<PAGE>
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                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
 
                            ------------------------
 
                                   FORM 10-Q
 
  /X/    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934
 
                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
 
                                       OR
 
  / /    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934
 
        FOR THE TRANSITION PERIOD FROM ______________ TO ______________
 
                         COMMISSION FILE NUMBER 0-27502
 
                            ------------------------
 
                       HEALTH SYSTEMS DESIGN CORPORATION
             (Exact name of registrant as specified in its charter)
 
                  DELAWARE                             94-3235734
      (State or other Jurisdiction of        (I.R.S. Employer Identification
       Incorporation or Organization)                    Number)
 
                    1330 BROADWAY, OAKLAND, CALIFORNIA 94612
              (Address of principal executive offices) (Zip code)
 
                                 (510) 763-2629
              (Registrant's telephone number, including area code)
 
                            ------------------------
 
    Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/  No / /
 
    The registrant had 6,662,708 shares of common stock outstanding as of July
31, 1998.
 
    Exhibit index is located on page 11
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
                       HEALTH SYSTEMS DESIGN CORPORATION
                                     INDEX
 
<TABLE>
<CAPTION>
                                                                                                                      PAGE
                                                                                                                      -----
<C>                <S>                                                                                             <C>
PART I. FINANCIAL INFORMATION
 
          Item 1.  Consolidated Financial Statements
 
                   Consolidated Balance Sheets--
                   June 30, 1998 and September 30, 1997..........................................................           2
 
                   Consolidated Statements of Operations--
                   Three and Nine months ended June 30, 1998 and 1997............................................           3
 
                   Consolidated Statements of Cash Flows--
                   Nine months ended June 30, 1998 and 1997......................................................           4
 
                   Notes to Consolidated Financial Statements....................................................           5
 
          Item 2.  Management's Discussion and Analysis of Financial Condition
                   and Results of Operations.....................................................................           7
 
PART II. OTHER INFORMATION
 
          Item 5.  Other Information.............................................................................          10
 
          Item 6.  Exhibits and Reports on Form 8-K..............................................................          10
</TABLE>
 
                                       1
<PAGE>
                         PART I. FINANCIAL INFORMATION
 
ITEM 1. FINANCIAL STATEMENTS
 
                       HEALTH SYSTEMS DESIGN CORPORATION
                          CONSOLIDATED BALANCE SHEETS
 
                                     ASSETS
 
<TABLE>
<CAPTION>
                                                                                   JUNE 30,    SEPTEMBER 30,
                                                                                     1998          1997
                                                                                  -----------  -------------
                                                                                  (UNAUDITED)
<S>                                                                               <C>          <C>
Current Assets:
  Cash and cash equivalents.....................................................  $ 9,752,339   $ 11,194,757
  Accounts receivable, net of allowance for doubtful accounts of $525,000 at
    June 30 1998, and $193,000 at September 30, 1997............................    5,056,510      5,208,056
  Unbilled revenue..............................................................    2,564,898        994,421
  Prepaid expenses..............................................................      499,870        568,266
                                                                                  -----------  -------------
    Total current assets........................................................   17,873,617     17,965,500
                                                                                  -----------  -------------
Property and equipment:
  Computer equipment............................................................    3,556,663      3,636,153
  Office furniture and other....................................................    1,373,437      1,149,701
                                                                                  -----------  -------------
    Total property and equipment................................................    4,930,100      4,785,854
Less: Accumulated depreciation..................................................   (1,990,045)    (1,599,767)
                                                                                  -----------  -------------
    Net property and equipment..................................................    2,940,055      3,186,087
                                                                                  -----------  -------------
Deposits and other assets.......................................................      117,894        127,000
                                                                                  -----------  -------------
Software development costs, net of accumulated amortization of $739,850 at June
  30, 1998 and $582,752 at September 30, 1997...................................    2,264,003        798,540
                                                                                  -----------  -------------
    Total assets................................................................  $23,195,569   $ 22,077,127
                                                                                  -----------  -------------
                                                                                  -----------  -------------
 
                                    LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
  Accounts payable..............................................................  $   785,161   $  1,202,204
  Accrued liabilities...........................................................    2,119,784      1,740,674
  Unearned revenue..............................................................    3,168,562      1,675,265
                                                                                  -----------  -------------
    Total current liabilities...................................................    6,073,507      4,618,143
 
