U. S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

(Mark One)

(X)      QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

         For the quarterly period ended October 29, 1999

( )      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

         For the transition period from ____________ to ____________


                        Commission file Number 001-14137

                                HLM Design, Inc.
             (Exact Name of Registrant as Specified in Its Charter)

                  Delaware                           56-2018819
      (State or Other Jurisdiction         (I.R.S Employer Identification No.)
             of Incorporation or
                Organization)

         121 West Trade Street, Suite 2950
         Charlotte, North Carolina                                28202
         (Address of principal executive offices)              (Zip Code)

         Registrant's Telephone Number, Including Area Code: (704) 358-0779

Indicate by check 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

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
<TABLE>
<CAPTION>
<S>                                                                  <C>
Title of Each Class                                   Outstanding at December 2, 1999
-------------------                                   -------------------------------
Common stock, par value $.001 per share                        2,086,942 shares
</TABLE>


<PAGE>




HLM DESIGN, INC. AND AFFILIATES
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
                                                                                            PAGE
                                                                                             NO.
PART I - FINANCIAL INFORMATION
<S>                           <C> <C>                                                         <C>
ITEM 1.      Financial Statements
             Condensed Consolidated Balance Sheets - April 30, 1999 and
              October 29, 1999                                                                3

             Condensed Consolidated Statements of Income - Six Month Periods
              Ended October 30, 1998 and October 29, 1999 and Three Month
              Periods Ended October 30, 1998 and October 29, 1999                             5

             Condensed Consolidated Statement of Stockholders' Equity - Six
              Month Period Ended October 29, 1999                                             6

             Condensed Consolidated Statements of Cash Flows - Six Month
              Periods Ended October 30, 1998 and October 29, 1999                             7

             Notes to Unaudited Condensed Consolidated Financial Statements                   8

ITEM 2.  Management's Discussion and Analysis of Financial Condition
             And Results of Operations                                                       11


PART II. OTHER INFORMATION

ITEM 4.  Submission of Matters to a Vote of Security Holders                                 17

ITEM 6.  Exhibits and  Reports on Form 8-K                                                   17

SIGNATURES                                                                                   18
</TABLE>

<PAGE>

PART I FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS
HLM DESIGN, INC. AND AFFILIATES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                          April 30,               October 29,
                                                                            1999                     1999
                                                                            ----                     ----
                                                                                                  (Unaudited)
<S>                                                                         <C>                      <C>
ASSETS:
Current Assets:
Cash                                                                        $ 250,575                $ 118,620
Trade and other receivables, less allowance for
   doubtful accounts at April 30, 1999 and October 29, 1999
   of $341,692 and $401,641, respectively                                   8,311,068                9,061,692
Costs and estimated earnings in excess of billings on
   uncompleted projects, net                                                7,550,247                8,023,902
Prepaid expenses and other                                                    482,740                  488,208
                                                                   --------------------------------------------
          Total Current Assets                                             16,594,630               17,692,422
                                                                   --------------------------------------------

Other Assets:
Goodwill, net                                                               7,442,301                7,879,814
Other                                                                       1,225,909                1,364,629
                                                                   --------------------------------------------
          Total Other Assets                                                8,668,210                9,244,443
                                                                   --------------------------------------------

Property and Equipment:
  Leasehold improvements                                                    1,114,337                1,442,808
  Furniture and fixtures                                                    1,291,633                1,606,778
  Assets under capital leases                                               1,638,043                1,853,857
                                                                   --------------------------------------------
Property and Equipment, at cost                                             4,044,013                4,903,443
Less Accumulated depreciation and amortization                              1,832,611                2,433,992
                                                                   --------------------------------------------
          Property and equipment, net                                       2,211,402                2,469,451
                                                                   --------------------------------------------
TOTAL ASSETS                                                             $ 27,474,242             $ 29,406,316
                                                                   ============================================


See notes to unaudited condensed consolidated financial statements.

