HLM DESIGN INC, S-1/A, 1998-06-12

HLM DESIGN INC
S-1/A, 1998-06-12
ENGINEERING, ACCOUNTING, RESEARCH, MANAGEMENT

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 11, 1998

REGISTRATION NO. 333-40617
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

AMENDMENT NO. 6

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933
------------------------

HLM DESIGN, INC.

(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 8712 56-2018819
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>

121 WEST TRADE STREET, SUITE 2950

CHARLOTTE, NORTH CAROLINA 28202

TELEPHONE (704) 358-0779

(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

------------------------

MR. JOSEPH M. HARRIS

PRESIDENT AND CHAIRMAN OF THE BOARD

HLM DESIGN, INC.

121 WEST TRADE STREET, SUITE 2950

CHARLOTTE, NORTH CAROLINA 28202

TELEPHONE (704) 358-0779

(Name, address, including zip code, and telephone number, including
area code, of agent for service)

COPIES TO:

<TABLE>
<S> <C>
GARY C. IVEY, ESQ. MICHAEL K. DENNEY, ESQ.
PARKER, POE, ADAMS & BERNSTEIN L.L.P. BRADLEY & RILEY, P.C.
2500 CHARLOTTE PLAZA 100 FIRST STREET, S.W.
CHARLOTTE, NORTH CAROLINA 28244 CEDAR RAPIDS, IOWA 52404
TELEPHONE (704) 372-9000 TELEPHONE (319) 363-0101
</TABLE>

------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:

As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. h

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. h

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. h

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. h

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. h
------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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- --------------------------------------------------------------------------------

<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR

TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

SUBJECT TO COMPLETION

PRELIMINARY PROSPECTUS DATED JUNE 11, 1998

PROSPECTUS

1,200,000 SHARES

COMMON STOCK
------------------------

All of the 1,200,000 shares (the "Shares") of common stock, par value $.001
per share (the "Common Stock"), are offered hereby (the "Offering") by HLM
Design, Inc. ("HLM Design").

Prior to the Offering, there has been no public market for the Common
Stock. It is currently anticipated that the public offering price will be
between $6.00 and $7.50 per share. See "Underwriting" for information relating
to factors to be considered in determining the initial public offering price.

HLM Design has been approved for quotation of the Common Stock on the
Nasdaq SmallCap Market under the symbol "HLMD."

THE SECURITIES OFFERED HEREBY ARE SPECULATIVE. SEE "RISK FACTORS" BEGINNING
ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS. THIS OFFERING INVOLVES A HIGH DEGREE OF RISK AND
SUBSTANTIAL DILUTION.
------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------

[CAPTION]
<TABLE>
<S> <C> <C> <C>
PRICE TO UNDERWRITING PROCEEDS TO THE
PUBLIC DISCOUNT (1) COMPANY(2)
<S> <C> <C> <C>
Per Share........................................... $ $ $
Total (3)........................................... $ $ $
</TABLE>

(1) HLM Design has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."

(2) Before deducting expenses, payable by HLM Design, estimated at $558,280.

(3) HLM Design has granted to the Underwriters an option, exercisable within 45
days of the date hereof, to purchase up to an aggregate of 180,000
additional shares of Common Stock solely to cover over-allotments, if any.
If such option is exercised in full, the total Price to Public, Underwriting
Discount and Proceeds to HLM Design will be $ , $ and $ ,
respectively. See "Underwriting."
------------------------

The Shares are being offered by the several Underwriters, subject to prior
sale, when, as and if issued to and accepted by them, subject to approval of
certain legal matters by counsel for the Underwriters and certain other
conditions. The Underwriters reserve the right to withdraw, cancel or modify
such offer and to reject orders in whole or in part. It is expected that
delivery of the Shares will be made in New York, New York on or about
, 1998.

BERTHEL FISHER & COMPANY FINANCIAL SERVICES, INC.

WESTPORT RESOURCES INVESTMENT SERVICES, INC.

MARION BASS SECURITIES CORPORATION
------------------------

The date of this Prospectus is , 1998.

<PAGE>
[Photographs of various projects completed by the Company]

HLM DESIGN INTENDS TO FURNISH ITS STOCKHOLDERS WITH ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS AUDITED BY ITS INDEPENDENT AUDITORS AND WILL
MAKE AVAILABLE COPIES OF ITS QUARTERLY RESULTS FOR THE FIRST THREE QUARTERS OF
EACH YEAR.

CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SUCH TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF COMMON STOCK TO COVER
SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION
OF THESE ACTIVITIES, SEE "UNDERWRITING."

<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ
IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS
(INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS
OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS (A) GIVES EFFECT TO AN
EFFECTIVE 12.75-TO-1 STOCK SPLIT (EFFECTED IN A SERIES OF TRANSACTIONS) OF HLM
DESIGN'S COMMON STOCK TO BE COMPLETED PRIOR TO THE CONSUMMATION OF THE OFFERING
(THE "STOCK SPLIT"), (B) ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS
NOT EXERCISED, AND (C) GIVES EFFECT TO THE EXERCISE OF THE WARRANTS, INCLUDING
THE WARRANTS HELD BY PACIFIC (AS DEFINED HEREIN) TO BE EXERCISED IMMEDIATELY
PRIOR TO THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT OF WHICH THIS
PROSPECTUS IS A PART. SEE "DESCRIPTION OF CAPITAL STOCK -- WARRANTS" AND
"UNDERWRITING." UNLESS THE CONTEXT OTHERWISE REQUIRES, REFERENCES HEREIN TO THE
"COMPANY" MEAN HLM DESIGN, INC. AND THE ARCHITECTURAL, ENGINEERING AND PLANNING
FIRMS ("AEP FIRMS") IT MANAGES CONSIDERED AS ONE ENTERPRISE, REFERENCES TO A
"MANAGEMENT AND SERVICES AGREEMENT" MEAN A LONG-TERM AGREEMENT BETWEEN HLM
DESIGN AND AN AEP FIRM AS DESCRIBED HEREIN IN "BUSINESS -- HLM DESIGN
OPERATIONS -- MANAGEMENT AND SERVICES AGREEMENTS", AND REFERENCES TO THE
"MANAGED FIRMS" MEAN (I) WITH RESPECT TO THE PERIOD PRIOR TO THE DATE OF THIS
PROSPECTUS, HLMI, HLMNC AND HLMO (EACH AS DEFINED BELOW) WHICH ARE THE AEP FIRMS
CURRENTLY OPERATING UNDER MANAGEMENT AND SERVICES AGREEMENTS WITH HLM DESIGN,
AND (II) WITH RESPECT TO THE PERIOD FROM AND AFTER THE DATE OF THIS PROSPECTUS,
HLMI, HLMNC AND HLMO AND SUCH OTHER AEP FIRMS WITH WHICH HLM DESIGN SHALL, FROM
TIME TO TIME, ENTER INTO MANAGEMENT AND SERVICES AGREEMENTS. "HLM" IS A
REGISTERED TRADEMARK OF HLM DESIGN.

THE COMPANY

HLM Design, Inc. is a management company that enters into management and
services relationships with full service AEP Firms. It was formed in March 1997
to pursue a strategy of consolidating non-professional operations and providing
management expertise to individual AEP Firms. HLM Design believes it is the
first company to pursue such a consolidation strategy in order to take advantage
of operating efficiencies and provide geographic and service diversification for
clients. Prior to March 1997, the current management team of HLM Design operated
HLM Design of Northamerica, Inc. (formerly named Hansen Lind Meyer Inc.), an
Iowa corporation ("HLMI"), HLM Design of the Southeast, P.C. (formerly named HLM
of North Carolina, P.C.) ("HLMNC") and HLM Design of the Northwest,
Architecture, Engineering and Planning, P.C. (formerly named HLM of Oregon,
Architecture and Planning, P.C.) ("HLMO"). HLMI has been in operation for over
thirty years. HLMNC and HLMO were organized in 1996 but have had no operations
to date. These three AEP Firms have each entered into a Management and Services
Agreement with HLM Design. The Managed Firms operate offices in Atlanta,
Georgia, Iowa City, Iowa, Chicago, Illinois, Orlando, Florida, Bethesda,
Maryland, Denver, Colorado, Sacramento, California, Philadelphia, Pennsylvania,
Portland, Oregon and Charlotte, North Carolina. HLM DESIGN IS NOT ENGAGED IN THE
PRACTICE OF ARCHITECTURE, ENGINEERING OR PLANNING.

Joseph M. Harris and Vernon B. Brannon, executive officers and principal
stockholders of HLM Design, are also the principal stockholders and officers of
the Managed Firms, HLMI, HLMNC and HLMO. As officers of the Managed Firms, they
caused the Managed Firms to enter into Management and Services Agreements with
HLM Design and as stockholders of each of the Managed Firms they entered into
Stockholders' Agreements (as described below). See "Certain
Transactions -- Relationships with Managed Firms."

A full-service AEP Firm provides a spectrum of services in various
specialties to customers through a broad range of professionals, including
architects, mechanical, electrical, structural and civil engineers, landscape
architects, interior designers and construction administration personnel. HLM
Design has chosen to focus its effort on the management of full-service AEP
Firms because it believes these firms offer a competitive advantage -- the
ability to provide a full line of high-quality, cost effective services -- over
firms that provide a more narrow range of services. HLM Design believes that its
consolidation strategy will assist in attracting new AEP Firms as a result of
two major trends: (1) the increasing complexity, cost and competitiveness of the
design practice conducted by AEP Firms requiring operating and cost
efficiencies, and (2) AEP Firms' need for access to a wider pool of
geographically dispersed professionals in order to provide solutions for the
evolving needs of their clients.

As a management company, HLM Design's relationship with the Managed Firms
is contractual; it has no ownership interest in the Managed Firms. As a result,
stockholders in HLM Design will have no direct or indirect ownership interest in
the Managed Firms.

HLM Design's strategy is to expand revenues through (1) the development of
new long-term Management and Services Agreements with full-service AEP Firms
throughout the United States and (2) the expansion of services to existing
clients. Currently, HLM Design is not engaged in negotiations with any AEP
Firms.

<PAGE>
HLM Design's principal executive office is located at 121 West Trade
Street, Suite 2950, Charlotte, North Carolina and its telephone number is (704)
358-0779.

OPERATING STRATEGY

The Company provides, primarily through HLMI, a complement of
architectural, engineering and planning services to a variety of clients in
several industries. These services include, in addition to the provision of
architectural and engineering services, all phases of a construction project
starting with assistance in the funding process, development of a master plan,
and construction oversight. The services also may involve the redesign of a
workplace to make it efficient, reliable and easy to maintain. The Company has
developed a strength and is recognized as a national leader in the following
markets:

(Bullet) Healthcare -- In the last five years, HLMI has designed and
constructed more than 15 million square feet of healthcare facilities. Clients
have ranged from 20-bed hospitals in the rural mid-west to America's most
prestigious academic medical centers. Healthcare clients include Duke University
Medical Center, University of Chicago Hospitals, University of Iowa Hospitals
and Clinics, Rush-Presbyterian-St. Lukes Medical Center, Thomas Jefferson
University Hospital and Georgetown University Medical Center.

(Bullet) Justice -- HLMI has designed over 10 million square feet of
justice facilities in the last ten years. It has designed jail and prison
projects valued at over $500 million and has designed emerging court facility
projects valued at over $555 million.

(Bullet) High-tech Research Facilities -- HLMI has designed research
facilities valued at over $500 million. The Company's clients in this market
include some of the most prestigious in the country including Johns Hopkins
University, the National Institutes of Health, the Mayo Foundation, and
Georgetown University. Planning for high-tech research facilities is intended to
optimize space utilization and provide flexibility to adapt to changing
technology and funding constraints.

All of the Company's architecture, engineering and planning services are
provided through the Managed Firms, and not by HLM Design.

GROWTH STRATEGY

HLM Design intends to implement an aggressive, yet disciplined, expansion
program by pursuing Management and Services Agreements with (i) large "regional"
AEP Firms with established operating histories located in large metropolitan and
high-growth suburban geographic markets that the Company does not currently
serve and (ii) small firms that provide operational diversity in geographic
areas that complement the services that are either currently provided by the
Company in such geographic areas or that are intended to be provided in the
future. HLM Design believes its approach will be attractive to these large and
small AEP Firms because it will provide these firms with economies of scale and
the synergies that result from increased purchasing power, a greater breadth of
services, an increased pool of professionals, and geographical diversity.
Furthermore, this strategy will give these regional and local AEP Firms, as a
part of the Company, the ability to provide services to existing and future
clients with national operations that might otherwise have turned to "non-local"
firms to service their needs. The goal is for the Company to be the single
source provider for large national clients that have geographically diverse
operations.

HLM Design generally expects that AEP Firms that sign Management and
Services Agreements will retain existing high-quality professional employees and
continue to operate in an effective and efficient manner with architects,
engineers and planning professionals who understand the local market. HLM
Design's management team will provide all management and administrative services
to the AEP Firms. Management believes it is positioned to pursue larger, well
established AEP Firms as a result of the depth of HLM Design's management team,
HLM Design's capital structure and the reputation of the management team in the
design industry. Management also believes its growth strategy can be achieved at
less cost than that which would be incurred by AEP firms operating on a stand
alone basis.

CERTAIN RISK FACTORS

The Common Stock offered hereby involves a high degree of risk. Prospective
purchasers should consider that:

(Bullet) HLM Design's operating and growth strategies are predicated upon
its ability to achieve significant consolidation of AEP Firm
operations and to generate profits from those firms;

(Bullet) Conflicts of interest could arise between HLM Design and Joseph
Harris and Vernon Brannon, the President and Chief Financial
Officer, respectively, of HLM Design, in connection with the
operation and enforcement of the provisions of Stockholders'
Agreements and the Management and Services Agreements;

<PAGE>
(Bullet) HLM Design's revenues are currently derived from Management and
Services Agreements with three firms, only one of which had active
operations at October 31, 1997 and all of which are related to
each other, and to HLM Design, by common and principal
stockholders, Messrs. Harris and Brannon;

(Bullet) HLM Design's operating and growth strategies require substantial
capital resources resulting in the incurrence of long-term and
short-term indebtedness and may result in the public or private
issuance from time to time of additional debt or equity
securities, including the issuance of such securities in
connection with the execution of new Management and Services
Agreements;

(Bullet) AEP Firms that have entered into Management and Services
Agreements with HLM Design have the right to terminate such
agreements upon the filing by HLM Design of a petition in
voluntary bankruptcy or assignment for the benefit of creditors,
or upon other action taken voluntarily or involuntarily under any
federal or state law for the benefit of debtors;

(Bullet) Because of the unique structure of the relationship between HLM
Design and its Managed Firms, many aspects of these relationships
have not been the subject of prior regulatory interpretations and
there can be no assurance that a review of the Company's business
by applicable regulatory authorities will not result in
determinations that may adversely affect the operations of the
Company or prevent its continued operations;

(Bullet) The Company's success depends to a significant degree upon the
continued contributions of Messrs. Harris and Brannon; and

(Bullet) There is no existing market for the Common Stock and no assurance
can be given that one will develop following the Offering.

