<PAGE>
 
                       SECURITIES AND EXCHANGE COMISSION
                            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 June 30, 1998


                           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)

<TABLE> 
<S>                                        <C> 
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)
</TABLE>

                                 (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 June 30, 1998, 14,858,297 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>        
PART I  - FINANCIAL INFORMATION                                Page
                                                               ----
<S>        <C>                                                 <C> 
Item 1.    Financial Statements
           
           Consolidated Condensed Balance Sheets as of            1
           June 30, 1998, (Unaudited) and December 31,
           1997
           Consolidated Statements of Income for the              2
           Quarter and Six Months ended June 30, 1998,
           and 1997 (Unaudited)
           Consolidated Statements of Cash Flows for the          3
           Six Months ended June 30, 1998, and 1997
           (Unaudited)
           Notes to Consolidated Financial Statements             4
Item 2.    Management's Discussion and Analysis of                6
           Financial Condition and Results of Operations
Item 3.    Quantitative and Qualitative Disclosures             N/A
           About Market Risk
 
</TABLE>


<TABLE>
<CAPTION>
PART II  - OTHER INFORMATION 
<S>        <C>                                                 <C>      
Item 1.    Legal Proceedings                                    N/A

Item 2.    Changes in Securities                                N/A

Item 3.    Defaults Upon Senior Securities                      N/A

Item 4.    Submission of Matters to a Vote of Security Holders   10

Item 5.    Other Information                                    N/A

Item 6.    Exhibits and Reports on Form 8-K                      11

Signatures                                                       12
</TABLE>
<PAGE>
 
                         PART I - FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS 

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


<TABLE>
<CAPTION>
                                                                   JUNE 30, 1998        DECEMBER 31, 1997
                                                                  ---------------      -------------------      
                                                                    (UNAUDITED)                                 
<S>                                                                <C>              <C>
                           ASSETS
CURRENT ASSETS:      
   Cash and investments.........................................      $46,807                $40,045
   Contract accounts receivable, net............................       15,017                 13,328
   Costs and estimated earnings in excess of billings on                            
      uncompleted contracts.....................................        8,048                  4,779
   Prepaid expenses and other...................................        1,253                  1,013
                                                                   ---------------         ----------- 
     Total Current Assets.......................................       71,125                 59,165
NET FIXED ASSETS:...............................................        9,002                  8,476
OTHER ASSETS....................................................          288                    246
                                                                   ---------------         ----------- 
    Total Assets................................................      $80,415                $67,887
                                                                   ===============         ===========
    LIABILITIES AND STOCKHOLDERS' EQUITY                                            
CURRENT LIABILITIES:                                                                
   Accounts payable and accrued expenses........................      $ 8,657                $ 4,895
   Billings in excess of costs and estimated earnings on                            
      uncompleted contracts.....................................        3,033                  3,646
   Deferred tax liability.......................................        1,191                  1,191
   Current portion of capital lease obligation..................           58                     52
                                                                   ---------------         ----------- 
Total Current Liabilities.......................................       12,939                  9,784
NONCURRENT LIABILITIES:                                                             
   Capital lease obligation, net of current portion.............           --                     31
   Other liabilities............................................          834                  1,018
   Deferred tax liability.......................................        1,480                  2,090
                                                                   ---------------         ----------- 
       Total Liabilities........................................       15,253                 12,923
                                                                   ---------------         ----------- 
COMMITMENTS AND CONTINGENCIES                                                       
STOCKHOLDERS' EQUITY:                                                               
   Common stock.................................................        1,486                  1,442
   Additional paid-in capital...................................       50,637                 46,627
   Accumulated comprehensive income ............................           32                     25
   Retained earnings............................................       13,007                  6,870
                                                                   ---------------         ----------- 
        Total Stockholders' Equity..............................       65,162                 54,964
                                                                   ---------------         ----------- 
             Total Liabilities and Stockholders' Equity.........      $80,415                $67,887
                                                                   ===============         ===========
</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>
 