                                       3
<PAGE>
HLM DESIGN, INC. AND AFFILIATES
CONDENSED CONSOLIDATED BALANCE SHEETS
                                                                          April 30,               October 29,
                                                                            1999                     1999
                                                                            ----                     ----
                                                                                                  (Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Current maturities of long-term debt
  and capital lease obligations                                          $ 1,054,369              $ 6,241,251
Accounts payable                                                           4,853,283                6,988,783
Billings in excess of costs and estimated earnings
  on uncompleted projects                                                  3,179,882                1,445,741
Accrued expenses and other                                                 2,385,121                1,760,897
                                                                       ---------------------------------------
          Total Current Liabilities                                       11,472,655               16,436,672
                                                                       ---------------------------------------
LONG-TERM DEBT AND OTHER                                                   6,997,517                3,459,189
                                                                       ---------------------------------------
TOTAL LIABILITIES                                                         18,470,172               19,895,861
                                                                       ---------------------------------------
MINORITY INTEREST                                                             21,930                      600
                                                                       ---------------------------------------
WARRANTS OUTSTANDING                                                           1,200                    1,200
                                                                       ---------------------------------------

STOCKHOLDERS' EQUITY:
Capital Stock:
  Common,  $.001 par value, voting, authorized  9,000,000
    shares: issued 2,345,077 and 2,354,609, respectively                       2,345                    2,355
    (April 30, 1999 and October 29, 1999) (includes 267,667 shares
     to be issued on a delayed delivery schedule)
  Preferred, $.10 par value, voting, authorized 1,000,000
    shares, no shares outstanding
Additional paid in capital                                                 7,408,864                7,431,962
Retained earnings                                                          1,570,393                2,067,272
Accumulated other comprehensive (loss) income                                   (662)                   7,066
                                                                       ---------------------------------------
TOTAL STOCKHOLDERS' EQUITY                                                 8,980,940                9,508,655
                                                                       ---------------------------------------
TOTAL LIABILITIES
   AND STOCKHOLDERS' EQUITY                                             $ 27,474,242             $ 29,406,316
                                                                       =======================================
</TABLE>


See notes to unaudited condensed consolidated financial statements.

                                       4
<PAGE>
<TABLE>
<CAPTION>

HLM DESIGN, INC. AND AFFILIATES
CONDENDSED CONSOLIDATED STATEMENTS OF OPERATION
(Unaudited)
                                                          Six             Six               Three          Three
                                                         Months          Months             Months         Months
                                                         Ended           Ended              Ended           Ended
                                                      October 30,     October 29,        October 30,    October 29,
                                                         1998            1999               1998            1999
                                                         ----            ----               ----            ----
<S>                                                    <C>             <C>                 <C>           <C>
REVENUES:
 Fee Income                                            $ 14,845,136    $ 22,137,677        $ 7,189,320   $ 11,473,611
 Reimbursable Income                                        799,410       1,640,759            321,104        851,630
                                                    --------------------------------   -------------------------------
     Total Revenues                                      15,644,546      23,778,436          7,510,424     12,325,241
                                                    --------------------------------   -------------------------------
CONSULTANT EXPENSE                                        2,142,048       6,004,259            885,093      3,230,710
                                                    --------------------------------   -------------------------------
PROJECT EXPENSES:
  Direct Expenses                                           345,968         354,828            151,879        140,828
  Reimbursable expenses                                     568,437         901,023            230,350        516,663
                                                    --------------------------------   -------------------------------
    Total project expenses                                  914,405       1,255,851            382,229        657,491
                                                    --------------------------------   -------------------------------
NET PRODUCTION INCOME                                    12,588,093      16,518,326          6,243,102      8,437,040
DIRECT LABOR                                              3,601,546       4,853,626          1,849,427      2,547,202
INDIRECT EXPENSES                                         7,852,607      10,227,418          3,816,864      5,111,915
                                                    --------------------------------   -------------------------------
OPERATING INCOME                                          1,133,940       1,437,282            576,811        777,923
                                                    --------------------------------   -------------------------------
OTHER EXPENSE:
   Interest Expense, net                                    328,382         472,162            123,557        254,797
                                                    --------------------------------   -------------------------------
     Total Other Expense                                    328,382         472,162            123,557        254,797
                                                    --------------------------------   -------------------------------
INCOME  BEFORE INCOME TAXES AND EXTRAORDINARY
   ITEM                                                     805,558         965,120            453,254        523,126
INCOME TAX                                                  364,151         468,241            203,469        253,217
                                                    --------------------------------   -------------------------------
NET INCOME BEFORE EXTRAORDINARY ITEM                        441,407         496,879            249,785        269,909
EXTRAORDINARY ITEM FOR EARLY
  EXTINGUISHMENT OF DEBT, NET OF TAX OF $171,842            280,849
                                                    ================================   ===============================
NET INCOME                                                $ 160,558       $ 496,879          $ 249,785      $ 269,909
                                                    ================================   ===============================

NET INCOME PER SHARE BEFORE EXTRAORDINARY ITEM:
  Basic and Diluted                                          $ 0.24          $ 0.21             $ 0.12         $ 0.11
                                                    ================================   ===============================
NET INCOME PER SHARE
  Basic and Diluted                                          $ 0.09          $ 0.21             $ 0.12         $ 0.11
                                                    ================================   ===============================
NUMBER OF SHARES USED TO COMPUTE PER SHARE DATA
  Basic and Diluted                                       1,812,339       2,350,248          2,075,087      2,352,993
                                                    ================================   ===============================
</TABLE>

See notes to unaudited condensed consolidated financial statements.

