<PAGE>

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                   FORM 10-Q


(Mark One)

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

                     For the quarterly period ended September 30, 1999


                                  OR


     [ ]             TRANSITION REPORT PURSUANT TO SECTION 13 OR
                     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                                 52-1552720
     (State or other jurisdiction of                   (I.R.S. Employer
      incorporation or organization)                 Identification No.)

      10480 Little Patuxent Parkway                       21044-3530
            Columbia, Maryland                            (Zip Code)
 (Address of principal executive offices)


                                (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 X No __

As of September 30, 1999, 14,493,451 shares of common stock $0.10 par value
("Common Stock") of the Registrant were outstanding.

<PAGE>

                            RWD TECHNOLOGIES, INC.

                                     INDEX

                                   FORM 10-Q
<TABLE>
<CAPTION>
                                                                                                          Page
                                                                                                        --------
<S>                                                                                                     <C>
PART I - FINANCIAL INFORMATION

Item 1.           Financial Statements

                  Consolidated Condensed Balance Sheets as of September 30, 1999, (Unaudited)                1
                   and December 31, 1998

                  Consolidated Statements of Income for the Three Months and Nine Months                     2
                   ended September 30, 1999, and 1998 (Unaudited)

                  Consolidated Statements of Cash Flows for the Nine Months ended                            3
                   September 30, 1999, and 1998 (Unaudited)

                  Notes to Consolidated Financial Statements                                                 4

Item 2.           Management's Discussion and Analysis of Financial Condition and Results of                 6
                   Operations

Item 3.           Quantitative and Qualitative Disclosures About Market Risk                                N/A


PART II - OTHER INFORMATION

Item 1.           Legal Proceedings                                                                         N/A

Item 2.           Changes in Securities                                                                     12

Item 3.           Defaults Upon Senior Securities                                                           N/A

Item 4.           Submission of Matters to a Vote of Security Holders                                       N/A

Item 5.           Other Information                                                                         N/A

Item 6.           Exhibits and Reports on Form 8-K                                                          12

Signatures                                                                                                  13
</TABLE>

<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

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

<TABLE>
<CAPTION>
                                                                     September 30, 1999         December 31, 1998
                                                                     ------------------         -----------------
                                                                         (unaudited)
<S>                                                                  <C>                        <C>
                               ASSETS
 CURRENT ASSETS:
      Cash and investments.........................................        $    29,196                $    51,224
      Contract accounts receivable, net............................             23,424                     20,388
      Costs and estimated earnings in excess of billings on
          uncompleted contracts....................................             11,143                      7,889
      Prepaid expenses and other...................................              1,243                      1,199
                                                                           -----------                -----------
          Total Current Assets.....................................             65,006                     80,700
 NET FIXED ASSETS..................................................             11,166                     9,394
 GOODWILL, net.....................................................             13,585                        --
 OTHER ASSETS......................................................              1,220                       300
                                                                           -----------                -----------
          Total Assets.............................................        $    90,977                $    90,394
                                                                           ===========                ===========

                LIABILITIES AND STOCKHOLDERS' EQUITY
 CURRENT LIABILITIES:
      Accounts payable and accrued expenses........................        $    11,554                $     9,245
      Line of credit...............................................              1,265                         --
      Billings in excess of costs and estimated earnings on
          uncompleted contracts....................................              3,827                      4,554
      Deferred tax liability.......................................                 66                        471
      Current portion of capital lease obligation..................                 --                         31
                                                                           -----------                -----------
          Total Current Liabilities................................             16,712                     14,301
 NONCURRENT LIABILITIES:
      Other liabilities............................................                661                        834
      Deferred tax liability.......................................                279                      1,298
                                                                           -----------                -----------
          Total Liabilities........................................             17,652                     16,433
                                                                           -----------                -----------
 COMMITMENTS AND CONTINGENCIES
 STOCKHOLDERS' EQUITY:
      Common stock.................................................              1,449                      1,502
      Additional paid-in capital...................................             46,141                     52,461
      Accumulated comprehensive income.............................                (34)                        81
      Retained earnings............................................             25,769                     19,917
                                                                           -----------                -----------
          Total Stockholders' Equity...............................             73,325                     73,961
                                                                           -----------                -----------
              Total Liabilities and Stockholders' Equity...........        $    90,977                $    90,394
                                                                           ===========                ===========
</TABLE>
             See accompanying notes to consolidated financial statements.



