Use these links to rapidly review the documentRWD TECHNOLOGIES, INC. INDEX FORM 10-Q

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

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FORM 10-Q

|(Mark One)                                        |                                                                                         
|------------------------------------------------- | ----------------------------------------------------------------------------------------
|ý                                                 | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|For the quarterly period ended September 30, 2002
|OR                                               
|o                                                 | 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: 0-22145

RWD TECHNOLOGIES, INC.(Exact name of Registrant as specified in its Charter)

|Maryland(State or other jurisdiction of
incorporation or organization)                   |  | 52-1552720(I.R.S. Employer
Identification No.)
|---------------------------------------------------------------------------------------- |  | ----------------------------------------------
|10480 Little Patuxent Parkway
Columbia, Maryland(Address of principal executive offices) |  | 21044-3530(Zip Code)                          

(410) 730-4377(Registrant's telephone number, including area code)

None(Former name, former address and former fiscal yearif changed since last report)

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 ý    No o

As
of October 31, 2002, 15,346,764 shares of common stock, $0.10 par value ("Common Stock"), of the Registrant were outstanding.

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RWD TECHNOLOGIES, INC.        INDEX        FORM 10-Q



|                             |  |                                                                                                                         
|---------------------------- |  | ------------------------------------------------------------------------------------------------------------------------
|PART IFINANCIAL INFORMATION
|Item 1.                      |  | Financial Statements                                                                                                    
|                             |  | Consolidated Condensed Balance Sheets as of September 30, 2002 (Unaudited) and December 31, 2001                        
|                             |  | Consolidated Statements of Operations for the Three Months and Nine Months ended September 30, 2002 and 2001 (Unaudited)
|                             |  | Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2002 and 2001 (Unaudited)                 
|                             |  | Notes to Consolidated Condensed Financial Statements (Unaudited)                                                        
|Item 2.                      |  | Management's Discussion and Analysis of Financial Condition and Results of Operations                                   
|Item 3.                      |  | Quantitative and Qualitative Disclosures About Market Risk                                                              
|Item 4.                      |  | Controls and Procedures                                                                                                 
|PART IIOTHER INFORMATION   
|Item 1.                      |  | Legal Proceedings                                                                                                       
|Item 2.                      |  | Changes in Securities                                                                                                   
|Item 3.                      |  | Defaults Upon Senior Securities                                                                                         
|Item 4.                      |  | Submission of Matters to a Vote of Security Holders                                                                     
|Item 5.                      |  | Other Information                                                                                                       
|Item 6.                      |  | Exhibits and Reports on Form 8-K                                                                                        
|Signatures                  
|Certifications              

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PART IFINANCIAL INFORMATION

Item 1. Financial Statements

RWD TECHNOLOGIES, INC.  Consolidated Condensed Balance Sheets  (In thousands)

|                                                        |                                                                             | September 30, 2002         |                                            | December 31, 2001 |       
|------------------------------------------------------- | --------------------------------------------------------------------------- | -------------------------- | ------------------------------------------ | ----------------- | ------
|
|ASSETS                                                  |                                                                             |                            |                                            |                   |       
|CURRENT ASSETS:                                         |                                                                             |                            |                                            |                   |       
|                                                        | Cash and investments                                                        |                            | $                                          | 11,575            |       
|                                                        | Restricted cash and investments                                             |                            |                                            | 10,351            |       
|                                                        | Contract accounts receivable, net                                           |                            |                                            | 19,261            |       
|                                                        | Costs and estimated earnings in excess of billings on uncompleted contracts |                            |                                            | 9,446             |       
|                                                        | Income tax receivable                                                       |                            |                                            | 6,427             |       
|                                                        | Prepaid expenses and other                                                  |                            |                                            | 2,164             |       
|                                                        | Deferred tax assets                                                         |                            |                                            | 3,027             |       
|                                                        |                                                                             |                            |                                            |                   |       
|                                                        |                                                                             | Total Current Assets       |                                            |                   | 62,251
|Fixed assets, net                                       |                                                                             |                            | 10,758                                     |                   |       
|Goodwill, net                                           |                                                                             |                            |                                           |                   |       
|Capitalized software development costs and other assets |                                                                             |                            | 4,501                                      |                   |       
|Restricted cash and investments                         |                                                                             |                            | 2,515                                      |                   |       
|                                                        |                                                                             |                            |                                            |                   |       
|                                                        |                                                                             | Total Assets               |                                            | $                 | 80,025
|                                                        |                                                                             |                            |                                            |                   |       
|LIABILITIES AND STOCKHOLDERS' EQUITY                    |                                                                             |                            |                                            |                   |       
|CURRENT LIABILITIES:                                    |                                                                             |                            |                                            |                   |       
|                                                        | Accounts payable and accrued expenses                                       |                            | $                                          | 13,260            |       
|                                                        | Credit line payable                                                         |                            |                                            | 7,357             |       
|                                                        | Billings in excess of costs and estimated earnings on uncompleted contracts |                            |                                            | 832               |       
|                                                        | Current portion of long-term debt                                           |                            |                                            | 547               |       
|                                                        |                                                                             |                            |                                            |                   |       
|                                                        |                                                                             | Total Current Liabilities  |                                            |                   | 21,996
|NONCURRENT LIABILITIES:                                 |                                                                             |                            |                                            |                   |       
|                                                        | Long-term debt, net of current portion                                      |                            |                                            | 2,870             |       
|                                                        | Deferred tax liabilities                                                    |                            |                                            | 3,027             |       
|                                                        |                                                                             |                            |                                            |                   |       
|                                                        |                                                                             | Total Liabilities          |                                            |                   | 27,893
|                                                        |                                                                             |                            |                                            |                   |       
|STOCKHOLDERS' EQUITY:                                   |                                                                             |                            |                                            |                   |       
|                                                        | Common stock                                                                |                            |                                            | 1,537             |       
|                                                        | Additional paid-in capital                                                  |                            |                                            | 47,203            |       
|                                                        | Accumulated comprehensive income (loss)                                     |                            |                                            | 451               |       
|                                                        | Retained earnings                                                           |                            |                                            | 2,941             |       
|                                                        |                                                                             |                            |                                            |                   |       
|                                                        |                                                                             | Total Stockholders' Equity |                                            |                   | 52,132
|                                                        |                                                                             |                            |                                            |                   |       
|                                                        |                                                                             |                            | Total Liabilities and Stockholders' Equity |                   | $     
|                                                        |                                                                             |                            |                                            |                   |       

See
accompanying notes to consolidated financial statements.