Stockholders' equity:
  Preferred stock, $.001 par value, 1,000,000 shares authorized, none
    outstanding.................................................................      --            --
  Common stock, $.001 par value, 20,000,000 shares authorized, 6,662,708 and
    6,533,406 shares issued and outstanding at June 30, 1998 and September 30,
    1997, respectively..........................................................        6,663          6,533
  Additional paid-in capital....................................................   23,938,372     23,029,552
  Treasury stock, 2,054 shares..................................................      (28,500)       (28,500)
  Deferred compensation.........................................................      (31,459)       (43,279)
  Retained deficit..............................................................   (6,763,014)    (5,505,322)
                                                                                  -----------  -------------
  Total stockholders' equity....................................................   17,122,062     17,458,984
                                                                                  -----------  -------------
    Total liabilities and stockholders' equity..................................  $23,195,569   $ 22,077,127
                                                                                  -----------  -------------
                                                                                  -----------  -------------
</TABLE>
 
                                       2
<PAGE>
                       HEALTH SYSTEMS DESIGN CORPORATION
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
 
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                   THREE MONTHS ENDED           NINE MONTHS ENDED
                                                                        JUNE 30,                     JUNE 30,
                                                               --------------------------  ----------------------------
                                                                   1998          1997          1998           1997
                                                               ------------  ------------  -------------  -------------
<S>                                                            <C>           <C>           <C>            <C>
Revenues:
  System sales...............................................  $  5,991,029  $  4,573,229  $  16,215,854  $  10,934,056
  Services and other.........................................     1,067,592       657,571      2,574,625      1,741,579
                                                               ------------  ------------  -------------  -------------
    Total revenues...........................................     7,058,621     5,230,800     18,790,479     12,675,635
Cost of revenues.............................................     2,478,658     1,680,797      7,410,988      4,407,695
                                                               ------------  ------------  -------------  -------------
    Gross margin.............................................     4,579,963     3,550,003     11,379,491      8,267,940
                                                               ------------  ------------  -------------  -------------
Operating expenses:
  General and administrative.................................     1,875,521     1,354,046      5,788,731      4,131,753
  Sales and marketing........................................     1,142,735       919,592      3,317,925      2,967,125
  Product development........................................     1,286,491     1,530,108      3,746,147      3,317,554
                                                               ------------  ------------  -------------  -------------
    Total operating expenses.................................     4,304,747     3,803,746     12,852,803     10,416,432
                                                               ------------  ------------  -------------  -------------
      Income (loss) from operations..........................       275,216      (253,743)    (1,473,312)    (2,148,492)
Interest income (expense), net...............................       105,247       166,469        335,270        527,696
                                                               ------------  ------------  -------------  -------------
    Income (loss) before provision for income taxes..........       380,463       (87,274)    (1,138,042)    (1,620,796)
Provision for income taxes...................................        86,053       --             119,649       --
                                                               ------------  ------------  -------------  -------------
Net income (loss)............................................  $    294,410  $    (87,274) $  (1,257,691) $  (1,620,796)
                                                               ------------  ------------  -------------  -------------
                                                               ------------  ------------  -------------  -------------
Net income (loss) per share..................................  $       0.04  $      (0.01) $       (0.19) $       (0.25)
                                                               ------------  ------------  -------------  -------------
                                                               ------------  ------------  -------------  -------------
Weighted average common shares outstanding:
  Basic......................................................     6,607,282     6,495,558      6,566,232      6,462,643
                                                               ------------  ------------  -------------  -------------
                                                               ------------  ------------  -------------  -------------
  Diluted....................................................     6,825,712     6,495,558      6,566,232      6,462,643
                                                               ------------  ------------  -------------  -------------
                                                               ------------  ------------  -------------  -------------
</TABLE>
 
