<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 June 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 June 30, 1999, 14,466,691 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 June 30, 1999, (Unaudited) and                 1
           December 31, 1998

           Consolidated Statements of Income for the Six Months ended June 30, 1999,                  2
           and 1998 (Unaudited)

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

           Notes to Consolidated Financial Statements                                                 4

Item 2.    Management's Discussion and Analysis of Financial Condition and Results of                 7
           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                                                                     14

Item 3.    Defaults Upon Senior Securities                                                          N/A

Item 4.    Submission of Matters to a Vote of Security Holders                                       14

Item 5.    Other Information                                                                        N/A

Item 6.    Exhibits and Reports on Form 8-K                                                          15

Signatures                                                                                           16
</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, 1999           December 31, 1998
                                                                    ----------------------    ----------------------
                                                                         (unaudited)
<S>                                                                 <C>                       <C>
                               ASSETS
 CURRENT ASSETS:
      Cash and investments......................................... $           30,490        $            51,224
      Contract accounts receivable, net............................             23,305                     20,388
      Costs and estimated earnings in excess of billings on
          uncompleted contracts....................................              8,966                      7,889
      Prepaid expenses and other...................................              1,539                      1,199
                                                                    ----------------------    ---------------------
          Total Current Assets.....................................             64,300                     80,700
 NET FIXED ASSETS..................................................             10,815                      9,394
 GOODWILL, net.....................................................             13,671                         --
 OTHER ASSETS......................................................                361                        300
                                                                    ----------------------    ----------------------
          Total Assets............................................. $           89,147        $            90,394
                                                                    ======================    ======================

                LIABILITIES AND STOCKHOLDERS' EQUITY
 CURRENT LIABILITIES:
      Accounts payable and accrued expenses........................ $           10,654        $             9,245
      Billings in excess of costs and estimated earnings on
          uncompleted contracts....................................              3,994                      4,554
      Deferred tax liability.......................................                 67                        471
      Current portion of capital lease obligation..................                 --                         31
                                                                    ----------------------     ---------------------
          Total Current Liabilities................................             14,715                     14,301
 NONCURRENT LIABILITIES:
      Other liabilities............................................                661                        834
      Deferred tax liability.......................................                579                      1,298
                                                                    ----------------------     ---------------------
          Total Liabilities........................................             15,955                     16,433
                                                                    ----------------------     ---------------------
 COMMITMENTS AND CONTINGENCIES
 STOCKHOLDERS' EQUITY:
      Common stock.................................................              1,447                      1,502
      Additional paid-in capital...................................             45,979                     52,461
      Accumulated comprehensive income.............................                 18                         81
      Retained earnings............................................             25,748                     19,917
                                                                    ----------------------     ---------------------
          Total Stockholders' Equity...............................             73,192                     73,961
                                                                    ----------------------     ---------------------
              Total Liabilities and Stockholders' Equity........... $           89,147         $           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 June 30,                 Six Months Ended June 30,
                                                     ---------------------------------------    ------------------------------------
                                                           1999                 1998                  1999                 1998
                                                     ------------------   ------------------    -----------------    ---------------
<S>                                                  <C>                  <C>                   <C>                  <C>
Revenue............................................. $        32,437       $       27,413       $        65,679      $        53,616
Cost of services....................................          24,834               19,250                48,426               37,660
                                                     ------------------   ------------------    -----------------    ---------------
    Gross profit....................................           7,603                8,163                17,253               15,956
General and administrative expenses.................           4,310                3,502                 8,334                6,948
                                                     ------------------   ------------------    -----------------    ---------------
Operating income....................................           3,293                4,661                 8,919                9,008
Other income, net...................................             397                  453                   857                  892
                                                     ------------------   ------------------    -----------------    ---------------
    Income before taxes.............................           3,690                5,114                 9,776                9,900
Income tax provision................................           1,384                1,944                 3,666                3,763
                                                     ==================   ==================    =================    ===============
    Net income...................................... $         2,306       $        3,170       $         6,110      $         6,137
                                                     ==================   ==================    =================    ===============

    Diluted earnings per share...................... $          0.15       $         0.20       $          0.39      $          0.38
                                                     ==================   ==================    =================    ===============
    Basic earnings per share........................ $          0.15       $         0.21       $          0.41      $          0.41
                                                     ==================   ==================    =================    ===============