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RWD TECHNOLOGIES, INC.  Consolidated Statements of Operations  (Unaudited) (In thousands, except per share data)

|                                                                                   |                               | Three Months Ended September 30, |        | Nine Months Ended September 30, |       
|---------------------------------------------------------------------------------- | ----------------------------- | -------------------------------- | ------ | ------------------------------- | ------
|
|Revenue:                                                                           |                               |                                  |        |                                 |       
|                                                                                   | Consulting services           |                                  | $      | 28,054                          |       
|                                                                                   | Products and product services |                                  |        | 2,318                           |       
|                                                                                   |                               |                                  |        |                                 |       
|                                                                                   |                               | Total revenue                    |        |                                 | 30,372
|                                                                                   |                               |                                  |        |                                 |       
|Cost of revenue:                                                                   |                               |                                  |        |                                 |       
|                                                                                   | Consulting services           |                                  |        | 22,026                          |       
|                                                                                   | Products and product services |                                  |        | 5,182                           |       
|                                                                                   |                               |                                  |        |                                 |       
|                                                                                   |                               | Total cost of revenue            |        |                                 | 27,208
|                                                                                   |                               |                                  |        |                                 |       
|Gross profit                                                                       |                               |                                  | 3,164  |                                 |       
|Selling, general and administrative expenses                                       |                               |                                  | 6,580  |                                 |       
|Severance and lease termination expenses                                           |                               |                                  | 1,760  |                                 |       
|                                                                                   |                               |                                  |        |                                 |       
|Operating loss                                                                     |                               |                                  | (5,176 | )                               |       
|Other income (expense), net                                                        |                               |                                  | (58    | )                               |       
|                                                                                   |                               |                                  |        |                                 |       
|Loss before income taxes and cumulative effect of a change in accounting principle |                               |                                  | (5,234 | )                               |       
|Income tax benefit                                                                 |                               |                                  | (229   | )                               |       
|                                                                                   |                               |                                  |        |                                 |       
|Loss before cumulative effect of a change in accounting principle                  |                               |                                  | (5,005 | )                               |       
|Cumulative effect on prior years of changing method of accounting for goodwill     |                               |                                  | (692   | )                               |       
|                                                                                   |                               |                                  |        |                                 |       
|Net loss                                                                           |                               | $                                | (5,697 | )                               | $     
|                                                                                   |                               |                                  |        |                                 |       
|Basic and diluted loss per share:                                                  |                               |                                  |        |                                 |       
|Loss before cumulative effect of a change in accounting principle                  |                               | $                                | (0.33  | )                               | $     
|Cumulative effect on prior years of changing method of accounting for goodwill     |                               |                                  | (0.04  | )                               |       
|                                                                                   |                               |                                  |        |                                 |       
|Net loss per share                                                                 |                               | $                                | (0.37  | )                               | $     
|                                                                                   |                               |                                  |        |                                 |       
|Weighted average shares outstanding:                                               |                               |                                  |        |                                 |       
|                                                                                   | Basic calculation             |                                  |        | 15,395                          |       
|                                                                                   |                               |                                  |        |                                 |       
|                                                                                   | Diluted calculation           |                                  |        | 15,395                          |       
|                                                                                   |                               |                                  |        |                                 |       

See
accompanying notes to consolidated financial statements.

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RWD TECHNOLOGIES, INC.  Consolidated Statements of Cash Flows  (Unaudited) (In thousands)

|                                               |                                                                             | Nine Months Ended September 30, |                                                                               
|---------------------------------------------- | --------------------------------------------------------------------------- | ------------------------------- | ------------------------------------------------------------------------------
|
|CASH FLOWS FROM OPERATING ACTIVITIES:          |                                                                             |                                 |                                                                               
|                                               | Net loss                                                                    |                                 | $                                                                             
|                                               | Adjustments to reconcile net loss to net cash used by operating activities: |                                 |                                                                               
|                                               |                                                                             |                                 | Depreciation and amortization                                                 
|                                               |                                                                             |                                 | Loss on disposal of fixed assets                                              
|                                               |                                                                             |                                 | Cumulative effect on prior years of changing method of accounting for goodwill
|                                               |                                                                             |                                 | Deferred income taxes                                                         
|                                               |                                                                             |                                 | Effect of changes in:                                                         
|                                               |                                                                             |                                 |                                                                               
|                                               |                                                                             |                                 |                                                                               
|                                               |                                                                             |                                 |                                                                               
|                                               |                                                                             |                                 |                                                                               
|                                               |                                                                             |                                 |                                                                               
|                                               |                                                                             |                                 |                                                                               
|                                               |                                                                             |                                 |                                                                               
|                                               |                                                                             |                                 |                                                                               
|                                               |                                                                             |                                 |                                                                               
|                                               |                                                                             |                                 |                                                                               
|                                               |                                                                             |                                 |                                                                               
|CASH FLOWS FROM INVESTING ACTIVITIES:          |                                                                             |                                 |                                                                               
|                                               |                                                                             |                                 | (Purchase) Sale of investments, net                                           
|                                               |                                                                             |                                 | Purchase of fixed assets                                                      
|                                               |                                                                             |                                 | Proceeds from sale of fixed assets                                            
|                                               |                                                                             |                                 |                                                                               
|                                               |                                                                             |                                 |                                                                               
|                                               |                                                                             |                                 |                                                                               
|CASH FLOWS FROM FINANCING ACTIVITIES:          |                                                                             |                                 |                                                                               
|                                               |                                                                             |                                 | Payments on long-term debt                                                    
|                                               |                                                                             |                                 | Borrowings on long-term debt                                                  
|                                               |                                                                             |                                 | Borrowings under line of credit                                               
|                                               |                                                                             |                                 | Payments under line of credit                                                 
|                                               |                                                                             |                                 | Issuance of common stock                                                      
|                                               |                                                                             |                                 | Repurchase of common stock                                                    
|                                               |                                                                             |                                 |                                                                               
|                                               |                                                                             |                                 |                                                                               
|                                               |                                                                             |                                 |                                                                               
|NET DECREASE IN CASH AND CASH EQUIVALENTS      |                                                                             |                                 | (493                                                                          
|Effect of exchange rate changes on cash        |                                                                             |                                 | 697                                                                           
|CASH AND CASH EQUIVALENTS, beginning of period |                                                                             |                                 | 3,676                                                                         
|                                               |                                                                             |                                 |                                                                               
|CASH AND CASH EQUIVALENTS, end of period       |                                                                             | $                               | 3,880                                                                         
|                                               |                                                                             |                                 |                                                                               
|Supplemental Cash Flow Disclosures:            |                                                                             |                                 |                                                                               
|                                               | Income taxes paid                                                           |                                 | $                                                                             
|                                               | Interest paid                                                               |                                 | $                                                                             
|                                               | Transfer of investments from unrestricted to restricted                     |                                 | $                                                                             

See accompanying notes to consolidated financial statements.