                                       1

<PAGE>

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

<TABLE>
<CAPTION>
                                                       Three Months Ended September 30,           Nine Months Ended September 30,
                                                   -----------------------------------------    ------------------------------------
                                                          1999                  1998                1999                 1998
                                                   --------------------   ------------------    ---------------    -----------------
<S>                                                <C>                    <C>                   <C>                 <C>
Revenue...........................................     $    29,096            $    30,151         $    94,775          $    83,767
Cost of services..................................          24,804                 20,952              73,230               58,612
                                                   --------------------   ------------------    ---------------    -----------------
    Gross profit..................................           4,292                  9,199              21,545               25,155
General and administrative expenses...............           4,395                  3,804              12,729               10,752
                                                   --------------------   ------------------    ---------------    -----------------
Operating (loss) income...........................            (103)                 5,395               8,816               14,403
Other income, net.................................             135                    294                 993                1,186
                                                   --------------------   ------------------    ---------------    -----------------
    Income before taxes...........................              32                  5,689               9,809               15,589
Income tax provision..............................              12                  2,190               3,678                5,953
                                                   --------------------   ------------------    ---------------    -----------------
    Net income....................................     $        20            $     3,499         $     6,131          $     9,636
                                                   ====================   ==================    ===============    =================

    Diluted earnings per share....................     $      0.00            $      0.22         $      0.39          $      0.60
                                                   ====================   ==================    ===============    =================
    Basic earnings per share......................     $      0.00            $      0.23         $      0.41          $      0.65
                                                   ====================   ==================    ===============    =================

    Weighted average shares outstanding -
       Diluted calculation........................          15,156                 16,005              15,620               16,014
                                                   ====================   ==================    ===============    =================
       Basic calculation..........................          14,481                 14,938              14,828               14,854
                                                   ====================   ==================    ===============    =================
</TABLE>

         See accompanying notes to consolidated financial statements.

                                       2
<PAGE>

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

<TABLE>
<CAPTION>
                                                                     Nine Months Ended September 30,
                                                                      1999                     1998
                                                                   ---------                ---------
<S>                                                                <C>                      <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
      Net income..............................................     $   6,131                $   9,636
      Adjustments to reconcile net income to net cash
        provided by operating activities:
         Depreciation and amortization........................         3,264                    2,638
         Loss on sale of fixed assets.........................             6                      271
         Deferred income taxes................................          (900)                    (915)
         Increase in trade accounts receivable................        (3,037)                  (4,086)
         Increase in costs and earnings in excess of
          billings on uncompleted contracts...................        (3,254)                  (5,670)
         Decrease in prepaid expense and other................           304                      117
         Increase in accounts payable and accrued expenses....         3,916                   11,220
         (Decrease) increase in billings in excess of
          earnings on uncompleted contracts...................          (926)                     136
         Decrease in other liabilities........................          (242)                    (184)
                                                                   ---------                ---------
         Net cash provided by operating activities............         5,262                   13,163
                                                                   ---------                ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
         Sale of investments, net.............................        10,955                      874
         Payments related to acquisition......................       (15,377)                      --
         Purchase of fixed assets.............................        (4,513)                  (3,377)
         Payments for other assets............................          (825)                     (46)
         Proceeds from sale of fixed assets...................            39                       25
                                                                   ---------                ---------
         Net cash used in investing activities................        (9,721)                  (2,524)
                                                                   ---------                ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
         Principal portion paid on capital lease..............           (32)                     (38)
         Borrowings under line of credit......................         1,265                       --
         Issuance of common stock.............................         1,045                      920
         Repurchase of common stock...........................        (8,776)                     (73)
                                                                   ---------                ---------
         Net cash (used in) provided by financing activities..        (6,498)                     809
                                                                   ---------                ---------

NET (DECREASE) INCREASE IN CASH AND CASH
   EQUIVALENTS...............................................        (10,957)                  11,448
                                                                   ---------                ---------
CASH AND CASH EQUIVALENTS, beginning of period...............         13,328                    3,619
                                                                   ---------                ---------
CASH AND CASH EQUIVALENTS, end of period.....................      $   2,371                $  15,067
                                                                   =========                =========
Supplemental Cash Flow Disclosures:
         Income taxes paid....................................     $   5,511                $     959
                                                                   =========                =========
         Interest expense paid................................     $       2                $      12
                                                                   =========                =========
</TABLE>
         See accompanying notes to consolidated financial statements.