    Weighted average shares outstanding -
       Diluted calculation..........................          15,783               16,090                15,851               16,019
                                                     ==================   ==================    =================    ===============
       Basic calculation............................          14,971               14,858                15,001               14,812
                                                     ==================   ==================    =================    ===============
</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,
                                                                      1999                     1998
                                                               --------------------     --------------------
<S>                                                            <C>                      <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
      Net income.............................................. $       6,110            $       6,137
      Adjustments to reconcile net income to net cash
         provided by operating activities:
         Depreciation and amortization........................         2,005                    1,744
         Loss on sale of fixed assets.........................             7                       37
         Deferred income taxes................................          (600)                    (610)
         Increase in trade accounts receivable................        (2,918)                  (1,689)
         Increase in costs and earnings in excess of
            billings on uncompleted contracts.................        (1,078)                  (3,269)
         Increase in prepaid expense and other................          (184)                    (212)
         Increase in accounts payable and accrued expenses....         3,266                    6,922
         Decrease in billings in excess of earnings on
            uncompleted contracts.............................          (759)                    (613)
         Decrease in other liabilities........................          (242)                    (184)
                                                               --------------------     --------------------
         Net cash provided by operating activities............         5,607                    8,263
                                                               --------------------     --------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
         Sale/(purchases) of investments, net.................         9,426                     (639)
         Payments related to acquisition......................       (15,342)                      --
         Purchase of fixed assets.............................        (3,056)                  (2,210)
         Payments for other assets............................           (56)                     (42)
         Proceeds from sale of fixed assets...................            18                        5
                                                               --------------------     --------------------
         Net cash used in investing activities................        (9,010)                  (2,886)
                                                               --------------------     --------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
         Principal portion paid on capital lease..............           (31)                     (24)
         Issuance of common stock.............................           966                      800
         Repurchase of common stock...........................        (8,776)                     (38)
                                                               --------------------     --------------------
         Net cash (used in) provided by financing activities..        (7,841)                     738
                                                               --------------------     --------------------

NET (DECREASE)/INCREASE IN CASH AND CASH
   EQUIVALENTS...............................................        (11,244)                   6,115
                                                               --------------------     --------------------
CASH AND CASH EQUIVALENTS, beginning of period...............         13,328                    3,620
                                                               --------------------     --------------------
CASH AND CASH EQUIVALENTS, end of period.....................  $       2,084            $       9,735
                                                               ====================     ====================
Supplemental Cash Flow Disclosures:
         Income taxes paid.................................... $       5,167            $         453
                                                               ====================     ====================
         Interest expense paid................................ $           2            $           9
                                                               ====================     ====================
</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              Six Months Ended
                                                            June 30,                       June 30,
                                                    --------------------------    ---------------------------
                                                                         (in thousands)
                                                       1999           1998           1999            1998
                                                    -----------    -----------    ------------    -----------
<S>                                                 <C>            <C>            <C>             <C>
Net Income as Reported                                   $2,306         $3,170          $6,110         $6,137
Effect of Unrealized (Loss)/Gains on
   Investments Available-for-Sale                           (40)             3             (63)             7
                                                    -----------    -----------    ------------    -----------

Comprehensive Net Income                                 $2,266         $3,173          $6,047         $6,144
                                                    ===========    ===========    ============    ===========
</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            Six Months Ended
                                                                June 30,                     June 30,
                                                                           (in thousands)
                                                           1999          1998           1999           1998
                                                        ---------     ---------      ---------       --------
<S>                                                     <C>           <C>            <C>             <C>
Revenue (all external):
    Information Technology                                $ 9,209       $ 6,552        $17,376        $12,781
    Enterprise Resource Planning                            9,773         8,689         21,880         15,970
    Lean Manufacturing Consulting                           5,509         4,568         10,322          9,156
    Technology Performance Support                          7,946         7,604         16,101         15,709
                                                         --------      --------       --------       --------
Total Revenue                                             $32,437       $27,413        $65,679        $53,616
                                                         ========      ========       ========       ========