PROSPECTIVE INVESTORS SHOULD ALSO BE AWARE THAT AS OF THE DATE HEREOF, HLM
DESIGN HAS ENTERED INTO MANAGEMENT AND SERVICES AGREEMENTS ONLY WITH AFFILIATED
ENTITIES AND NO ASSURANCES MAY BE GIVEN THAT HLM DESIGN WILL BE SUCCESSFUL IN
ENTERING INTO SUCH AGREEMENTS WITH OTHER AEP FIRMS.

See "Risk Factors" beginning on page 7 for a discussion of factors that
should be considered by prospective purchasers of the Common Stock offered
hereby.

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by HLM Design.................... 1,200,000 shares (1)
Common Stock to be outstanding after the Offering..... 2,075,087 shares (1)(2)(3)
Total............................................ 2,075,087 shares
Use of proceeds....................................... The net proceeds of the Offering will be used to repay certain
indebtedness of HLM Design, for working capital and for general
corporate purposes, including the funding of HLM Design's entering
into new Management and Services Agreements. See "Use of Proceeds."
Trading............................................... The Company has been approved for quotation of the Common Stock on
the Nasdaq SmallCap Market ("Nasdaq"), under the symbol "HLMD."
</TABLE>

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(1) Does not include up to an aggregate of 180,000 shares that may be sold by
HLM Design upon exercise of the over-allotment option granted to the
Underwriters. See "Underwriting."

(2) Excludes (i) 159,955 shares of Common Stock reserved for future issuance
under HLM Design's Stock Option Plan (as defined herein), including options
to purchase an aggregate of 115,908 shares of Common Stock that have been
granted and are currently effective or will become effective immediately
before the completion of the Offering, and (ii) up to 57,954 shares of
Common Stock reserved for future issuance under HLM Design's ESPP (as
defined herein).

(3) Gives effect to the Stock Split.

All broker-dealers effecting transactions in the Common Stock in the State
of Oklahoma must comply with the requirements of Section 660: 10-9-31 of the
Rules of the Oklahoma Securities Commission and the Administrator of the
Department of Securities to deliver a prospectus prior to or concurrently with
any transaction in the Common Stock until 90 days after the effective date of
the registration of the Common Stock in Oklahoma.

California investors are subject to certain investor suitability standards.
See "Underwriting."

<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA

The following summary historical and financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the financial statements of HLM Design and
Affiliates and the Predecessor Company (as defined below) and the related notes
thereto included elsewhere in this Prospectus.

The following summary historical financial data for the Predecessor Company
for each of the three fiscal years ended April 25, 1997 are derived from audited
financial statements, which are included elsewhere in this Prospectus. The
summary financial data (Predecessor Company) for the one month ended May 30,
1997 and the nine months ended January 24, 1997 are derived from the unaudited
financial statements of HLMI, which are included elsewhere in this Prospectus.
The selected financial data for the nine months ended January 30, 1998 are
derived from the unaudited combined financial statements of HLM Design and, for
the eight months ended January 30, 1998, of HLMI, HLMNC and HLMO, which are
included elsewhere in this Prospectus. In the opinion of management, these
unaudited financial statements reflect all adjustments necessary for a fair
presentation of its results of operations and financial condition. The results
of operations for an interim period are not necessarily indicative of results of
operations for a full fiscal year or any other interim period.
<TABLE>
<CAPTION>
PREDECESSOR COMPANY (1)
-----------------------------------------------------------------------
NINE
FOR THE YEAR ENDED MONTHS ONE MONTH
----------------------------------------- ENDED ENDED
APRIL 30, APRIL 26, APRIL 25, JANUARY 24, MAY 30,
1995 1996 1997 1997 1997
----------- ----------- ----------- ----------- -----------
INCOME STATEMENT DATA:
<S> <C> <C> <C> <C> <C>
Revenue........................................ $29,122,557 $28,554,424 $26,754,710 $19,442,280 $2,233,036
----------- ----------- ----------- ----------- -----------
Costs and Expenses:
Direct cost of revenue......................... 15,685,671 14,261,952 13,376,251 9,917,627 898,979
Operating costs................................ 14,098,729 13,104,278 12,414,739 9,359,733 1,163,141
ESOP expenses.................................. 573,837 584,202 408,765 406,652
Amortization on intangible assets.............. 5,952 99,145 107,670 81,807 9,571
----------- ----------- ----------- ----------- -----------
Total costs and expenses....................... 30,364,189 28,049,577 26,307,425 19,765,819 2,071,691
----------- ----------- ----------- ----------- -----------
Income (loss) from operations.................. (1,241,632) 504,847 447,285 (323,539 ) 161,345
----------- ----------- ----------- ----------- -----------
Other income (expense):
Net interest................................... (142,744) (383,552) (396,007) (280,027 ) (36,951 )
Non-operating income........................... 428,475 850,273 285,635
----------- ----------- ----------- ----------- -----------
Total other income (expense)............... 285,731 466,721 (110,372) (280,027 ) (36,951 )
----------- ----------- ----------- ----------- -----------
Income (Loss) Before Income Taxes.............. (955,901) 971,568 336,913 (603,566 ) 124,394
Income tax expense (benefit)................... (360,080) 435,459 219,799 (143,517 ) 43,000
----------- ----------- ----------- ----------- -----------
Net income (loss) (3).......................... $ (595,821) $ 536,109 $ 117,114 $ (460,049 ) $ 81,394
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
BALANCE SHEET DATA:
Working capital(deficiency).................... $(1,029,547) $(1,620,488) $(1,902,363) $ (686,632 ) $(2,238,531)
Total assets................................... 10,519,859 12,577,992 12,874,503 13,402,269 17,639,673
Long-term debt................................. 840,302 564,577 103,792 769,742 2,476,008
Total liabilities.............................. 10,690,072 11,819,796 11,670,962 12,803,938 16,354,738
Warrants outstanding (4).......................
Stockholders' equity (deficiency) (5).......... (170,213) 758,196 1,203,541 598,331 1,284,935

<CAPTION>
HLM DESIGN
(COMBINED)
NINE
MONTHS
ENDED
JANUARY 30,
1998 (2)
-----------
INCOME STATEMENT DATA:
<S> <C>
Revenue........................................ $21,543,416
-----------
Costs and Expenses:
Direct cost of revenue......................... 9,979,581
Operating costs................................ 9,629,991
ESOP expenses..................................
Amortization on intangible assets.............. 114,549
-----------
Total costs and expenses....................... 19,724,121
-----------
Income (loss) from operations.................. 1,819,295
-----------
Other income (expense):
Net interest................................... (748,621 )
Non-operating income...........................
-----------
Total other income (expense)............... (748,621 )
-----------
Income (Loss) Before Income Taxes.............. 1,070,674
Income tax expense (benefit)................... 514,063
-----------
Net income (loss) (3).......................... $ 556,611
-----------
-----------
BALANCE SHEET DATA:
Working capital(deficiency).................... $ (432,870 )
Total assets................................... 18,043,555
Long-term debt................................. 4,357,057
Total liabilities.............................. 17,194,658
Warrants outstanding (4)....................... 200,068
Stockholders' equity (deficiency) (5).......... 648,829
</TABLE>

- ---------------

(1) The "Predecessor Company" is HLMI.

(2) Includes information for HLM Design and for the Managed Firms for the eight
months from May 31, 1997 to January 30, 1998 on a combined basis. HLM
Design's operations for the month ended May 30, 1997 reflected herein
include no revenues or expenses.

(3) Historical net income per share is not presented, as the historical capital
structure prior to the Offering is not comparable with the capital structure
of the Company that will exist after the Offering.

(4) Reflects Warrants held by Pacific and Equitas as of January 30, 1998.
Equitas exercised its Warrants in February 1998 and Pacific has undertaken
that it will exercise its Warrants immediately prior to the effective date
of the Registration Statement of which this Prospectus is a part.

(5) Neither HLM Design nor the Predecessor Company has paid cash dividends from
May 1, 1994 to January 30, 1998.

<PAGE>
RISK FACTORS

PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER AND EVALUATE ALL OF THE
INFORMATION SET FORTH IN THIS PROSPECTUS, INCLUDING THE PRINCIPAL RISK FACTORS
SET FORTH BELOW.

INNOVATIVE STRATEGY

HLM Design's operating and growth strategies are predicated upon its
ability to achieve significant consolidation of AEP Firm operations and to
generate profits from those firms. The process of identifying suitable
candidates for entering into Management and Services Agreements and proposing,
negotiating and implementing economically feasible affiliations with AEP Firms
is lengthy and complex. Such strategies require intense management direction in
a dynamic marketplace that is increasingly subject to cost containment and other
competitive pressures. There can be no assurance that these strategies will be
successful or that modifications to the Company's strategies will not be
required.

CONFLICTS OF INTEREST

Joseph Harris and Vernon Brannon, the President and the Chief Financial
Officer, respectively, of HLM Design, are also principal stockholders in each of
HLMI, HLMNC and HLMO and have entered into Stockholders' Agreements with respect
to those firms that, among other things, permit the management by HLM Design of
each of HLMI, HLMNC and HLMO. Conflicts of interest could arise between HLM
Design and Messrs. Harris and Brannon in connection with the operation and
enforcement of the provisions of these Stockholders' Agreements and the
Management and Services Agreements. See "Certain Transactions." The interests of
HLM Design could be materially adversely affected if circumstances arose in
which it would be in the interest of Joseph Harris and Vernon Brannon to
interfere with the performance by HLMI, HLMNC or HLMO of the Management and
Services Agreements. Upon the execution of new Management and Services
Agreements with AEP Firms, similar conflicts of interest would arise between HLM
Design and stockholders of such firms.

BENEFITS OF OFFERING TO INSIDERS

Joseph M. Harris and Vernon B. Brannon, stockholders, directors and
executive officers of HLM Design, will benefit personally from the Offering in
several ways. Both Mr. Harris and Mr. Brannon will be released from personal
guaranties in connection with the Pacific/Equitas Loan (as defined below) upon
the consummation of the Offering and the repayment of the Pacific/Equitas Loan
from the proceeds of the Offering. The Offering will result in increased
liquidity for Messrs. Harris and Brannon, as well as all other current
stockholders of HLM Design, with respect to the shares of Common Stock each such
person currently holds in HLM Design. Messrs. Harris and Brannon and Berthel
Fisher & Company Leasing, Inc. ("Berthel Leasing") have, however, agreed to
escrow Common Stock owned by each of them pursuant to the requirements of the
various state securities commissions. For a description of restrictions on
current stockholders' ability to freely transfer Common Stock outstanding on the
date hereof and not sold in the Offering, see "Shares Eligible for Future Sale."
Additionally, in connection with the consummation of the Offering, Messrs.
Harris and Brannon have entered into Employment Agreements with HLM Design
whereby each will receive compensation and other benefits as well as options to
purchase 57,954 shares of HLM Design Common Stock. See "Management -- Employment
Agreements."

MANAGEMENT AND SERVICES AGREEMENTS WITH ONLY THREE FIRMS

HLM Design's revenues are derived solely from its contractual relationships
with the Managed Firms (for whom, as indicated below, HLM Design will also
provide required financing). Currently, HLM Design has Management and Services
Agreements with three firms, only one (HLMI) of which had active operations at
January 30, 1998. All three of these firms are related to each other and to HLM
Design, by common principal stockholders, Joseph M. Harris and Vernon B.
Brannon. There can be no assurance that HLM Design will be able to successfully
enter into Management and Services Agreements with additional firms.

UNCERTAINTIES CONCERNING ABILITY TO RECEIVE PAYMENTS FROM MANAGED FIRMS

HLM Design earns, for services provided to the Managed Firms, 99% of the
net income of the Managed Firms as determined in accordance with generally
accepted accounting principles. However, for cash management purposes, HLM
Design is to receive 99% of the positive cash flows of the Managed Firms
(calculated for any period as the change in the cash balances from the beginning
of the period to the end of the period). HLM Design's ability actually to
receive payments in respect thereof during the period will be subject to the
cash requirements of the Managed Firms for the period. Through January 30, 1998,
HLM Design had earned aggregate management fees under Management and Services
Agreements with

<PAGE>
Managed Firms of $1,034,008 since its inception in March 1997. As of January 30,
1998, $450 in management fees had actually been paid by the Managed Firms to HLM
Design and $1,033,558 continued to be carried by HLM Design as an account
receivable. Such receivable balance is to be paid with future positive cash
flows. To the extent, however, the cash requirements of the Managed Firms
continue to exceed 1% of positive cash flows, HLM Design will be unable to
receive payments against such receivable and such payments will continue to be
delayed. HLM Design's ability to pay dividends on the Common Stock will depend
on the ability of HLM Design to collect such receivables.

UNCERTAINTIES CONCERNING ADDITIONAL FINANCINGS AND COMPANY'S ABILITY TO OBTAIN
NEW LINE OF CREDIT

HLM Design's operating and growth strategies require substantial capital
resources, particularly since HLM Design, as the management company, will be
responsible for the financing of working capital growth, capital growth and
other cash needs of the Managed Firms. See "Business -- HLM Design
Operating -- Management and Services Agreements." These requirements will result
in HLM Design incurring long-term and short-term indebtedness and may result in
the public or private issuance, from time to time, of additional debt or equity
securities, including the issuance of such securities in connection with the
execution of Management and Services Agreements. There can be no assurance that
any such financing will be obtainable on terms acceptable to HLM Design. As
further discussed in "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources," HLM
Design has already incurred borrowings under its existing revolving line of
credit equal to the full amount of its borrowing capacity thereunder.
Furthermore, such line of credit, as extended, matures as of July 30, 1998,
unless it is renewed by the lender. Although HLM Design has received both verbal
and written indications of the willingness of the lender to renew and increase
HLM Design's line of credit following a successful completion of this Offering,
the lender has not entered into any commitment to do so. If HLM Design is unable
to obtain a new revolving line of credit following the Offering, its ability to
implement its growth strategy will be adversely affected.