                                       3
<PAGE>

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

1.   Summary of Significant Accounting Policies:

Organization and Business
--------------------------

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

     The Company's operations depend upon, among other things, the Company's
ability to attract, develop, and retain a sufficient number of highly skilled
professional employees. In addition, the Company's revenue is generated from a
limited number of clients in specific industries. Future operations may be
affected by its ability to retain these clients and cyclical and economic
factors that could have an impact on those industries.

Basis of Presentation
---------------------

     The accompanying consolidated financial statements include the accounts of
RWD Technologies, Inc., and its wholly owned subsidiaries and are presented on
the accrual basis of accounting in accordance with generally accepted accounting
principles. All significant intercompany balances and transactions have been
eliminated in consolidation. The preparation of consolidated financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities as of
the date of the consolidated financial statements and the reported amounts of
total revenue and expenses during the reporting period. Actual results could
differ from those estimates.

Acquisition
-----------

         During June 1999 the Company acquired all of the outstanding stock of
Merrimac Interactive Media Corporation for a purchase price of $13.5 million
plus certain other costs. The excess purchase price over the fair value of the
net assets acquired resulted in the recognition of approximately $13.7 million
of goodwill, which is being amortized over the estimated useful life of 20
years.

Comprehensive Income
--------------------

     Comprehensive income is defined as the change in equity of a business
enterprise during a period from transactions and other events and circumstances
from nonowner sources. The Company's comprehensive income for the periods
presented is listed below:

<TABLE>
<CAPTION>
                                                             For the                         For the
                                                       Three Months Ended               Nine Months Ended
                                                          September 30,                   September 30,
                                                    --------------------------      ---------------------------
                                                                         (in thousands)
                                                       1999             1998           1999             1998
                                                    ---------         --------       --------         --------
<S>                                                 <C>               <C>            <C>              <C>
Net Income as Reported                              $     20          $  3,499       $  6,131         $  9,636
Effect of Unrealized (Loss) Gains on
   Investments Available-for-Sale                        (52)               21           (115)              28
                                                    =========         ========       =========        ========

Comprehensive Net (Loss) Income                          (32)         $  3,520       $  6,016         $  9,664
                                                    =========         ========       =========        ========
</TABLE>
                                       4
<PAGE>

2.   Business Segments:

     The Company believes it has reportable operating segments, as defined by
Statement of Financial Accounting Standards No. 131. The Company has identified
four distinct operating segments: Information Technology Services; Enterprise
Resource Planning Services; Lean Manufacturing Consulting Services; and
Technology Performance Support 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 are
recorded at the corporate level with depreciation 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.
<TABLE>
<CAPTION>
                                                           Three Months Ended        Nine Months Ended
                                                             September 30,             September 30,
                                                                         (in thousands)
                                                          1999          1998         1999         1998
                                                        ---------    ---------    ---------    ---------
<S>                                                     <C>           <C>          <C>         <C>
Revenue (all external):
    Information Technology                                $ 7,701      $ 7,072      $25,077      $19,853
    Enterprise Resource Planning                            7,983       10,796       29,863       26,766
    Lean Manufacturing Consulting                           6,170        4,365       16,492       13,521
    Technology Performance Support                          7,242        7,918       23,343       23,627
                                                        ---------    ---------    ---------    ---------
Total Revenue                                             $29,096      $30,151      $94,775      $83,767
                                                        =========    =========    =========    =========

Gross Profit:
    Information Technology                                $   674      $ 2,606      $ 6,696      $ 7,425
    Enterprise Resource Planning                              (13)       3,362        4,227        7,748
    Lean Manufacturing Consulting                           2,056        1,440        5,251        4,519
    Technology Performance Support                          1,575        1,791        5,371        5,463
                                                        ---------    ---------    ---------    ---------
Total Gross Profit                                        $ 4,292      $ 9,199      $21,545      $25,155
                                                        =========    =========    =========    =========

