as of
September  30,  2001.  As of December  31,  2000,  the  Company had  outstanding
borrowings under the credit facility of $5,013,000.

     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 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  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 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  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 regards to the financial
condition  of the assets,  liabilities  and  operations  of the  Company.  As of
September 30, 2001, the Company was in compliance with all financial covenants.

     Interest expense on debt and obligations under capital leases  approximated
$581,000 and $409,000  for the nine months  ended  September  30, 2001 and 2000,
respectively.

NOTE 4 - DISCONTINUED OPERATIONS

     In November  1999,  the Company  announced  its  intentions to spin off its
Internet  applications  services and management  consulting  business subject to
certain  approvals and conditions.  On January 1, 2000, the Company  transferred
its Internet  applications  services and  management  consulting  businesses  to
SeraNova, a wholly-owned subsidiary of the Company on such date.



                                     - 7 -
<PAGE>

NOTE 4 - DISCONTINUED OPERATIONS (CONTINUED)

     On July 5, 2000, the Company completed the tax-free spin-off of SeraNova by
distributing 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.  SeraNova  represented  a  significant
segment of the Company's business.

     Pursuant to APB  Opinion No. 30,  "Reporting  the Results of  Operations  -
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently  Occurring Events and  Transactions,"  the Consolidated
Financial  Statements  of the  Company  have been  reclassified  to reflect  the
spin-off of SeraNova.  Accordingly,  the results of operations and cash flows of
SeraNova have been segregated in the  Consolidated  Statements of Operations and
Consolidated  Statements of Cash Flows.  The net operating  results and net cash
flows  of  SeraNova  have  been  reported  as  "Discontinued   Operations."  The
historical  carrying  amount of the net assets of SeraNova on the spin-off  date
has been recorded as a stock dividend.

     The  following is summarized  financial  information  for the  discontinued
operations of SeraNova:

                                           APRIL 1, 2000 TO   JANUARY 1, 2000 TO
                                             JULY 5, 2000        JULY 5, 2000
                                           ----------------   ------------------

 Revenue................................    $  19,843,000       $  36,019,000
 Pre-tax loss...........................       (2,797,000)         (6,986,000)
 Income tax benefit.....................         (985,000)         (2,095,000)
 Loss from discontinued operations......       (1,812,000)         (4,891,000)

                                             JULY 5, 2000
                                             ------------
 Current assets.........................    $  25,319,000
 Total assets...........................       36,874,000
 Note payable to Intelligroup...........       15,059,000
 Current liabilities....................        9,173,000
 Total liabilities......................       26,170,000
 Net assets of discontinued operations..       10,704,000


NOTE 5 - NOTE RECEIVABLE - SERANOVA

     On May  31,  2000,  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  and
$803,000 as of  September  30, 2001 and December  31,  2000,  respectively.  The
Company  has not  recorded  any  accrued  interest  on the  balance  of the Note
subsequent to the maturity  date of July 31, 2001.  On September  29, 2000,  the
Company received a $3,000,000 payment from SeraNova.




                                     - 8 -
<PAGE>

NOTE 5 - NOTE RECEIVABLE - SERANOVA (CONTINUED)

     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.

     During  the first  nine  months of 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.  In the event the
Company accepts a payment in less than full satisfaction of the $10,080,000 due,
the Company will record a charge against earnings for such difference.  Although
management believes they are entitled to the entire $10,080,000  balance,  there
can be no assurance that SeraNova and/or  Silverline will pay the entire balance
due the Company. In addition,  SeraNova 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 $5,000,000 and punitive damages in the
amount of  $10,000,000.  The Company  believes that there is no basis to support
such amounts claimed by SeraNova.




                                     - 9 -
<PAGE>

NOTE 6 - GRANT RECEIVABLE FROM THE GOVERNMENT OF PUERTO RICO

     In June 2000,  the Company  announced an agreement  with the  Government of
Puerto Rico, in conjunction with the Puerto Rico Industrial  Development Company
("PRIDCO"),  to  locate a new  technology  development  center  in  Puerto  Rico
("PR-ADC").  The  agreement  provided for  substantial  incentive  grants to the
Company, totaling approximately $9.0 million, contingent upon the employment and
training of up to 500 Puerto Rican technology  professionals  over the course of
three  years at the PR-ADC.  In mid 2000,  the Company  began  constructing  the
building, acquiring the necessary furniture, fixtures and equipment and engaging
in sales,  marketing and other administrative  activities to support the PR-ADC.
Accordingly, the Company has recorded an asset for the costs of these activities
and had requested  reimbursement  from the  Government  of Puerto Rico,  through
PRIDCO in accordance with its contractual right.

     During the second  quarter of 2001,  the Company  found that  processing of
reimbursement requests, previously submitted by the Company to PRIDCO, was being
delayed.  Upon inquiry to PRIDCO,  the Company was  verbally  advised that there
were certain  concerns  raised  within  PRIDCO about the delayed  opening of the
PR-ADC, and about the Company's adherence to other commitments  contained within
the grant  documents.  After  repeated  inquiries  by the  Company,  the Company
received a letter from PRIDCO's  counsel in July 2001,  stating that the Company
was not in compliance with certain terms of the agreements,  although  specifics
were not provided. During the period from July through October 2001, the Company
met and  corresponded  with PRIDCO  representatives  on multiple  occasions,  to
determine the source of their concerns and seek appropriate resolution.

     On November 2, 2001, the general  counsel for PRIDCO notified the Company's
attorney  advising  that PRIDCO was amenable to an amicable  termination  of the
agreements,  and would work with the  Company to close out  certain  outstanding
issues,  including the resolution of the litigation with Fe-Ri Construction (see
Part II, Item 1, Legal Proceedings).