Additionally, issuing securities in connection with the execution of
Management and Services Agreements will dilute the percentage of Common Stock
owned by stockholders prior to such issuance. There is no assurance that such
financings will not cause dilution in the book value per share of the Common
Stock.

EFFECT OF BANKRUPTCY

AEP Firms that have entered into Management and Services Agreements with
HLM Design have the right to terminate such agreements upon the filing by HLM
Design of a petition in voluntary bankruptcy, an assignment for the benefit of
creditors, or upon other action taken voluntarily or involuntarily under any
federal or state law for the benefit of debtors. Because the substantial
majority of the assets of the Company are owned by the Managed Firms, if such
agreements are terminated, HLM Design would proceed through bankruptcy without
any meaningful assets. In such circumstances, it is likely that no significant
assets would be available for distribution to stockholders upon a liquidation.

GOVERNMENT REGULATION

The architectural and engineering industries are regulated at the state
level. The Company believes its operations are in material compliance with
applicable law. Nevertheless, because of the unique structure of the
relationships between HLM Design and its Managed Firms, many aspects of these
relationships have not been the subject of prior regulatory interpretation. The
Company has not discussed its structure with or received approvals from any
regulatory authorities, and is unaware of its business being reviewed by any
such regulatory authorities. There can be no assurance that a review of the
Company's business by applicable regulatory authorities will not result in
determinations that may adversely affect the operations of the Company or
prevent its continued operation. There also can be no assurance that the
regulatory environment will not change so as to restrict the Company's existing
operations or limit the expansion of the Company's business. Expansion of the
operations of the Company to certain jurisdictions could require structural and
organizational modifications of HLM Design's relationships with its Managed
Firms. Consequently, if the Company is unable or unwilling to undertake such
modifications, it may be limited in its ability to expand into certain
jurisdictions. As of the date hereof, the Company has not determined which
jurisdictions would require structural or organizational modifications of HLM
Design's relationships with the Managed Firms. Although the Company believes its
operations are in material compliance with existing applicable law, there can be
no assurance that the Company's existing Management and Services Agreements
could not be successfully challenged as, for example, constituting the
unlicensed practice of architecture, or that the enforceability of the
provisions thereof, including non-disclosure agreements therein, will not be
limited.

<PAGE>
DEPENDENCE ON KEY PERSONNEL AND LIMITED MANAGEMENT AND PERSONNEL RESOURCES

The Company's success depends to a significant degree upon the continued
contributions of its management team (particularly its senior management) and
professional personnel. The loss of the services of one or more of these key
employees could have a material adverse effect on the Company. The Company
carries key employee insurance on each of Joseph M. Harris (and has agreed with
the Underwriters to maintain such coverage) and Vernon B. Brannon and has
employment and/or noncompetition agreements with Messrs. Harris and Brannon as
well as with several members of its senior professional staff, but does not have
such agreements with all of its key personnel. There can be no assurance that a
court would enforce the noncompetition agreements as currently in effect. A
court might, for example, narrow the geographical or client restrictions
contained in such agreement, lessen the length of the agreements or, in some
cases, refuse to enforce any provisions thereof. If courts refuse to enforce the
noncompetition agreements of HLM Design or the Managed Firms, such refusals
could have a material adverse effect on HLM Design.

In addition, as the Company expands it may need to hire additional
personnel and will likely be dependent on the senior professional staff of any
firm with which HLM Design enters into a Management and Services Agreement. The
market for qualified employees in the industry and in the regions in which the
Company operates is competitive and may subject the Company to increased labor
costs in periods of low unemployment. The loss of the services of key employees
or the inability to attract additional qualified professional staff could have a
material adverse effect on the Company. In addition, the lack of qualified
professional staff or employees of the Company's potential candidates for
Management and Services Agreements may limit the Company's ability to consummate
future agreements. See "Business -- Growth Strategy," "Business -- Competition"
and "Management."

RISKS INHERENT IN PROVISION OF SERVICES

The Managed Firms and certain employees of the Managed Firms are involved
in the delivery of services to the public and, therefore, are exposed to the
risk of professional liability claims. Claims of this nature, if successful,
could result in substantial damage awards to the claimants that may exceed the
limits of any applicable insurance coverage. Insurance against losses related to
claims of this type can be expensive and varies widely from state to state.
Although HLM Design is indemnified under its Management and Services Agreements
for claims against the Managed Firms and their employees, HLM Design maintains
liability insurance for itself and negotiates liability insurance for its
Managed Firms and the professionals employed by its Managed Firms. Successful
malpractice claims asserted against the Managed Firms, their employees or HLM
Design could have an adverse effect on the Company's profitability.

DEPENDENCE ON MANAGED FIRMS

HLM Design's revenues depend on fees and revenues generated by various AEP
Firms managed by HLM Design. Any material loss of revenue by such firms, whether
as a result of the loss of professionals or otherwise, could have a material
adverse effect on HLM Design. HLM Design is not engaged in the practice of
architecture, engineering or planning and, as a result, does not control (i) the
practice of architecture, engineering or planning by professionals or (ii) the
compliance with certain regulatory requirements directly applicable to the
Managed Firms.

COMPETITION

The business of providing architectural, engineering and planning related
services is highly competitive. The Company's competition includes many other
firms, including large national firms as well as regional or small local firms.
Several companies that have established operating histories and significantly
greater resources than the Company provide some of the services provided by the
Managed Firms. In addition, there are other companies with substantial resources
that may in the future decide to engage in activities similar to those in which
the Company engages. See "Business -- Competition."

CONCENTRATION OF VOTING POWER AND ANTI-TAKEOVER PROVISIONS

HLM Design's Certificate of Incorporation authorizes the Board of Directors
of HLM Design to issue 1,000,000 shares of preferred stock with such
designations, rights and preferences as may be determined from time to time by
the Board of Directors. Accordingly, the Board of Directors is empowered,
without stockholder approval, to issue preferred stock with dividend,
liquidation, conversion, voting or other rights that could adversely effect the
voting power or other rights of the holders of HLM Design's Common Stock. In the
event of issuance, the preferred stock could be utilized, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of the Company. Although the Company has no present intention to issue
any shares of preferred stock, there can be no assurance that the Company will
not do

<PAGE>
so in the future. The application of any such provisions or the issuance of
preferred stock could prevent stockholders from realizing a premium upon the
sale of their shares of Common Stock upon an acquisition of the Company. See
"Description of Capital Stock."

Certain provisions of the Company's Certificate of Incorporation and Bylaws
make it more difficult for stockholders of the Company to effect certain
corporate actions. See "Description of Capital Stock -- Delaware Law and Certain
Charter and Bylaw Provisions." Under the Company's Stock Option Plan, options
outstanding thereunder become immediately exercisable upon a change in control
of the Company. See "Management -- Stock Option Plan." Additionally, HLM
Design's Bylaws provide: (i) for a Board of Directors divided into three classes
serving staggered terms, (ii) that special meetings of stockholders, unless
otherwise prescribed by law or its Certificate of Incorporation, may be called
only by the President at the request in writing of the majority of the Board of
Directors and (iii) that any stockholder seeking to bring business before an
annual meeting of stockholders, or to nominate candidates for election as
directors at an annual or special meeting of stockholders, must provide timely
notice thereof in writing. These provisions will impair the stockholders'
ability to influence or control the Company or to effect a change in control of
the Company, and may prevent stockholders from realizing a premium on the sale
of their shares of Common Stock upon an acquisition of the Company. See
"Description of Capital Stock."

NO PRIOR PUBLIC MARKET FOR COMMON STOCK AND POSSIBLE VOLATILITY OF STOCK PRICE

Prior to the Offering, there has been no public market for the Common
Stock. HLM Design has been approved for quotation of its Common Stock on the
Nasdaq SmallCap Market. The initial public offering price of the Common Stock
will be determined by negotiations among the Company and representatives of the
Underwriters. See "Underwriting." There can be no assurance that the market
price of the Common Stock prevailing at any time after this Offering will equal
or exceed the initial public offering price. Quarterly and annual operating
results of the Company, variations between such results and the results expected
by investors and analysts, changes in local or general economic conditions or
developments affecting the architecture or engineering industries, the Company
or its competitors could cause the market price of the Common Stock to fluctuate
substantially. As a result of these factors, as well as other factors common to
initial public offerings, the market price could fluctuate substantially from
the initial offering price. In addition, the stock market has, from time to
time, experienced extreme price and volume fluctuations, which could adversely
effect the market price for the Common Stock without regard to the financial
performance of the Company.

POSSIBLE INABILITY TO MEET CONTINUED NASDAQ SMALLCAP LISTING REQUIREMENTS

While the Company has been approved for Nasdaq SmallCap listing and expects
its Common Stock to be initially included on the Nasdaq SmallCap, there can be
no assurance that the Company will at all times meet the criteria for continued
listing. If the Company is unable to satisfy the Nasdaq SmallCap's maintenance
requirements, its Common Stock may be delisted from the Nasdaq SmallCap. In
addition, Nasdaq has the right to review and reverse a decision to list a
security on the Nasdaq SmallCap Market before or after the completion of an
offering. In the event of any such delisting, trading, if any, in the Common
Stock would thereafter be conducted in the over-the-counter market in the
so-called "pink-sheets" or the "Electronic Bulletin Board" of the National
Association of Securities Dealers, Inc. ("NASD") and it could be more difficult
to obtain quotations of the market price of the Company's Common Stock.
Consequently, the liquidity of the Company's Common Stock could be impaired, not
only in the number of securities which could be bought and sold, but also
through delays in the timing of transactions, reduction in security analysts'
and the news media's coverage of the Company. The Company expects to meet the
Nasdaq SmallCap continued listing requirements immediately following this
Offering.

POTENTIAL ADVERSE EFFECTS OF DELISTING; "PENNY STOCK" RULES

If the Company's Common Stock were delisted from the Nasdaq SmallCap, it
could become subject to Rule 15g-9 under the Exchange Act, which imposes
additional sales practice requirements on broker-dealers that sell such Common
Stock to persons other than established customers and "accredited investors"
(generally, individuals with a net worth in excess of $1,000,000 or annual
incomes exceeding $200,000 or $300,000 together with their spouses), among
others. For transactions covered by such a rule, a broker-dealer must make a
special suitability determination for the purchaser and have received the
purchaser's written consent to the transaction prior to sale. Consequently such
rule may adversely affect the ability of broker-dealers to sell the Company's
Common Stock and may adversely affect the ability of purchasers in the Offering
to sell in the secondary market any of the Common Stock acquired.

Commission regulations define a "penny stock" to be any non-Nasdaq equity
security that has a market price (as therein defined) of less than $5.00 per
share or with an exercise price of less than $5.00 per share, subject to certain
exceptions. For any transaction involving a penny stock, unless exempt, the
rules require delivery, prior to any transaction in a penny stock,

<PAGE>
of a disclosure schedule relating to the penny stock market. Disclosure is also
required to be made about commissions payable to both the broker-dealer and the
registered representative and current quotations for the securities. Finally,
monthly statements are required to be sent disclosing recent price information
for the penny stock held in the account and information on the limited market in
penny stocks.

The foregoing required penny stock restrictions will not apply to the
Company's Common Stock if the Common Stock is listed on the Nasdaq SmallCap and
has certain price and volume information provided on a current and continuing
basis or meets certain minimum net tangible assets or average revenue criteria.
There can be no assurance that the Company's Common Stock will qualify for
exemption from these restrictions. In any event, even if the Company's Common
Stock was exempt from such restrictions, it would remain subject to Section
15(b)(6) of the Exchange Act, which gives the Commission the authority to
prohibit any person that is engaged in unlawful conduct while participating in a
distribution of a penny stock from associating with a broker-dealer or
participating in a distribution of a penny stock, if the Commission finds that
such a restriction would be in the public interest. If the Company's Common
Stock were subject to the rules on penny stocks, the market liquidity for the
Company's Common Stock could be severely adversely affected.

LACK OF INDEPENDENT DIRECTORS

Upon completion of the Offering, the majority of the members of HLM
Design's Board of Directors will be employees of HLM Design or representatives
of holders of Common Stock. HLM Design intends to maintain at least two
independent directors on its Board following completion of the Offering and to
establish audit and compensation committees which will consist entirely of
outside directors. Such directors will not, however, constitute a majority of
the Board, and HLM Design's Board may not have a majority of independent
directors at any time in the future. In the absence of a majority of independent
directors, HLM Design's executive officers, who also are principal stockholders
and directors, could establish policies and enter into transactions without
independent review and approval thereof, subject to certain restrictions under
HLM Design's Certificate of Incorporation and other undertakings by HLM Design.
HLM Design has undertaken that all transactions between the Company and any of
its officers, directors and employees or any of their affiliates (including
affiliated Managed Firms) will be approved by the outside directors. See
"Management."

DILUTION

Purchasers of Common Stock in the Offering will experience immediate and
substantial dilution in the amount of $3.53 per share, or 59% of the initial
public offering price ($3.74 per share, or 62% of the initial public offering
price, giving effect to the Common Stock issuance and exercise of Warrants
subsequent to January 30, 1998), in net tangible book value per share from the
initial offering price, assuming an initial offering price of $6.00 per share
(the low point of the range of the initial offering price set forth on the cover
page of this Prospectus). See "Dilution."