                                       5
<PAGE>

HLM DESIGN, INC. AND AFFILIATES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
                                                                                                    Accumulated
                                                                       Additional                      Other              Total
                                                   Common Stock         Paid-In       Retained     Comprehensive      Stockholders'
                                              Shares         Amount     Capital       Earnings     (Loss) Income          Equity
                                              ------         ------     -------       --------     -------------          ------

<S>            <C> <C>                       <C>            <C>       <C>           <C>                 <C>           <C>
Balance, April 30, 1999                      2,345,077      $ 2,345   $ 7,408,864   $ 1,570,393         $ (662)       $ 8,980,940

Issuance of Common Stock                         9,532           10        23,098                                          23,108
   (Note  5)

Comprehensive Income-
  Foreign Currency Translation Adjustment                                                                7,728              7,728

Net Income                                                                              496,879                           496,879
                                            ----------------------------------------------------------------------------------------
Balance, October 29, 1999                    2,354,609      $ 2,355   $ 7,431,962   $ 2,067,272        $ 7,066        $ 9,508,655
                                            ========================================================================================
</TABLE>


See notes to unaudited condensed consolidated financial statements.


                                        6

<PAGE>
<TABLE>
<CAPTION>
HLM DESIGN, INC. AND AFFILIATES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)                                                                                       Six                  Six
                                                                                                 Months               Months
                                                                                                  Ended                Ended
                                                                                              October 30,          October 29,
                                                                                                  1998                 1999
                                                                                                  ----                 ----
<S>                                                                                                  <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                                                         $ 160,558            $ 496,879
  Adjustments to reconcile net income to net cash used in operating activities:
     Extraordinary item for early extinguishment of debt                                               280,849                    -
     Depreciation                                                                                      464,532              419,949
     Amortization of goodwill                                                                           86,097              201,439
     Amortization of deferred loan fees                                                                 42,703               39,275
     Other                                                                                             117,450                    -
     Changes in assets and liabilities, net of effects from purchase of
         acquired companies:
       Decrease (increase) in trade and other  accounts receivable                                     863,724             (733,024)
       Increase  in costs and estimated earnings compared to billings
         on uncompleted contracts, net                                                              (1,065,871)          (1,892,640)
       Decrease (increase)  in prepaid expenses and other assets                                        46,969              (76,514)
       Increase (decrease) in accounts payable                                                        (866,191)           1,870,176
       Decrease in accrued expenses and other                                                         (570,232)          (1,082,178)
                                                                                          ------------------------------------------
           Net cash used in operating activities                                                      (439,412)            (756,638)
                                                                                          ------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property and equipment                                                                 (638,749)            (569,075)
  Payment for purchase of minority interest in GAIH                                                          -              (21,330)
  Payment for purchase of acquired companies, net of cash acquired                                  (1,834,279)            (153,993)
                                                                                          ------------------------------------------
           Net cash used in investing activities                                                    (2,473,028)            (744,398)
                                                                                          ------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net borrowing on line of credit                                                                      951,335            1,800,000
  Net proceeds from issuance of common stock                                                         5,922,709                    -
  Net decrease on short term borrowings                                                               (750,000)                   -
  Payment on long-term borrowings                                                                   (2,509,051)            (454,027)
  Proceeds from issuance of warrants                                                                     1,200                    -
  Proceeds from issuance of common stock under the Employee Stock Purchase Plan                              -               23,108
                                                                                          ------------------------------------------
           Net cash provided by financing activities                                                 3,616,193            1,369,081
                                                                                          ------------------------------------------
INCREASE (DECREASE) IN CASH                                                                            703,753             (131,955)
CASH BALANCE:
  Beginning of period                                                                                   17,369              250,575
                                                                                          ------------------------------------------
  End of period                                                                                      $ 721,122            $ 118,620
                                                                                          ==========================================
SUPPLEMENTAL DISCLOSURES:
  Cash paid during the year for:
    Interest                                                                                         $ 460,175            $ 382,272
    Income tax payments                                                                              $ 184,526            $ 703,943
Noncash investing and financing transactions:
  Issuance of warrants to certain debt holders                                                         $ 1,200
  Acquisition of JPJ Architects, Inc.:
     Notes payable issued to JPJ Architects, Inc. shareholders                                       $ 872,320
     Fair value of assets acquired and liabilities assumed, net                                      $ 180,150
    Common stock to be issued on delayed delivery schedule                                         $ 1,071,000