     The Company has determined that this resolution is reasonable,  and has the
least  detrimental  effect  on the  Company's  continuing  endeavors,  including
opportunities  for  additional  business  within  Puerto  Rico.  The  Company is
negotiating  with PRIDCO to work out a definitive  agreement for  termination of
the PR-ADC  project.  As of September  30, 2001,  the Company has recorded  $1.7
million in other  current  assets  related to the  PR-ADC.  Although  management
believes they are entitled to be reimbursed the entire $1.7 million from PRIDCO,
there can be no  assurance  that the  negotiations  will  result in the  Company
collecting the amount. If the Company were to collect less than $1.7 million, it
would record a charge to expense for any difference.




                                     - 10 -
<PAGE>

NOTE 7 - RESTRUCTURING AND OTHER SPECIAL CHARGES

     In connection with the Company's plan to reduce costs and improve operating
efficiencies,  the Company incurred a non-recurring charge of $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.


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

<TABLE>
<CAPTION>
                                                COSTS        ACCRUED        COST        ACCRUED        COST        ACCRUED
                               CHARGES TO       PAID          COSTS         PAID         COSTS         PAID         COSTS
                               OPERATIONS      DURING      DECEMBER 31,    DURING     DECEMBER 31,    DURING      SEPTEMBER
                                 IN 1999        1999          1999          2000         2000          2001        30, 2001
                               ----------      ------      ------------    ------     ------------    ------      ---------

<S>                           <C>             <C>            <C>          <C>           <C>           <C>          <C>
Severance and related
  costs....................   $ 5,027,000     $4,162,000     $865,000     $608,000      $257,000      $257,000     $    --
Other costs primarily to
  exit facilities,
  contracts, and certain
  activities...............       601,000        517,000       84,000           --        84,000        20,000      64,000
                              -----------    -----------     --------     --------      --------      --------     -------
                              $ 5,628,000     $4,679,000     $949,000     $608,000      $341,000      $277,000     $64,000
                              ===========     ==========     ========     ========      ========      ========     =======
</TABLE>

NOTE 8 - SEGMENT DATA AND GEOGRAPHIC INFORMATION

     The  Company  operates  in one  industry  segment,  information  technology
solutions and services.  Prior to the spin-off of SeraNova, the Company had been
reporting two business segments as follows:

     o    Enterprise  Applications Services group - the largest business segment
          of  the  Company's   operations,   which  provides  a  wide  range  of
          information   technology   solutions  and   services,   including  the
          development,  integration,  implementation,  hosting  and  application
          management and support of e-commerce and  enterprise  applications  to
          companies of all sizes.

     o    Internet  Applications  Services  group  - the  Internet  professional
          services to  businesses  segment of the  Company's  operations,  which
          provides  information  technology  services  that enable  customers to
          communicate and conduct commerce between its customers,  suppliers and
          partners over the Internet.




                                     - 11 -
<PAGE>

NOTE 8 - SEGMENT DATA AND GEOGRAPHIC INFORMATION (CONTINUED)

     The  Internet   Applications   Services  group   represented   the  assets,
liabilities  and results of operations  of SeraNova,  which has been reported as
discontinued  operations for all periods presented.  Accordingly,  the Company's
Enterprise  Applications  Services group is presented as one business segment in
the following geographic areas for the three and nine months ended September 30,
2001 and 2000.

<TABLE>
<CAPTION>
                                    UNITED STATES    ASIA-PACIFIC        EUROPE            INDIA              TOTAL
                                    -------------    ------------        ------            -----              -----
<S>                                 <C>              <C>              <C>               <C>                <C>
THREE MONTHS ENDED
------------------
SEPTEMBER 30, 2001
------------------
Revenue.......................      $ 17,165,000     $  3,069,000     $  2,051,000      $ 2,827,000        $ 25,112,000
Depreciation & amortization...           556,000           67,000          199,000          170,000             992,000 (1)
Operating income (loss).......           796,000          237,000         (972,000)         463,000             524,000
Total assets..................        43,783,000        5,943,000        7,307,000        5,841,000          62,874,000

THREE MONTHS ENDED
------------------
SEPTEMBER 30, 2000
------------------
Revenue.......................      $ 18,978,000     $  2,923,000     $  4,385,000      $ 1,313,000        $ 27,599,000
Depreciation & amortization...           529,000           31,000          177,000           99,000             836,000
Operating income (loss).......          (418,000)         247,000         (369,000)        (262,000)           (802,000)
Total assets..................        50,995,000        4,628,000       10,365,000        4,989,000          70,977,000

NINE MONTHS ENDED
-----------------
SEPTEMBER 30, 2001
------------------
Revenue.......................      $ 55,107,000     $  9,812,000     $  8,628,000      $ 9,629,000        $ 83,176,000
Depreciation & amortization...         1,630,000          236,000          564,000          424,000           2,854,000(1)
Operating income (loss).......           815,000          343,000       (2,878,000)       2,754,000           1,034,000

NINE MONTHS ENDED
-----------------
SEPTEMBER 30, 2000
------------------
Revenue.......................      $ 59,611,000     $  7,490,000     $ 13,678,000      $ 3,561,000        $ 84,340,000
Depreciation & amortization...         1,501,000           87,000          520,000          298,000           2,406,000
Operating loss................        (5,461,000)         (33,000)      (1,099,000)        (853,000)         (7,446,000)
</TABLE>

-------------
(1)      Excludes   $217,000  and  $626,000  of  depreciation  and  amortization
         included in cost of sales for the three and nine months ended September
         30, 2001, respectively.

     Included above are hosting and application  management and support revenues
of $6,568,000 and  $4,951,000 for the three months ended  September 30, 2001 and
2000, respectively.  The hosting and application management and support revenues
for the nine months  ended  September  30, 2001 and 2000,  are  $17,779,000  and
$15,834,000,   respectively.  Other  information  related  to  the  hosting  and
application  management  and support  business is not maintained and the Company
determined that it would be impractical to calculate such data.