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RWD TECHNOLOGIES, INC.  Notes to Consolidated Condensed Financial Statements  (Unaudited)

1.    Summary of Significant Accounting Policies:

Organization and Business

RWD Technologies, Inc. (the "Company") was incorporated on January 22, 1988, in the State of Maryland. The Company provides a broad range of
integrated solutions and products designed to improve the productivity and effectiveness of workers in complex operating environments.

Basis of Presentation

The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by accounting
principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments considered necessary for
a fair presentation, have been included. These financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the fiscal year ended
December 31, 2001, included in the Company's Annual Report on Form 10-K.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its greater than 50% owned subsidiaries. The earnings in consolidated subsidiaries
are recorded net of minority interests. Investments in 20%- through 50%-owned affiliated companies in which the Company exercises significant influence over operating and financial affairs are
included under the equity method of accounting. Otherwise, investments are included at cost. All significant intercompany accounts and transactions have been eliminated.

Reclassifications

Certain reclassifications were made to prior quarters' and prior year's amounts to conform to current quarter presentation.

2.    Basic and Diluted Net Loss per Share:

Basic loss per share has been computed using the weighted-average number of shares of common stock outstanding during the period, less shares that may be
repurchased, and excludes any dilutive effects of options, warrants, and convertible securities. Diluted net loss per share is computed based on the combined weighted-average number of shares and
share equivalents outstanding. For all periods presented, potentially dilutive stock options have been excluded from the computation of diluted net loss per share as their inclusion would be
anti-dilutive. No reconciling items exist between the net loss used for basic and diluted net loss per share.

3.    Comprehensive Loss:

Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from nonowner
sources. It includes all changes in

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equity during a period, except those resulting from investments by owners and distributions to owners. The Company's comprehensive loss for the periods presented is listed below:

|                                                                        |  | Three Months Ended
September 30, |        | Nine Months Ended
September 30, |  
|----------------------------------------------------------------------- |  | -------------------------------- | ------ | ------------------------------- | -
|
|
|Net loss                                                                |  | $                                | (5,697 | )                               | $
|Effect of unrealized loss on investments available-for-sale, net of tax |  |                                  | (4     | )                               |  
|Effect of unrealized gain on foreign exchange, net of tax               |  |                                  | 305    |                                 |  
|                                                                        |  |                                  |        |                                 |  
|Comprehensive loss                                                      |  | $                                | (5,334 | )                               | $
|                                                                        |  |                                  |        |                                 |  

4.    Business Segments:

The Company has three distinct operating segments: Enterprise Systems, which provides products and services supporting the implementation of
enterprise-wide software products and applications; Performance Solutions, which addresses all aspects of manufacturing processes in order to promote continuous improvements; and
Latitude360, which encompasses the design and delivery of information systems to end-users of technology as well as Web-based training, products and services.

The
accounting policies for these segments are the same as those described in the summary of significant accounting policies. Depreciation and amortization expense is reported in each
operating segment. However, the Company's tangible assets are not managed as distinct asset groups. All tangible assets not specifically identified to a segment are recorded at the corporate level
with depreciation

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expense allocated to operating segments based on headcount. Interest expense, interest income, and income taxes are reported at the corporate level only and are not disclosed below.

|                                                             |                       | Three Months Ended
September 30, |        | Nine Months Ended
September 30, |  
|------------------------------------------------------------ | --------------------- | -------------------------------- | ------ | ------------------------------- | -
|
|
|Revenue (all external):                                      |                       |                                  |        |                                 |  
|                                                             | Enterprise Systems    |                                  | $      | 13,605                          |  
|                                                             | Performance Solutions |                                  |        | 12,341                          |  
|                                                             | Latitude360           |                                  |        | 4,426                           |  
|                                                             |                       |                                  |        |                                 |  
|Total Revenue                                                |                       | $                                | 30,372 |                                 | $
|                                                             |                       |                                  |        |                                 |  
|Gross Profit (Loss):                                         |                       |                                  |        |                                 |  
|                                                             | Enterprise Systems    |                                  | $      | 2,897                           |  
|                                                             | Performance Solutions |                                  |        | 3,476                           |  
|                                                             | Latitude360           |                                  |        | (3,209                          | )
|                                                             |                       |                                  |        |                                 |  
|Total Gross Profit                                           |                       | $                                | 3,164  |                                 | $
|                                                             |                       |                                  |        |                                 |  
|Depreciation and Amortization Expense Allocated To Segments: |                       |                                  |        |                                 |  
|                                                             | Enterprise Systems    |                                  | $      | 825                             |  
|                                                             | Performance Solutions |                                  |        | 202                             |  
|                                                             | Latitude360           |                                  |        | 2,631                           |  
|                                                             |                       |                                  |        |                                 |  
|Total Allocated to Segments                                  |                       |                                  | 3,658  |                                 |  
|Amount not Allocated to Segments                             |                       |                                  | 551    |                                 |  
|                                                             |                       |                                  |        |                                 |  
|Total Depreciation and Amortization Expense                  |                       | $                                | 4,209  |                                 | $
|                                                             |                       |                                  |        |                                 |  
|Revenue (by geography):                                      |                       |                                  |        |                                 |  
|                                                             | United States         |                                  | $      | 23,505                          |  
|                                                             | United Kingdom        |                                  |        | 5,142                           |  
|                                                             | Other                 |                                  |        | 1,725                           |  
|                                                             |                       |                                  |        |                                 |  
|Total Revenue                                                |                       | $                                | 30,372 |                                 | $
|                                                             |                       |                                  |        |                                 |  

5.    Goodwill and Intangible Assets (in thousands, except per share data):

In accordance with Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets," goodwill and intangible assets
deemed to have indefinite lives will no longer be amortized, but instead will be subject to periodic impairment testing under a fair value approach. The Company applied these new rules beginning
January 1, 2002 and ceased amortizing goodwill. Goodwill, net of accumulated amortization, as of December 31, 2001 was $12,529. Goodwill amortization for the quarters ended
March 31, 2001, June 30, 2001, and September 30, 2001 was $179.

Under
SFAS No. 142, the Company was required to test all existing goodwill for impairment as of January 1, 2002, on a "reporting unit" basis. A reporting unit is an
operating segment, or one level below an operating segment, the "component" level. The component level is used if it constitutes a business for which discrete financial information is available and
segment management regularly reviews the operating results of that component. The Company tested the reporting unit related to the 1999 acquisition of Merrimac Interactive Media Corporation, which
generated goodwill of $14,290.