See notes to unaudited condensed consolidated financial statements.
</TABLE>

                                       7

<PAGE>


HLM DESIGN, INC. AND AFFILIATES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Organization and Business-HLM Design, Inc. (the "Company" or "HLM
         Design") is a management services company incorporated March 6, 1997
         for the purpose of providing management and services to architectural,
         engineering and planning design entities under long term management and
         services agreements ("MSAs"). In May 1997, HLM Design executed long
         term MSAs with HLM Design of North America, Inc. ("HLMNA"), HLM of the
         Southeast. P.C. ("HLMSE") and HLM of the Northwest, Architecture,
         Engineering and Planning, P.C. ("HLMNW"). HLMSE and HLMNW were
         organized in 1996 and had no operations through May 1, 1998. In July
         1998, HLM Design entered into an MSA with each of HLM Design of the
         Midwest, Inc. ("HLMMW"), HLM Design of the Midatlantic, P.C. ("HLMMA")
         and HLM Design of the Northeast, Architecture, Engineering and
         Planning, P.C. ("HLMNE"). In October 1998, HLM Design entered into an
         MSA with JPJ Architects, Inc. ("JPJ"). In January 1999, HLM Design
         entered into an MSA with G.A. Design International Holdings, Ltd.
         ("GAIH"). JPJ and GAIH are subsidiaries of the Company that were
         acquired on October 30, 1998 and January 30, 1999 respectively. In
         September 1999, the Company acquired ESS Architects, Inc. ("ESS").
         HLMNA, HLMSE, HLMNW, HLMMW, HLMMA, HLMNE, JPJ, GAIH and ESS are
         referred to herein collectively as "Managed Firms". In order to
         simplify the MSAs, in November 1999, HLMMA, HLMNW and HLMSE merged into
         HLMNE. HLMNE's name was changed to HLM Design Architecture, Engineering
         and Planning, P.C. In addition, HLMMW's name was changed to HLM Design
         USA, Inc.

         Financial Statement Presentation - The accompanying unaudited financial
         information for the three and six month periods ended October 30, 1998
         and October 29, 1999 has been prepared in accordance with generally
         accepted accounting principles pursuant to the rules and regulations of
         the Securities and Exchange Commission. All significant intercompany
         accounts and transactions have been eliminated. These unaudited
         consolidated financial statements reflect, in the opinion of
         management, all material adjustments (which include only normal
         recurring adjustments) necessary to fairly state the financial position
         and the results of operations for the interim periods presented. The
         results for interim periods are not necessarily indicative of the
         results to be expected for the entire fiscal year. These interim
         financial statements should be read in conjunction with the Company's
         audited consolidated financial statements for the year ended April 30,
         1999.

                                       8
<PAGE>

HLM DESIGN,  INC. AND AFFILIATES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

2.       CONTRACTS IN PROGRESS
         Information relative to contracts in progress is as follows:
<TABLE>
<CAPTION>

                                                     April 30,         October 29,
                                                       1999               1999
                                                       ----               ----
<S>                                              <C>                 <C>
        Costs incurred on uncompleted projects
           (excluding overhead)                  $52,092,171         $54,501,739
        Estimated earnings thereon                 49,678,268          50,963,826
                                                 ------------       -------------
        Total                                    101,770,439         105,465,565
        Less billings to date                      97,400,074          98,887,404
                                                 ------------       -------------
        Net underbillings                         $ 4,370,365        $  6,578,161
                                                 ============       =============
</TABLE>

      Net underbillings are included in the accompanying balance sheets as
follows:
<TABLE>
<CAPTION>

                                                              April 30,        October 29,
                                                                1999               1999
                                                                ----               ----
<S>                                                           <C>                <C>
        Costs and estimated earnings in excess of billings
            On uncompleted projects                           $7,550,247         $8,023,902
        Billings in excess of costs and estimated earnings
            On uncompleted projects                           (3,179,882)        (1,445,741)
                                                              ----------         ----------
        Net underbillings                                     $4,370,365         $6,578,161
                                                              ==========         ==========
</TABLE>

3.       ACQUISITIONS

         ESS ARCHITECTS, INC.
         On September 16, 1999, HLM Design purchased all the issued and
         outstanding common stock of ESS for a combination of cash and
         promissory notes for a total of $425,000. The purchase price has been
         allocated on a preliminary basis to the assets and liabilities acquired
         based on their estimated fair value at the acquisition date resulting
         in an allocation of goodwill of approximately $515,450. Such
         allocations may ultimately be different than amounts referenced herein
         depending on final valuations.