                                     - 12 -
<PAGE>

NOTE 9 - PENDING ACCOUNTING PRONOUNCEMENTS

     In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting  Standards No. 141, Business  Combinations ("SFAS No. 141")
and No. 142, Goodwill and Other Intangible Assets ("SFAS No. 142"). SFAS No. 141
changes the  accounting for business  combinations,  requiring that all business
combinations  be  accounted  for using the purchase  method and that  intangible
assets  be  recognized  as  assets  apart  from  goodwill  if  they  arise  from
contractual or other legal rights,  or if they are separable or capable of being
separated from the acquired entity and sold,  transferred,  licensed,  rented or
exchanged.  SFAS No. 141 is effective  for all business  combinations  initiated
after June 30,  2001.  SFAS No.  142  specifies  the  financial  accounting  and
reporting  for  acquired  goodwill  and other  intangible  assets.  Goodwill and
intangible  assets that have  indefinite  useful lives will not be amortized but
rather  will be  tested  at least  annually  for  impairment.  SFAS  No.  142 is
effective for fiscal years beginning after December 15, 2001.

     SFAS No. 142 requires that the useful lives of intangible  assets  acquired
on or before June 30, 2001 be reassessed and the remaining  amortization periods
adjusted  accordingly.  Previously  recognized  intangible assets deemed to have
indefinite  lives  shall be tested for  impairment.  Goodwill  recognized  on or
before June 30, 2001, shall be assigned to one or more reporting units and shall
be tested for  impairment  as of the  beginning of the fiscal year in which SFAS
No. 142 is initially applied in its entirety.

     The Company has not fully assessed the potential  impact of the adoption of
SFAS No. 142,  which is  effective  for the  Company as of January 1, 2002.  The
reassessment of intangible  assets must be completed during the first quarter of
2002 and the assignment of goodwill to reporting units, along with completion of
the first step of the transitional  goodwill impairment tests, must be completed
during the first six months of 2002. The Company  anticipates  that a portion of
the  intangible  assets and  goodwill  recognized  prior to July 1, 2001 will no
longer be amortized  effective January 1, 2002. Total amortization of intangible
assets and goodwill for the nine months  ended  September  30, 2001 and for year
ended December 31, 2000, was $342,000 and $456,000, respectively.

     In August 2001, the Financial  Accounting  Standards Board issued Statement
of  Financial  Accounting  Standard  No. 143,  Accounting  for Asset  Retirement
Obligations  ("SFAS No. 143"). SFAS No. 143 addresses  financial  accounting and
reporting  obligations  associated  with the  retirement of tangible  long-lived
assets and the associated asset retirement  costs. SFAS No. 143 is effective for
fiscal years  beginning  after June 14, 2002. The Company has not fully assessed
the potential impact of the adoption of SFAS No. 143, which is effective for the
Company as of January 1, 2003.



                                     - 13 -
<PAGE>

NOTE 9 - PENDING ACCOUNTING PRONOUNCEMENTS (CONTINUED)

     In October 2001, the Financial  Accounting Standards Board issued Statement
of Financial  Accounting  Standard No. 144,  Accounting  for the  Impairment  or
Disposal  of  Long-Lived  Assets  ("SFAS No.  144").  SFAS No. 144  changes  the
accounting  for long-lived  assets by requiring  that all  long-lived  assets be
measured  at the  lower of  carrying  amount  or fair  value  less cost to sell,
whether reporting continuing operations or in discontinued operations.  SFAS No.
144,  which  replaces SFAS No. 121,  Accounting for the Impairment of Long-Lived
Assets and for  Long-Lived  Assets to Be Disposed  Of, is  effective  for fiscal
years  beginning after December 15, 2001. The Company has not fully assessed the
potential  impact of the adoption of SFAS No. 144,  which is  effective  for the
Company as of January 1, 2002.





                                     - 14 -
<PAGE>

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

OVERVIEW

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

     Since the Company's  inception in 1987, it has built its  reputation on the
design, development,  implementation and support of complex technology solutions
based  primarily  on SAP,  Oracle and  PeopleSoft  products.  In late 1999,  the
Company  made the  strategic  decision to leverage its  traditional  application
implementation 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 the shareholders of the Company.  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.
Accordingly,   results  of   operations   of  SeraNova  have  been  reported  as
discontinued   operations  for  all  periods   presented.   (See   "Discontinued
Operations").

     During the second half of 2000,  finding  that the market for ASP  services
had not grown in  accordance  with  market  analysts'  projections,  the Company
significantly reduced its investment strategy around the ASP model. Expenditures
in the areas of marketing  and direct  selling  initiatives  were  significantly
decreased,  as were the infrastructure and personnel previously added to provide
ongoing support of the ASP business model. The Company renewed its efforts aimed
at shorter-term success opportunities,  such as implementations and enhancements
of solutions based on SAP, Oracle and PeopleSoft products.

     The Company also  redirected  some of its ASP  infrastructure  and staffing
toward  the market for  managing  and  supporting  customers'  mission  critical
applications  ("Application  Management").  With potential customers focusing on
reducing  the cost of  maintaining  and  supporting  their IT  environment,  the
Company believes it is well-positioned to deliver  high-quality,  cost-effective
Applications  Management services that offer operational  improvements that help
clients  reduce their  costs.  The  Company's  Application  Management  services
provide experienced staffing,  tools, and processes,  usually on a fixed fee per
month basis,  under a multiple year support contract.  The Company believes that
increasing the number of new


                                     - 15 -
<PAGE>

Application  Management  customers will provide stable,  recurring revenues upon
which to build its long term growth.