Depreciation and Amortization Expense
  Allocated To Segments:
    Information Technology                                $   264      $   155      $   647      $   428
    Enterprise Resource Planning                              301          231          883          585
    Lean Manufacturing Consulting                              73           51          198          156
    Technology Performance Support                            203          197          605          596
                                                        ---------    ---------    ---------    ---------
Total Allocated to Segments                                   841          634        2,333        1,765

Amount not Allocated to Segments                              418          260          931          873
                                                        ---------    ---------    ---------    ---------
Total Depreciation and Amortization Expense               $ 1,259      $   894      $ 3,264      $ 2,638
                                                        =========    =========    =========    =========

Revenue (by geography):
    United States                                         $26,035      $27,274      $85,902      $73,734
    Non-United States                                       3,061        2,877        8,873       10,033
                                                        ---------    ---------    ---------    ---------
Total Revenue                                             $29,096      $30,151      $94,775      $83,767
                                                        =========    =========    =========    =========
</TABLE>

                                       5
<PAGE>

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

Results of Operations

     Quarter Ended September 30, 1999, Compared to Quarter Ended
September 30, 1998

     Revenue.  Revenue for the total Company decreased by $1.1 million (or 3.5
percent), from $30.2 million for the quarter ending September 30, 1998, to $29.1
million for the quarter ending September 30, 1999. The Company experienced
changes in its operating segments as follows:

     Information Technology Services. Revenue for the Company's Information
     Technology Services increased by $629,000 (or 8.9 percent), from $7.1
     million in the quarter ending September 30, 1998, to $7.7 million in
     the quarter ending September 30, 1999, representing 23.5 percent of the
     Company's revenue in 1998 and 26.5 percent of the Company's revenue in
     1999. Key factors in revenue increases included new client business in
     customer relationship management systems (CRM) and e-commerce, as well
     as follow-on work from existing clients and new e-Learning services
     revenue from acquired Merrimac Interactive Media.

     Enterprise Resource Planning Services. Revenue for the Company's
     Enterprise Resource Planning (ERP) Services decreased by $2.8 million
     (or 26.1 percent), from $10.8 million in the quarter ending September
     30, 1998, to $8.0 million in the quarter ending September 30, 1999,
     representing 35.8 percent of the Company's revenue in 1998 and 27.4
     percent of the Company's revenue in 1999. The decrease in the Company's
     ERP revenue from 1998 to 1999 was attributable to the overall slowdown
     in the market for ERP software systems, generally recognized as due to
     the effects in 1999 of client focus on remediation of the year 2000
     computer problem, and the resulting decrease in demand for the
     Company's ERP services.

     Lean Manufacturing Consulting Services. Revenue for the Company's Lean
     Manufacturing Consulting Services increased by $1.8 million (or 41.4
     percent), from $4.4 million in the quarter ending September 30, 1998,
     to $6.2 million in the quarter ending September 30, 1999, representing
     14.5 percent of the Company's revenue in 1998 and 21.2 percent of the
     Company's revenue in 1999. This increase in revenue was due primarily
     to growth in business with new automotive industry supplier clients and
     a large auto manufacturer.

     Technology Performance Support Services. Revenue for the Company's
     Technology Performance Support Services decreased by $676,000 (or 8.5
     percent), from $7.9 million in the quarter ending September 30, 1998,
     to $7.2 million in the quarter ending September 30, 1999, representing
     26.3 percent of the Company's revenue in 1998 and 24.9 percent of the
     Company's revenue in 1999. This decrease in revenue was the result of
     the normal completion of a proportion of the Company's on-going
     projects and their replacement with follow-on work at somewhat lower
     levels of revenue.

     Gross Profit. Gross profit for the total Company decreased by $4.9 million
(or 53.3 percent), from $9.2 million in the quarter ending September 30, 1998,
to $4.3 million in the quarter ending September 30, 1999, and decreased from
30.5 percent of revenue in 1998 to 14.8 percent of revenue in 1999. This
decrease in gross profit as a percentage of revenue resulted primarily from
decreases in staff utilization in the Company's Enterprise Resource Planning
Services and Information Technology businesses, and increases in
employee-related expenses and marketing expenses, partially offset by increases
in project profitability. Gross profit for individual operating segments were as
follows:

     Information Technology Services. Gross profit for Information
     Technology Services decreased by 74.1 percent from $2.6 million in the
     quarter ending September 30, 1998, to $674,000 in the quarter ending
     September 30, 1999. Gross profit margin for Information Technology


                                       6
<PAGE>

         Services decreased from 36.9 percent of this segment's revenue in the
         third quarter of 1998 to 8.8 percent in 1999. This decrease in gross
         profit margin resulted primarily from decreased staff utilization and
         investments in the Company's capabilities in customer relationship
         management systems implementation, as well as increased marketing
         expenditures, and increased employee-related expenses.