4.       FINANCING ARRANGEMENTS
         A summary of changes in financing arrangements are as follows:
         $5,000,000 Revolving Line of Credit: As of October 29, 1999, the
         Company has borrowings outstanding of $4,918,335. This loan matures on
         August 31, 2000.

         Notes Payable: In November 1999, the Company entered into a secured
         $250,000 debt agreement with the Lender. This note bears interest at
         prime plus 1 percent and matures on February 8, 2000.


                                       9
<PAGE>
HLM DESIGN, INC. AND AFFILIATES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


5.       STOCKHOLDERS' EQUITY
         In September 1999, 2,411 shares of stock were issued under the HLM
         Design, Inc. Employee Stock Purchase Plan.

         In September 1999, the Company purchased the remaining 5 percent of the
         issued and outstanding common stock of GAIH for $25,960.

         On July 21, 1999, 28,400 stock options were issued to certain Company
         employees at a grant price of $3.61.


6.       HLM DESIGN, INC. FINANCIAL INFORMATION (UNAUDITED)

         HLM Design's unconsolidated balance sheet as of and for the six month
         period ended October 29, 1999 is as follows:

         Balance Sheet
         Current assets                                             $15,072,626
                                                                    -----------
         Non-current assets                                           9,029,340
                                                                    -----------
         Total assets                                               $24,101,966
                                                                    ===========

         Current liabilities                                         13,357,497
                                                                    -----------
         Non-current liabilities                                      1,235,814
                                                                    -----------
         Total liabilities                                           14,593,311
                                                                    -----------
         Total stockholders' equity                                   9,508,655
                                                                    -----------
         Total liabilities and stockholders' equity                 $24,101,966
                                                                    ===========

         Statement of Income
         Equity in earnings of affiliate                            $   552,923
         Net interest, income tax and other expense                      56,044
                                                                    -----------
         Net income                                                 $   496,879
                                                                    ===========


7.       NEW ACCOUNTING PRONOUNCEMENT

         In June 1998, the Financial Accounting Standards Board issued Statement
         of Financial Accounting Standards No. 133, ACCOUNTING FOR DERIVATIVE
         INSTRUMENT AND HEDGING ACTIVITIES. This Standard establishes accounting
         and reporting standards for derivative instruments, including certain
         derivative instruments embedded in other contracts, and hedging
         activities. Management originally intended to adopt this provision
         effective January 30, 1999. However, based on further review of the
         pronouncement and the potential impact on the Company which can not be
         currently determined, management has deferred adoption of the
         pronouncement. The Statement will become effective for the Company's
         second quarter of fiscal 2001.

                                       10
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

         The following discussion of the results of operations and financial
condition of the Company should be read in conjunction with the financial
statements and related notes thereto included elsewhere in this report.

RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
                                     Consolidated        Consolidated       Consolidated       Consolidated
                                     Three Months        Three Months        Six Months         Six Months
                                         Ended              Ended              Ended              Ended
                                      October 30,        October 29,         October 30,      October 29,
                                         1998                1999               1998               1999
                                         ----                ----               ----               ----
<S>                                 <C>                  <C>               <C>                 <C>
Revenues                            $ 7,510,424          $12,325,241       $15,644,546         $23,778,436
Consultant and project expenses       1,267,322            3,888,201         3,056,453           7,260,110
                                    -----------          -----------       -----------         -----------
Net production income                 6,243,102            8,437,040        12,588,093          16,518,326
                                    -----------          -----------       -----------         -----------
Direct labor                          1,849,427            2,547,202         3,601,546           4,853,626
Operating costs                       3,773,791            5,010,455         7,766,510          10,025,979
Amortization of intangible assets        43,073              101,460            86,097             201,439
                                    -----------          -----------       -----------         -----------
Total costs and expenses              5,666,291            7,659,117        11,454,153          15,081,044
                                    -----------          -----------       -----------         -----------
Income from operations                  576,811              777,923         1,133,940           1,437,282
Interest expense, net                   123,557              254,797           328,382             472,162
                                    -----------          -----------       -----------         -----------
Total other expense                     123,557              254,797           328,382             472,162
                                    -----------          -----------       -----------         -----------
Income before income taxes and
Extraordinary item                      453,254              523,126           805,558             965,120