                                                        Quarter Ended         Six Months Ended
                                                           June 30,               June 30,
                                                  ---------------------      -----------------
                                                      1998         1997        1998       1997
                                                      ----         ----        ----       ----
<S>                                             <C>         <C>              <C>        <C>
Revenue.......................................  $   27,413  $    20,706   $  53,616  $  39,806
Cost of services..............................      19,250       14,273      37,660     27,686
                                                  --------     ---------     ------     ------
  Gross profit................................       8,163        6,433      15,956     12,120
General and administrative expenses...........       3,502        2,782       6,948      5,468
                                                  --------     ---------     ------     ------
Operating income..............................       4,661        3,652       9,008      6,652
Other income (expense), net...................         453          (21)        892          1
                                                  --------     ---------     ------     ------
Income before taxes...........................       5,114        3,631       9,900      6,653
Provision for income tax......................       1,944        4,889       3,763      4,989
                                                  --------     ---------     ------     ------
   Net income (loss)..........................  $    3,170  $    (1,258)  $   6,137  $   1,664
                                                  ---------    ---------     ------     ------
   Diluted earnings per share.................  $     0.20  $     (0.11)  $    0.38  $    0.13
                                                  =========    =========     ======     ======
   Basic earnings per share...................  $     0.21  $     (0.11)  $    0.41  $    0.15
                                                  =========    =========     ======     ======
                                                               
Pro Forma Information:                                        
   Income before taxes, as reported...........  $   5,114   $     3,631   $   9,900  $   6,653
   Pro forma income tax provision to recognize                 
    C corporation provision for income taxes..      1,944         1,453       3,763      2,661
                                                  --------     ---------     ------     ------
       Pro forma net income...................  $   3,170   $     2,178   $   6,137  $   3,992
                                                  ========     =========     ======     ======
     Pro forma diluted earnings per share.....  $    0.20   $      0.16   $    0.38  $    0.30
                                                  ========     =========     ======     ======
     Pro forma basic earnings per share.......  $    0.21   $      0.19   $    0.41  $    0.36
                                                  ========     =========     ======     ======
     Weighted average shares outstanding                       
      Diluted calculation.....................     16,090        13,381      16,019     13,175
                                                  ========     =========     ======     ======
      Basic calculation.......................     14,858        11,408      14,812     11,163
                                                  ========     =========     ======     ======
 
</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>
                                                                   SIX MONTHS ENDED JUNE 30, 
                                                                  1998                  1997
                                                               ---------------     ----------------
<S>                                                            <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net Income............................................      $   6,137          $      1,664
   Adjustments to reconcile net income to net cash
      Depreciation and amortization......................          1,744                 1,506
      Loss/(Gain) on sale of fixed assets................             37                   (21)
      Deferred income taxes..............................           (610)                4,500
      (Increase)/Decrease in trade accounts receivable...         (1,689)                  370
      Increase in costs and earnings in
        excess of billings on uncompleted contracts......         (3,269)               (4,302)
      Increase in prepaid expense and other..............           (212)                 (165)
      Increase in accounts payable and accrued expenses..          6,922                 2,597
      Decrease in other liabilities......................           (184)                   -
      (Decrease)/Increase in billings in excess of
        earnings on uncompleted contracts................           (613)                  487
                                                            -----------------     ----------------
      Net Cash provided by operating activities..........          8,263                 6,636
                                                            -----------------     ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
      Net Purchases of Investments.......................           (639)              (19,497)
      Purchase of fixed assets...........................         (2,210)               (2,140)
      (Increase)/Decrease in other assets................            (42)                   63
      Proceeds from sale of fixed assets.................              5                    25
                                                            -----------------     ----------------
      Net Cash used in investing activities..............         (2,886)              (21,549)
                                                            -----------------     ----------------     
CASH FLOWS FROM FINANCING ACTIVITIES:
      Principal portion paid on capital lease............            (24)                  (19)
      Payments on shareholder loans......................              -                (3,800)
      Distributions to shareholders......................              -                (9,864)
      Public Offering Costs..............................              -                (3,228)
      Issuance of common stock...........................            800                47,547
      Repurchase of common stock.........................            (38)                 (820)
                                                            -----------------     ----------------
      Net Cash provided by financing activities..........            738                29,816
                                                            -----------------     ----------------
NET INCREASE IN CASH AND CASH EQUIVALENTS................          6,115                14,903
                                                            -----------------     ----------------
CASH AND CASH EQUIVALENTS, beginning of period...........          3,620                 3,531
                                                            -----------------     ----------------
CASH AND CASH EQUIVALENTS, end of period.................   $      9,735          $     18,434
                                                            =================     ================
SUPPLEMENTAL DISCLOSURE
 Income Taxes Paid.......................................   $        453          $         42
                                                            =================     ================
 Interest Expense Paid...................................   $          9          $        176
                                                            =================     ================
</TABLE>