A
fair value approach was used to test goodwill for impairment. An impairment is recognized for the amount, if any, by which the carrying amount of goodwill exceeds its implied fair
value. The fair

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value of the reporting unit and the related implied fair value of its respective goodwill was established using discounted cash flows by an independent appraiser. As appropriate, comparative market
multiples were used to corroborate results of the discounted cash flows.

As
a result of testing goodwill for impairment in accordance with SFAS No. 142 as of January 1, 2002, the Company recorded a non-cash transitional impairment
charge of $12,529, or $0.81 loss per share. This amount is reported in the Statement of Operations as a cumulative effect on prior years of changing the method of accounting for goodwill. The charge
relates to a component of the Latitude360 segment.

Goodwill

The 2001 results on a historical basis do not reflect the non-amortization provisions of SFAS No. 142. If the Company had adopted SFAS
No. 142 on January 1, 2001, the historical net loss, basic and diluted net loss per common share would have been reduced to the "as adjusted" amounts indicated below.

|                               |  | Three Months Ended
September 30, 2001 |        | Nine Months Ended
September 30, 2001 |  
|------------------------------ |  | ------------------------------------- | ------ | ------------------------------------ | -
|
|As reported  historical basis |  | $                                     | (3,618 | )                                    | $
|Add: Goodwill amortization     |  |                                       | 179    |                                      |  
|Income tax effect              |  |                                       | (56    | )                                    |  
|                               |  |                                       |        |                                      |  
|As adjusted                    |  | $                                     | (3,495 | )                                    | $
|                               |  |                                       |        |                                      |  

6.    Income Taxes (in thousands):

The Company estimates its income tax expense or benefit in interim financial reporting periods by applying the estimated effective annual income tax rate to
year-to-date income or loss before income taxes. Effects of changes in tax laws that affect previously recorded deferred income tax assets or liabilities are also recorded in
the period that these changes are enacted. Income tax provisions in 2002 associated with the reported loss before the cumulative effect of adopting a new method of accounting for goodwill are
determined assuming the cumulative effect adjustment is not a component of the pretax loss. The Company's estimate of its 2002 consolidated effective annual income tax rate is subject to change based
on a variety of factors, including estimates of income or loss in U.S. Federal, state and foreign taxing jurisdictions, and the proportionate contribution to income or loss of domestic and foreign
operations.

For
the year ending December 31, 2002, the Company estimates that its effective annual income tax rate before the cumulative effect of a change in accounting principle and the
effect of enacted tax law changes will be approximately 17%. In addition to the income tax benefit associated with 2002 operations, in the first quarter of 2002, the Company recorded an income tax
benefit of $1,800 as a result of a U.S. Federal tax law change extending the net operating loss carryback period from two to five years. This change in tax law resulted in a corresponding reduction of
a previously recorded valuation allowance for deferred tax assets. As a result of the assessment of the status of deferred tax assets, the net operating loss carryforward was not assured beyond a
reasonable doubt and a valuation allowance was recorded against net deferred tax assets previously recognized.

During
the third quarter of 2002, management revised its estimated annual effective tax rate from 32% to 17%. If the Company had estimated the effective annual income tax rate before the
cumulative

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effect of a change in accounting principle and the effect of tax law changes to be 17% for the six months ended June 30, 2002, the loss before cumulative effect of a change in accounting
principle, the cumulative effect on prior years of changing method of accounting for goodwill, and net loss would have increased to the "as adjusted" amounts indicated below.

|                                                                                   |  | Six Months Ended June 30, 2002 |        
|---------------------------------------------------------------------------------- |  | ------------------------------ | -------
|
|Loss before income taxes and cumulative effect of a change in accounting principle |  | $                              | (4,560 
|Income tax benefit                                                                 |  |                                | (3,289 
|                                                                                   |  |                                |        
|Loss before cumulative effect of a change in accounting principle                  |  |                                | (1,271 
|Cumulative effect on prior years of changing method of accounting for goodwill     |  |                                | (11,837
|                                                                                   |  |                                |        
|Net loss                                                                           |  | $                              | (13,108
|                                                                                   |  |                                |        

7.    Long-Term Debt (in thousands):

The Company entered into two new long-term debt agreements during the nine months ended September 30, 2002. Information related to the debt
agreements as of September 30, 2002 is summarized as follows:

|                     |  | Interest Rate |  | Maturities
Through |  | Balance |     
|-------------------- |  | ------------- |  | ------------------ |  | ------- | ----
|Note payable         |  | 5.07%         |  | March 2007         |  | $       | 446 
|Note payable         |  | 0.00%         |  | February 2012      |  |         | 467 
|                     |  |               |  |                    |  |         |     
|                     |  |               |  |                    |  |         | 913 
|Less current portion |  |               |  |                    |  |         | (136
|                     |  |               |  |                    |  |         |     
|                     |  |               |  |                    |  | $       | 777 
|                     |  |               |  |                    |  |         |     

In
March 2002, the Company obtained a $490 loan from a commercial bank for funding of operating equipment needs at the Applied Technology Laboratory ("ATL") at the
University of Maryland, Baltimore County ("UMBC"). Monthly principal and interest repayments of $9 began April 2002 and are due ratably over five years. The interest rate on the loan is the
bank's Certificate of Deposit Annual Rate plus 250 basis points.

In
February 2002, the Company obtained a $500 interest-free loan from the Baltimore County Economic Development Authority to provide additional funding for leasehold
improvements to the Company's new ATL facility. Monthly principal repayments of $4 began March 2002 and are due ratably over ten years.

The
company has certain financial covenants in place under borrowing agreements with its lenders and during the third quarter of 2002, the covenants were amended. The Company was in
compliance with all financial covenants under loan agreements as of December 31, 2001 and September 30, 2002.

8.    Exit Activities (in thousands):

In June 2002, the Financial Accounting Standards Board ("FASB") issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal
Activities," which addresses accounting for

8

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restructuring and similar costs. SFAS No. 146 supersedes previous accounting guidance, principally Emerging Issues Task Force ("EITF") Issue No. 94-3. The Company early
adopted the provisions of SFAS No. 146 for restructuring and exit activities initiated after July 1, 2002. SFAS No. 146 requires that the liability for costs associated with an
exit or disposal activity be recognized when the liability is incurred. Under EITF No. 94-3, the liability for exit costs was recognized at the date of a company's commitment to an
exit plan. Under SFAS No. 146, a liability for costs that will continue to be incurred under a contract for its remaining term without economic benefit to the entity shall be recognized and
measured at its fair value when the entity ceases using the right conveyed by the contract. SFAS No. 146 also establishes that the liability should initially be measured and recorded at fair
value. Accordingly, SFAS No. 146 will affect the timing of recognizing exit and restructuring costs as well as the amount recognized.