Gross Profit:
    Information Technology                                $ 3,150       $ 2,521        $ 6,022        $ 4,819
    Enterprise Resource Planning                              869         2,382          4,240          4,386
    Lean Manufacturing Consulting                           1,746         1,593          3,195          3,079
    Technology Performance Support                          1,838         1,667          3,796          3,672
                                                         --------      --------       --------       --------
Total Gross Profit                                        $ 7,603       $ 8,163        $17,253        $15,956
                                                         ========      ========       ========       ========

Depreciation and Amortization Expense Allocated To Segments:
    Information Technology                                $   203       $   138        $   383        $   273
    Enterprise Resource Planning                              295           193            582            354
    Lean Manufacturing Consulting                              66            54            125            105
    Technology Performance Support                            203           201            402            399
                                                         --------      --------       --------       --------
Total Allocated to Segments                                   767           586          1,492          1,131
Amount not Allocated to Segments                              271           304            513            613
                                                         --------      --------       --------       --------
Total Depreciation and Amortization Expense               $ 1,038       $   890        $ 2,005        $ 1,744
                                                         ========      ========       ========       ========

Revenue (by geography):
    United States                                         $29,848       $23,658        $59,867        $46,460
    Non-United States                                       2,589         3,755          5,812          7,156
                                                         --------      --------       --------       --------
Total Revenue                                             $32,437       $27,413        $65,679        $53,616
                                                         ========      ========       ========       ========
</TABLE>

                                                                               5
<PAGE>

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

Results of Operations

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

     Revenue. Revenue for the total Company increased by $5.0 million (or 18.3
percent), from $27.4 million for the quarter ending June 30, 1998, to $32.4
million for the quarter ending June 30, 1999. The Company experienced revenue
growth in all of its operating segments as follows:

     .   Information Technology Services. Revenue for the Company's Information
         Technology Services increased by $2.7 million (or 40.6 percent), from
         $6.6 million in the quarter ending June 30, 1998, to $9.2 million in
         the quarter ending June 30, 1999, representing 23.9 percent of the
         Company's revenue in 1998 and 28.4 percent of the Company's revenue in
         1999. Key factors in revenue increases included strong follow-on
         business with existing clients as well as new client business and
         business deriving from expansion into strategic IT consulting.

     .   Enterprise Resource Planning Services. Revenue for the Company's
         Enterprise Resource Planning Services increased by $1.1 million (or
         12.5 percent), from $8.7 million in the quarter ending June 30, 1998,
         to $9.8 million in the quarter ending June 30, 1999, representing 31.7
         percent of the Company's revenue in 1998 and 30.1 percent of the
         Company's revenue in 1999. The Company's ERP business decreased from
         the first quarter to the second quarter of 1999 due to moderating
         demand in the ERP market and deferral during the second quarter of
         contracted business into future quarters.

     .   Lean Manufacturing Consulting Services. Revenue for the Company's Lean
         Manufacturing Consulting Services increased by $942,000 (or 20.6
         percent), from $4.6 million in the quarter ending June 30, 1998, to
         $5.5 million in the quarter ending June 30, 1999, representing 16.7
         percent of the Company's revenue in 1998 and 17.0 percent of the
         Company's revenue in 1999. This increase in revenue was primarily
         attributable to growth in business with new clients, both automotive
         supplier and other non-auto industry clients, and increases in billing
         rates charged to clients.

     .   Technology Performance Support Services. Revenue for the Company's
         Technology Performance Support Services increased by $342,000 (or 4.5
         percent), from $7.6 million in the quarter ending June 30, 1998, to
         $7.9 million in the quarter ending June 30, 1999, representing 27.7
         percent of the Company's revenue in 1998 and 24.5 percent of the
         Company's revenue in 1999. This modest increase in revenue included
         increases in billing rates charged to clients and an increase in staff
         utilization.

     Gross Profit. Gross profit for the total Company decreased by $560,000 (or
6.9 percent), from $8.2 million in the quarter ending June 30, 1998, to $7.6
million in the quarter ending June 30, 1999, and decreased from 29.8 percent of
revenue in 1998 to 23.4 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 business, and
increases in other employee related expenses. Gross profit for individual
operating segments were as follows:

     .   Information Technology Services. Gross profit for Information
         Technology Services increased by 24.9 percent from $2.5 million in the
         quarter ending June 30, 1998, to $3.1 million in the quarter ending
         June 30, 1999. Gross profit margin for Information Technology Services
         decreased from 38.5 percent of this segment's revenue in the second
         quarter of 1998 to 34.2 percent in 1999. This

                                                                               6
<PAGE>

         decrease in gross profit margin resulted primarily from decreases in
         staff utilization, partially offset by decreases as a percent of
         revenue in employee related expenses.