         Enterprise Resource Planning Services. Gross profit for Enterprise
         Resource Planning Services decreased from $3.4 million in the quarter
         ending September 30, 1998, to a loss of $13,000 in the quarter ending
         September 30, 1999. Gross profit margin for Enterprise Resource
         Planning Services decreased from 31.1 percent of this segment's revenue
         in the third quarter of 1998 to (0.2) percent in 1999. This decrease in
         gross profit margin resulted primarily from decreased staff
         utilization, as well as increased marketing and employee-related
         expenses, partially offset by increased project profitability.

         Lean Manufacturing Consulting Services. Gross profit for Lean
         Manufacturing Consulting Services increased by 42.8 percent from $1.4
         million in the quarter ending September 30, 1998, to $2.1 million in
         the quarter ending September 30, 1999. Gross profit margin for Lean
         Manufacturing Consulting Services increased from 33.0 percent of this
         segment's revenue in the third quarter of 1998 to 33.3 percent in 1999.
         This increase in gross profit margin resulted primarily from increased
         project profitability, partially offset by decreased staff utilization,
         as well as increased employee-related costs.

         Technology Performance Support Services. Gross profit for Technology
         Performance Support Services decreased by 12.1 percent from $1.8
         million in the quarter ending September 30, 1998, to $1.6 million in
         the quarter ending September 30, 1999. Gross profit margin for
         Technology Performance Support Services decreased from 22.6 percent of
         this segment's revenue in the third quarter of 1998 to 21.7 percent in
         1999. This decrease in gross profit margin resulted primarily from
         decreased staff utilization, partially offset by increased project
         profitability.

     General and Administrative Expenses. General and administrative expenses
increased by $591,000 (or 15.5 percent), from $3.8 million in the third quarter
of 1998 to $4.4 million in the third quarter of 1999, increasing from 12.6
percent of revenue in 1998 to 15.1 percent of revenue in 1999. This increase in
general and administrative expenses as a percentage of revenue resulted
primarily from growth in corporate personnel and increases in employee-related
expenses, as well as the lower revenue run-rate in the third quarter of 1999.

     Operating Income. As a result of the foregoing, the Company's operating
income decreased by $5.5 million from $5.4 million in the third quarter of 1998
to a loss of $103,000 in the third quarter of 1999 and decreased from 17.9
percent of revenue in the third quarter of 1998 to 0.0 percent of revenue in the
third quarter of 1999.

     Other Income. Other income was $294,000 in the third quarter of 1998 and
$135,000 in the third quarter of 1999. The decrease in the dollar amount of
other income resulted primarily from reduced interest income due to the use of
cash for the Company's acquisition and share repurchases, as well as goodwill
recognized in the third quarter of 1999 for the Merrimac acquisition, partially
offset by a loss recorded for a one-time asset sale in the third quarter of
1998.

     Net Income. Net income decreased by $3.5 million (or 99.4 percent), from
$3.5 in the third quarter of 1998 to $20,000 in the third quarter of 1999,
decreasing from 11.6 percent of revenue in 1998 to 0.0 percent of revenue in
1999.

                                       7
<PAGE>

     Nine Months Ended September 30, 1999, Compared to Nine Months Ended
September 30, 1998

     Revenue. Revenue for the total Company increased by $11.0 million (or 13.1
percent), from $83.8 million for the nine months ending September 30, 1998, to
$94.8 million for the nine months ending September 30, 1999. The Company
experienced changes in revenue in its operating segments as follows:

     Information Technology Services. Revenue for the Company's Information
     Technology Services increased by $5.2 million (or 26.3 percent), from
     $19.9 million in the nine months ending September 30, 1998, to $25.1
     million in the nine months ending September 30, 1999, representing 23.7
     percent of the Company's revenue in 1998 and 26.5 percent of the
     Company's revenue in 1999. Key factors in revenue increases included
     new client business and follow on work in customer relationship
     management systems (CRM), e-commerce and package software
     implementation, as well as custom development for software partners and
     new e-Learning revenues from acquired Merrimac Interactive Media.