Company
management approved a restructuring plan which downsized its Latitude360 operating segment.    This plan includes changes in management and management structure as
well as a fundamental reorganization of the operating segment. As a result of this restructuring, the Company recorded $723 in severance charges for the quarter ended September 30, 2002 and
$1,066 for the nine months ended September 30, 2002. Restructuring charges included the Company's estimate of employee
severance and related costs for employees terminated as a result of the revised business plan. The expenses associated with employee severance are included as a component of loss from operations.

The
Company assessed its available vacant space during the third quarter of 2002 and determined that a charge for the remaining rental payments should be recorded due to uncertainties
surrounding the sublease of the space. As a result, the Company recorded an expense of $1,037 in the third quarter of $2002 and $1,456 through the nine months ended September 30, 2002. In
connection with the relocation of employees to the ATL, the Company will continue to incur costs related to vacant leased space at the Columbia, Maryland facility. Due to poor general economic
conditions, the sublease market for the leased facility is depressed. The Company does not expect to sublease the vacant space between the moving date and the termination of the lease on
December 31, 2003. Therefore, in accordance with SFAS No. 146. the Company will likely expense the remaining rental payments of approximately $500 to $700 for the vacant space in the
fourth quarter of 2002. In addition to the vacant space charges, the Company will incur approximately $150 to $250 in costs related to moving expenses and other construction expenses in order to
prepare the facility for the relocation of personnel. No additional significant costs are expected to be incurred with respect to the relocation. The expenses associated with vacant space charges and
moving and construction costs will be presented in the loss from continuing operations.

The
following is a summary of the costs of exit activities recorded in 2002:

|                        |  | Three months ended
September 30, 2002 |       | Nine months ended
September 30, 2002
|----------------------- |  | ------------------------------------- | ----- | ------------------------------------
|Lease termination costs |  | $                                     | 1,037 |                                     
|Employee severance      |  |                                       | 723   |                                     
|                        |  |                                       |       |                                     
|Total                   |  | $                                     | 1,760 |                                     
|                        |  |                                       |       |                                     

9.    Software Development Costs (in thousands):

As discussed in Note 1 to the 2001 consolidated financial statements included in the Company's Annual Report on Form 10-K, the Company
amortizes its capitalized software development costs on a product-by-product basis at the greater of the amount determined with reference to total estimated revenues to be
generated by the product or the amount computed on a straight-line basis over the product's estimated useful life. During 2001 and 2002, the Company recorded impairment charges

9

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through increased amortization of its capitalized software development costs due to slow market acceptance of certain products.

Total
amortization expense for all capitalized software development costs was as follows:

|                            |  | Three months ended
September 30, |       | Nine months ended
September 30,
|--------------------------- |  | -------------------------------- | ----- | -------------------------------
|Amortization expense  2001 |  | $                                | 303   |                                
|Amortization expense  2002 |  |                                  | 2,801 |                                

10.  Cost of Revenue (in thousands):

During the third quarter of 2002, management reclassified certain costs of revenues from consulting services to products and product services due to an error in
the allocation of operating overhead costs. If the Company had reported the cost of revenue in product and product services, the cost of revenues for consulting services would have decreased and the
cost of revenues for products and product services would have increased $2,844 for the three and six months ended June 30, 2002. There is no impact of the reclassification on the cost of
revenue for the first quarter of 2002 or 2001 amounts. Additionally, the reclassification has no effect on segment profit as previously disclosed.

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

Certain statements contained herein, including statements regarding anticipated future results, development of the Company's services, products, markets and
future demands for the Company's services, products, and other statements regarding matters that are not historical facts, are "forward-looking statements," as defined in the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements include risks and uncertainties, particularly those described in the Company's filings with the Securities and Exchange Commission,
including those described in this Quarterly Report under the caption "Business Risks." Consequently, actual results may differ materially from those expressed or implied by these forward-looking
statements.

Overview

RWD Technologies, Inc. (the "Company") provides a broad range of integrated products and solutions designed to improve the productivity and effectiveness
of workers in complex operating environments. As the scope and complexity of technology used by business increases and the global business environment becomes more competitive, companies are
increasingly focused on maximizing their return on their advanced technology and eCommerce investments. As the Company's business evolves, strategic initiatives focus on aligning the organization to
best serve the customers, emphasizing learning products, expanding strategic partnerships, and pursuing additional international business.

Critical Accounting Policies

The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States, which require estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the year. Actual results could differ from those estimates. The following policies are considered to be the most critical to understanding the judgments that are involved in
preparing the financial statements and the uncertainties that could impact the results of operations, financial condition, and cash flows.

Goodwill and Intangible Assets.In accordance with SFAS No. 142, "Goodwill and Other Intangible Assets," the Company
tests goodwill and intangible assets deemed to have indefinite lives for impairment at least annually. As a result of testing goodwill for impairment in 2002, the Company recorded a
non-cash charge which is reported as a cumulative effect on prior years of changing the method of accounting for goodwill, as discussed more fully in Note 5 of the financial
statements.

Software Development Costs.The Company accounts for software development costs in accordance with SFAS No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed."

Costs
incurred prior to the establishment of technological feasibility are expensed as incurred. Captialized computer software development costs are amortized, beginning when the product
is first available for general release to customers. Periodic amortization is computed on a product-by-product basis at the greater of the amount determined with reference to
total estimated revenues to be generated by the product or the amount computed on a straight-line basis with reference to the product's expected life cycle.

The
Company evaluates capitalized software development costs for impairment by comparing the net book value against estimated net realizable value. Net realizable value is based on the
Company's estimate of future sales and to the extent these sales do not occur in the future, the net book value of capitalized software development costs may be impaired and written down to net
realizable value.

Costs
incurred in the search for, or the evaluation of, software product alternatives and for the conceptual formulation and the translation of knowledge into a design are considered
research and

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development expenses and are expensed as incurred. Software maintenance costs are also expensed as incurred.

Revenue Recognition.The majority of the Company's revenue is generated from consulting fees. The majority of the Company's
consulting contracts are on a time-and-materials basis, although many of the contracts contain initial "not-to-exceed" amounts and Company performance
obligations. The Company's other consulting contracts are on a fixed-price basis. Revenue is recognized using the percentage of completion method. Consulting contracts generally vary in length from
one to 36 months.