     .   Enterprise Resource Planning Services. Gross profit for Enterprise
         Resource Planning Services decreased by 63.5 percent from $2.4 million
         in the quarter ending June 30, 1998, to $869,000 in the quarter ending
         June 30, 1999. Gross profit margin for Enterprise Resource Planning
         Services decreased from 27.4 percent of this segment's revenue in the
         second quarter of 1998 to 8.9 percent in 1999. This decrease in gross
         profit margin was due primarily to a decrease in staff utilization
         resulting from the decrease in business level from the first quarter of
         1999, as well as investments in European operations, and increased
         marketing expenses.

     .   Lean Manufacturing Consulting Services. Gross profit for Lean
         Manufacturing Consulting Services increased by 9.6 percent from $1.6
         million in the quarter ending June 30, 1998, to $1.7 million in the
         quarter ending June 30, 1999. Gross profit margin for Lean
         Manufacturing Consulting Services decreased from 34.9 percent of this
         segment's revenue in the second quarter of 1998 to 31.7 percent in
         1999. This decrease in gross profit margin resulted primarily from a
         decrease in staff utilization and an increase in employee related
         expenses as a percentage of revenue.

     .   Technology Performance Support Services. Gross profit for Technology
         Performance Support Services increased by 10.2 percent from $1.7
         million in the quarter ending June 30, 1998, to $1.8 million in the
         quarter ending June 30, 1999. Gross profit margin for Technology
         Performance Support Services increased from 21.9 percent of this
         segment's revenue in the second quarter of 1998 to 23.1 percent in
         1999. This increase in gross profit margin resulted primarily from
         increases in the proportion of labor revenue to other revenue and
         increases in billing rates.

     General and Administrative Expenses. General and administrative expenses
increased by $808,000 (or 23.1 percent), from $3.5 million in the second quarter
of 1998 to $4.3 million in the second quarter of 1999, increasing from 12.8
percent of revenue in 1998 to 13.3 percent of revenue in 1999. This increase in
general and administrative expenses as a percentage of revenue resulted
primarily from increases as a percent of revenue in employee related expenses
and consultant fees, partially offset by a modest decrease in depreciation
expense.

     Operating Income. As a result of the foregoing, the Company's operating
income decreased by $1.4 million (or 29.3 percent), from $4.7 million in the
second quarter of 1998 to $3.3 million in the second quarter of 1999 and
decreased from 17.0 percent of revenue in the first quarter of 1998 to 10.2
percent of revenue in the first quarter of 1999.

     Other Income. Other income was $452,500 in the second quarter of 1998 and
$396,700 in the second quarter of 1999. In both periods, this income consisted
primarily of interest income from cash and investment balances partially offset
by interest expense from the Company's capital leases.

     Net Income. Net income decreased by $863,400 (or 27.2 percent), from $3.2
million in the second quarter of 1998 to $2.3 million in the second quarter of
1999, decreasing from 11.6 percent of revenue in 1998 to 7.1 percent of revenue
in 1999.


     Six Months Ended June 30, 1999, Compared to Six Months Ended June 30, 1998

     Revenue. Revenue for the total Company increased by $12.1 million (or 22.5
percent), from $53.6 million for the six months ending June 30, 1998, to $65.7
million for the six months ending June 30, 1999. The Company experienced revenue
growth in all of its operating segments as follows:

                                                                               7
<PAGE>

     .   Information Technology Services. Revenue for the Company's Information
         Technology Services increased by $4.6 million (or 36.0 percent), from
         $12.8 million in the six months ending June 30, 1998, to $17.4 million
         in the six months ending June 30, 1999, representing 23.8 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 strong follow-on
         business with existing clients as well as new client business and
         business deriving from expansion into strategic IT consulting and the
         Company's alliance relationships.