                                       3
<PAGE>
                       HEALTH SYSTEMS DESIGN CORPORATION
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                                                NINE MONTHS ENDED
                                                                                                     JUNE 30,
                                                                                           ----------------------------
                                                                                               1998           1997
                                                                                           -------------  -------------
<S>                                                                                        <C>            <C>
Cash flows from operating activities:
  Net loss...............................................................................  $  (1,257,691) $  (1,620,796)
  Adjustments to reconcile net loss to net cash and cash equivalents
    Provided by (used in) operating activities:
      Allowance for doubtful accounts....................................................        332,000              0
      Depreciation and amortization......................................................      1,048,864        863,129
      (Gain) Loss on disposal of property and equipment..................................        175,190           (439)
      Changes in current assets and liabilities:
        Accounts receivable..............................................................       (180,454)       (90,670)
        Unbilled revenue.................................................................     (1,570,477)       118,453
        Prepaid expenses.................................................................         68,396        (27,259)
        Accounts payable.................................................................       (417,043)        21,546
        Accrued liabilities..............................................................        379,110       (147,640)
        Unearned revenue.................................................................      1,493,297         63,980
                                                                                           -------------  -------------
          Net cash provided by (used in) operating activities............................         71,192       (819,696)
                                                                                           -------------  -------------
Cash flows from investing activities:
  Purchases of property and equipment....................................................       (828,522)      (955,370)
  Proceeds from sale of property and equipment...........................................         19,417          5,000
  Capitalization of software development costs...........................................     (1,622,561)      (548,489)
  Other assets...........................................................................          9,106        (43,791)
                                                                                           -------------  -------------
    Net cash used in investing activities................................................     (2,422,560)    (1,542,650)
                                                                                           -------------  -------------
Cash flows from financing activities:
  Payments under capital leases..........................................................       --               (3,505)
  Proceeds from exercise of common stock options.........................................        908,950        157,017
                                                                                           -------------  -------------
    Net cash provided by financing activities............................................        908,950        153,512
                                                                                           -------------  -------------
    Net decrease in cash and cash equivalents............................................     (1,442,418)    (2,208,834)
Cash and cash equivalents at beginning of period.........................................     11,194,757     15,254,042
                                                                                           -------------  -------------
Cash and cash equivalents at end of period...............................................  $   9,752,339  $  13,045,208
                                                                                           -------------  -------------
                                                                                           -------------  -------------
 
Supplemental disclosure of cash flow information:
 
  Interest paid..........................................................................  $    --        $          21
  Taxes paid.............................................................................  $     119,649  $       5,600
</TABLE>
 
                                       4
<PAGE>
                       HEALTH SYSTEMS DESIGN CORPORATION
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
                                 JUNE 30, 1998
 
1. BASIS OF PRESENTATION
 
    The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information on substantially the same basis as the annual audited
financial statements. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. Operating results for the
nine month period ended June 30, 1998 are not necessarily indicative of the
results that may be expected for the year ended September 30, 1998. These
consolidated financial statements should be read in conjunction with the
financial statements and footnotes thereto for the year ended September 30, 1997
included in the Company's Form 10-K Annual Report.
 
2. REVENUE RECOGNITION
 
    The Company licenses its internally developed software products and other
software products to healthcare organizations under the terms of product license
contracts. Individual sales may include, among others, a combination of software
license, implementation, program modifications, training, and support. Contracts
with customers could be terminated under certain circumstances and revenues
recognized could be refundable upon termination in certain cases, including
breach of contract.
 
    In October, 1997, the AICPA issued SOP 97-2, "Software Revenue Recognition,"
which the Company was required to adopt as of October 1, 1999. SOP 97-2 provides
guidance on applying generally accepted accounting principles in recognizing
revenue on software transactions and supercedes the guidance contained in SOP
91-1. The Company elected to adopt the provisions of the statement effective
October 1, 1997.
 
    The Company generates revenues from licensing the rights to use its software
products directly to end users and indirectly through distributors. The Company
also generates revenues from sales of post-contract support, implementation and
modification services, and training services performed for customers who license
the Company's products.
 
    If the contract does not require significant production, modification or
customization of software, revenue is recognized when all the following
conditions are met: a signed contract is obtained, delivery has occurred, the
fee is fixed and determinable, and collection is probable. Effective October 1,
1997, the Company generally recognizes Diamond 725 license revenue upon shipment
of the software to end users, as no significant production, modification or
customization of this software is required, and the installation period is
relatively short. The Company generally recognizes Diamond 950C/S license
revenue on a percentage of completion basis based on the labor hours required to
implement the system, as this software generally requires an extended
installation period and can require significant modifications. If the software
license agreement provides for acceptance criteria that extend beyond the
published specifications of the applicable product, then revenues are recognized
upon the earlier of customer acceptance or the expiration of the acceptance
period.
 