Earned
revenue is based on the percentage that direct labor and other contract costs incurred to date bear to total estimated costs, after giving effect to the most recent estimates of
total cost. The cumulative impact of revisions in total cost estimates during the progress of work is reflected in the period in which these changes become known. Earned revenue reflects the original
contract price adjusted for agreed-upon claim and change order revenue, if any. Losses expected to be incurred on
jobs in process, after consideration of estimated minimum recoveries from claims and change orders, are charged to income as soon as such losses are known.

The
Company recognizes revenue from the sale of software license agreements in accordance with American Institute of Certified Public Accountants ("AICPA") Statement of Position ("SOP")
No. 97-2, "Software Revenue Recognition" and SOP No. 98-9, "Modification of SOP 97-2 with Respect to Certain Transactions."

Revenue
from the sale of multiple-element software license agreements is generally recognized under the residual method at the time of delivery of software products to the customer and
when collectibility is probable and there is persuasive evidence of an agreement. Under the residual method, the Company defers revenue on any undelivered element, as indicated by vendor-specific
objective evidence of the fair market value of the undelivered element, and recognizes the residual amount in the period in which delivery takes place. The Company does not grant its customers a right
of return for a full or partial refund on its products. Revenue from all maintenance, hosting, and customer support agreements is recognized ratably over the term of the agreement, generally one year,
with the unrecognized portion at the balance sheet date being recorded as unearned revenue. Revenue from professional services and training relating to products is recognized as the services are
performed.

Income Taxes.The Company estimates its income tax expense or benefit in interim financial reporting periods by applying the
estimated effective annual income tax rate to year-to-date income or loss before income taxes. Effects of changes in tax laws that affect previously recorded deferred income
tax assets or liabilities are also recorded in the period that these changes are enacted. Income tax provisions in 2002 associated with the reported loss before the cumulative effect of adopting a new
method of accounting for goodwill were determined assuming the cumulative effect adjustment was not a component of the pretax loss. The Company's estimate of its 2002 consolidated effective annual
income tax rate is subject to change based on a variety of factors, including estimates of income or loss in U.S. Federal, state and foreign taxing jurisdictions and the proportionate contribution to
income or loss of domestic and foreign operations.

Results of Operations



Revenue.Consolidated revenue increased by $1.5 million, or 5.1%, from $28.9 million for the quarter ended
September 30, 2001 to $30.4 million for the quarter ended September 30, 2002. Performance by segment was as follows:



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Gross Profit.Gross profit for the total Company increased $0.4 million, or 11.7%, from $2.8 million for the
quarter ended September 30, 2001, to $3.2 million for the quarter ended September 30, 2002, and increased from 9.8% of revenue for the third quarter of 2001 to 10.4% of revenue
for the 2002 period as a result of on-going cost alignment efforts to return the Company to profitability. Performance by segment was as follows:



Selling, General and Administrative Expenses.Selling, general and administrative expenses decreased $1.1 million,
from $7.7 million for the third quarter of 2001 to $6.6 million for the third quarter of 2002, decreasing from 26.5% of total revenue for the third quarter of 2001 to 21.7% of total
revenue for the 2002 period. During the third quarter of 2002, there were decreases in facility rent of

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$0.2 million and marketing and indirect salaries and related personnel expenses of approximately $0.7 million. As required, the Company implemented in 2002 SFAS No. 142,
"Goodwill and Other Intangible Assets." As a result of adopting the new accounting standard, which resulted in an expense reduction of approximately $0.2 million for the quarter ended
September 30, 2002, the Company no longer amortizes goodwill.

Severance and Lease Termination Expenses.Severance and lease termination costs increased $1.1 million, from
$0.6 million for the third quarter of 2001 to $1.7 million for the third quarter of 2002, increasing from 2.1% of total revenue for the third quarter of 2001 to 5.8% of total revenue for
the 2002 period. The increase in severance expenses resulted from management's restructuring plan approved by management in the third quarter of 2002 relating to the Latitude360 operating segment. In
addition, management evaluated the ability to sublease vacant space in its current facilities. As a result of this assessment, the Company recorded a non-cash charge for future rental
payments related to this vacant space of $1.0 million. These charges are reported as an operating loss in the Statement of Operations discussed in Note 8 of the financial statements.

Operating Loss.As a result of the preceding discussion, the Company's operating loss decreased by $0.2 million, from
an operating loss of $5.4 million for the third quarter of 2001 to an operating loss of $5.2 million for the third quarter of 2002.

Other Income and Expense.Other income and expense decreased $0.3 million from income of $0.2 million for the
third quarter of 2001 to an expense of $0.1 million for the third quarter of 2002. This decrease resulted from higher levels of interest expense and lower interest income.

Income Tax Benefit.Income tax benefit decreased $1.4 million, from $1.6 million for the third quarter of 2001
to $0.2 million for the third quarter of 2002. The change in the income tax benefit resulted from the revision of the annual effective tax rate from 32% to 17%. The tax benefit for the third
quarter of 2002, as well as the cumulative effect on prior years of changing method of accounting for goodwill, were adjusted to reflect this change.

Net Loss.Net loss increased $2.1 million from a loss of $3.6 million for the third quarter of 2001 to a loss
of $5.7 million for the third quarter of 2002. The net loss for the third quarter of 2002 included a revision to the tax benefit to adjust the year-to-date tax benefit
and cumulative effect on prior years of changing method of accounting for goodwill to reflect the estimated effective annual tax rate of 17% for 2002.



Revenue.Consolidated revenue increased by $0.1 million, or 0.2%, from $89.4 million for the nine months ended
September 30, 2001 to $89.5 million for the nine months ended September 30, 2002. Performance by segment was as follows:



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Gross Profit.Gross profit for the total Company decreased by $0.3 million, or 2.1%, from $12.6 million for the
nine months ended September 30, 2001, to $12.3 million for the nine months ended September 30, 2002, and decreased from 14.1% of revenue for the nine months ended
September 30, 2001 to 13.8% of revenue for the 2002 period. Performance by segment was as follows:



Selling, General and Administrative Expenses.Selling, general and administrative expenses decreased $1.8 million,
from $21.4 million for the nine months ended September 30, 2001 to $19.6 million for the 2002 period, decreasing from 23.9% of total revenue for the nine months ended
September 30, 2001 to 21.9% of total revenue for the 2002 period. During the nine months ended September 30, 2002, there were reductions in facilities rent of $0.8 million,
indirect travel of $0.1 million, and bad debt expense of $0.3 million. During the nine months ended September 30, 2002, the Company implemented SFAS No. 142, "Goodwill and
Other Intangible Assets." As a result of adopting the new accounting standard, the Company no longer amortizes goodwill, which resulted in an expense reduction of approximately $0.6 million for
the nine months ended September 30, 2002.