     Beginning  in  2000,  the  Company   introduced  a  series  of  SAP  based,
proprietary  tools with which it can aid customers in their plans to upgrade and
maintain  their  previously  implemented  SAP system.  During 2001,  the Company
announced two industry  vertical,  pre-configured,  SAP solutions,  which can be
deployed at customer  sites.  The tools and  solutions  developed by the Company
offer  customers ways to improve the efficiency and lower the cost of enhancing,
maintaining and supporting  their  enterprise and e-business  environments.  The
Company's Power Upgrade  Services (SM) enable SAP customers to  cost-effectively
size and analyze an upgrade  project,  and reduce the time and cost of deploying
SAP  Support   Packages.   Pharma  Express  (SM),  a  pharmaceutical   solution,
incorporating  SAP Best  Practices and capturing  the Company's  experience  and
knowledge  derived from working with Fortune 100  pharmaceutical  companies,  is
designed to improve manufacturing efficiencies and control production costs. E&C
Express (SM), an enhanced SAP R/3 Engineering and Construction industry solution
for  contractors,  is designed to control costs and manage resources and project
timelines through a construction project lifecycle.

     The Company's high-quality offshore Advanced Development Center ("ADC") and
Global Support Center ("GSC") is key to the Company's ability to offer customers
the benefits of reduced costs and lower total cost of  ownership.  The Company's
ISO  9001-certified  and  SEI/SW-CMM  Level 5 and  SEI/P-CMM  Level  2  assessed
offshore ADC delivers  scalable,  high-quality  24x7 development  services.  The
offshore GSC keeps customers' critical applications,  systems and infrastructure
stable,  current and optimized through efficient user,  technical and operations
support.  The ADC and GSC enable the  Company  to  provide  customers  access to
experienced technical professionals,  24x7 services,  high-quality processes and
comprehensive service level agreements.

     The  majority  of  the  Company's  revenues  continue  to be  derived  from
professional  consulting services rendered to customers,  either directly at the
customer's site or remotely  delivered by our offshore ADC. 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, 2000,  revenues  derived  from  projects  under fixed price
contracts  represented  approximately 10% of the Company's total revenue.  Fixed
price  contracts,  in the  aggregate,  represented  12% of the  Company's  total
revenue during the nine months ended September 30, 2001. No single fixed



                                     - 16 -
<PAGE>

price project was material to the Company's  business  during 2000 or during the
nine months ended  September 30, 2001. The Company  believes that, as it pursues
its  strategy  of  providing  application  management  and  support  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 nine  months  ended  September  30,  2001 and the year  ended
December 31, 2000,  the  Company's  ten largest  customers  accounted for in the
aggregate  approximately  28% and 34% of  revenue,  respectively.  For the  nine
months ended September 30, 2001, no single customer  accounted for more than 10%
of revenues.  For the year ended December 31, 2000,  one customer  accounted for
more than 10% of revenue.  For the nine months ended  September 30, 2001 and the
year ended  December  31,  2000,  43% and 36%,  respectively,  of the  Company's
revenue was  generated by serving as a member of consulting  teams  assembled by
other information  technology  consulting firms.  There can be no assurance that
such information technology consulting firms will continue to engage the Company
in the future at current levels of retention, if at all.

     During the nine months ended September 30, 2001 and the year ended December
31,  2000,  approximately  69% and 63%,  respectively,  of the  Company's  total
revenue was derived from  projects in which the Company  implemented,  extended,
hosted or  maintained  software  developed  by SAP.  For the nine  months  ended
September 30, 2001 and the year ended December 31, 2000,  approximately  17% and
24%,  respectively,  of the Company's total revenue was derived from projects in
which the Company implemented, extended, hosted or maintained software developed
by PeopleSoft. For each of the nine months ended September 30, 2001 and the year
ended  December 31, 2000,  approximately  9% of the Company's  total revenue was
derived  from  projects in which the Company  implemented,  extended,  hosted or
maintained 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),
with branch offices in Atlanta (Georgia),  Rosemont (Illinois),  and Foster City
(California).  The Company also maintains offices in Europe (Denmark, the United
Kingdom,  and Sweden),  and Asia Pacific (Australia,  India, Japan, New Zealand,
Singapore,  Indonesia and Hong Kong).  The Company  leases its  headquarters  in
Edison,  New Jersey.  Such lease has an initial  term of ten (10)  years,  which
commenced in September 1998.



                                     - 17 -
<PAGE>

UNITED KINGDOM OPERATIONS

     As a result of the challenging  business  climate within the United Kingdom
("UK")  marketplace,  opportunities  within our UK operations have become highly
unpredictable  over the past 9  months.  As a  result,  our UK  operations  have
continued to produce significant  operating losses,  despite efforts to increase
revenue  and  control   expenditures.   The  Company  currently  estimates  that
undiscounted  future cash flows of the UK  operations  are in excess of the UK's
long-lived assets.  However, the Company is currently reviewing several options,
strategies and  alternatives to decrease its exposure in this region,  including
the  possibility  of winding down the UK  operations.  Based upon the outcome of
these options and alternatives,  it is reasonably  possible that the estimate of
undiscounted  cash  flows may change in the near term  resulting  in the need to
write-down certain of the UK assets,  including intangible assets,  deferred tax
assets and other long-lived assets, which have a carrying value of approximately
$5.2 million as of September 30, 2001.

DISCONTINUED OPERATIONS

     On July 5, 2000, the Company completed the tax-free spin-off of SeraNova by
distributing 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).

     SeraNova  represented  a  significant  segment of the  Company's  business.
Pursuant to Accounting  Principles Board ("APB") Opinion No. 30,  "Reporting the
Results of  Operations  -  Reporting  the  Effects of Disposal of a Segment of a
Business,  and  Extraordinary,  Unusual and  Infrequently  Occurring  Events and
Transactions,"  the Consolidated  Financial  Statements of the Company have been
reclassified  to reflect the spin-off of SeraNova.  Accordingly,  the results of
operations and cash flows of SeraNova have been  segregated in the  Consolidated
Statements  of Operations  and  Consolidated  Statements of Cash Flows.  The net
operating  results  and net  cash  flows  of  SeraNova  have  been  reported  as
"Discontinued  Operations." The historical  carrying amount of the net assets of
SeraNova on the spin-off date has been recorded as a dividend.