Income tax expense                      203,469              253,217           364,151             468,241
                                    -----------          -----------       -----------         -----------
Net income before extraordinary
item                                    249,785              269,909           441,407             496,879
Extraordinary item for early
extinguishment
of debt, net of tax of $171,842                                                280,849
                                    -----------          -----------       -----------         -----------
Net income                          $   249,785            $ 269,909         $ 160,558           $ 496,879
                                    ===========          ===========       ===========         ===========
</TABLE>

                                       11
<PAGE>



ITEM 2.  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS-CONTINUED

RESULTS OF OPERATIONS

FOR THE THREE MONTHS ENDED OCTOBER 29, 1999 AND OCTOBER 30, 1998

         Revenues were $12.3 million for the three month period ended October
29, 1999 as compared to $7.5 million for the three month period ended October
30, 1998. This increase of 64% is attributable to the acquisition of JPJ in
October 1998 and to internal growth.

            Direct costs which primarily include consultant costs and
reimbursable project expenses totaling $3.9 million, or 32% of revenues, for the
three month period ended October 29, 1999 as compared to $1.3 million, or 17% of
revenues, for the three month period ended October 30, 1998. This increase as a
percent of revenue is due to an increased use of consultants to meet project
requirements (26% and 12% of revenue for the three month periods ended October
29, 1999 and October 30, 1998, respectively), primarily due to JPJ's use of
consultants since November 1998. Management believes that JPJ will continue to
use consultants which will cause direct costs as a percent of revenues to
increase in future periods as JPJ consultant expenses are reflected for a twelve
month period.

         Direct labor cost was $2.5 million, or 30% of net production income,
for the three month period ended October 29, 1999 as compared to $1.8 million,
or 30% of net production income, for the three month period ended October 30,
1998. Management believes that although the volume of architecture, planning and
engineering services has increased, it is offset by (a) an increase in salary
and salary related costs which has not been passed through to the Company's
clients in all cases; and (b) a reduction in certain higher margin projects.

         Operating costs were $5.0 million, or 59% of net production income, for
the three month period ended October 29, 1999 as compared to $3.8 million, or
60% of net production income, for the three month period ended October 30, 1998.
This decrease as a percent of net production income is principally due to a
decrease in certain recurring expenses relating to the Company's obligations as
a public company as well as the Company's internally performing several
functions that has previously been outsourced. This decrease is partially offset
by (a) an increase in education and seminars due to the Company's increased
focus on training and education of its employees; (b) an increase in
depreciation expense due to the Company's increased focus on improvement of
certain computer and related equipment; and (c) an increase in certain salary
and related costs as a result of market competition for certain professionals.

         Amortization of intangible assets was $101,460 for the three months
ended October 29, 1999 as compared to $43,073 for the three months ended October
30, 1998. This increase is attributable to amortization expense arising from the
acquisition of JPJ and GAIH in October 1998 and January 1999, respectively.


                                       12
<PAGE>

ITEM 2.  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS-CONTINUED

         Interest expense was $0.3 million for the three month period ended
October 29, 1999 as compared to $0.1 million for the three month period ended
October 30, 1998. This increase is principally due to the Company's increase in
borrowings on its line of credit as well as debt resulting from the acquisitions
of JPJ and GAIH which is partially offset by the repayment of approximately $3.0
million in debt from the proceeds of its initial public offering in June of 1998
(the "Offering").

         Income tax expense was $0.3 million for the three month period ended
October 29, 1999 as compared to $0.2 million for the three month period ended
October 30, 1998. The effective income tax rate was 48% and 45% for the three
month periods ended October 29, 1999 and October 30, 1998, respectively. This
effective tax rate is higher principally due to increased goodwill amortization.


FOR THE SIX MONTHS ENDED OCTOBER 29, 1999 AND OCTOBER 30, 1998

         Revenues were $23.8 million for the six month period ended October 29,
1999 as compared to $15.6 million for the six month period ended October 30,
1998. This increase of 52% is attributable to the acquisition of JPJ in October
1998 and to internal growth.