          See accompanying notes to consolidated financial statements.

                                                                               3
<PAGE>
 
                   RWD TECHNOLOGIES, INC., AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements
                                  (Unaudited)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(1.) 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.

(2.) Basis of Presentation

         The interim consolidated financial statements included herein for RWD
Technologies, Inc., and subsidiaries (the Company) have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission.  In management's opinion, the interim financial data
presented herein include all adjustments (which include only normal recurring
adjustments) necessary for a fair presentation.  Certain information and
footnote disclosures normally included in the financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations.  Results for interim periods are
not necessarily indicative of results to be expected for the full year.  It is
suggested that these consolidated financial statements be read in conjunction
with the Company's December 31, 1997, financial statements and notes thereto
included in the Company's annual report on Form 10-K.

         The accompanying consolidated condensed balance sheets are presented on
the accrual basis of accounting in accordance with generally accepted accounting
principles.  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
revenues and expenses during the reporting period.  While actual results could
differ from those estimates, management believes that actual results will not be
materially different from amounts provided in the accompanying consolidated
balance sheets.

                                                                               4
<PAGE>
 
(3.) Initial Public Offering

         In June 1997, the Company completed an initial public offering of
approximately 3 million  shares of Common Stock at the price per share of
$13.00.  After the underwriting discounts, commissions and other expenses, net
proceeds to the Company from the initial public offering were approximately
$38.5 million.

(4.) Income Taxes

         Historically, the Company had elected to be taxed under the provisions
of Subchapter S of the Internal Revenue Code which provide that, in lieu of
corporate federal and some state income taxes, the stockholders are taxed on
their proportionate share of the Company's taxable income.  In connection with
the IPO of the Company's common stock during 1997, the Company elected to change
its tax status from an S Corporation to a C Corporation.  As a result of the
Company's Subchapter S election, the accompanying consolidated statements of
income do not include an income tax provision for federal and most state income
taxes during the periods of the S Corporation election; however, pro forma
adjustments have been made to reflect the income tax provision as if the Company
was taxed as a C Corporation during all periods.  The pro forma adjustments have
been made at an effective rate of 40.0%, which is the tax rate that would have
been in effect had the Company been taxed as a C Corporation for the duration of
each of those periods.  Basic earnings per common share was computed by dividing
net income by the weighted average number of shares of common stock outstanding
during the period.  Diluted earnings per common share was computed assuming the
terms and conditions for the common equivalent shares were met and converted.

(5.) Earnings Per Share

         During 1997, the Financial Accounting Standards Board (FASB) issued
Statement No. 128 (SFAS No. 128), "Earnings Per Share," which establishes new
standards for computing and presenting earnings per share.  The Company adopted
SFAS No. 128 during 1997 and has restated earnings per share data presented to
reflect the new standard.  SFAS No. 128 requires presentation of basic earnings
per share and diluted earnings per share.  Dilutive common equivalent shares
include shares issuable upon the exercise of stock options, using the treasury
stock method.  For the periods prior to the IPO, the weighted average number of
shares used included the shares exercised in connection with the IPO by the
majority shareholder and the number of shares to be calculated pursuant to the
Securities and Exchange Commission Staff Accounting Bulletin No. 1.B.3.