     The  Company  has  reported  a loss from  discontinued  operations  of $4.9
million for the nine months ended September 30, 2000.

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 its
focus  to  comprehensive  ASPPlus  solutions.  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 by customers;

                                     - 18 -
<PAGE>

     o    the continued  uncertainty of the Application Service Provider ("ASP")
          market  and  revenues   derived  from   anticipated  ASP  hosting  and
          application management and support business;

     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 hosting and
          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  enterprise  application and e-commerce
          partners,  (f) levels of market acceptance for the Company's services,
          (g) general  economic  conditions,  (h) the hiring of additional staff
          and (i) fixed price contracts;

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

     o    the  Company's  ability to manage its growth  effectively,  which will
          require the  Company to (a)  continue  developing  and  improving  its
          operational,  financial  and other  internal  systems,  as well as its
          business  development   capabilities,   (b)  attract,  train,  retain,
          motivate and manage its employees, (c) continue to maintain high rates
          of employee  utilization at profitable billing rates, (d) successfully
          integrate the personnel and  businesses  acquired by the Company,  and
          (e) maintain  project  quality,  particularly if the size and scope of
          the Company's projects increase;

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

     o    the Company's  reliance on a continued  relationship  with SAP America
          and the Company's  present status as a mySAP.com Partner - Services or
          SAP Services Partner;

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

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

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

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

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


                                     - 19 -
<PAGE>

     o    uncertainties   resulting  from  pending  litigation   matters,   from
          potential  administrative  and  regulatory  immigration  and  tax  law
          matters and from the outstanding  liability of SeraNova to the Company
          under the promissory note dated May 31, 2000, as amended;

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

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

<TABLE>
<CAPTION>
                                                                     PERCENTAGE OF REVENUE
                                                     --------------------------------------------------
                                                     THREE MONTHS ENDED               NINE MONTHS ENDED
                                                         SEPTEMBER 30,                  SEPTEMBER 30,
                                                     ------------------              ------------------
                                                     2001         2000               2001         2000
                                                     ----         ----               ----         ----

<S>                                                  <C>          <C>                <C>          <C>
Revenue....................................          100.0%       100.0%             100.0%       100.0%

Cost of sales..............................           65.6         65.8               67.3         66.2
                                                     -----        -----              -----        -----
     Gross profit..........................           34.4         34.2               32.7         33.8

Selling, general and administrative
   expenses................................           28.4         34.1               28.0         39.8

Depreciation and amortization expenses.....            4.0          3.0                3.5          2.8
                                                     -----        -----              -----        -----
     Total operating expenses..............           32.4         37.1               31.5         42.6
                                                     -----        -----              -----        -----
     Operating income (loss)...............            2.0         (2.9)               1.2         (8.8)

Other income (expense), net................           (0.0)         0.8               (0.0)         0.5
                                                     -----        -----              -----        -----
Income (loss) from continuing operations
    before income taxes....................            2.0         (2.1)               1.2         (8.3)

Provision (benefit) for income taxes.......            1.4          2.2                0.6         (1.0)
                                                     -----        -----              -----        -----
Income (loss) from continuing operations...            0.6%        (4.3)%              0.6%        (7.3)%
                                                     =====        =====              =====        =====
</TABLE>


                                     - 20 -
<PAGE>

THREE MONTHS ENDED  SEPTEMBER 30, 2001 COMPARED TO THREE MONTHS ENDED  SEPTEMBER
30, 2000

     The following discussion compares the three months ended September 30, 2001
and the three months ended September 30, 2000, for continuing operations.

     Revenue.  Total  revenue  decreased by 9.0%,  or $2.5  million,  from $27.6
million  during the three months ended  September  30,  2000,  to $25.1  million
during the three  months  ended  September  30,  2001.  The  decrease in revenue
reflects the continued weakness in the global economy and increased  competitive
conditions  within  the  IT  services  market.  The  Company  has  continued  to
experience challenging market conditions for traditional professional consulting
services,  which includes enterprise and e-commerce application  implementations
and  extensions,  in both the US and Europe,  while  Asia-Pacific  has  remained
relatively stable.

     Gross  profit.  Cost of sales  primarily  includes  the cost of salaries to
consultants  and related  employee  benefits  and payroll  taxes.  Cost of sales
decreased by 9.3%, or $1.7 million,  from $18.2 million  during the three months
ended  September  30,  2000 to $16.5  million  during  the  three  months  ended
September  30,  2001.  The  decrease  in  cost of  sales  was  primarily  due to
aggressively  managing  non-billable  time and  discretionary  expenses,  and by
reducing our  compensation  plans.  Gross profit decreased by 8.5%, or $799,000,
from $9.4  million  during the three  months  ended  September  30, 2000 to $8.6
million  during the three months ended  September 30, 2001.  Gross profit margin
increased to 34.4% of revenue  during the three months ended  September 30, 2001
from 34.2% of revenue  during the three months  ended  September  30, 2000.  The
improvement in gross margins reflects a combination of aggressive  management of
non-billable consultant time and other related costs.

     Selling,  general  and  administrative   expenses.   Selling,  general  and
administrative  expenses  consist  primarily  of  administrative  salaries,  and
related benefits costs,  occupancy costs, sales person compensation,  travel and
entertainment,  costs  associated  with  the  Advanced  Development  Center  and
professional fees.  Selling,  general and  administrative  expenses decreased by
24.3%,  or $2.3  million,  from  $9.4  million  during  the three  months  ended
September 30, 2000 to $7.1 million  during the three months ended  September 30,
2001,   and   decreased  as  a  percentage  of  revenue  from  34.1%  to  28.4%,
respectively.  The  decrease  in such  expenses,  in  absolute  dollars and as a
percentage of revenue,  was primarily related to the significant  investments in
marketing and developing the hosting and application  management business during
the three months ended  September 30, 2000.  Subsequently,  the Company has been
focused  on  improving  operating  efficiencies  and  controlling  discretionary
expenditures  throughout the  organization to maintain an alignment with current
and projected revenues.