3. CAPITALIZED SOFTWARE DEVELOPMENT COSTS
 
    The Company accounts for capitalized software costs in accordance with SFAS
86, "Accounting for the Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed." The Company begins capitalizing software development costs
upon the establishment of technological feasibility, which is established upon
the completion of a working model or, in the case of major releases, detailed
program design.
 
                                       5
<PAGE>
                       HEALTH SYSTEMS DESIGN CORPORATION
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
                                 JUNE 30, 1998
 
4. EARNINGS PER SHARE
 
    In the fiscal year ending September 30, 1998, the Company will report its
earnings per share based on the recently issued Statement of Financial
Accounting Standards No. 128 (SFAS No. 128), "Earnings per Share". The pro forma
effect of this accounting change on the nine months ended June 30, 1998 and 1997
is:
 
<TABLE>
<CAPTION>
                                                                          JUNE 30, 1998     JUNE 30, 1997
                                                                        -----------------  ---------------
<S>                                                                     <C>                <C>
Primary EPS, as reported..............................................            .04             (0.18)
Pro forma effect SFAS No. 128.........................................              0                 0
Basic EPS, pro forma..................................................            .04             (0.18)
 
Fully diluted EPS, as reported........................................            .04             (0.19)
Fully diluted effect of SFAS No. 128..................................              0                 0
Diluted EPS, pro forma................................................            .04             (0.19)
</TABLE>
 
                                       6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS
 
OVERVIEW
 
    The Company provides managed care information systems software to healthcare
organizations that use managed care techniques to deliver services, manage
financial risk and control costs. The Company introduced its first internally
financed and developed application, Diamond 725, in fiscal 1992, followed by
Diamond 950C/S in fiscal 1995.
 
    The Company's revenues are derived from licensing these products, providing
the associated implementation, modification, support and consulting services,
and reselling hardware and third party products. If collection is probable, the
Company generally recognizes Diamond 950C/S license revenue on a percentage of
completion basis based on the labor hours required to implement the system. As
such, a significant portion of license revenues recorded in any quarter come
from contracts executed in earlier quarters. If collection is probable and there
are no uncertainties surrounding a contract, the Company generally recognizes
Diamond 725 license revenue upon shipment of the software to end users.
Implementation, modification, support and consulting fees are billed either on
an hourly or monthly basis and are recognized as services are rendered. Hardware
and third party software fees are typically billed and recognized as revenues
when delivered to the client.
 
RESULTS OF OPERATIONS
 
    REVENUES
 
    Total revenues were $7,059,000 and $5,231,000 for the three months ended
June 30, 1998 and 1997, respectively, representing an increase of 35%. Total
revenues were $18,790,000 and $12,676,000 for the nine months ended June 30,
1998 and 1997, respectively, representing an increase of 48%. The growth in
total revenues is attributable primarily to an increase in system sales.
Approximately 43% and 30% of total revenues were from two customers for the
three and nine months ended June 30, 1998.
 
    SYSTEM SALES.  System sales revenues were $5,991,000 and $4,573,000 for the
three months ended June 30, 1998 and 1997, respectively, representing an
increase of 31%. System sales revenues were $16,216,000 and $10,934,000 for the
nine months ended June 30, 1998 and 1997 respectively, representing an increase
of 48%. The increase in system sales was due primarily to the increase in
Diamond 950C/S license and implementation fees resulting from an increase in the
size of Diamond 950C/S implementations in progress during the period.
 
    SERVICES AND OTHER.  Services and other revenues were $1,068,000 and
$658,000 for the three months ended June 30, 1998 and 1997, respectively,
representing an increase of 62%. Services and other revenues were $2,575,000 and
$1,742,000 for the nine months ended June 30, 1998 and 1997, respectively,
representing an increase of 48%. Support fees continued to account for the
majority of services and other revenues. As a result, the increase in services
and other revenues was due primarily to an increase in the Company's installed
customer base. In addition, the Company experienced an increase in consulting
and group training fees.
 
    COST OF REVENUES.  Cost of revenues was $2,479,000 and $1,681,000 for the
three months ended June 30, 1998 and 1997, respectively, representing an
increase of 47%. Cost of revenues was $7,411,000 and $4,408,000 for the nine
months ended June 30, 1998 and 1997, respectively, representing an increase of
68%. Cost of revenues increased primarily as a result of the increased number of
personnel, both HSD employees and independent contractors, required to implement
and support the larger client base. Cost of revenues increased from 32% of total
revenues in the three months ended June 30, 1997 to 35% of total revenues in the
three months ended June 30, 1998, although no long-term trend should be implied
from this quarter to quarter comparison. Cost of revenues increased from 35% of
total revenues in the nine months ended June 30, 1997 to 39% of total revenues
in the nine months ended June 30, 1998, although no long-term trend should be
implied from this period to period comparison. The cost of revenues as a
percentage of sales is dependent on the mix of license, service, and hardware
and third party software revenues, and may fluctuate over time as these revenue
sources fluctuate.
 