(6.) New Authoritative Standards

         During 1997, the FASB issued Statement No. 130, "Reporting
Comprehensive Income" (SFAS No. 130), which is effective for fiscal years
beginning after December 15, 1997.  This statement establishes standards for
reporting and display of comprehensive income and its components.  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 adopted SFAS No. 130 during the six months ended June 30,
1998, and has presented comprehensive income in the accompanying consolidated
financial statements.  The Company's income in accordance with SFAS No. 130,
consists of net income of $6,137,000 and $1,664,000, plus unrealized gains on
investments available-for-sale of $32,000 and $-0- for the six months ended June

                                                                               5
<PAGE>
 
30, 1998 and 1997, respectively.  The Company's income in accordance with SFAS
No. 130, consists of net income (loss) of $3,170,000 and ($1,258,000)  plus
unrealized gains on investments available-for-sale of $3,000 and $-0- for the
three months ended June 30, 1998 and 1997, respectively.

         During 1997, the FASB issued Statement No. 131, "Disclosures about
Segments of an Enterprise and Related Information" (SFAS No. 131), which is
effective for fiscal years beginning after December 15, 1997.  This statement
establishes revised standards under which an entity must report business segment
information in its financial statements and what segment information must be
disclosed.  The Company believes it may have reportable operating segments, as
defined by SFAS No. 131, and is currently evaluating what such segments would be
and the financial statement presentation required for such segments.


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

RESULTS OF OPERATIONS

         THREE MONTHS ENDED JUNE 30, 1998, COMPARED WITH THREE MONTHS ENDED 
JUNE 30, 1997.

         Revenue. Revenue increased by $6.7 million, or 32.4 percent, from $20.7
million in the second quarter of 1997 to $27.4 million in the second quarter of
1998.  The Company experienced growth in all but one of its service areas in the
second quarter of 1998 compared to the same period in 1997; with enterprise
systems implementation support services revenue increasing by 106.9 percent,
from $4.2 million to $8.7 million; information technology services revenue
increasing by 17.1 percent, from $5.6 million to $6.6 million; lean
manufacturing consulting services revenue increasing by 43.2 percent from $3.0
million to $4.3 million; and performance support services revenue decreasing by
0.8 percent, from $7.9 million to $7.8 million.  Performance support services,
enterprise systems implementation support services, information technology
services, and lean manufacturing consulting generated 28.4 percent, 31.7
percent, 23.9 percent, and 16.0 percent of total revenue, respectively, in the
second quarter of 1998.

         Revenue from the Company's largest client, Chrysler, was $6.26 million
in the second quarter of 1997 and $6.27 million in the same period in 1998.

         Gross Profit. Gross profit increased by $1.7 million, or 26.9 percent,
from $6.4 million in the second quarter of 1997 to $8.2 million in the same
period of 1998 and decreased from 31.1 percent of revenue in 1997 to 29.8
percent in 1998. This decrease in gross profit margin resulted primarily from
increases in unreimbursed travel, employee relocation, temporary labor, and
costs for on-going development of client service processes.

         General and Administrative Expenses. General and administrative
expenses increased by $720,100, or 25.9 percent, from $2.8 million in the second
quarter of 1997 to $3.5 million in the same period in 1998, decreasing from 13.4
percent of revenue in 1997 to 12.8 percent of revenue in 1998. This decrease in
general and administrative expenses as a percentage of revenue resulted
primarily from decreases in payroll taxes, depreciation, and corporate travel,
partially offset by increases in 

                                                                               6
<PAGE>
 
temporary labor costs.

         Operating Income. As a result of the foregoing, the Company's operating
income increased by $1.0 million, or 27.6 percent, from $3.7 million in the
second quarter of 1997 to $4.7 million in the same period in 1998 and increased
from 17.6 percent of revenue in 1997 to 17.0 percent of revenue in 1998.

         Other Income (Expense), net. Other income (expense), net was ($21,200)
in the second quarter of 1997 and $452,500 in the second quarter of 1998. In
1997, this expense consisted primarily of interest paid on Stockholder Notes,
partially offset by interest income from cash and investment balances. In 1998,
this income consisted primarily of interest income from cash and investment
balances, partially offset by interest paid on the Company's capital lease
obligations.