     Depreciation  and  amortization.  Depreciation  and  amortization  expenses
increased 18.7% to $992,000 (excluding $217,000 of depreciation and amortization
included in cost of sales)  during the three  months ended  September  30, 2001,
compared to $836,000  during the three months  ended  September  30,  2000.  The
increase was primarily due to  depreciation on additional  computers,  equipment
and software placed in service since September 30, 2000.



                                     - 21 -
<PAGE>

     Other income  (expense).  The Company  earned  $120,000 in interest  income
during the three months ended September 30, 2001,  compared with $486,000 during
the three months ended  September  30, 2000.  The interest  income was primarily
related  to the  interest  earned on the  balance  of the note  receivable  with
SeraNova.  The  decrease  was  primarily  related 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. The Company incurred $151,000
and $270,000 in interest  expense  during the three months ended  September  30,
2001 and 2000,  respectively,  primarily related to borrowings under its line of
credit.  Borrowings  under  the  line of  credit  were  used  to fund  operating
activities.

     Provision  (benefit) for income taxes. The Company's effective tax rate was
70.4% and  101.7%  for the  three  months  ended  September  30,  2001 and 2000,
respectively.  The high  effective tax rates  primarily  relate to the valuation
allowances  provided  relating to the European  losses for the nine months ended
September 30, 2001 and 2000, respectively.  The Company's net deferred tax asset
as of  September  30,  2001  primarily  relates to the US  operations.  Based on
anticipated  profitability  in the near future,  management  believes it is more
likely  than  not,  that the net  deferred  tax  asset of $1.3  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 three months ended September 30, 2001 and 2000, the tax
holiday and new tax deduction  favorably  impacted the  Company's  effective tax
rate.

NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
2000

     The following  discussion compares the nine months ended September 30, 2001
and the nine months ended September 30, 2000, for continuing operations.

     Revenue.  Total  revenue  decreased by 1.4%,  or $1.2  million,  from $84.3
million during the nine months ended September 30, 2000, to $83.2 million during
the nine months ended  September 30, 2001. The decrease in revenue  reflects the
continued  weakness in the global economy and increased  competitive  conditions
within  the  IT  services  market.  The  Company  has  continued  to  experience
challenging market conditions for traditional  professional consulting services,
which  includes  enterprise  and  e-commerce  application   implementations  and
extensions,  in  both  the  US  and  Europe,  while  Asia-Pacific  has  remained
relatively stable.

     Gross  profit.  Cost of sales  increased by 0.3%,  or $149,000,  from $55.8
million during the nine months ended  September 30, 2000 to $56.0 million during
the nine months ended  September 30, 2001. The slight  increase in cost of sales
was primarily due to additional  salary,  payroll  taxes,  benefits,  travel and
training costs for consultants during the first six months of 2001. Gross profit
decreased by 4.6%, or $1.3 million, from $28.5 million during the nine


                                     - 22 -
<PAGE>

months ended  September 30, 2000 to $27.2  million  during the nine months ended
September 30, 2001.  Gross profit margin  decreased from 33.8% of revenue during
the nine months  ended  September  30, 2000 to 32.7% of revenue  during the nine
months  ended  September  30,  2001.  The  decrease in gross  profit and margins
reflects a combination  of competitive  pressure on consultant  billing rates in
the current  market,  and growth in the  long-term  application  management  and
support business, which typically has lower margins.

     Selling,  general  and  administrative   expenses.   Selling,  general  and
administrative expenses decreased by 30.5%, or $10.2 million, from $33.5 million
during the nine months ended September 30, 2000 to $23.3 million during the nine
months ended  September 30, 2001,  and decreased as a percentage of revenue from
39.8% to 28.0%, respectively. The decrease in such expenses, in absolute dollars
and as a  percentage  of  revenue,  was  primarily  related  to the  significant
investments in marketing and developing the hosting and  application  management
business  during the nine months ended  September  30, 2000.  Subsequently,  the
Company has been focused on improving  operating  efficiencies  and  controlling
discretionary  expenditures throughout the organization to maintain an alignment
with current and projected revenues.

     Depreciation  and  amortization.  Depreciation  and  amortization  expenses
increased  18.6%  to  $2.9  million  (excluding  $626,000  of  depreciation  and
amortization  included in cost of sales) during the nine months ended  September
30, 2001,  compared to $2.4 million  during the nine months ended  September 30,
2000. The increase was primarily due to  depreciation  on additional  computers,
equipment and software placed in service since September 30, 2000.

     Other income  (expense).  The Company  earned  $539,000 in interest  income
during the nine months ended  September 30, 2001,  compared with $809,000 during
the nine months ended  September  30, 2000.  The interest  income was  primarily
related  to the  interest  earned on the  balance  of the note  receivable  with
SeraNova.  The  decrease  was  primarily  related 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. The Company incurred $581,000
and $409,000 in interest expense during the nine months ended September 30, 2001
and  2000,  respectively,  primarily  related  to  borrowings  under its line of
credit.  Borrowings  under  the  line of  credit  were  used  to fund  operating
activities.

     Provision  (benefit) for income taxes. The Company's effective tax rate was
48.4%  and  (12.3)%  for the nine  months  ended  September  30,  2001 and 2000,
respectively.  The  Company's  net deferred  tax asset as of September  30, 2001
primarily  relates to the US operations.  Based on anticipated  profitability in
the near future,  management  believes it is more likely than not,  that the net
deferred tax asset of $1.3 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 nine months



                                     - 23 -
<PAGE>

ended  September  30,  2001 and  2000,  the tax  holiday  and new tax  deduction
favorably impacted the Company's effective tax rate.