     .   Enterprise Resource Planning Services. Revenue for the Company's
         Enterprise Resource Planning Services increased by $5.9 million (or
         37.0 percent), from $16.0 million in the six months ending June 30,
         1998, to $21.9 million in the six months ending June 30, 1999,
         representing 29.8 percent of the Company's revenue in 1998 and 33.3
         percent of the Company's revenue in 1999. This growth was due primarily
         to strong 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 was offset by moderating demand in the ERP marketplace in the
         second quarter of 1999 and by deferrals in the second quarter of
         contracted work into future quarters both of which caused revenues to
         decrease in the second quarter of 1999 from the first quarter of 1999.

     .   Lean Manufacturing Consulting Services. Revenue for the Company's Lean
         Manufacturing Consulting Services increased by $1.2 million (or 12.7
         percent), from $9.2 million in the six months ending June 30, 1998, to
         $10.3 million in the six months ending June 30, 1999, representing 17.1
         percent of the Company's revenue in 1998 and 15.7 percent of the
         Company's revenue in 1999. This increase in revenue was primarily
         attributable to growth in business with new clients, both automotive
         supplier and other non-auto industry clients, and increases in billing
         rates charged to clients.

     .   Technology Performance Support Services. Revenue for the Company's
         Technology Performance Support Services increased by $391,200 (or 2.5
         percent), from $15.7 million in the six months ending June 30, 1998, to
         $16.1 million in the six months ending June 30, 1999, representing 29.3
         percent of the Company's revenue in 1998 and 24.5 percent of the
         Company's revenue in 1999. This increase in revenue included increases
         in billing rates charged to clients and a modest decrease in staff
         utilization.

     Gross Profit.  Gross profit for the total Company increased by $1.3 million
(or 8.1 percent), from $16.0 million in the six months ending June 30, 1998, to
$17.3 million in the six months ending June 30, 1999, and decreased from 29.8
percent of revenue in 1998 to 26.3 percent of revenue in 1999. This increase in
gross profit as a percentage of revenue resulted primarily from decreases in
employee related expenses and in consulting fees, partially offset by decreases
as a percent of revenue in staff utilization. Gross profit for individual
operating segments were as follows:

     .   Information Technology Services. Gross profit for Information
         Technology Services increased by 25.0 percent from $4.8 million in the
         six months ending June 30, 1998, to $6.0 million in the six months
         ending June 30, 1999. Gross profit margin for Information Technology
         Services decreased from 37.7 percent of this segment's revenue in the
         second six months of 1998 to 34.7 percent in 1999. This decrease in
         gross profit margin resulted primarily from decreases in staff
         utilization partially offset by increases in billing rates charged to
         clients, and decreases in employee related expenses.

     .   Enterprise Resource Planning Services. Gross profit for Enterprise
         Resource Planning Services decreased by 3.3 percent from $4.4 million
         in the six months ending June 30, 1998, to $4.2 million

                                                                               8
<PAGE>

         in the six months ending June 30, 1999. Gross profit margin for
         Enterprise Resource Planning Services decreased from 27.5 percent of
         this segment's revenue in the second six months of 1998 to 19.4 percent
         in 1999. This decrease in gross profit margin was primarily due to
         decreases in staff utilization in the second quarter resulting from the
         decrease in business level from the first quarter of 1999. Gross profit
         margin was also impacted by decreases in the proportion of labor
         revenue to other revenue and increases as a percent of revenue in
         employee related expenses, as well as investments in European
         operations, and increased marketing expenses.

     .   Lean Manufacturing Consulting Services. Gross profit for Lean
         Manufacturing Consulting Services increased by 3.8 percent from $3.1
         million in the six months ending June 30, 1998, to $3.2 million in the
         six months ending June 30, 1999. Gross profit margin for Lean
         Manufacturing Consulting Services decreased from 33.6 percent of this
         segment's revenue in the second six months of 1998 to 31.0 percent in
         1999. This decrease in gross profit margin resulted primarily from a
         modest decrease in staff utilization partially offset by increases in
         billing rates charged to clients, and decreases as a percent of revenue
         in employee related expenses.

     .   Technology Performance Support Services. Gross profit for Technology
         Performance Support Services increased by 3.4 percent from $3.7 million
         in the six months ending June 30, 1998, to $3.8 million in the six
         months ending June 30, 1999. Gross profit margin for Technology
         Performance Support Services increased from 23.4 percent of this
         segment's revenue in the second six months of 1998 to 23.6 percent in
         1999. This modest increase in gross profit margin included increases in
         the proportion of labor revenue to other revenue and increases in staff
         utilization.