     Enterprise Resource Planning Services. Revenue for the Company's Enterprise
     Resource Planning Services increased by $3.1 million (or 11.6 percent),
     from $26.8 million in the nine months ending September 30, 1998, to $29.9
     million in the nine months ending September 30, 1999, representing 32.0
     percent of the Company's revenue in 1998 and 31.5 percent of the Company's
     revenue in 1999. The growth in ERP revenue was due primarily to growth
     throughout 1998 and the first quarter of 1999 based, in part, on the
     Company's strong reputation in the marketplace and the Company's alliances
     with SAP and PricewaterhouseCoopers. This strong growth in 1998 and the
     first quarter of 1999 was offset by moderating demand in the ERP
     marketplace after the first quarter of 1999 and by deferrals in the second
     quarter of contracted work into future quarters, both of which caused ERP
     revenue to decrease after the first quarter of 1999.

     Lean Manufacturing Consulting Services. Revenue for the Company's Lean
     Manufacturing Consulting Services increased by $3.0 million (or 22.0
     percent), from $13.5 million in the nine months ending September 30,
     1998, to $16.5 million in the nine months ending September 30, 1999,
     representing 16.1 percent of the Company's revenue in 1998 and 17.4
     percent of the Company's revenue in 1999. This increase in revenue was
     primarily attributable to growth in new client revenue, as well as new
     business with a large auto manufacturer.

     Technology Performance Support Services. Revenue for the Company's
     Technology Performance Support Services were essentially unchanged,
     decreasing modestly from $23.6 million in the nine months ending
     September 30, 1998, to $23.3 million in the nine months ending
     September 30, 1999, representing 28.2 percent of the Company's revenue
     in 1998 and 24.6 percent of the Company's revenue in 1999.

     Gross Profit. Gross profit for the total Company decreased by $3.6 million
(or 14.4 percent), from $25.2 million in the nine months ending September 30,
1998, to $21.5 million in the nine months ending September 30, 1999, and
decreased from 30.0 percent of revenue in 1998 to 22.7 percent of revenue in
1999. This decrease in gross profit as a percentage of revenue resulted
primarily from decreases in staff utilization in the Company's Enterprise
Resource Planning Services and Information Technology businesses, and increases
in employee-related expenses and marketing expenses, partially offset by
increases in project profitability. Gross profit for individual operating
segments were as follows:

     Information Technology Services. Gross profit for Information
     Technology Services decreased by 9.8 percent from $7.4 million in the
     nine months ending September 30, 1998, to $6.7 million in the nine
     months ending September 30, 1999. Gross profit margin for Information
     Technology Services decreased from 37.4 percent of this segment's
     revenue in the first nine months of 1998 to 26.7 percent in 1999. This
     decrease in gross profit margin resulted primarily from decreases in staff


                                       8
<PAGE>

     utilization and investments in the Company's capabilities in customer
     relationship management systems implementation, as well as increased
     marketing and employee-related expenses.

     Enterprise Resource Planning Services. Gross profit for Enterprise
     Resource Planning Services decreased by 45.4 percent from $7.7 million
     in the nine months ending September 30, 1998, to $4.2 million in the
     nine months ending September 30, 1999. Gross profit margin for
     Enterprise Resource Planning Services decreased from 28.9 percent of
     this segment's revenue in the first nine months of 1998 to 14.2 percent
     in 1999. This decrease in gross profit margin resulted primarily from
     decreases in staff utilization, as well as increased marketing and
     employee-related expenses and investments in client service tools,
     partially offset by improved project profitability.

     Lean Manufacturing Consulting Services. Gross profit for Lean
     Manufacturing Consulting Services increased by 16.2 percent from $4.5
     million in the nine months ending September 30, 1998, to $5.3 million
     in the nine months ending September 30, 1999. Gross profit margin for
     Lean Manufacturing Consulting Services decreased from 33.4 percent of
     this segment's revenue in the first nine months of 1998 to 31.8 percent
     in 1999. This decrease in gross profit margin resulted primarily from
     decreased staff utilization, as well as additions of marketing and
     management personnel and increased employee-related expenses, partially
     offset by increased project profitability.