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Severance and Lease Termination Expenses.Severance and lease termination costs increased $1.5 million, from
$1.0 million for the nine months ended September 30, 2001 to $2.5 million for the 2002 period, increasing from 1.1% of total revenue for the nine months ended September 30,
2001 to 2.8% of total revenue for the 2002 period. The increase in severance expenses was due primarily to the management restructuring plan approved by management in an effort to return the
Latitude360 operating segment to profitability. In addition, management assessed the ability to sublease vacant space in its current facilities. As a result of this assessment, the Company recorded a
non-cash charge related to future rental payments for vacant space of $1.5 million. This charge is reported as an operating loss in the Statement of Operations as discussed in
Note 8 of the financial statements.

Operating Loss.As a result of the preceding, the Company's operating loss was $9.8 million for both the nine months
ended September 30, 2001 and the nine months ended September 30, 2002.

Other Income.Other income decreased $0.6 million from the nine months ended September 30, 2001 to the nine
months ended September 30, 2002. The decrease primarily resulted from a decrease in interest income and a decrease in minority interest income from the Company's majority-owned joint venture,
SAPLS.

Income Tax Benefit.Income tax benefit increased $0.1 million, from $3.4 million for the nine months ended
September 30, 2001 to $3.5 million for the nine months ended September 30, 2002. The Company's effective income tax benefit for its loss before the cumulative effect of a change
in accounting principle was 36% for the nine months ended September 30, 2001 and 2002. The tax benefit in the 2002 period includes a $1.8 million benefit recorded in the first quarter of
2002 as a result of a change in the U.S. Federal tax law that extended the net operating loss carryback from two to five years. Excluding this benefit resulting from a tax law change, the effective
income tax benefit for the nine months ended September 30, 2002 was 17%. This rate differs from the U.S. statutory income tax rate of 34% principally because the Company expects to record
benefits from its operating losses in 2002 only to the extent that it can carryback those losses and recover taxes paid in previous years.

Cumulative effect on prior years of changing method of accounting for goodwill.As a result of the implementation of SFAS
No. 142, the Company recognized an impairment loss of $12.5 million on goodwill. The effects of adopting the new accounting standard on 2002 and 2001 operating results are discussed in
Note 5 of the financial statements.

Net loss.Net loss increased by $13.0 million, from a net loss of $5.8 million for the nine months ended
September 30, 2001 to a net loss of $18.8 million for the nine months ended September 30, 2002.

Liquidity and Capital Resources

The Company's cash and investments were $24.4 million as of September 30, 2002, of which $12.9 million was restricted and designated as collateral
for borrowed amounts, compared to $22.8 million as of December 31, 2001. The Company's working capital was $40.3 million as of September 30, 2002, and $41.5 million
as of December 31, 2001. Additionally, as of September 30, 2002, there was a $6.4 million tax receivable outstanding from the IRS and several local taxing authorities.

The
Company's operating activities used cash of approximately $4.4 million for the nine months ended September 30, 2002, compared to using cash of $4.9 million for
the nine months ended September 30, 2001. Included in the Company's net loss are several non-cash charges for the nine months ended September 30, 2002. These
non-cash charges and other items affecting the net loss for the nine months ended September 30, 2002 are described above in the discussion of the Company's results of operations.
The change in cash used for operating activities is primarily due to improving earnings before non-cash items, which consist principally of depreciation and amortization and a goodwill
impairment charge. For the nine months ended September 30, 2002, earnings before

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depreciation and amortization and non-cash charges were $0.6 million, compared to $0.1 million in the comparable 2001 period.

Investing
activities used cash of approximately $3.5 million for the nine months ended September 30, 2002, compared to providing cash of $0.8 million for the nine
months ended September 30, 2001. Cash used for investing activities for the nine months ended September 30, 2002 consisted primarily of purchases of fixed assets and investments, as well
as the purchase of investments as collateral for loans obtained to fund a portion of the Company's leased ATL facility. For the nine months ended September 30, 2001, investing activities
consisted primarily of the sale of investments offset by the purchase of fixed assets.

Financing
activities provided cash of approximately $7.4 million for the nine months ended September 30, 2002, compared to providing $2.3 million for the nine months
ended September 30, 2001. For the nine months ended September 30, 2002, cash provided by financing activities consisted of the borrowings of long-term debt and draws under
the credit line. During the nine months ended
September 30, 2002, the Company obtained a $0.5 million interest-free loan from the Baltimore County Economic Development Authority to provide additional funding for the
leased ATL facility at UMBC. Monthly principal repayments began in March 2002 and are due ratably over a ten-year period. Additionally, the Company obtained a $0.5 million
loan from a commercial bank for funding of operating equipment needs at the ATL facility. Monthly principal and interest payments began in April 2002 and are due ratably over a
five-year period.

The
Company has a $10.0 million secured revolving line of credit with a commercial bank, which bears interest at the 30-day LIBOR rate (1.82% on September 30,
2002), plus 1.2%. The Company utilizes this line of credit regularly to finance a portion of its working capital needs. There was no balance outstanding on the line of credit as of December 31,
2001. The balance outstanding on the line of credit was $5.7 million as of September 30, 2002. The highest borrowing level was $5.7 million during the nine months ended
September 30, 2002 and $4.1 million during 2001.

The
Company's majority-owned subsidiary, SAP Learning Solutions Pte Ltd ("SAPLS"), has a Singapore dollar ("SGD") revolving credit facility with a major bank intended for general
working capital requirements. The revolving credit facility is secured by a SGD3.0 million (approximately $1.7 million) standby letter of credit provided by the Company and a
SGD2.0 million (approximately $1.1 million) corporate guarantee by the Company's joint venture partner. As of December 31, 2001 and September 30, 2002, there was
$0.7 million and $1.7 million, respectively, outstanding under this line of credit.

During
the nine months ended September 30, 2002 and 2001, the Company made $2.1 million and $2.8 million in capital expenditures, respectively, primarily for
operating equipment and furniture and fixtures to support its professional and administrative staff, the majority of which were installed at the Company's leased ATL facility. These capital
expenditures were primarily funded from available cash, although the Company entered into leases for some of the equipment for the new facility.

During
2002 and continuing into 2003, the Company anticipates it will significantly reduce the level of capital and product development expenditures from 2001 levels. The Company expects
to fund those expenditures from a combination of available cash and alternative financing methods, such as equipment leases or asset-based borrowings. The Company believes its existing cash balances,
cash provided by future operations, cash provided by income tax refunds, and its line of credit will be sufficient to meet the Company's working capital and other cash needs at least through 2003.