     General and Administrative Expenses. General and administrative expenses
increased by $1.4 million (or 19.9 percent), from $6.9 million in the six months
ending June 30, 1998 to $8.3 million in the same period of 1999, decreasing from
13.0 percent of revenue in 1998 to 12.7 percent of revenue in 1999. This
decrease in general and administrative expenses as a percentage of revenue
resulted primarily from decreases as a percent of revenue in employee related
expenses and legal and accounting fees, partially offset by increases as a
percentage of revenue in facility rent, and depreciation.

     Operating Income. As a result of the foregoing, the Company's operating
income decreased by $89,100 (or 1.0 percent), from $9.0 million in the six
months ending June 30, 1998 to $8.9 million in the same period of 1999 and
decreased from 16.8 percent of revenue in the six months ending June 30, 1998 to
13.6 percent of revenue in the same period of 1999.

     Other Income. Other income was $892,000 for the six months ending June 30,
1998 and $857,300 for the same period of 1999. In both periods, this income
consisted primarily of interest income from cash and investment balances
partially offset by interest expense from the Company's capital leases.

     Net Income. Net income decreased by $26,700 (or 0.4 percent), from $6.13
million in the six months ending June 30, 1998 to $6.11 million in the same
period of 1999, decreasing from 11.4 percent of revenue in 1998 to 9.3 percent
of revenue in 1999.


Liquidity and Capital Resources

     The Company's cash and investments were $30.5 million at June 30, 1999,
compared to $51.2 million at December 31, 1998. Decreases in cash and
investments at June 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 $49.6 million
at June 30, 1999, and $66.4 million at December 31, 1998.

                                                                               9
<PAGE>

     The Company's operating activities provided cash of approximately $5.6
million for the six months ended June 30, 1999, compared to $8.3 million for the
same period in 1998. The cash provided from operations in the first six months
of 1999 resulted primarily from net income and increases in trade accounts
payable, partially offset by increases in unbilled revenue, and accounts
receivable.

     Investing activities used cash of $9.0 million in the six months ended June
30, 1999, compared to $2.9 million for the same period in 1998. Cash used for
investing activities in the six months ended June 30, 1999, consisted primarily
of $15.3 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 $7.8 million in the six months ended
June 30, 1999, compared to generation of $737,600 for the same period in 1998.
Cash used for financing activities in the six months ended June 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 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 (6.24 percent on June 30, 1999). 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, 1999, or on December 31, 1998.

     During the six months ending June 30, 1999, the Company made $3.1 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 involves four phases:

         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 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.

                                                                              10
<PAGE>

         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. The Company expects
         to complete this phase by the end of the third quarter of
         1999.

     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 4.     Submission of Matters to a Vote of Security Holders

(a)   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.

(b)   The annual meeting of stockholders of the Company was held on April 30,
1999, and approved the following matters:

(c)   (1)  Election of Directors

       The following directors were elected to serve as Class II directors to
serve until the 2002 annual meeting of stockholders:

<TABLE>
<CAPTION>
             Name                   For          Withheld       Against
             ----                   ---          --------       -------
       <S>                       <C>             <C>            <C>
       John H. Beakes            14,260,822       16,100           0
       Bruce D. Alexander        14,260,822       16,100           0
       Deborah T. Ung            14,260,822       16,100           0
</TABLE>

      (2)  The adoption of the Company's Amended and Restated Stock Purchase
      Plan.

<TABLE>
<CAPTION>
              For            Against         Abstain        Broker Non-Vote
              ---            -------         -------        ---------------
           <S>               <C>             <C>            <C>
           14,246,522          18,300         12,100               0
</TABLE>

      (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>

           14,268,268           3,524          5,130
</TABLE>

                                                                              12
<PAGE>

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

(a)          Exhibits

             27. Financial Data Schedule

(b)          Current Reports on Form 8-K

             N/A

                                                                              13
<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 9, 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,                            August 9, 1999
------------------------------------
Robert W. Deutsch                           Chief Executive Officer, and Director


/s/ Ronald E. Holtz                         Vice President, Chief Financial Officer,          August 9, 1999
------------------------------------
Ronald E. Holtz                             and Director
</TABLE>

                                                                              14