POTENTIAL ADVERSE MARKET PRICE EFFECT OF ADDITIONAL SHARES ELIGIBLE FOR FUTURE
SALE

The 875,087 shares of Common Stock owned beneficially by existing
stockholders of HLM Design and the 159,955 shares of Common Stock reserved for
future issuance under the Stock Option Plan will be "restricted securities" as
defined in, or will be otherwise subject to the provisions of, Rule 144 under
the Securities Act of 1933, as amended (the "Securities Act"), and may in the
future be resold in compliance with Rule 144. See "Management -- Stock Option
Plan" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources." No prediction can be
made as to the effect that resale of shares of Common Stock, or the availability
of shares of Common Stock for resale, will have on the market price of the
Common Stock prevailing from time to time. The resale of substantial amounts of
Common Stock, or the perception that such resales may occur, could adversely
affect prevailing market prices for the Common Stock and the ability of HLM
Design to raise equity capital in the future. HLM Design has agreed, subject to
certain exceptions relating to the execution of new Management and Services
Agreements, not to offer, sell or otherwise dispose of, and Messrs. Harris and
Brannon have agreed not to offer or sell any shares of Common Stock or other
equity securities of HLM Design, for 365 days after the date of this Prospectus
without the prior written consent of Berthel Fisher & Company Financial
Services, Inc. ("Berthel Fisher"). See "Shares Eligible for Future Sale" and
"Underwriting." Additionally, Messrs. Harris and Brannon and Berthel Leasing
have agreed to escrow all Common Stock owned by each of them for a period of
three years from the date of acquisition thereof, subject to prior release if
(i) the market price of the Common Stock exceeds 175% of the initial public
offering price for at least 90 consecutive trading days after at least one year
from the date of effectiveness of this Registration Statement, or (ii) the
Company achieves certain earnings results for two consecutive fiscal years.
Notwithstanding the foregoing, Messrs. Harris and Brannon and Berthel Leasing
have agreed with HLM Design that such Common Stock shall not be released from
escrow pursuant to (i) or (ii) above to the extent such release would result
in the recognition of compensation expense to the Company in connection
therewith.

<PAGE>
USE OF PROCEEDS

The net proceeds to HLM Design from the sale of the shares of Common Stock
offered hereby are estimated to be approximately $5.92 million ($6.89 million if
the Underwriters' over-allotment option is exercised in full), assuming an
initial public offering price of $6.00 per share (the low point of the range of
the initial public offering price set forth on the cover page of this
Prospectus) and after deducting the underwriting discount and estimated expenses
of the Offering.

HLM Design intends to use approximately $3.0 million of the net proceeds to
repay certain indebtedness consisting of (i) the $2.0 million due under the
Pacific/Equitas Loan (bearing interest at a nominal rate of 13.5% per annum and
maturing June 1, 2002, with monthly principal payments commencing June 1, 2000),
(ii) a $0.75 million term loan from Berthel Leasing, an affiliate of one of the
Underwriters (payable July 1, 1998, with an interest rate of 12% due in monthly
installments), and (iii) notes payable in an aggregate principal amount of $0.2
million to employee stockholders (payable at various dates until August 2002
including interest of 6.0%). The $3.0 million of indebtedness currently has an
effective weighted interest cost at an annual rate equal to 23%. (In connection
with the merger agreement between HLMI and BBH Corp. described elsewhere in this
Prospectus and the payment of the merger consideration to holders of HLMI's
common stock, the Company incurred indebtedness in the aggregate principal
amount of $2 million to Pacific Capital, L.P. ("Pacific") and Equitas, L.P.
("Equitas") (the "Pacific/Equitas Loan") and assumed the above-referenced notes
payable to employee stockholders. The Berthel Leasing proceeds were used for
working capital.) See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."

HLM Design intends to use the remaining expected net proceeds of the
Offering for the development of new business, including payments made by HLM
Design in connection with the execution of new Management and Services
Agreements, and, to the extent not required in that regard, up to 15% of the net
proceeds of the Offering for working capital and other general corporate
purposes. Until utilized, the Company will invest the net proceeds in
short-term, interest bearing, investment grade instruments. The following table
illustrates HLM Design's intended use of proceeds in order of priority:

<TABLE>
<CAPTION>
DOLLARS PERCENTAGE OF
USE OF PROCEEDS ($) PROCEEDS (%)
- ------------------------------------------------------------------------------------------------- ---------- -------------
<S> <C> <C>
Underwriting Discount............................................................................ $ 720,000 10.00%
Payment of Expenses.............................................................................. 558,280 7.75%
Repayment of Pacific/Equitas Loan................................................................ 2,000,000 27.78%
Repayment of Berthel Leasing Loan................................................................ 750,000 10.42%
Repayment of notes payable to employee stockholders.............................................. 200,000 2.78%
New Business Development......................................................................... 2,971,720 41.27%
---------- -------------
Estimated Net Proceeds to HLM Design........................................................... $7,200,000 100.00%
---------- -------------
---------- -------------
</TABLE>

DIVIDEND POLICY

HLM Design has never declared or paid a dividend on its Common Stock. HLM
Design intends to retain all of its earnings to finance the growth and
development of its business, including through the execution of new Management
and Services Agreements, and does not anticipate paying any cash dividends on
its Common Stock for the foreseeable future. Any future change in HLM Design's
dividend policy will be made at the discretion of the Board of Directors of HLM
Design and will depend upon HLM Design's operating results, financial condition,
capital requirements, general business conditions and such other factors as the
Board of Directors deems relevant. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and "Description of Capital Stock."

<PAGE>
CAPITALIZATION

The following table sets forth, as of January 30, 1998, the combined
capitalization of HLM Design and Affiliates (a) on an actual basis (giving
effect to the Stock Split), and (b) on a pro forma basis, as adjusted to reflect
the Offering and the application of the estimated net proceeds thereof to be
received by the Company, and the Common Stock issuance and exercise of Warrants
subsequent to January 30, 1998. See "Use of Proceeds", "Dilution" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources." This table should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the unaudited pro forma financial statements of
HLM Design and Affiliates and the related notes thereto included elsewhere in
this Prospectus.

<TABLE>
<CAPTION>
JANUARY 30, 1998
-------------------------------
PRO FORMA FOR THE
COMMON STOCK
ISSUANCE AND
EXERCISE OF
WARRANTS
SUBSEQUENT TO
JANUARY 30, 1998
AND FOR THE
ACTUAL OFFERING(1)
---------- -----------------
<S> <C> <C>
Short-term debt:
Notes payable.............................................................................. $2,250,000 $ 1,500,000
Current maturities of long-term debt....................................................... 743,311 743,311
---------- -----------------
Total short-term debt................................................................... $2,993,311 $ 2,243,311
---------- -----------------
---------- -----------------
Long-term debt, excluding current maturities................................................. $4,357,057 $ 2,194,749
---------- -----------------
Warrants outstanding......................................................................... 200,068 0
---------- -----------------
Stockholders' equity:
Preferred Stock of HLM Design, $.10 par value, 1,000,000 shares authorized; no shares
issued and outstanding.................................................................. 0 0
Common Stock of HLM Design, $.001 par value, 9,000,000 shares authorized; 702,834 shares
issued and outstanding, actual; 2,075,087 shares issued and outstanding, as adjusted
(2)..................................................................................... 703 2,075
Common Stock of HLMI, $.01 par value; Class A, voting authorized 2,000,000 shares; issued
200; Class B, nonvoting, authorized 1,000,000 shares, no shares outstanding............. 2 2
Common Stock of HLMNC $.01 par value, 10,000 shares authorized; 300 shares issued and
outstanding............................................................................. 3 3
Common Stock of HLMO $.01 par value, 10,000 shares authorized; 300 shares issued and
outstanding............................................................................. 3 3
Additional Paid-in capital (3)............................................................. 101,031 6,221,533
Retained earnings.......................................................................... 556,611 556,611
Stock subscription receivable -- HLM Design, HLMNC, HLMO (4)............................... (9,524) (9,524)
---------- -----------------
Total stockholders' equity.............................................................. 648,829 6,770,703
---------- -----------------
Total capitalization.................................................................. $5,205,954 $ 8,965,452
---------- -----------------
---------- -----------------
</TABLE>

- ---------------

(1) Adjusted to give effect to the Offering and the application of the net
proceeds thereof, the exercise by Equitas of Warrants to purchase 5,749
shares of Common Stock (73,300 shares after giving effect to the Stock
Split) and the exercise by Pacific of Warrants to purchase 7,761 shares of
Common Stock (98,953 shares after giving effect to the Stock Split). See
"Use of Proceeds", "Dilution", "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and "Certain Transactions."

(2) 2,255,087 shares if the Underwriters' over-allotment option is exercised in
full. See "Underwriting" and "Principal Stockholders." Excludes (i) 159,955
shares of Common Stock reserved for future issuance under HLM Design's Stock
Option Plan (including up to 115,908 shares of Common Stock reserved for
issuance upon exercise of options prior to consummation of the Offering
pursuant to the Stock Option Plan), and (ii) up to 57,954 shares of Common
Stock reserved for issuance under HLM Design's ESPP. See "Management's
Discussion of Financial Condition and Results of Operations -- Liquidity and
Capital Resources," "Management -- Stock Option Plan" and
"Management -- Employee Stock Purchase Plan".

(3) Includes additional consideration received in connection with the exercise
of Warrants after the time of the initial exercise in the case of Equitas,
Berthel Leasing and Mr. Caroland. See "Dilution."

(4) Common Stock had not been funded as of January 30, 1998.

<PAGE>
DILUTION

The net tangible book deficit of the Company (defined as the combined net
tangible book value (deficit) of HLM Design, HLMI, HLMNC, and HLMO) as of
January 30, 1998 was $1,618,616, or $2.30 per share of Common Stock. Net
tangible book value (deficit) per share is determined by dividing the tangible
net worth of the Company by the total number of outstanding shares of Common
Stock. After giving effect to the sale of the 1,200,000 shares of Common Stock
offered hereby and the receipt of an assumed $5.92 million of net proceeds from
the Offering (based on an assumed initial public offering price of $6.00 per
share and net of underwriting discounts and estimated offering expenses), net
tangible book value of the Company at January 30, 1998 would have been $2.47 per
share. This represents an immediate increase in the net tangible book value of
$4.77 per share to existing stockholders and an immediate dilution of $3.53 per
share to new investors purchasing Common Stock in the Offering. The following
table illustrates this per share dilution (as of January 30, 1998 and without
giving effect to the Common Stock issuance or exercise of Warrants subsequent to
January 30, 1998):

<TABLE>
<S> <C>
Assumed initial public offering price per share...................................................................... $ 6.00
Net tangible book value per share (deficit) before giving effect to the Offering................................... (2.30)
Increase in net tangible book value per share attributable to the Offering......................................... 4.77
Pro forma net tangible book value per share after giving effect to the Offering...................................... 2.47

Dilution per share to new investors(1)(2)............................................................................ $ 3.53
Dilution per share as a percentage of the assumed initial public offering price(2)................................. 59%
</TABLE>

- ---------------

(1) Dilution is determined by subtracting the net tangible book value per share
of Common Stock after the Offering from the public offering price per share.

(2) Giving effect to the Common Stock issuance and exercise of Warrants
subsequent to January 30, 1998 the dilution per share to new investors would
be $3.74 and the dilution per share as a percentage of the assumed initial
public offering price would be 62%.

The following table sets forth the issuance of Common Stock to current
stockholders of HLM Design (giving effect to the Stock Split):

<TABLE>
<CAPTION>
NUMBER OF
STOCKHOLDER(4) DATE ISSUED SHARES ISSUED PRICE
- -------------------------------- ---------------------------------- ------------- ----------------------------
<S> <C> <C> <C>
Joseph Harris March 20, 1997 261,375 an aggregate of $1,000
March 2, 1998 47,813 $2.09 per share (1)
Vernon Brannon March 20, 1997 261,375 an aggregate of $1,000
March 2, 1998 47,812 $2.09 per share (1)
Equitas February 12, 1998 73,300 an aggregate of $110.67 (2)
Pacific (4) 98,953 an aggregate of $98.96 (2)
Berthel Leasing December 26, 1997 43,631 an aggregate of $43.64 (2)
Clay R. Caroland November 10, 1997 10,991 an aggregate of $11.00 (2)
Other employee stockholders (3) May 16, 1997-November 1, 1997 29,837 an aggregate of $34,655.40
</TABLE>

- ---------------

(1) Represents price paid by Messrs. Harris and Brannon in purchase of shares
from a former director.

(2) Represents price paid in connection with exercise of Warrants, including in
the case of Equitas, Berthel Leasing and Mr. Caroland, a portion received
after the time of the initial exercise. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources." Equitas (and/or a representative thereof), Pacific,
Bethel Leasing and Mr. Caroland originally paid $8,000, $10,800, $4,757 and
$1,200, respectively, as consideration for the purchase of the Warrants.

(3) Each of such employees owns less than 1% of the Common Stock outstanding.

(4) Warrants to be exercised and shares issued immediately prior to the
effective date of the Registration Statement of which this Prospectus is a
part.