                                       7
<PAGE>
    OPERATING EXPENSES.
 
    GENERAL AND ADMINISTRATIVE.  General and administrative expenditures were
$1,895,000 and $1,354,000 for the three months ended June 30, 1998 and 1997,
respectively, representing an increase of 40%. General and administrative
expenditures were $5,808,000 and $4,132,000 for the nine months ended June 30,
1998 and 1997, respectively, representing an increase of 41%. The increase in
general and administrative expenses was due primarily to staff additions and
investment in infrastructure to support the Company's expanded operations, as
well as additional reserves booked during the nine months ended June 30, 1998.
General and administrative expenses include the salaries and benefits associated
with general management, finance and administration, as well as costs associated
with recruiting and facilities. General and administrative expenditures as a
percentage of revenues for the three and nine months ended June 30, 1998 were
27% and 31%, respectively compared to 26% and 33% for the three and nine months
ended June 30, 1997, respectively.
 
    SALES AND MARKETING.  Sales and marketing expenditures were $1,143,000 and
$920,000 for the three months ended June 30, 1998 and 1997, respectively,
representing an increase of 24%. Sales and marketing expenditures were
$3,318,000 and $2,967,000 for the nine months ended June 30, 1998 and 1997,
respectively, representing an increase of 12%. The increase was primarily due to
the Company's continued emphasis on the expansion of its sales and marketing
department to better address market demand for its products, as well as the
affects of a new commission plan for sales personnel. Sales and marketing
expenditures as a percentage of revenues for the three and nine months ended
June 30, 1998 were 16% and 18%, respectively compared to 18% and 23% for the
three and nine months ended June 30, 1997, respectively.
 
    PRODUCT DEVELOPMENT.  Product development expenditures, net of software
capitalization, were $1,286,000 and $1,530,000 for the three months ended June
30, 1998 and 1997, respectively, representing a decrease of 16%. Product
development expenditures, net of software capitalization, were $3,746,000 and
$3,318,000 for the nine months ended June 30, 1998 and 1997, respectively,
representing a increase of 13%. Product development expenditures as a percentage
of revenues for the three and nine months ended June 30, 1998 were 18% and 20%,
respectively compared to 29% and 26% for the three and nine months ended June
30, 1997, respectively. The Company believes that product development
expenditures are essential to maintaining its competitive position and expects
these costs to continue to constitute a significant percentage of total revenues
in the near future.
 
    The Company capitalized $696,000 and $188,000 of product development costs
in the three months ended June 30, 1998 and 1997, respectively and $1,623,000
and $548,000 in the nine months ended June 30, 1998 and 1997, respectively.
Capitalized product development expenditures as a percentage of total product
expenditures were 35% and 30% for the three and nine months ended June 30, 1998,
respectively, and 11% and 14% for the three and nine months ended June 30, 1997,
respectively. The increase in the percentage of product development costs
capitalized is due primarily to the Company's efforts, beginning in the three
month period ended March 31, 1998, on the development of major releases of
Diamond 950C/S and Diamond 725. No such major releases were being developed in
the nine months ended June 30, 1997.
 
    INTEREST INCOME AND EXPENSE.  Interest income, net of interest expense, was
$105,000 and $166,000 for the three months ended June 30, 1998 and 1997,
respectively. Interest income was $335,000 and $528,000 for the nine months
ended June 30, 1998 and 1997, respectively. The decrease in interest income, net
of expense, was primarily due to a decrease in cash reserves invested. Interest
income represents interest earned on the Company's excess cash balances, which
are generally placed in short term investments, money market funds, and
government securities.
 
    PROVISION FOR INCOME TAXES.  The provision for income taxes was $86,000 and
$0 for the three months ended June 30, 1998 and 1997 respectively. The provision
for income taxes was $119,649 and $0 for the nine months ended June 30, 1998 and
1997 respectively. The increase in the provision for income taxes is due to
taxes withheld on overseas sales.
 