            Direct costs (primarily including consultant costs and reimbursable
project expenses) totaling $7.3 million, or 31% of revenues, for the six month
period ended October 29, 1999 as compared to $3.1 million, or 20% of revenues,
for the six month period ended October 30, 1998. This increase as a percent of
revenue is due to an increased use of consultants to meet project requirements
(25% and 14% of revenue for the six month periods ended October 29, 1999 and
October 30, 1998, respectively), primarily due to JPJ's use of consultants since
November 1998. Management believes that JPJ will continue to use consultants
which will cause direct costs as a percent of revenues to increase in future
periods as JPJ consultant expenses are reflected for a twelve month period.

         Direct labor cost was $4.9 million, or 30% of net production income,
for the six month period ended October 29, 1999 as compared to $3.6 million, or
29% of net production income, for the six month period ended October 30, 1998.
Management believes that although volume of architecture, planning and
engineering services has increased, it is offset by (a) an increase in salary
and salary related costs which has not been passed through to the Company's
clients in all cases and (b) a reduction in certain higher margin projects.


                                       13
<PAGE>

ITEM 2.  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS-CONTINUED

         Operating costs were $10.0 million, or 61% of net production income,
for the six month period ended October 29, 1999 as compared to $7.8 million, or
62% of net production income, for the six month period ended October 30, 1998.
This decrease as a percent of net production income is principally due to (a) a
decrease in certain recurring expenses relating to the Compny's obligation as a
public company as well as the Company's internally performing several functions
that had previously been outsourced; and (b) a decrease in office supplies due
to additional costs related to implementation of an updated corporate identity
in the prior year. This decrease is partially offset by (a) an increase in
education and seminars due to the Company's increased focus on training and
education of its employees and (b) an increase in depreciation expense due to
the Company's increased focus on improvement of certain computer and related
equipment.

         Amortization of intangible assets was $201,439 for the six months ended
October 29, 1999 as compared to $86,097 for the six months ended October 30,
1998. This increase is attributable to amortization expense arising from the
acquisitions of JPJ and GAIH in October 1998 and January 1999, respectively.

         Interest expense was $0.5 million for the six month period ended
October 29, 1999 as compared to $0.3 million for the six month period ended
October 30, 1998. This increase is principally due to the Company's increase in
borrowings on its line of credit as well as debt resulting from the acquisition
of JPJ and GAIH which is partially offset by the repayment of approximately $3.0
million in debt from the proceeds of its Offering.

         Income tax expense was $0.5 million for the six month period ended
October 29, 1999 as compared to $0.4 million for the six month period ended
October 30, 1998. The effective income tax rate was 49% and 45% for the six
month periods ended October 29, 1999 and October 30, 1998, respectively. This
effective rate is higher principally due to increased goodwill amortization.


LIQUIDITY AND CAPITAL RESOURCES

         At October 29, 1999, the Company's current assets of $17.7 million
exceeded current liabilities of $16.4 million resulting in net working capital
of $1.3 million. Working capital has declined since April 30, 1999 as a result
of the classification of certain debt as current. During the six month period
ended October 29, 1999, the Company used $0.8 million in operating activities
primarily due to the increase in costs and estimated earnings compared to
billings on uncompleted projects and accounts receivable as well as a decrease
in accrued expenses and other. This use of cash provided by operating activities
is partially offset by an increase in accounts payable. The Company used $0.7
million for investing activities, primarily the purchase of equipment as well as
payment for purchase of ESS in September 1999. In addition, the Company
generated $1.8 million in financing activities primarily from borrowings under
the Company's revolving line of credit.

                                       14
<PAGE>

ITEM 2.  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS-CONTINUED


         The Company's growth and operating strategy will require substantial
capital and may result in the Company incurring additional debt, issuing equity
securities or obtaining additional bank financing. As a management company, HLM
Design will be responsible for the financing of working capital growth, capital
growth and other cash needs of its managed firms. In August 1999, the Company's
$5.0 million revolving line of credit maturity date was extended from June 30,
2000 to August 31, 2000. As of October 29, 1999, the Company has borrowings
outstanding under this line of credit of $4.9 million. In November 1999, the
Company entered into a $250,000 debt agreement with a maturity date of February
8, 2000.

         The Company is working with several lenders to obtain additional
capital in order to finance any future acquisitions. The Company expects to
receive several proposals during late December 1999 in order to determine the
ultimate financing arrangements. In order to continue its expansion program
through acquisitions, the Company will require additional capital. If the
Company is unable to obtain additional capital, its ability to implement its
growth strategy will be adversely affected. The Company believes that its
revolving line of credit and anticipated funds from future operations will be
sufficient to meet the Company's operating needs for at least the next twelve
months.