<PAGE>
SELECTED FINANCIAL DATA

The following selected financial data for the Predecessor Company for each
of the three fiscal years ended April 25, 1997 are derived from audited
financial statements, which are included elsewhere in this Prospectus. The
following selected financial data for the Predecessor Company for each of the
two fiscal years ended April 30, 1994 are derived from unaudited financial
statements, which are not included in this Prospectus. The selected financial
data (Predecessor Company) for the one month ended May 30, 1997 and the nine
months ended January 24, 1997 are derived from the unaudited financial
statements of HLMI, which are included elsewhere in this Prospectus. The
selected financial data for the nine months ended January 30, 1998 are derived
from the unaudited combined financial statements of HLM Design and, for the
eight months ended January 30, 1998, of HLMI, HLMNC and HLMO, which are included
elsewhere in this Prospectus. In the opinion of management, these unaudited
financial statements reflect all adjustments necessary for a fair presentation
of its results of operations and financial condition. The results of operations
for an interim period are not necessarily indicative of results of operations
for a full fiscal year or any other interim period. All of the data set forth
below should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the Financial Statements
and related notes included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
(PREDECESSOR COMPANY) (1)
-------------------------------------------------------------------------------------------------
NINE
FOR THE YEAR ENDED MONTHS ONE MONTH
------------------------------------------------------------------- ENDED ENDED
APRIL 30, APRIL 30, APRIL 30, APRIL 26, APRIL 25, JANUARY 24, MAY 30,
1993 1994 1995 1996 1997 1997 1997
----------- ----------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue.......................... $33,464,656 $27,841,902 $29,122,557 $28,554,424 $26,754,710 $19,442,280 $ 2,233,036
----------- ----------- ----------- ----------- ----------- ------------ ------------

Costs and Expenses:
Direct cost of revenue........... 18,371,876 15,925,434 15,685,671 14,261,952 13,376,251 9,917,627 898,979
Operating costs.................. 15,376,045 13,516,392 14,098,729 13,104,278 12,414,739 9,359,733 1,163,141
ESOP expenses.................... 474,403 564,918 573,837 584,202 408,765 406,652
Amortization on intangible
assets......................... 4,464 5,952 5,952 99,145 107,670 81,807 9,571
----------- ----------- ----------- ----------- ----------- ------------ ------------
Total costs and expenses......... 34,226,788 30,012,696 30,364,189 28,049,577 26,307,425 19,765,819 2,071,691
----------- ----------- ----------- ----------- ----------- ------------ ------------
Income (loss) from operations.... (762,132 ) (2,170,794 ) (1,241,632) 504,847 447,285 (323,539 ) 161,345
----------- ----------- ----------- ----------- ----------- ------------ ------------
Other income (expense):

Net interest..................... (18,438 ) (43,058 ) (142,744) (383,552) (396,007) (280,027 ) (36,951 )
Non-operating income............. -- -- 428,475 850,273 285,635
----------- ----------- ----------- ----------- ----------- ------------ ------------
Total other income
(expense)................... (18,438 ) (43,058 ) 285,731 466,721 (110,372) (280,027 ) (36,951 )
----------- ----------- ----------- ----------- ----------- ------------ ------------
Income (loss) before income
taxes.......................... (780,570 ) (2,213,852 ) (955,901) 971,568 336,913 (603,566 ) 124,394
Income tax expense (benefit)..... (260,000 ) (779,000 ) (360,080) 435,459 219,799 (143,517 ) 43,000
----------- ----------- ----------- ----------- ----------- ------------ ------------
Net income (loss) (3)............ $ (520,570 ) $(1,434,852) $ (595,821) $ 536,109 $ 117,114 $ (460,049 )$ 81,394
----------- ----------- ----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ----------- ----------- ------------ ------------
BALANCE SHEET DATA:
Working capital(deficiency)...... $2,059,840 $1,229,211 $(1,029,547) $(1,620,488) $(1,902,363) (686,632 ) (2,238,531 )
Total assets..................... 11,586,309 10,147,420 10,519,859 12,577,992 12,874,503 13,402,269 17,639,673
Long-term debt................... 1,598,727 1,050,330 840,302 564,577 103,792 769,742 2,476,008
Total liabilities................ 10,020,182 9,713,789 10,690,072 11,819,796 11,670,962 12,803,938 16,354,738
Warrants outstanding (4).........
Stockholders' equity (deficiency)
(5)............................ 1,566,127 433,631 (170,213) 758,196 1,203,541 598,331 1,284,935

<CAPTION>
HLM DESIGN
(COMBINED)
NINE
MONTHS
ENDED
JANUARY 30,
1998 (2)
-----------
<S> <C>
Revenue.......................... $21,543,416
-----------
Costs and Expenses:
Direct cost of revenue........... 9,979,581
Operating costs.................. 9,629,991
ESOP expenses....................
Amortization on intangible
assets......................... 114,549
-----------
Total costs and expenses......... 19,724,121
-----------
Income (loss) from operations.... 1,819,295
-----------
Other income (expense):
Net interest..................... (748,621 )
Non-operating income.............
-----------
Total other income
(expense)................... (748,621 )
-----------
Income (loss) before income
taxes.......................... 1,070,674
Income tax expense (benefit)..... 514,063
-----------
Net income (loss) (3)............ $ 556,611
-----------
-----------
BALANCE SHEET DATA:
Working capital(deficiency)...... (432,870 )
Total assets..................... 18,043,555
Long-term debt................... 4,357,057
Total liabilities................ 17,194,658
Warrants outstanding (4)......... 200,068
Stockholders' equity (deficiency)
(5)............................ 648,829
</TABLE>

- ---------------

(1) The "Predecessor Company" is HLMI.

(5) Neither HLM Design nor the Predecessor Company has paid cash dividends from
May 1, 1992 to January 30, 1998.

<PAGE>
HLM DESIGN, INC. AND AFFILIATES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

The following unaudited pro forma combined financial information includes
HLM Design, HLMI, HLMNC and HLMO to reflect their results assuming that the
acquisition of HLMI through the merger of BBH Corp., a non-operating entity
controlled by the controlling stockholders of HLM Design, into HLMI had occurred
at the beginning of the respective periods and that the Management and Services
Agreements and related Stockholder Agreements had been effective as of the
beginning of the respective periods.

The Company believes that the assumptions used in the following statements
provide a reasonable basis on which to present the pro forma financial data. The
unaudited pro forma combined financial data is provided for informational
purposes only and should not be construed to be indicative of the Company's
financial condition or results of operations had the transactions and events
described above been consummated on the dates assumed, and are not intended to
project the Company's financial condition on any future date or its results of
operation for any future period.

<TABLE>
<CAPTION>
(PREDECESSOR HLM DESIGN (COMBINED)
COMPANY) (COMBINED) PRO FORMA
ONE MONTH NINE MONTHS PRO FORMA FOR THE NINE
ENDED ENDED ADJUSTMENTS MONTHS ENDED
MAY 30, JANUARY 30, PRO FORMA FOR THE JANUARY 30,
1997 1998 ADJUSTMENTS(1) OFFERING 1998
----------- ----------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Revenue................................... $ 2,233,036 $21,543,416 $23,776,452
Costs and expenses:
Direct cost of revenue.................... 898,979 9,979,581 10,878,560
Operating costs........................... 1,163,141 9,629,991 $ (3,800)(7) 10,761,332
(28,000)(3)
Amortization of intangible assets......... 9,571 114,549 4,800(2) 128,920
----------- ----------- ------------- ------------- ------------
Total costs and expenses.................. 2,071,691 19,724,121 (27,000) 21,768,812
----------- ----------- ------------- ------------- ------------
Income from operations.................... 161,345 1,819,295 27,000 2,007,640
Other income (expense)
Interest expense.......................... (36,951) (748,621) 26,000(4) $ (298,000)(6) (994,572 )
(35,000)(4) 355,000(6)
(48,000)(5) (209,000)(12)
----------- ----------- ------------- ------------- ------------
Total other expense..................... (36,951) (748,621) (57,000) (152,000) (994,572 )
----------- ----------- ------------- ------------- ------------
Income before income taxes................ 124,394 1,070,674 (30,000) (152,000) 1,013,068
Income tax expense........................ 43,000 514,063 (9,650)(9) (58,140)(8) 489,273
----------- ----------- ------------- ------------- ------------
Net income................................ $ 81,394 $ 556,611 $ (20,350) $ (93,860) $ 523,795
----------- ----------- ------------- ------------- ------------
----------- ----------- ------------- ------------- ------------
Pro forma net income per share (11)(14)... $ .25
------------
Weighted average shares outstanding
(000s).................................. 2,060
------------
------------
</TABLE>

(FOOTNOTES ON FOLLOWING PAGE)

<PAGE>
HLM DESIGN, INC. AND AFFILIATES

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
FOR THE TWELVE (1) ADJUSTMENTS FOR THE TWELVE
MONTHS ENDED PRO FORMA FOR THE MONTHS ENDED
APRIL 25, 1997 ADJUSTMENTS OFFERING APRIL 25, 1997
-------------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
Revenue.................................................. $ 26,754,710 $ 26,754,710
Costs and Expenses:
Direct cost of revenue................................... 13,376,251 13,376,251
Operating costs.......................................... 12,414,739 $(338,000)(3) 12,031,739
(45,000)(7)
ESOP expenses............................................ 408,765 (408,765)(10)
Amortization of intangible assets........................ 107,670 60,330(2) 168,000
-------------- ----------- ----------- --------------
Total costs and expenses................................. 26,307,425 (731,435) 25,575,990
-------------- ----------- ----------- --------------
Income from operations................................... 447,285 731,435 1,178,720
-------------- ----------- ----------- --------------
Other income (expense)
Interest expense......................................... (402,509) 311,000(4) $(240,000)(6) (1,118,509)
(425,000)(4) 400,000(6)
(580,000)(5) (182,000)(12)
Non-operating income..................................... 292,137 292,137
-------------- ----------- ----------- --------------
Total other expense.................................... (110,372) (694,000) (22,000) (826,372)
-------------- ----------- ----------- --------------
Income before income taxes............................... 336,913 37,435 (22,000) 352,348
Income tax expense....................................... 219,799 78,579(9) (8,415)(8) 289,963
-------------- ----------- ----------- --------------
Net income............................................... $ 117,114 $ (41,144) $ (13,585) $ 62,385
-------------- ----------- ----------- --------------
-------------- ----------- ----------- --------------
Pro forma net income per share (13)(14).................. $ .03
--------------
Weighted average shares outstanding (000s)............... 2,033
--------------
--------------
</TABLE>

- ---------------

(1) On May 23, 1997 BBH Corp., affiliated with HLM Design through a
majority-in-interest of common stockholders, acquired HLMI in a transaction
accounted for under the purchase method of accounting. BBH Corp. purchased
50,000 shares in HLMI for $3.2 million, and in connection with this
transaction, BBH Corp. was merged into HLMI with HLMI being the surviving
entity. Upon the merger, each share of common stock in BBH Corp.
outstanding at the time of merger was converted into one share of common
stock in HLMI. All common stock of HLMI held by BBH Corp. (including HLMI
common stock contributed to BBH Corp. by Messrs. Harris and Brannon as
their initial capital contribution to BBH Corp.) were canceled and retired.
As a part of the foregoing, the stockholders of HLMI (other than BBH
Corp.), including the HLMI Employee Stock Ownership Plan (the "ESOP"),
redeemed their HLMI common stock for a total of $64 a share. As a result,
there was a 90% change in voting control of HLMI. The assets and
liabilities of HLMI were restated to fair value as of May 31, 1997.
Purchase accounting was effected May 31, 1997 because (i) it was not
materially different than May 23, 1997, (ii) May 30, 1997 was the normal
accounting close for HLMI and (iii) a portion of the acquisition funding
commitment for the transaction was not finalized until May 30, 1997. The
excess of the purchase cost over the fair value of tangible net assets was
recorded as goodwill and will be amortized over fifteen years.

(2) Reflects the adjustment necessary for the amortization of goodwill arising
from the acquisition of HLMI by BBH Corp. and the merger of BBH Corp. into
HLMI.

(3) Reflects the adjustment necessary to record the net decrease in
depreciation expense as a result of the extended lives of depreciable
assets (furniture and fixtures) due to the establishment of remaining lives
subsequent to the acquisition by BBH Corp. Management estimated the
remaining useful lives of such assets from their date of acquisition or the
term of lease if less.

(4) Reflects the increase in interest expense resulting from the financing
arrangement for the HLMI acquisition, which was in the form of a
sale-leaseback agreement and which is reduced by the interest costs
associated with bank loans that were repaid. Although the transaction was
structured in the form of a sale leaseback, the transaction was in
substance a financing, and, therefore, no gain or loss resulted.

(5) Reflects the adjustment to record interest expense for the debt incurred to
effect the acquisition of HLMI by BBH Corp. through the merger of BBH Corp.
into HLMI.

(6) Reflects the decrease in interest expense resulting from the repayment of
certain indebtedness through the proceeds of the Offering which is offset
by an increase in deferred fee expense associated with the pay off of such
indebtedness. See "Use of Proceeds".

<PAGE>
(7) Reflects the adjustment necessary to record decreased depreciation expense
due to the reduction to fair value of certain leasehold improvements in
connection with the HLMI transaction.

(8) Reflects the change in provision for income taxes resulting from adjustment
(5) above.

(9) Reflects the change in provision for income taxes resulting from
adjustments above.

(10) Reflects the elimination of ESOP expenses as a result of the acquisition of
HLMI by BBH Corp. through the merger of BBH Corp. into HLMI.

(11) Pro forma net income per share is based upon the assumption that 2,075,087
shares of Common Stock are outstanding after the Offering. This amount
represents 1,200,000 shares of Common Stock to be issued in the Offering,
702,834 shares of Common Stock owned by the Company's stockholders prior to
the Offering, and the inclusion of Common Stock equivalents of 172,253
related to Warrants.

(12) Reflects the increase in interest expense resulting from the write-off of
deferred loan costs relating to Warrants attached to certain indebtedness
which was repaid with proceeds of the Offering. See "Use of Proceeds".

(13) Pro forma net income per share is based upon the assumption that 2,033,685
shares of Common Stock are outstanding after the Offering. This amount
represents 1,200,000 shares of Common Stock to be issued in the Offering,
618,375 shares of Common Stock owned by the Company's stockholders prior to
the Offering, and the inclusion of Common Stock equivalents of 215,310
related to Warrants.

(14) Fully diluted earnings per share are not materially different.

<PAGE>
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 HLM Design and
Affiliate's financial statements and the Predecessor Company's financial
statements and the related notes thereto included elsewhere in this Prospectus.

OVERVIEW

HLM Design is a management company which enters into management and
services relationships with full-service architectural, engineering and planning
firms. Currently, HLM Design has entered into Management and Services Agreements
with HLMI, HLMNC and HLMO. These three firms operate in ten offices in Atlanta,
Georgia, Iowa City, Iowa, Chicago, Illinois, Orlando, Florida, Bethesda,
Maryland, Denver, Colorado, Sacramento, California, Philadelphia, Pennsylvania,
Portland, Oregon, and Charlotte, North Carolina. A full service AEP Firm
provides a spectrum of services in various specialties to customers through a
broad range of professionals, including architectural, mechanical, electrical,
structural and civil engineers, landscape architects, interior designers and
construction administration personnel.

In May 1997, BBH Corp., a corporation controlled by Joseph Harris and
Vernon Brannon, controlling shareholders of HLM Design, merged into HLMI with
HLMI being the surviving corporation. Funding for the acquisition through the
merger and "cash-out" of HLMI's existing stockholders, including the redemption
of the ESOP, was provided by loans of $3.2 million from HLM Design to BBH Corp.
See "Certain Transactions -- Merger Transaction."