                                       8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
 
    Net cash provided by (used in) operating activities was $71,000 and
$(820,000) during the nine months ended June 30, 1998 and 1997, respectively. In
the nine months ended June 30, 1998, the increase in cash provided by operating
activities as compared to prior period resulted primarily from the reduced
operating loss.
 
    Net cash used in investing activities was $2,423,000 and $1,543,000 during
the nine months ended June 30, 1998 and 1997, respectively, and consisted
primarily of purchases of computer and office equipment and capitalization of
software development costs.
 
    Net cash provided by financing activities was $909,000 and $154,000 during
the nine months ended June 30, 1998 and 1997, respectively, consisting primarily
of proceeds from the exercise of common stock options by employees.
 
    As of June 30, 1998 and 1997, the Company had cash and cash equivalents in
the amounts of $9,752,000 and $13,045,000, respectively. The company believes
that available funds and its cash flow from operations will be adequate to fund
its presently anticipated working capital requirements for at least the next 12
months.
 
Year 2000
 
    Many computer systems used by the Company may not properly recognize a date
using "00" as the year 2000 (Year 2000). This could result in system/program
failures or logic errors that would disrupt normal business activities. The
Company is in the process of identifying and modifying or replacing computer
systems that potentially subject the Company to risk.
 
    In addition, certain software programs sold by the Company may not be Year
2000 compliant. The Company has evaluated such software programs to determine if
they are Year 2000 ready, and has notified its Diamond 725 customers that the
current release (Version 4.3) is Year 2000 compliant. Diamond 950 customers have
been notified that a Year 2000 compliant release for that project is expected to
be available in the first fiscal quarter ended December 31, 1998.
 
    The Company has initiated communications with suppliers to raise their
awareness of the Year 2000 issue and to determine the extent to which the
Company is vulnerable to their failure to remediate their own Year 2000 issues.
The Company cannot reasonably predict the degree to which its suppliers will be
successful in mitigating the potential negative effects of the Year 2000
date-recognition problem.
 
    If computer systems used by the Company or its suppliers, or the software
applications sold by the Company, fail or experience significant difficulties,
the Company's results of operations could be materially adversely affected. At
this time, the Company cannot reasonably estimate the cost of its Year 2000
compliance program.
 
    "Safe Harbor" Statement under the Private Securities Litigation Reform Act
of 1995: The statements contained in this report which are not historical facts
are forward-looking statements that are subject to risks and uncertainties that
could cause actual results to differ materially from those set forth in or
implied by forward-looking statements; including the Company's dependence on a
single product line; the dynamic nature of the market in with the Company's
product line competes; continued market acceptance of the Company's product;
development of new products and enhancements of the current product; dependence
of the Company's results of operations on its relationship with certain large
customers; the variable nature of the Company's operating results; the length of
the Company's sales cycle; the Company's dependence on key personnel; intense
competition and other risks described in the Company's Securities and Exchange
Commission filings.
 
                                       9
<PAGE>
                           PART II. OTHER INFORMATION
 
ITEM 5. OTHER INFORMATION
 
    In accordance with Rule 14a-4(c)(1) promulgated by the Securities and
Exchange Commission, management proxies intend to use their discretionary voting
authority with respect to any shareholder proposal raised at the Company's
annual meeting as to which the proponent fails to notify to Company on or before
January 17, 1998.
 
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
 
(a) Exhibits
 
    11.1  Statement re: computation of earnings per share
 
(b) Reports on Form 8-K
 
    No reports on Form 8-K have been filed during the quarter for which this
    report is filed.
 
                                   SIGNATURES
 
    Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
 
                                Health Systems Design Corporation
 
                                By:  /s/ Russell J. Harrison
                                     ------------------------------------------
                                     Russell J. Harrison, President and
Date: August 13, 1998                Chief Executive Officer
 
                                By:  /s/ Steven L. Moore
                                     ------------------------------------------
                                     Steven L. Moore,
                                     Chief Financial Officer
 
                                       10
<PAGE>
                       HEALTH SYSTEMS DESIGN CORPORATION
                               INDEX TO EXHIBITS
 
<TABLE>
<CAPTION>
  EXHIBIT                                                      DESCRIPTION
-----------  ---------------------------------------------------------------------------------------------------------------
<C>          <S>
      11.1   Computation of net income (loss) per share
</TABLE>
 
                                       11