LIQUIDITY AND CAPITAL RESOURCES

     The Company had cash and cash  equivalents of $1.9 million at September 30,
2001 and $1.3 million at December 31, 2000.  The Company had working  capital of
$21.0 million at September 30, 2001 and $23.6 million at December 31, 2000.

     Cash provided by continuing  operating  activities  was $4.7 million during
the nine months ended September 30, 2001,  primarily  resulting from income from
continuing  operations,  depreciation and  amortization,  provision for doubtful
accounts and a decrease in accounts  receivable.  These  amounts were  partially
offset by decreases in accounts  payable,  accrued payroll and related taxes and
accrued  expenses and other  liabilities.  The  decrease in accounts  receivable
results from  enhanced  credit and  collection  efforts as well as a decrease in
revenues.  The decrease in accounts  payable,  accrued payroll and related taxes
and accrued expenses and other liabilities  results from the overall decrease in
operating expenses.  Cash provided by continuing operating activities during the
nine months ended September 30, 2000 was $9.4 million.

     The Company  invested $3.0 million and $2.4 million in computer  equipment,
internal-use computer software and office furniture and fixtures during the nine
months ended September 30, 2001 and 2000,  respectively.  The increase  reflects
purchases of computer and  telecommunications  equipment,  internal-use computer
software and office  furniture and fixtures for consultants  and  administrative
staff.

     In  conjunction  with the  strategic  decision to focus on the emerging ASP
market, the Company invested $2.7 million and $3.0 million in purchased computer
software during the nine months ended September 30, 2001 and 2000, respectively.
As of  September  30, 2001,  the Company has $5.7 million of purchased  computer
software  recorded as other  assets.  The computer  software is to be re-sold to
customers as part of the Company's ASPPlus solutions and services.  However, the
Company has not yet experienced the level of interest originally expected in its
ASPPlus business. Although the Company expects the level of interest to increase
dramatically  over the next few years, the Company's near term plans have had to
be realigned  around more active markets within the IT services space. The shift
away from a focused ASP strategy may hinder the Company's future plans for these
software assets.

     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 September 30, 2001, the Company had outstanding  borrowings under
the credit facility of $5.9 million.  The Company estimates undrawn availability
under the credit facility to be $5.1 million



                                     - 24 -
<PAGE>

as of September 30, 2001. As of December 31, 2000,  the Company had  outstanding
borrowings under the credit facility of $5.0 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 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  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 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  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  September  30,  2001,  the  Company  was in  compliance  with all  financial
covenants.

     On May 31,  2000,  SeraNova  and the  Company  formalized  a $15.1  million
unsecured  promissory  note (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 and
$803,000 as of  September  30, 2001 and December  31,  2000,  respectively.  The
Company  has not  recorded  any  accrued  interest  on the  balance  of the Note
subsequent to the 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.



                                     - 25 -
<PAGE>

     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.

     During  the first  nine  months of 2001,  the  Company  received  principal
payments  totaling $2.1 million from SeraNova.  However,  SeraNova has 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. In the event the
Company  accepts a payment in less than full  satisfaction  of the $10.1 million
due, the Company  will record a charge  against  earnings  for such  difference.
Although  management  believes  they are  entitled to the entire  $10.1  million
balance,  there can be no assurance that SeraNova and/or Silverline will pay the
entire  balance due the Company.  In  addition,  SeraNova  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 $5.0 million
and punitive  damages in the amount of $10.0 million.  The Company believes that
there is no basis to support such amounts claimed by SeraNova.

     In June 2000,  the Company  announced an agreement  with the  Government of
Puerto Rico, in conjunction with the Puerto Rico Industrial  Development Company
("PRIDCO"),  to  locate a new  technology  development  center  in  Puerto  Rico
("PR-ADC").  The  agreement  provided for  substantial  incentive  grants to the
Company, totaling approximately $9.0 million, contingent upon the employment and
training of up to 500 Puerto Rican technology  professionals  over the course of
three  years at the PR-ADC.  In mid 2000,  the Company  began  constructing  the
building, acquiring the necessary furniture, fixtures and equipment and engaging
in sales,  marketing and other administrative  activities to support the PR-ADC.
Accordingly, the Company has recorded an asset for the costs of these activities
and had requested  reimbursement  from the  Government  of Puerto Rico,  through
PRIDCO in accordance with its contractual right.

     During the second  quarter of 2001,  the Company  found that  processing of
reimbursement requests, previously submitted by the Company to PRIDCO, was being
delayed.  Upon inquiry to PRIDCO,  the Company was  verbally  advised that there
were certain  concerns  raised  within  PRIDCO about the delayed  opening of the
PR-ADC, and about the Company's adherence to other commitments  contained within
the grant  documents.  After  repeated  inquiries  by the  Company,  the Company
received a letter from PRIDCO's  counsel in July 2001,  stating that the Company
was not in compliance with certain terms of the agreements,  although  specifics
were not provided. During the period from July through October 2001, the Company
met and  corresponded  with PRIDCO  representatives  on multiple  occasions,  to
determine the source of their concerns and seek appropriate resolution.


                                     - 26 -
<PAGE>

     On November 2, 2001, the general  counsel for PRIDCO notified the Company's
attorney  advising  that PRIDCO was amenable to an amicable  termination  of the
agreements,  and would work with the  Company to close out  certain  outstanding
issues,  including the resolution of the litigation with Fe-Ri Construction (see
Part II, Item 1, Legal Proceedings).

     The Company has determined that this resolution is reasonable,  and has the
least  detrimental  effect  on the  Company's  continuing  endeavors,  including
opportunities  for  additional  business  within  Puerto  Rico.  The  Company is
negotiating  with PRIDCO to work out a definitive  agreement for  termination of
the PR-ADC  project.  As of September  30, 2001,  the Company has recorded  $1.7
million in other  current  assets  related to the  PR-ADC.  Although  management
believes they are entitled to be reimbursed the entire $1.7 million from PRIDCO,
there can be no  assurance  that the  negotiations  will  result in the  Company
collecting the amount. If the Company were to collect less than $1.7 million, it
would record a charge to expense for any difference.