Immediately following the merger, the Managed Firms, HLMI, HLMNC and HLMO,
entered into Management and Services Agreements with HLM Design. HLM Design,
under the terms of such agreements, is the sole and exclusive manager and
administrator of all of the Managed Firms' day-to-day business functions,
including financial planning, facilities, equipment and supplies, management and
administrative services, and earns 99% of the net income of the Managed Firms
and, for cash management purposes, receives all but 1% of each firm's positive
cash flow following the payment by each firm of all such firm's expenses.

PRO FORMA RESULTS OF OPERATIONS (EXCLUDING THE EFFECT OF THE OFFERING)

As a result of the acquisition of HLMI through the merger of BBH Corp. into
HLMI and the consummation of the Management and Services Agreements and
Stockholders' Agreements, the discussion and analysis of results of operations
for the nine months ended January 30, 1998 compared to nine months ended January
24, 1997 is presented on a pro forma basis that reflects the acquisition of the
assets of HLMI through the merger of BBH Corp. into HLMI and the consummation of
the Management and Services Agreements and Stockholders' Agreements as though
they occurred at the beginning of the respective periods.

NINE MONTHS ENDED JANUARY 30, 1998 COMPARED WITH NINE MONTHS ENDED JANUARY 24,
1997 -- PRO FORMA

This pro forma financial data does not give effect to the Offering.

<TABLE>
<CAPTION>
COMBINED COMBINED
PRO FORMA PRO FORMA
JANUARY 24, JANUARY 30,
1997 1998
----------- -----------
<S> <C> <C>
Revenue........................................................................................ $19,442,280 $23,776,452
Costs and expenses:
Direct cost of revenue......................................................................... 9,917,627 10,878,560
Operating costs................................................................................ 9,072,733 10,761,332
Amortization of intangible assets.............................................................. 126,000 128,920
----------- -----------
Total costs and expenses....................................................................... 19,116,360 21,768,812
----------- -----------
Income from operations......................................................................... 325,920 2,007,640
Other income (expense)
Interest expense............................................................................... (801,027) (842,572)
----------- -----------
Total other expense.......................................................................... (801,027) (842,572)
----------- -----------
Income (loss) before income taxes.............................................................. (475,107) 1,165,068
Income tax expense (benefit)................................................................... (77,517) 547,413
----------- -----------
Net income (loss).............................................................................. $ (397,590) $ 617,655
----------- -----------
----------- -----------
</TABLE>

Revenues were $23.8 million for the nine months ended January 30, 1998
compared to $19.4 million for the nine months ended January 24, 1997, which is
an increase of 22.3%. The increase in revenues is attributable to management's
stronger focus on marketing efforts during the nine months ended January 30,
1998.

<PAGE>
Direct costs primarily include, direct labor, subconsultant costs, and
reimbursable expenses. Direct costs were $10.9 million, or 45.8% of revenues,
for the nine months ended January 30, 1998, as compared to $9.9 million, or
51.0% of revenues, for the nine months ended January 24, 1997. This decrease as
a percent of revenue is principally due to a decrease in direct labor incurred
as a percentage of revenues due to improved productivity as a result of
management's closer monitoring of each project, as well as a decrease in
subconsultant costs.

Operating expenses were $10.8 million, or 45.3% of revenues, for the nine
months ended January 30, 1998 as compared to $9.1 million, or 46.7% of revenues,
for the nine months ended January 24, 1997. This decrease as a percentage of net
sales was due principally to increased sales.

Amortization of intangible assets were $0.1 million for both the nine
months ended January 30, 1998 and January 24, 1997. The amortization expense
relates to the goodwill arising from the acquisition of HLMI by BBH Corp.
through the merger of BBH Corp. into HLMI. See Note 2 to the Notes to Combined
Financial Statements.

Interest expense was $0.8 million for the nine months ended January 30,
1998 as compared to $0.8 million for the nine months ended January 24, 1997.

Income tax expense for the nine months ended January 30, 1998 was $0.5
million as compared to an income tax benefit of $0.1 million for the nine months
ended January 24, 1997. The effective income tax rate was 48% for the nine
months ended January 30, 1998 as compared to 16.3% for the nine months ended
January 24, 1997. The effective income tax rate was higher due to non-deductible
goodwill amortization and the ratio of non-deductible penalties and meals and
entertainment expense to pre-tax income or loss.

PREDECESSOR RESULTS OF OPERATIONS

The following discussion and analysis and results of operations for the
fiscal years ended April 25, 1997, 1996 and 1995 relate to the Predecessor
Company, HLMI. HLM Design was incorporated on March 6, 1997 had no significant
activity as of April 25, 1997.

FISCAL 1997 COMPARED WITH FISCAL 1996

Revenues were $26.8 million in fiscal 1997 compared to $28.6 million in
fiscal 1996, which was a decline of 6.3%. The decline in revenues was primarily
attributable to HLMI's decentralization of architectural personnel from one
location to multiple locations, a shift in HLMI's mix from large academic
education facilities to smaller healthcare and criminal justice projects, and
HLMI's efforts to focus on the estimating process and selecting contracts with
profitability as the major goal, which resulted in some potential contracts not
being pursued. During fiscal 1997 and fiscal 1996, approximately 70% of HLMI's
revenues were related to health care projects and approximately 30% were from
criminal justice and other projects.

Direct costs include, among other things, direct labor, subconsultant
costs, and reimbursable expenses. Direct costs were $13.4 million, or 50.0% of
revenues, in fiscal 1997 as compared to $14.3 million, or 49.9% of revenues, in
fiscal 1996. This increase as a percent of revenue is principally due to an
increase in the use of subconsultants to meet project requirements (18.2% and
16.7% of revenue in fiscal 1997 and fiscal 1996, respectively) and an increase
in reimbursable expenses incurred (4.4% and 3.3% of revenue in fiscal 1997 and
fiscal 1996, respectively). This increase is offset by a decrease in direct
labor incurred due to improved productivity as a result of HLMI's focus on cost
containment of each project (24.7% and 26.7% of revenue in fiscal 1997 and
fiscal 1996, respectively). As a result of these fluctuations and decreased
sales, gross profit from revenue (revenue less direct cost of revenue) decreased
to $13.4 million in fiscal 1997 from $14.3 million in fiscal 1996.

Operating expenses decreased 5.3% to $12.4 million, or 46.4% of revenues,
in fiscal 1997 from $13.1 million, or 45.9% of revenues, in fiscal 1996. The
decrease of 5.3% is principally due to a reduction in personnel costs resulting
from HLMI's efforts to increase utilization of labor.

ESOP expenses were $0.4 million in fiscal 1997 as compared to $0.6 million
in fiscal 1996. These expenses represent principal and interest payments on the
ESOP debt.

Amortization of intangible assets was $0.1 million for both fiscal 1997 and
1996. The amortization relates to the goodwill arising from the acquisition of
MPB Architects, Inc. in April 1995. See Note 2 to HLMI Financial Statements
included elsewhere in this Prospectus.

Interest expense was $0.4 million for both fiscal 1997 and fiscal 1996.

<PAGE>
Non-operating income was $0.3 million in fiscal 1997 compared to $0.9
million in fiscal 1996. Non-operating income is principally due to the gain on a
lease termination as a result of the cumulative excess of lease expense over the
lease payments made as of the termination dates. In fiscal 1997 and fiscal 1996,
HLMI terminated facility leases resulting in a gain of $0.3 million and $0.8
million, respectively.

Income tax expense was $0.2 million in fiscal 1997 compared to $0.4 million
in fiscal 1996. The effective income tax rate in fiscal 1997 was 65.2% compared
to 44.8% in fiscal 1996. The effective tax rate was higher for fiscal 1997 as
compared to fiscal 1996 due principally to nondeductible penalties (17.4% in
1997) and meals and entertainment expenses (9.3% in 1997). The increase in
penalty expense is due to HLMI's inability to timely fund payroll taxes.

FISCAL 1996 COMPARED WITH FISCAL 1995

Revenues were $28.6 million in fiscal 1996 compared to $29.1 million in
fiscal 1995, a decline of 2.0%. The decline in revenues was primarily
attributable to HLMI's decentralization of architectural services from one
location to multiple locations and its efforts to focus on the estimating
process and selecting contracts with profitability as the major goal, which
resulted in some potential contracts not being pursued. During fiscal 1996,
approximately 70% of HLMI's revenues were related to health care projects and
approximately 30% were from criminal justice and other projects as compared to
during fiscal 1995, approximately 73% of HLMI's revenues were related to health
care projects and approximately 27% were from criminal justice and other
projects.

Direct costs include, among other things, direct labor, subconsultants
costs, and reimbursable expenses. Direct costs were $14.3 million, or 49.9% of
revenues, in fiscal 1996 as compared to $15.7 million, or 53.9% of revenues, in
fiscal 1995. This decrease as a percent of revenues is principally due to a
decrease in the use of subconsultants to meet project requirements (16.7% and
18.4% of revenue in fiscal 1996 and fiscal 1995, respectively), a decrease in
direct labor incurred as a result of HLMI's focus on cost containment of each
project (26.7% and 27.3% of revenue in fiscal 1996 and fiscal 1995,
respectively) and a decrease in reimbursable expenses incurred (3.3% and 5.3% of
revenue in fiscal 1996 and fiscal 1995, respectively). As a result of these
reductions, gross profit from revenue (revenue less direct cost of revenue)
increased to $14.3 million in fiscal 1996 from $13.4 million in fiscal 1995.

Operating expenses decreased 7.1% to $13.1 million, or 45.9% of revenues,
in fiscal 1996 from $14.1 million, or 48.4% of revenues, in fiscal 1995. The
decrease is principally due to a decrease in rent and occupancy costs resulting
from management's renegotiation of certain office leases and, to a lesser
extent, a decrease in the costs incurred for contingencies related to various
disputes and legal actions related to contract operations due to HLMI's focus on
prevention and resolution of such matters on an ongoing basis. This was
partially offset by an increase in salary and related costs and reproduction
costs.

ESOP expenses were $0.6 million for both fiscal 1996 and 1995. The expenses
represent principal and interest payments on the ESOP debt.

Amortization of intangible assets were $0.1 million in fiscal 1996 and
$5,952 in fiscal 1995. This increase relates to the goodwill arising from the
acquisition of MPB Architects, Inc. in April 1995. See Note 2 to Notes to HLMI
Financial Statements.

Interest expense was $0.4 million for fiscal 1996 and $0.2 million for
fiscal 1995. This increase is primarily due to increased borrowing for working
capital needs in fiscal 1996.

Non-operating income was $0.9 million in fiscal 1996 compared to $0.4
million in fiscal 1995. In fiscal 1996, the Company terminated facility leases
resulting in a gain of $0.8 million. In fiscal 1995, HLMI sold its airplane
which generated a gain on sale of assets of $0.4 million. See Note 4 to Notes to
HLMI Financial Statements.

Income tax expense was $0.4 million in fiscal 1996 compared to an income
tax benefit of $0.4 million in fiscal 1995. The effective income tax rate in
fiscal 1996 was 44.8% compared to 37.7% in fiscal 1995. The effective tax rate
was higher for fiscal 1996 as compared to fiscal 1995 due to the ratio of
non-deductible meals and entertainment expense to pre-tax income or loss.

LIQUIDITY AND CAPITAL RESOURCES

At April 25, 1997, HLMI's current liabilities of $11.6 million exceeded
current assets of $9.7 million, resulting in a working capital deficit of $1.9
million. During fiscal 1997, HLMI generated $0.5 million in cash from operating
activities. HLMI used $0.7 million in investing activities, primarily the
purchase of equipment. HLMI received proceeds from new debt

<PAGE>
of $0.5 million and repaid borrowings on notes payable of $0.4 million. These
transactions resulted in a net decrease in cash of $8,809 for the fiscal year.

At January 30, 1998, the Company's current liabilities of $12.8 million
exceeded current assets of $12.4 million resulting in a working capital
deficiency of $.4 million. During the nine months ended January 30, 1998, the
Company provided $0.2 million in cash for operating activities. The Company used
$0.5 million for investing activities, primarily the purchase of equipment. The
Company generated $0.4 million for financing activities, primarily from
long-term borrowings reduced by the payment of the ESOP buyback.

The Company received proceeds, in June 1997, from financing, in the form of
a 60 month, triple net capital lease, of $2.8 million (the "Lease Financing")
from Berthel Leasing. The proceeds were used to repay a line of credit and a
note payable due to Firstar Bank of Iowa, N.A. In connection with the Lease
Financing (which carries a rental payment of $64,501 per month and a $1 purchase
option at the end of the lease term), HLMI granted a security interest in all of
its personal property to Berthel Leasing, and Joseph Harris, Vernon Brannon and
a former director of HLM Design, partially guaranteed the amount due to Berthel
Leasing. HLM Design also entered into a $0.75 million term loan, in September
1997, with Berthel Leasing for working capital purposes. Such loan, which
matures as of July 1, 1998, is also secured by a pledge of HLM Design assets and
guaranties by HLMI, Joseph Harris and Vernon Brannon. In consideration for this
borrowing, HLM Design sold Warrants to purchase 3,422 shares of Common Stock
(43,631 shares after giving effect to the Stock Split), subject to adjustment in
certain circumstances, to Berthel Leasing (the "Berthel Warrants"). See "Certain
Transactions -- Berthel Leasing Lease Financing" and "Description of Capital
Stock -- Warrants." In December 1997, Berthel Leasing exercised its Warrants and
purchased 3,422 shares of Common Stock (43,631 shares after giving effect to the
Stock Split) at an exercise price of $.01 per share.