         Pro forma Net Income. Pro forma net income increased by $1.0 million,
or 45.5 percent from $2.2 million in the second quarter of 1997 to $3.2 million
in the second quarter of 1998. Pro forma results for 1997 assume the Company was
taxed as a C corporation during the period. The Company converted from S
corporation status to C corporation status in June 1997.


SIX MONTHS ENDED JUNE 30, 1998, COMPARED WITH SIX MONTHS ENDED JUNE 30, 1997.

         Revenue. Revenue increased by $13.8 million, or 34.7 percent, from
$39.8 million in the in the six months ending June 30, 1997, to $53.6 million in
the same period of 1998.  The Company experienced growth in all of its
service areas in the six months ending June 30, 1998, compared to the same
period in 1997, with performance support services revenue increasing by 2.6
percent, from $15.5 million to $15.9 million; enterprise systems implementation
support services revenue increasing by 103.2 percent, from $7.9 million to $16.0
million; information technology services revenue increasing by 20.2 percent,
from $10.6 million to $12.8 million; and lean manufacturing consulting services
revenue increasing by 54.2 percent from $5.8 million to $9.0 million.
Performance support services, enterprise systems implementation support
services, information technology services, and lean manufacturing consulting
generated 29.6 percent, 29.8 percent, 23.8 percent, and 16.8 percent of total
revenue, respectively, in the first six months of 1998.

         Revenue from the Company's largest client, Chrysler, increased by 8.9
percent in the six months ending June 30, 1998, from $11.5 million in the six
months ending June 30, 1997, to $12.6 million in the same period in 1998, as a
result of increases in performance support and lean manufacturing services,
partially offset by a decrease in information technology services provided by
the Company.

         Gross Profit. Gross profit increased by $3.8 million, or 31.6 percent,
from $12.1 million in the six months ending June 30, 1997 to $16.0 million in
the same period in 1998 and decreased from 30.4 percent of revenue in 1997 to
29.8 percent in 1998. This decrease in gross profit margin resulted primarily
from increases in recruiting fees, employee relocation, and unreimbursed travel
costs paid by the Company.


                                                                               7
<PAGE>

         General and Administrative Expenses. General and administrative
expenses increased by $1.5 million, or 27.1 percent, from $5.5 million in the
six months ending June 30, 1997, to $6.9 million in the same period in 1998,
decreasing from 13.7 percent of revenue in 1997 to 13.0 percent of revenue in
1998. This decrease in general and administrative expenses as a percentage of
revenue resulted primarily from decreases in training costs as a result of a
state training grant, depreciation, and professional services fees, partially
offset by increases in payroll taxes, recruiting fees, and temporary labor
costs.

         Operating Income. As a result of the foregoing, the Company's operating
income increased by $2.4 million, or 35.4 percent, from $6.7 million in the six
months ending June 30, 1997, to $9.0 million in the same period in 1998 and
increased from 16.7 percent of revenue in 1997 to 16.8 percent of revenue in
1998.

         Other Income (Expense), net. Other income, net was $900 in the six
months ending June 30, 1997, and $892,000 in the same period of 1998. In 1997,
this income consisted primarily of interest income from cash and investment
balances, partially offset by interest expenses paid on Stockholder Notes. In
1998, this income consisted primarily of interest income from cash and
investment balances, partially offset by interest expense paid on the Company's
capital lease obligations.

         Pro forma Net Income. Pro forma net income increased by $2.1 million,
or 53.7 percent from $4.0 million in the six months ending June 30, 1997, to
$6.1 million in the same period in 1998. Pro forma results assume the Company
was a C corporation throughout each of the periods. The Company converted from S
corporation status to C corporation status in June 1997.



LIQUIDITY AND CAPITAL RESOURCES

         The Company's cash and investments were $46.8 million at June 30, 1998,
compared to $40.0 million at December 31, 1997. Increases in cash and
investments at June 30, 1998, were attributable primarily to increases in cash
provided by operating activities and interest earned on proceeds from the
Company's June 1997 initial public offering. The Company's working capital was
$58.2 million at June 30, 1998, and $49.4 million at December 31, 1997.