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Contractual Cash Obligations and Other Commercial Commitments (in thousands)

The following tables reflect a summary of the Company's contractual cash obligations and other commercial commitments as of September 30, 2002:

|Contractual Cash Obligations       |  | Total |        | Due in less
than 1 year |   | Due in
1-3 years |  | Due in
4-5 years |        | Due after 5
years
|---------------------------------- |  | ----- | ------ | ----------------------- | - | ---------------- |  | ---------------- | ------ | -----------------
|Long-term debt (1)                 |  | $     | 3,391  |                         | $ | 534              |  | $                | 1,890  |                  
|Capital lease obligations          |  |       | 26     |                         |   | 13               |  |                  | 13     |                  
|Operating leases                   |  |       | 24,103 |                         |   | 6,643            |  |                  | 8,833  |                  
|                                   |  |       |        |                         |   |                  |  |                  |        |                  
|Total Contractual Cash Obligations |  | $     | 27,520 |                         | $ | 7,190            |  | $                | 10,736 |                  
|                                   |  |       |        |                         |   |                  |  |                  |        |                  

|Other Commercial Commitments     |  | Total |        | Due in less
than 1 year |   | Due in
1-3 years |  | Due in
4-5 years |   | Due after
5 years
|-------------------------------- |  | ----- | ------ | ----------------------- | - | ---------------- |  | ---------------- | - | -----------------
|Lines of credit (1)(2)(5)        |  | $     | 7,357  |                         | $ | 7,357            |  | $                |  |                  
|Standby letters of credit (3)(4) |  |       | 2,947  |                         |   | 2,947            |  |                  |  |                  
|                                 |  |       |        |                         |   |                  |  |                  |   |                  
|Total Commercial Commitments     |  | $     | 10,304 |                         | $ | 10,304           |  | $                |  |                  
|                                 |  |       |        |                         |   |                  |  |                  |   |                  

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Recent Accounting Pronouncements

In June 2002, the Financial Accounting Standards Board ("FASB") issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal
Activities," which addresses accounting for restructuring and similar costs. SFAS No. 146 supersedes previous accounting guidance, principally Emerging Issues Task Force ("EITF") Issue
No. 94-3. The Company early adopted the provisions of SFAS No. 146 for restructuring and exit activities initiated after July 1, 2002. SFAS No. 146 requires
that the liability for costs associated with an exit or disposal activity be recognized when the liability is incurred. Under EITF No. 94-3, a liability for an exit costs was
recognized at the date of a company's commitment to an exit plan. SFAS No. 146 also establishes that the liability should initially be measured and recorded at fair value. Accordingly, SFAS
No. 146 will affect the timing of recognizing

18

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exit and restructuring costs as well as the amount recognized. The effects and disclosures related to the adoption of the new accounting standard on 2002 are discussed in Note 8 of the
financial statements.

Effects of Inflation

Inflation has not had a significant effect on the Company's business during the past three years. The Company cannot predict what effect, if any, inflation may
have on its future results of operations.

Business Risks

The following are some of the factors that may cause the Company's future results of operations to differ materially from management's expectations and historic
trends.



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Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company does not have significant interest rate risk related to its line of credit, which has an interest rate equivalent to the 30-day LIBOR rate
(1.82% on September 30, 2002), plus 1.2%. The Company does not have significant foreign currency risk related to foreign sales because of the amount of funds maintained in foreign payroll and
operating accounts. The Company does not have any derivative commodity instruments or other financial instruments such as interest swaps, foreign currency forwards, futures and options, or foreign
currency denominated debt, except for credit line debt of its majority-owned subsidiary, SAPLS, which is denominated in Singapore dollars. The Company does not have commodity price risk or other
relevant market risks.

Item 4. Controls and Procedures

(a)Evaluation of disclosure controls and procedures.During the 90-day period prior to the filing date of this
report, management, including the Company's Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company's disclosure controls and
procedures. Based upon, and as of the date of that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective, in all
material respects, to ensure that information required to be disclosed in the reports the Company files and submits under the Exchange Act is recorded, processed, summarized and reported as and when
required.

(b)Changes in internal controls.There were no significant changes in the Company's internal controls or in other factors
that could significantly affect those controls subsequent to the evaluation date, and no corrective actions with regard to significant deficiencies and material weaknesses.

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PART IIOTHER INFORMATION

Item 1. Legal Proceedings

From time of time, the Company is party to routine litigation in the ordinary course of business. The Company is not currently party to any material litigation.

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

No matters were submitted to a vote of security holders during the third quarter of 2002.

Item 5. Other Information

Sarbanes-Oxley Act of 2002

The Company has filed with the Securities and Exchange Commission the certifications of its Chief Executive Officer and Chief Financial Officer required by
Section 906 of the Sarbanes-Oxley Act of 2002 (the "Act") on Form 8-K (Item 9), filed the date hereof. The Certifications required by Section 302 of the Act are included
herewith.

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







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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.

| |  | RWD TECHNOLOGIES, INC.
| |  | ----------------------
| |  | By:                   
| |  | By:                   

Dated:
November 12, 2002

Pursuant
to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on
the dates indicated.

|Name                                         |  | Capacity                                                               |  | Date             
|-------------------------------------------- |  | ---------------------------------------------------------------------- |  | -----------------
|                                             |  |                                                                        |  |                  
|/s/ROBERT W. DEUTSCHRobert W. Deutsch, Ph.D. |  | Chairman of the Board, Chief Executive Officer, President and Director |  | November 12, 2002
|/s/BETH MARIE BUCKBeth Marie Buck, CPA       |  | Chief Financial Officer and Vice President                             |  | November 12, 2002

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CERTIFICATIONS

Each of the undersigned, in his/her capacity as an officer of RWD Technologies, Inc., provides the following certifications required by 18 U.S.C.
Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, and 17 C.F.R. §240.13a-14.

I,
Robert W. Deutsch, certify that:



Dated:
November 12, 2002

| |  | By: | /s/ROBERT W. DEUTSCHRobert W. Deutsch, Ph.D.
Chairman of the Board, Chief Executive Officer, President, and Director (Principal Executive Officer)
| |  | --- | --------------------------------------------------------------------------------------------------------------------------------------------------

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I,
Beth Marie Buck, certify that:



Dated:
November 12, 2002

| |  | By: | /s/BETH MARIE BUCKBeth Marie Buck, CPA
Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)
| |  | --- | ------------------------------------------------------------------------------------------------------------------------------

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