     The Company's 2001 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 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, combined 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.

EUROPEAN MONETARY UNION (EMU)

     The euro was  introduced  on  January  1,  1999,  at which  time the eleven
participating  EMU member countries  established  fixed conversion rates between
their  existing   currencies  (legacy  currencies)  and  the  euro.  The  legacy
currencies  will  continue to be used as legal tender  through  January 1, 2002;
thereafter, the legacy currencies will be canceled and euro bills and coins will
be used for cash  transactions  in the  participating  countries.  The Company's
European  sales and  operations  offices  affected by the euro  conversion  have
established  plans to address the  systems  issues  raised by the euro  currency
conversion  and  are  cognizant  of  the  potential  business   implications  of
converting to a common currency. The Company is unable to determine the ultimate
financial  impact of the  conversion on its  operations,  if any, given that the
impact  will be  dependent  upon the  competitive  situations  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.



                                     - 27 -
<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 is a material  adverse  change in
the  relationship  between European  currencies  and/or Asian currencies and the
United  States  Dollar,  such change would  adversely  affect the results of the
Company's  European  and/or  Asian  operations  as  reflected  in the  Company's
financial  statements.  The Company has not hedged its exposure  with respect to
this currency  risk,  and does not expect to do so in the future,  since it does
not believe that it is practicable for it to do so at a reasonable cost.




                                     - 28 -
<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 director  of the  Company,  as
defendants.  The plaintiff alleges that it invested money in SeraNova as part of
a private  placement of SeraNova  stock in March 2000,  prior to the spin-off of
SeraNova by the Company.  The complaint,  which seeks damages,  alleges that the
Company, as a "controlling person" vis-a-vis 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. On May 14, 2001, a motion to dismiss was
filed  on  behalf  of the  Company;  however,  a  hearing  date has not yet been
scheduled by the court.  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 May 21, 2001, Fe-Ri  Construction,  Inc. filed a complaint in the United
States  District  Court for the  District  of Puerto  Rico naming the Company as
defendant. The complaint,  which seeks damages, alleges among other things, that
the  Company  has  failed to pay  plaintiff  amounts  due  under a  construction
contract  totaling  $558,852  together  with  interest  and  costs,   damage  to
plaintiff's  reputation  and  impairment of plaintiff's  bonding  capacity.  The
Company was served with the  complaint and has filed a motion to extend the time
in which to file an answer.  The  Company  is  currently  engaged in  settlement
discussions with the plaintiff with respect to plaintiff's  claims. In addition,
the Company is exploring  potential  third party claims it may have  relating to
the claims  asserted by  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  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 $5,000,000 and
punitive  damages in the amount of $10,000,000.  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
full amount due from  SeraNova  and/or  Silverline  or an adverse  decision with
respect to the Company relating



                                     - 29 -
<PAGE>

to SeraNova's  counterclaim  could  negatively  affect 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 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     The Annual  Meeting of  Shareholders  of the Company was held on August 16,
2001.

     There  were  present  at the  meeting  in person  or by proxy  shareholders
holding an aggregate of 15,458,603  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             14,766,237              692,366
     Rajkumar Koneru                   14,584,239              874,364
     Klaus P. Besier                   14,773,937              684,666
     Dennis McIntosh                   14,772,837              685,766
     Gregory Dimit                     14,772,837              685,766

     A proposal was  introduced  to approve an amendment to the  Company's  1996
Stock Plan to increase the maximum  number of shares of Common  Stock  available
for  issuance  under the 1996  Stock Plan from  4,700,000  to  5,200,000  and to
reserve an  additional  500,000  shares of Common  Stock for  issuance  upon the
exercise of stock options  granted or for the issuance of stock purchase  rights
under the 1996 Stock Plan. This proposal was approved with the following  votes:
12,750,172  shares voted in favor of such proposal,  2,700,481 shares were voted
against such proposal, 7,950 shares abstained from voting.

     In addition,  a vote was taken on the proposal to ratify the appointment of
Arthur  Andersen LLP as the  independent  auditors of the Company for the fiscal
year ending December 31, 2001. Of the shares present at the meeting in person or
by  proxy,  15,398,154  shares  of  Common  Stock  were  voted  in favor of such
proposal,  58,999  shares of Common Stock were voted  against such  proposal and
1,450 shares of Common Stock abstained from voting.




                                     - 30 -
<PAGE>

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

        (a)    Exhibits.

               None.

        (b)    Reports on Form 8-K.

               On August 1, 2001, the Company filed a Current Report on Form 8-K
               with the  Securities  and  Exchange  Commission  relating  to the
               status of a promissory note due from SeraNova,  Inc. See Part II,
               Item 1, Legal Proceedings.

               On August 17, 2001,  the Company  filed a Current  Report on Form
               8-K with the Securities and Exchange  Commission  relating to the
               commencement of litigation against SeraNova,  Inc. and Silverline
               Technologies  Limited to recover amounts owing under a promissory
               note and a system  implementation  project.  See Part II, Item 1,
               Legal Proceedings.




                                     - 31 -
<PAGE>

                                   SIGNATURES


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

                                        Intelligroup, Inc.


DATE: November 14, 2001                 By: /s/ Nagarjun Valluripalli
                                           -------------------------------------
                                           Nagarjun Valluripalli,
                                           Chairman and Chief Executive Officer
                                           (Principal Executive Officer)


DATE: November 14, 2001                 By: /s/ Nicholas Visco
                                           -------------------------------------
                                           Nicholas Visco,
                                           Senior Vice President-Finance and
                                           Administration and Chief Financial
                                           Officer (Principal Financial and
                                           Accounting Officer)


                                     - 32 -