         The Company's operating activities provided cash of $8.3 million for
the six months ended June 30, 1998, compared to $6.6 million for the same period
in 1997. The increase in cash from operations resulted primarily from increases
in net income, depreciation expense, and trade accounts payable, partially
offset by increases in unbilled revenue, and accounts receivable and a decrease
in deferred income taxes.

         Investing activities used cash of $2.9 million in the six months ended
June 30, 1998, compared to $21.5 million for the same period in 1997. Cash used
for investing activities in the six months ended June 30, 1998, consisted
primarily of the net purchase of capital assets.

         Financing activities provided cash of $737,600 in the six months ended
June 30, 1998, compared to $29.8 million for the same period in 1997. Cash
provided from financing activities in the

                                                                               8
<PAGE>
 
six months ended June 30, 1998, consisted primarily of the 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 (6.87 percent on June 30, 1998). The Company utilizes this line of
credit to finance a portion of its working capital needs. There was no balance
outstanding on the line of credit as of June 30, 1998, or on December 31, 1997.

         During the second quarter of 1997, the Company converted from S
corporation to C corporation tax status and as a result recognized a $4.5
million charge to establish a deferred tax liability. This tax liability becomes
due ratably over the four years beginning with 1997.

         During the first six months of 1998, the Company made $2.3 million in
capital expenditures, primarily for office furniture, computer and office
equipment, and leasehold improvements to support the anticipated 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.


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.


YEAR 2000

         Based upon the Company's current assessment of its Year 2000 readiness,
there are no significant Year 2000 issues known that the Company anticipates
would have a material effect on its results of operations, liquidity, or
financial condition.

                                                                               9
<PAGE>
 
                          PART II - OTHER INFORMATION

ITEM 2.   CHANGES IN SECURITIES.

(c)       Issuance of Securities

          N/A


ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

(a)     The annual meeting of stockholders of the Company was held on May 19,
1998, and approved the following matters:

(b)     Proxies for the annual meeting were solicited pursuant to Regulation 14A
under the Securities and Exchange Act of 1934. There was no solicitation in
opposition to management's nominees as listed in the proxy statement, and all
such nominees were re-elected.

(c)     (1)  Election of Directors
             ---------------------
        The following directors were elected to serve as Class I directors to
serve until the 2001 annual meeting of stockholders:
 
<TABLE>
<CAPTION>
                Name                For        Withheld      Against
                ----                ---        --------      -------
        <S>                     <C>         <C>          <C>
        Dr. Robert W. Deutsch   13,511,502      31,750          0
        Ronald E. Holtz         13,511,502      31,750          0
        Kenneth J. Rebeck       13,511,502      31,750          0
</TABLE>

          The following director was elected to serve as Class III director to
serve until the 2002 annual meeting of stockholders:
 
<TABLE>
<CAPTION>
                Name                For        Withheld      Against
                ----                ---        --------      -------
        <S>                     <C>         <C>          <C>
        Bruce D. Alexander      13,511,502           0          0
</TABLE>

        (2)  The adoption of the 1998 Omnibus Stock Incentive Plan of the
             Company.

<TABLE>
<CAPTION>
                For        Against      Abstain      Broker Non-Vote
                ----       -------      -------      ---------------
            <S>          <C>          <C>           <C>
             11,775,265   1,054,662       5,550              0
</TABLE>

                                                                              10
<PAGE>
 
        (3)  The ratification of the appointment by the Board of Directors of
             Arthur Andersen, LLP as auditors of the Company.

<TABLE>
<CAPTION>
             For       Against          Abstain
             ---       -------          -------
        <S>           <C>               <C>
        13,543,252        0                 0
</TABLE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

(a)       Exhibits

          27. Financial Data Schedule

(b)       Current Reports on Form 8-K

          N/A

                                                                              11
<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: August 6, 1998

          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,                           August 6, 1998
--------------------------------
Robert W. Deutsch                    Chief Executive Officer, and Director
                                                                               
/s/ Ronald E. Holtz                  Vice President, Chief Financial Officer,         August 6, 1998
--------------------------------
Ronald E. Holtz                      and Director 
</TABLE>

                                                                              12