     Technology Performance Support Services. Gross profit for Technology
     Performance Support Services decreased by 1.7 percent from $5.5 million
     in the nine months ending September 30, 1998, to $5.4 million in the
     nine months ending September 30, 1999. Gross profit margin for
     Technology Performance Support Services decreased from 23.1 percent of
     this segment's revenue in the first nine months of 1998 to 23.0 percent
     in 1999. Gross profit margin remained essentially unchanged as a result
     of decreases in staff utilization, offset by improved project
     profitability.

     General and Administrative Expenses. General and administrative expenses
increased by $2.0 million (or 18.4 percent), from $10.8 million in the nine
months ending September 30, 1998 to $12.7 million in the same period of 1999,
increasing from 12.8 percent of revenue in 1998 to 13.4 percent of revenue in
1999. This increase in general and administrative expenses as a percentage of
revenue resulted primarily from growth in corporate personnel, as well as
increases in employee-related and professional services expenses, and the lower
revenue run-rate in the third quarter of 1999.

     Operating Income. As a result of the foregoing, the Company's operating
income decreased by $5.6 million (or 38.8 percent), from $14.4 million in the
nine months ending September 30, 1998 to $8.8 million in the same period of 1999
and decreased from 17.2 percent of revenue in the nine months ending September
30, 1998 to 9.3 percent of revenue in the same period of 1999.

     Other Income. Other income was $1.2 million for the nine months ending
September 30, 1998 and $993,000 for the same period of 1999. The decrease in the
dollar amount of other income resulted primarily from reduced interest income in
1999 due to the use of cash for the Company's acquisition and share repurchases,
as well as goodwill recognized in the third quarter of 1999 for the Merrimac
acquisition, partially offset by a loss recorded for a one-time asset sale in
the third quarter of 1998.

     Net Income. Net income decreased by $3.5 million (or 36.4 percent), from
$9.6 million in the nine months ending September 30, 1998 to $6.1 million in the
same period of 1999, decreasing from 11.5 percent of revenue in 1998 to 6.5
percent of revenue in 1999.

                                       9
<PAGE>

Liquidity and Capital Resources

    The Company's cash and investments were $29.2 million at September 30, 1999,
compared to $51.2 million at December 31, 1998. Decreases in cash and
investments at September 30, 1999, were attributable primarily to the
acquisition of Merrimac Interactive Media Corporation, the repurchase of common
stock, and the purchase of capital equipment. The Company's working capital was
$48.3 million at September 30, 1999, and $66.4 million at December 31, 1998.

    The Company's operating activities provided cash of approximately $5.3
million for the nine months ended September 30, 1999, compared to $13.2 million
for the same period in 1998. The cash provided from operations in the first nine
months of 1999 resulted primarily from net income and increases in accounts
payable partially offset by increases in accounts receivable and unbilled
revenue.

    Investing activities used cash of $9.7 million in the nine months ended
September 30, 1999, compared to $2.5 million for the same period in 1998. Cash
used for investing activities in the nine months ended September 30, 1999,
consisted primarily of $15.4 million for the purchase of Merrimac Interactive
Media Corporation and the purchase of capital equipment, funded by the sale of
marketable securities.

    Financing activities utilized cash of $6.5 million in the nine months ended
September 30, 1999, compared to generation of $809,000 for the same period in
1998. Cash used for financing activities in the nine months ended September 30,
1999, consisted primarily of the repurchase of approximately 150,000 shares of
the Company's common stock in the first quarter of 1999 and 660,000 shares in
the second quarter of 1999, partially offset by borrowings under the Company's
line of credit and proceeds from the issuance of common stock due to the
exercise of employee stock options.

    The Company has a $10.0 million unsecured revolving line of credit with a
commercial bank, which bears interest at the 30-day, LIBOR rate, plus 1.0
percent (6.27625 percent on September 30, 1999). The Company utilizes this line
of credit to finance a portion of its working capital needs. The balance
outstanding on the line of credit was $1,265,000 and $0 as of September 30, 199
and December 31, 1998, respectively.