In connection with the merger agreement with BBH Corp. and the payment of
the merger consideration to holders of HLMI common stock, the Company (i) issued
indebtedness in the aggregate principal amount of $2 million to Pacific and
Equitas, (ii) obtained financing from First Charter National Bank in the form of
a revolving line of credit in an aggregate principal amount of $1 million
(together with a $0.5 million line of credit with First Charter National Bank
previously in effect with HLMI, the "First Charter Loan") (under which the
Company currently has borrowings outstanding of $1.5 million) and obtained notes
payable to employee stockholders for $0.2 million. The Pacific/Equitas Loan is
secured by, among other things, a collateral assignment of HLM Design's interest
in its Management and Services Agreements and the HLMI Note (as defined below)
and a security interest in HLM Design's personal property and fixtures.
Additionally, HLMI, and under certain circumstances, Joseph Harris and Vernon
Brannon have guaranteed the Pacific/Equitas Loan. HLM Design also sold Warrants
to purchase 14,372 shares of Common Stock (183,242 shares after giving effect to
the Stock Split), subject to adjustment in certain circumstances, to Pacific,
Equitas, Shannon LeRoy, a representative of Equitas and a member of the Board of
HLM Design, and Clay R. Caroland, a representative of Pacific and a member of
the Board of HLM Design (the "Pacific/Equitas Warrants" and, together with the
Berthel Warrants, the "Warrants"). See "Certain Transactions -- Merger
Transaction," "Description of Capital Stock -- Warrants" and Note 4 to the
Combined Financial Statements. In November 1997, Mr. Caroland exercised his
Warrants and purchased 862 shares of Common Stock (10,991 shares after giving
effect to the Stock Split) at an exercise price of $.01 per share and Mr. LeRoy
transferred his Warrants to purchase 862 shares of Common Stock (10,991 shares
after giving effect to the Stock Split) to Equitas. In February 1998, Equitas
exercised its Warrants and purchased 5,749 shares of Common Stock (73,300 shares
after giving effect to the Stock Split) at an exercise price of $.01 per share.
Pacific has undertaken that it will exercise its Warrants immediately prior to
the effective date of the Registration Statement of which this Prospectus is a
part. The First Charter Loan is secured by an unconditional guaranty from HLMI,
and is secured by a security interest in all of HLMI's accounts receivable.
Joseph Harris, Vernon Brannon and a former director have also guaranteed the
First Charter Loan. For additional information concerning the First Charter
Loan, see Note 4 to the accompanying combined financial statements of HLM
Design.

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 the management company,
HLM Design will be responsible for the financing of working capital growth,
capital growth and other cash needs of the Managed Firms. See "Business -- HLM
Design Operations -- Management and Services Agreements"). As indicated above,
HLM Design has already maximized its borrowings under its existing revolving
line of credit in the form of the First Charter Loan. Furthermore, such line of
credit, as extended, matures as of July 30, 1998, unless it is renewed by First
Charter. Although HLM Design has received both verbal and written indications
from First Charter of its willingness to renew and increase HLM Design's line of
credit following a successful completion of this Offering, First Charter has not
entered into any commitment to do so. The Company believes that the net proceeds
from the Offering, the new revolving line of credit and anticipated funds from
future operations will be sufficient to meet its working capital needs for at
least the next twelve months. If HLM

<PAGE>
Design is unable to obtain a new revolving line of credit following the
Offering, however, its ability to implement its growth strategy will be
adversely affected.

The Company's operations are professional services and as such are not
capital intensive. However, in order to enhance productivity, the Company has
increased its purchase of computer hardware and software. The Company currently
has no material commitments for purchases of additional equipment. Capital
expenditures during fiscal year 1997 were $0.7 million. The Company expects
fiscal 1998 capital expenditures to be comparable to expenditures in fiscal
1997.

Subsequent to the Offering, the Company expects to fund AEP Firm
affiliations with proceeds from the Offering and future offerings.

SEASONALITY

The Company's operations are not seasonal in nature.

EFFECTS OF INFLATION

Due to the relatively low levels of inflation in fiscal years 1995, 1996
and 1997, inflation did not have a significant effect on the Company's results
of operations for those periods.

NEW ACCOUNTING STANDARDS

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Standards No. 128, "Earnings Per Share." This Statement specifies
the computation, presentation and disclosure requirements for earnings per
share. The Company believes that the adoption of such Statement would not result
in earnings per share materially different than pro forma earnings per share
presented in the accompanying pro forma statements of income. It will be
effective for periods ending after December 15, 1997.

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income." This
Statement establishes standards of reporting and display of comprehensive income
and its components in a full set of general-purpose financial statements. This
Statement will be effective for HLM Design's fiscal year ending April 24, 1998,
and the Company does not intend to adopt this Statement prior to the effective
date.

On November 20, 1997, EITF 97-2, "Application of FASB Statement No. 94,
CONSOLIDATION OF ALL MAJORITY-OWNED SUBSIDIARIES, and APB Opinion No. 16,
BUSINESS COMBINATIONS, to Physician Practice Management Entities and Certain
Other Entities with Contractual Management Arrangements", was issued which
reached a consensus that arrangements similar to those between HLM Design and
the Managed Firms should be accounted for on a consolidated basis. The Company
intends to reflect this change prospectively in the fiscal year ended April 24,
1998 financial statements. If the change had been effected for the nine months
ended January 30, 1998, the effect would have been a reduction to stockholder's
equity by approximately $10,511, an increase in minority interest by
approximately $10,511 and a decrease in net income of approximately $10,509.

<PAGE>
BUSINESS
OVERVIEW

HLMI was founded in Iowa City, Iowa in 1962 to provide architectural,
engineering and planning services. HLMI enjoyed steady growth, expanding
geographically and establishing a national presence and is now recognized as a
leader in the healthcare arena. In 1987, the original founders of HLMI sold
their ownership in the company to the ESOP and a board of directors, consisting
of senior principals, took control of HLMI.

In 1994, as a result of the poor financial performance of HLMI, Joseph M.
Harris was hired as Chief Executive Officer and Vernon B. Brannon was hired as
Chief Financial Officer. Messrs. Harris and Brannon instituted significant
changes, cutting costs and personnel, with a focus on returning HLMI to
profitability. In 1996, HLMO and HLMNC were formed and the headquarters of HLMI
was moved from Iowa City, Iowa to Charlotte, North Carolina. HLMI, HLMO and
HLMNC currently operate offices in Atlanta, Georgia, Iowa City, Iowa, Chicago,
Illinois, Orlando, Florida, Bethesda Maryland, Denver, Colorado, Sacramento,
California, Philadelphia Pennsylvania, Portland, Oregon and Charlotte, North
Carolina.

On May 23, 1997, BBH Corp. merged into HLMI. See "Certain
Transactions -- Merger Transaction." Following the merger of BBH Corp. into
HLMI, Messrs. Harris and Brannon owned all of the outstanding common stock in
HLMI.

In March 1997, HLM Design was formed with the intent of managing the
nonprofessional operations of AEP Firms through Management and Services
Agreements. HLM Design believes it is the first company in the architectural,
engineering and planning industry to actively pursue the strategy of
consolidating non-professional operations and providing management expertise to
AEP Firms. Currently, HLM Design is not engaged in negotiations with any AEP
Firms. HLM Design believes its strategy will take advantage of operating
efficiencies for AEP Firms and provide service and geographic diversification
for its AEP Firm's clients. The process of developing and entering into
management and services relationships is complex and will likely require several
months to complete. In May 1997, HLM Design entered into forty-year Management
and Services Agreements with HLMI, HLMNC and HLMO. All three of these firms are
related through common principal stockholders and these stockholders have
entered into Stockholders' Agreements. See "Certain Transactions."

OPERATING STRATEGY

The creation of a management relationship between HLM Design and an AEP
Firm involves, among other things, the signing of a Management and Services
Agreement between HLM Design and the AEP Firm. Under the terms of the Management
and Services Agreement, HLM Design is the sole and exclusive manager and
administrator of all of the Managed Firm's day-to-day business functions. These
functions include financial planning, facilities, equipment and supplies, and
management and administrative services. Management and administrative services
include bookkeeping and accounts, general administration services, contract
negotiation and administration for all non-architectural and non-engineering
aspects of all agreements pertaining to the provision of architectural and
engineering services by Managed Firms to third parties, personnel, security and
maintenance, architectural and engineering recruiting and training, insurance,
issuance of debt and additional capital stock and billing and collections. In
connection with these services, HLM Design receives all but 1% of the firm's
positive cash flow (as determined in accordance with generally accepted
accounting principles applied on a consistent basis) following the payment by
the AEP Firm of all such firm's expenses. See " -- HLM Design
Operations -- Management and Services Agreements."

In addition to the Management and Services Agreement, HLM Design will
require stockholders of Managed Firms to enter into Stockholders' Agreements
which will provide the stockholders of those entities with nominee stockholder
status. Generally, the Stockholders' Agreements will provide for the following:
(i) the repurchase by the Managed Firm of the stockholder's stock upon such
stockholder's death, (ii) restrictions on transferability of the stock, (iii) a
"call-right" on the stock by the Managed Firm and (iv) a voting agreement among
the stockholders and the Managed Firm. See " -- HLM Design
Operations -- Stockholders' Agreements."

The architects, engineers and planners employed by the Managed Firms offer
a broad range of specialty and ancillary services. The Managed Firms offer
services in master planning, architectural design, mechanical, electrical,
structural and civil engineering, interior design, environmental graphics,
landscape architecture, construction services and facility management. Each
office varies in the number and types of specialties offered. The Managed Firms
provide excellence in design and over the years have designed over a billion
square feet of buildings and completed hundreds of planning and feasibility
studies. Clients of the firms range from small companies to America's most
prestigious corporations. The professionals at the Managed Firms specialize in
the design of hospitals, criminal justice buildings and high-tech research
facilities. Design experience of professionals employed by the Managed Firms
includes corporate headquarters, physician office buildings, investment office
buildings, multi-use office complexes and related facilities. The Managed Firms'
professionals maintain

<PAGE>
full control over their architectural and engineering practices, determine which
projects to pursue and set their own standards of practice in order to promote
high-quality provision of services and retain ownership of all contracts with
clients. HLM Design is not engaged in the practice of architecture, engineering
or planning.

The following more fully describes the services provided by the Managed
Firms:

FOCUS ON HEALTHCARE. The Managed Firms design healthcare facilities that
help their clients improve patient care and reduce operating costs. During the
last 33 years, HLMI has designed over one billion square feet of healthcare
facilities. Its experience includes more than 325 healthcare clients and over
825 major healthcare engagements including:

(Bullet) 201 health facility master plans
(Bullet) 118 ambulatory care centers
(Bullet) 77 ambulatory surgery centers
(Bullet) 119 academic medical centers and teaching facilities
(Bullet) 64 cancer centers
(Bullet) 69 women's facilities
(Bullet) 13 replacement hospitals
(Bullet) 44 medical office buildings

FOCUS ON JUSTICE. The Managed Firms design justice facilities that help
their clients build efficient and effective public facilities in times where
financing of construction and operation of these public facilities is
continually being scrutinized. Its experience includes:

(Bullet) 25 federal and state projects
(Bullet) 1.8 million square feet for the federal government
(Bullet) 3 million square feet of courthouse renovation

By integrating design and planning, the Company's professionals meet
project objectives by improving staff efficiency, accelerating the project
schedule or even addressing sensitive urban design issues. Teams explore options
to optimize the return on construction dollars, for example, by creatively
combining renovation and new construction. The Company helps bridge the gap
between need and public acceptance through public information campaigns and cost
control. The results are buildings -- courts, police, detention or corrections
facilities -- that meet stringent cost requirements yet still achieve a high
quality of design.

FOCUS ON RESEARCH FACILITIES. The Managed Firms design laboratories for
clients that focus on optimizing space utilization and provide flexibility to
adapt to changing technology or funding constraints. Systems are designed to
control operating costs while protecting the demands of the research function
and making safety and security the highest priority. Often, the goal is to
produce environments that stimulate creativity, promote interaction, enhance the
client's ability to recruit the best and brightest and attract funding. The
Managed Firms have completed 30 projects totalling over 3 million square feet
valued at $540 million in construction.

GROWTH STRATEGY

HLM Design intends to implement an aggressive, yet disciplined, expansion
program by pursuing Management and Services Agreements with (i) large "regional"
AEP Firms with established operating histories located in large metropolitan and
high-growth suburban geographic markets that the Company does not currently
serve and (ii) small firms that provide operational diversity in geographic
areas that will complement the services that are either currently provided by
the Company in such geographic areas or that are intended to be provided in the
future. HLM Design believes its approach will be attractive to these large and
small AEP Firms because it will provide these firms with economies of scale and
the synergies that result from increased purchasing power, a greater breadth of
services, an increased pool of professionals, and geographical diversity.
Furthermore, this strategy will give these regional and local AEP Firms, as a
part of the Company, the ability to provide services to existing and future
clients with national operations that might otherwise have turned to "non-local"
firms to service their needs. The goal is for the Company to be the single
source provider for large national clients with geographically diverse
operations.

HLM Design generally expects that AEP Firms that sign Management and
Services Agreements will retain existing high-quality professional staff and
continue to operate in an effective and efficient manner with personnel who
understand the local market. Additionally, management believes it is positioned
to pursue larger, well established AEP Firms as a result of the depth of HLM
Design's management team, its capital structure and the reputation of the
management team in the design

<PAGE>
industry. Management also believes these goals can be achieved at less cost than
that which would be incurred by AEP firms operating on a stand alone basis.

HLM DESIGN OPERATIONS

Pursuant to its Management and Services Agreements, HLM Design manages all
aspects of the Managed Firm other than the provision of professional
architectural, engineering and planning services. The provision of these
services is controlled by the Managed Firms themselves. HLM Design enhances firm
growth by assisting in the recruitment of new professionals and by expanding and
adding ancillary services.

One of HLM Design's goals is to negotiate national arrangements and provide
cost savings to Managed Firms through economies of scale in areas such as
malpractice insurance, supplies, equipment and business functions.

MANAGEMENT AND SERVICES AGREEMENTS

The Management and Services Agreements with the Managed Firms are for a
period of forty years. Although these agreements are terminable by HLM Design,
with or without cause, upon 60 days' notice to the Managed Firms, they cannot be
terminated by the Managed Firms without a material default or bankruptcy. Under
these agreements, HLM Design is appointed as the sole and exclusive manager and
administrator of all of the Managed Firms' day-to-day business functions,
including financial planning, facilities, equipment and supplies, and management
and administrative services (including bookkeeping and accounts, general
administration services, contract negotiation and administration for all
non-architectural and non-engineering aspects of all agreements pertaining to
the provision of architectural and engineering services by Managed Firms to
third parties), personnel, security and maintenance, architectural and
engineering recruiting and training, insurance, billing and collections and
marketing support. HLM Design has no authority, directly or indirectly, to
perform any function of the Managed Firm's operations pertaining to services
which are required to be performed by duly licensed architects and engineers
pursuant to any and all applicable laws, rules or regulations adopted by any
authority regulating the licensing of architects or engineers. The Managed Firms
will retain ownership of all contracts with clients. Additionally, HLM Design
has the authority to approve or deny, on behalf of the Managed Firm, any and all
proposals by stockholders of such firm to encumber, sell, pledge, give or
otherwise transfer the capital stock of the Managed Firm, as well as the
authority to approve issuance of common stock or incurrence of indebtedness.