YEAR 2000 COMPLIANCE

          Some computer systems will not be able to process dates beyond 1999
and will need to be modified or replaced prior to the year 2000. Many of the
Company's information technology purchases were made after January 1997, and
management believes the Company's internal software and hardware systems will
function properly with respect to dates in the year 2000 and thereafter. Year
2000 issues are also addressed as the Company's network and internal systems are
upgraded in the normal course of business. As of October 29, 1999, the Company's
expenditures toward year 2000 compliance has been minimal and management does
not expect its additional expenditures directly related to year 2000 compliance
to exceed $40,000. Management continually reassesses the estimated costs and
status of the Company's year 2000 compliance effort.

          The Company began conducting verification testing of all its internal
information technology and information systems in 1998. The testing is a
multi-phased process which includes, but is not limited to, simulating several
key dates and times in the year 2000 and performing normal daily activities. The
infrastructure, servers and workstations, as well as primary software systems,
have been tested and validated using this process.


                                       15
<PAGE>

ITEM 2.  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS-CONTINUED

        While management believes that its hardware and software applications
are year 2000 compliant, there can be no assurance until the year 2000 occurs
that all systems will then function adequately. The Company is monitoring all
key vendors and suppliers for year 2000 compliance by various methods including,
but not limited to, gathering information from detailed surveys sent by the
Company to each key vendor. Most of the Company's significant suppliers and
vendors have advised the Company that they are, or anticipate being, year 2000
compliant. If, however, other software applications of other suppliers or of
local exchange carriers, long distance carriers, service providers, competitive
access providers, or others on whose services the Company depends are not year
2000 compliant, a material adverse effect on the Company's financial condition
and results of operations could result. The Company is not aware of any
significant vendor who may be unable to provide service to the Company as a
result of year 2000 non-compliance. The Company currently has a disaster
recovery plan in place which will serve as a foundation for its contingency plan
in the event some suppliers and vendors are not year 2000 compliant.


ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
         In the opinion of management, there has been no material change in
market risk since April 30, 1999.


                                       16
<PAGE>


PART II-OTHER INFORMATION

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

     The Company held its Annual Meeting of Stockholders on September 22, 1999
for the purpose of electing five directors and ratifying the appointment of
independent accountants. Proxies were solicited pursuant to Regulation 14A of
the Securities Exchange Act of 1934 and there was no solicitation in opposition
to management's solicitations.

Proposal 1:

Election of directors for terms indicated:
<TABLE>
<CAPTION>
                                   Years of Annual Meeting of
                                        Stockholders that
                                          Term Expires                    Shares Voted                      Shares
              Name                                                           "For"                        "Withheld"
              ----                                                           -----                        ----------
<S>                                           <C>                          <C>                               <C>
D. Shannon LeRoy                              2000                         1,928,307                         8,100
James E. Finley                               2001                         1,928,307                         8,100
L. Fred Pounds                                2001                         1,928,807                         7,600
Joseph M. Harris                              2002                         1,928,807                         7,600
Vernon B. Brannon                             2002                         1,928,807                         7,600
</TABLE>

Proposal 2:

Ratification of appointment of Deloitte & Touche LLP as the Company's
independent accountants was approved with the following vote:


            Shares Voted                 Shares Voted                  Shares
               "For"                       "Against"                "Abstaining"
               -----                       ---------                ------------
             1,929,191                       1,800                      5,416


Item 6.  Exhibits and Reports on Form 8-K

(a) The exhibits filed as part of this Form 10-Q are:

Exhibit No.     Description
-----------     -----------

10.62           Promissory Note made by the Company in favor of First Charter
                National Bank dated as of November 10, 1999.

27              Financial Data Schedule

(b) HLM Design has not filed any reports on Form 8-K during the period covered
by this report.

                                       17
<PAGE>

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.

                                     HLM DESIGN, INC.
                                       (Registrant)


Date: December  13, 1999          By: /s/  Joseph M. Harris
      ------------------              ---------------------
                                      Joseph M. Harris
                                      President, Chairman and Director


Date: December  13, 1999          By: /s/ Vernon B. Brannon
      ------------------              ---------------------
                                      Vernon B. Brannon
                                      Senior Vice President, Chief Financial
                                      Officer, Treasurer, Assistant Secretary
                                      And Director


                                       18