    During the nine months ending September 30, 1999, the Company made $4.5
million in capital expenditures, primarily for office furniture, computer and
office equipment, and leasehold improvements to support the growth in its
professional and administrative staff. Capital expenditures currently are funded
from available cash, although the Company may consider alternative financing
methods, such as equipment leases or asset-based borrowings in future periods.


Year 2000 Compliance

    The Company has commenced a process to assure Year 2000 compliance of all
hardware, software, and ancillary equipment which are date dependent. The
process involved four phases, each of which is substantially complete:

         Phase I - Inventory and Data Collection. This phase involves an
         identification of all items that are date dependent. The Company
         commenced this phase in the fourth quarter of 1997. This phase is now
         complete.

          Phase II - Compliance Requests. This phase involves requests to
          systems vendors for verification that the systems identified in Phase
          I are Year 2000 compliant. The Company identified critical systems
          that cannot be updated or certified as compliant. The Company

                                       10
<PAGE>

         commenced this phase in the first quarter of 1998. This phase is now
         complete. The Company has verified that its accounting, payroll, human
         resources, banking and local wide area network hardware and software
         systems are compliant. In addition, the Company has determined that
         substantially all of its personal computers and PC applications are
         compliant.

         Phase III - Test, Fix, and Verify. This phase involves testing all
         items that are date dependent and upgrading all non-compliant systems.
         This phase is now complete.

         Phase IV - Final Testing, New Item Compliance. This phase involves
         review of all systems for compliance and re-testing as necessary.
         During this phase, all new systems and equipment will be tested for
         compliance. This phase is now substantially complete.

    To date, the Company has no knowledge that any of its major systems are not
Year 2000 compliant. The Company has not incurred significant expenditures and
should achieve substantial Year 2000 compliance without the need to acquire
significant new hardware, software, or systems other than in the ordinary course
of business. The Company is not aware of any non-compliance that would have a
material effect on its operations if not replaced or that would be costly to
replace. The Company is not aware of any non-compliance by its suppliers that is
likely to have a material impact on the Company's business. Nevertheless, there
can be no assurance that unanticipated non-compliance will not occur, that such
non-compliance would not require material costs to repair or that it would not
cause material disruptions if not repaired.

    The Company delivers software solutions to clients and believes that all
such software delivered over the past several years is Year 2000 compliant.
Because such software is usually the property of the client, the Company has no
control over modifications to the software by the client or over its integration
with other software, either of which could potentially cause Year 2000
compliance difficulties.


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.


Forward Looking Statements

    Certain statements contained herein, including statements regarding
development of the Company's services, markets, and future demands for the
Company's services, 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; consequently, actual results may differ from
those expressed or implied thereby. Factors that could cause actual results to
differ materially are described in the Company's filings with the Securities and
Exchange Commission including its most recent Form 10-K, and include reliance on
strategic alliances, geographic expansion, slower growth in the Enterprise
Resource Planning industry, rapid change in the Information Technology sector,
customer and industry revenue concentration, attracting and retaining personnel,
increasing competition, and other factors such as the Company's ability to
effectively manage its growth, the inherent variability of its operating
results, various risks associated with the success and profitability of
individual projects, and its dependence on key personnel.

                                       11
<PAGE>

                           PART II - OTHER INFORMATION

Item 2.           Changes in Securities.

(c)               Issuance of Securities

                  N/A


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

(a)               Exhibits

                  27. Financial Data Schedule

(b)               Current Reports on Form 8-K

                  N/A

                                       12
<PAGE>

                                  SIGNATURES


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

                                RWD TECHNOLOGIES, INC.


                                By:  /s/ Ronald E. Holtz
                                     Ronald E. Holtz
                                     Vice President, Chief Financial Officer,
                                     and Director
Dated: November 11, 1999

      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.

<TABLE>
<CAPTION>
               Name                                  Capacity                                   Date
               ----                                  --------                                   ----
<S>                               <C>                                                       <C>
/s/ Robert W. Deutsch             Chairman of the Board,                                    November 11, 1999
----------------------------       Chief Executive Officer, and Director
Robert W. Deutsch

/s/ Ronald E. Holtz               Vice President, Chief Financial Officer,                  November 11, 1999
----------------------------       and Director
Ronald E. Holtz
</TABLE>
                                       13