As compensation for the provision of its services under the Management and
Services Agreement, HLM Design earns 99% of the net income of the Managed Firms,
as determined in accordance with generally accepted accounting principles.
However, for cash management purposes, the Management and Services Agreements
state that HLM Design is to receive all but 1% of the positive cash flow
(calculated as the change in the cash balances from the beginning of the period
to the end of the period for the Managed Firms). As the management company, HLM
Design will be responsible for the financing of working capital growth, capital
growth and other cash needs. The Management and Services Agreements are
structured so as not to force the Managed Firms to borrow money to satisfy their
inter-company obligations for the management fee (defined as 99% of the net
income of the Managed Firm). For the nine months ended January 30, 1998, HLM
Design earned $1,034,008; however, due to cash requirements of the Managed
Firms, the management fee required to be paid at January 30, 1998 was $450. The
remaining balance of $1,033,558 has been recorded as a receivable by HLM Design,
which will be paid with future positive cash flows. All significant balances and
transactions between HLM Design and the Managed Firms have been eliminated in
the combined financial statements included elsewhere herein.

Effective January 1, 1998, all HLMI employees were transferred to HLM
Design and now provide services to HLMI as HLM Design employees. From May 30,
1997 (the date of inception of the Management and Services Agreement), until
December 31, 1997, HLMI accrued no compensation bonuses for HLMI stockholder
officers.

STOCKHOLDERS' AGREEMENTS

Stockholders of Managed Firms have entered into a Stockholders' Agreement
which generally restricts the ability of these stockholders to exercise certain
rights commonly associated with ownership of common stock and effectively
provides stockholders of such entities with nominee stockholder status.
Generally, such Stockholders' Agreements provide that:

(i) upon the death of a stockholder, the Managed Firm will purchase,
and the personal representative of such stockholder's estate will sell to
the Managed Firm, all the stock owned by such deceased stockholder;
provided, however, in certain circumstances the sale of such stockholder's
stock may be made to one or more third parties, subject to the approval of
the Managed Firm;

<PAGE>
(ii) stockholders may not sell, pledge, give or otherwise transfer any
or all of their stock to any third party, either voluntarily or
involuntarily, without first obtaining the Managed Firm's written approval
of such transfer, provided, that if the Managed Firm denies such approval,
it shall purchase such stock;

(iii) the Managed Firm has the right at any time to purchase all, but
not less than all, of the stock then owned by any or all of the
stockholders; and

(iv) the stockholders agree that with respect to all matters which are
submitted to stockholder vote (and, to the extent that all or any of the
stockholders serve as a director of the Managed Firm, then also with
respect to all matters which are submitted to a vote of the board of
directors), the stockholders will, if not in unanimous agreement, follow
specified procedures to achieve unity in voting among all stockholders.

In addition, the Stockholders' Agreements contain an acknowledgment on the
part of each stockholder that it is in the parties' best interest that certain
of the Managed Firm's administrative and managerial functions be performed
pursuant to a Management and Services Agreement with HLM Design and that in
order to ensure consistency and continuity in the management of the firm's
business and affairs, with respect to all matters pertaining to the initiation
of stock "calls" and the approval or denial of proposed stock transfers, the
Managed Firm will in all cases act in accordance with the written recommendation
of HLM Design. The Stockholders' Agreements provide that they may be terminated
upon the occurrence of any of the following events:

(i) cessation of the Managed Firm's business,

(ii) bankruptcy, receivership or dissolution of the Managed Firm, or

(iii) the voluntary agreement of all parties bound by the terms of
such Stockholders' Agreement.

It is anticipated that Stockholders' Agreements among stockholders of the
AEP Firms with whom HLM Design enters into Management and Services Agreements in
the future will have similar terms.

PROPERTIES

HLM Design's principal executive offices are located at 121 West Trade
Street, Suite 2950, Charlotte, North Carolina and its telephone number is (704)
358-0779, where the Company leases 7,254 square feet. Its lease of such offices
is for a term of 5 years and expires in 2000. The Company believes the office
facility is adequate for its current uses and anticipated growth. In addition to
HLM Design's principal executive offices, the Company leases office space in
Sacramento, California, Denver, Colorado, Orlando, Florida, Atlanta, Georgia,
Iowa City, Iowa, Chicago, Illinois, Bethesda, Maryland, Portland, Oregon and
Philadelphia, Pennsylvania.

COMPETITION

The business of providing architectural, engineering and planning services
is highly competitive. Although HLM Design is not aware of any other company
actively pursuing a strategy of consolidating firms' administrative and
management functions, it believes that additional companies with similar
objectives will be organized in the future. Potential sources of competition
include larger, nationally known, multi-specialty professional groups or
professional firms and others, a number of which may have significantly greater
resources than those of the Company.

The Managed Firms are in competition with many other AEP firms, including
large, national firms as well as many small, local firms. The Managed Firms
compete with these firms on the basis of technical capabilities, qualifications
and availability of personnel, experience, reputation, quality performance and,
to a lesser extent, price of services.

GOVERNMENTAL REGULATIONS AND ENVIRONMENTAL MATTERS

Each state has enacted legislation governing the registration of architects
and engineers, and, in some cases, landscape architects, fire protection
engineers and interior designers. These state laws impose licensing requirements
upon individual design professionals and architectural-engineering firms and are
implemented by a more detailed set of administrative rules and regulations
overseen by a registration board. In general, the state laws define the practice
of architecture and engineering, restrict the use of the titles ARCHITECT and
ENGINEER to licensed individuals, establish rules for entry into the profession,
explain how professionals licensed in other states may become reciprocally
registered to practice in the jurisdiction and define and enforce standards of
professional conduct and misconduct.

<PAGE>
The state laws, or the regulations established by a registration board, may
also establish requirements for the practice of architecture or engineering by a
corporation or partnership. A few states do not permit the practice of
architecture or engineering in a corporate form. Some states require design
professionals who want to incorporate to do so as a professional corporation
authorized and certified by the secretary of state. Most states permit practice
through either a professional corporation or a general business corporation.
Even if a state permits practice in a corporate form, the state may require that
a certain number of principals in the corporation must be registered architects
or engineers. Some states specify that a certain percentage of the principals,
directors or stockholders of a corporate entity must be registered architects or
engineers in order to practice in the state. A corporation seeking to practice
in a state other than that in which it is incorporated must register as a
foreign corporation in the other state and satisfy all of the registration
requirements.

There can be no assurance that the regulatory environment in which the
Company operates will not change significantly in the future. For additional
information regarding uncertainties concerning governmental regulations relating
to the practice of architecture and engineering in light of the relationship
between HLM Design and the Managed Firms, see "Risk Factors -- Governmental
Regulation."

Federal, state and local environmental laws and regulations have not
historically had a material impact on the operations of the Company; however,
the Company cannot predict the effect on its operations of possible future
environmental legislation or regulations.

EMPLOYEES

Prior to January 1, 1998, all employees were employed with HLMI; however,
under HLMI's Management and Services Agreement and consistent with HLM Design's
strategy, all employees were transferred to HLM Design as of January 1, 1998. As
of January 1, 1998, HLM Design employed approximately 246 persons of which
approximately 92 were registered professionals (engineers, architects and
others), approximately 102 were degreed professionals and approximately 52 were
administrative personnel. None of HLM Design's employees or the Managed Firm's
employees is represented by a labor union. HLM Design considers its relations
with its employees and the employees of the Managed Firms to be satisfactory.

The registered professional architects and engineers generally have degrees
from accredited architecture or engineering schools, several years of work
experience and have passed licensing examinations. Both registered and degreed
architects have either a five year architectural degree or a four year degree
and a two year advanced architectural degree. The Company's degreed
professionals who are not registered have not yet passed the required licensing
examinations.

LEGAL PROCEEDINGS

From time to time HLM Design or one or more of the Managed Firms are named
in claims involving contractual disputes or other matters arising in the
ordinary course of business. Currently, no legal proceedings are pending against
or involve HLM Design or the Managed Firms that, in the opinion of management,
when considering insurance coverage, could reasonably be expected to have a
material adverse effect on the business, financial condition or results of
operations of HLM Design.

<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS; KEY PERSONNEL

The executive officers, directors and key personnel of the Company, and
their ages as of the date of this Prospectus, are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION(S) WITH THE COMPANY
- ------------------------- --- -------------------------------------------------------------------
<S> <C> <C>
Joseph M. Harris 53 President, Chairman of the Board and Director*
Vernon B. Brannon 54 Senior Vice President, Chief Financial Officer, Treasurer,
Assistant Secretary and Director*
Clay R. Caroland III 43 Director
D. Shannon LeRoy 41 Director
Thomas G. Pinkerton, Sr. 53 Senior Vice President of HLMI
Bradley A. Earl 50 Vice President of HLMI
Viktor A. Lituczy 44 Vice President of HLMI
Frank E. Talbert 41 Vice President of HLMI
Robert P. Ludden 42 Vice President of HLMI
</TABLE>

- ---------------

* Executive Officer

JOSEPH M. HARRIS, AIA, RIBA, has been President, Chairman of the Board, and
a Director of HLM Design since its organization in 1997. He has been President
and Chief Executive Officer of HLMI for the past three years. Prior to joining
HLMI in 1994, he served as President of Heery Architects and Engineers, Inc. and
an Executive Vice President and Director of Technical Services of Heery
International, Inc., one of the country's largest full-service
multi-disciplinary professional service firms. Prior to that, Mr. Harris was one
of the founders and served as President of Clark, Tribble, Harris and Li,
Architects, P.A. a multi-service architectural firm. Mr. Harris has over 30
years of professional experience and is an architect licensed in 32 states and
in the United Kingdom. It is expected that Mr. Harris' initial term as a
director of HLM Design will expire at the third annual meeting of stockholders
of HLM Design following classification of the Board of Directors pursuant to the
Bylaws.

VERNON B. BRANNON has been Senior Vice President, Chief Financial Officer,
and a Director of HLM Design since its organization in 1997. Along with Mr.
Harris, he is a stockholder of HLMI which he joined in 1994 as Chief Financial
Officer and was appointed Senior Vice President soon after joining the firm.
Prior to joining HLMI, from 1988 to 1994, Mr. Brannon was Chief Operating
Officer of UAV Corporation, a video distribution firm, with responsibility for
manufacturing, finance, accounting, and all other functions except sales. It is
expected that Mr. Brannon's initial term as a director of HLM Design will expire
at the third annual meeting of stockholders of HLM Design following Board
classification.

CLAY R. CAROLAND III has been a partner since 1987 in Health Investors, LP
and its affiliates. From 1996 to 1997 he also served as President of the General
Partner of Pacific Capital, L.P. Health Investors and Pacific are investment
firms. In 1989, he, along with Health Investors, organized and capitalized
ClinTrials, Inc., which grew to become a leading CRO. In 1981, he co-founded
Liberty Street Capital, NY, a Wall Street investment boutique and was Managing
Director there until 1987. Mr. Caroland has served on the boards of directors of
a number of companies including EquiVision and ClinTrials. It is expected that
Mr. Caroland's initial term as a director of HLM Design will expire at the
second annual meeting of stockholders of HLM Design following Board
classification.

D. SHANNON LEROY currently serves as President of Tennessee Business
Investments, Inc., the general partner of Equitas, L.P., a licensed Small
Business Investment Company. From 1988 until 1994, Mr. LeRoy served as a Senior
Vice President of First Union National Bank of Tennessee, where he managed
commercial banking. Mr. LeRoy is a Director of Power Designs, Inc., a
manufacturer of power supply and power line conditional products, and Laure
Beverage Company, a consumer beverage company. It is expected that Mr. LeRoy's
initial term as a director of HLM Design will expire at the first annual meeting
of stockholders of HLM Design following Board classification.

BRADLEY A. EARL is a Vice President managing the Philadelphia office of
HLMI. He joined HLMI in 1996. Prior to that he served in various leadership
positions in architectural firms and as an independent architect. He was
Director of Architecture at The Klett Organization from 1994 to 1996 and
Executive Architect to Children's Hospital of Philadelphia from 1992 to 1994. He
is a registered architect with 21 years of experience.

VIKTOR A. LITUCZY rejoined HLMI in 1996 as Vice President managing HLMI's
Portland, Oregon office. Prior to leaving HLMI in 1989. Mr. Lituczy was
Corporate Vice President for the Chicago office as well as director of high-tech
laboratory projects firmwide. From 1992 until 1996 he had his own architectural
practice in Portland and consulted with a number of healthcare clients and
architects on projects. From 1989 until 1992 he was an Associate Principal for
KMD Architects & Planners in Portland. He is a registered architect with 20
years of experience.

<PAGE>
ROBERT P. LUDDEN is a Vice President managing the Orlando office of HLMI.
He joined HLMI in 1993. Prior to that, from 1986 to 1993, he was a Vice
President at Cannon, a large architectural firm that focuses on healthcare
architecture. Mr. Ludden's career has focused on the leadership and direction of
significant architectural and engineering projects. His work spans a number of
markets including justice, healthcare, research and commercial. He is a
registered architect.

THOMAS G. PINKERTON is a Senior Vice President of HLMI. He joined the firm
in 1994 as National Director of Justice Architecture. Prior to joining HLMI he
was an associate with Hellmuth, Obata & Kassabaum, Inc., one of the largest
architectural firms in the country. A registered architect with 33 years of
experience, he has devoted his practice exclusively to the design of justice
facilities.

FRANK E. TALBERT is a registered architect with 17 years experience. He
joined HLMI in 1994 and is Vice President managing the Chicago office of HLMI.
Prior to joining HLMI he was President of FibreCem Corporation from 1992 to 1994
where he led the successful turnaround of that company. His success was achieved
with a combination of an intensive, hands-on sales effort, and a reorganization
of operations. From 1990 to 1992 he managed the Carolinas office of Kajima
International Inc., the world's largest turnkey developer/builder where he
established a program for financial enhancements on free standing not leased
retail projects. Mr. Talbert is a registered architect.

After the Offering, HLM Design intends to maintain two individuals not
employed by or affiliated with HLM Design to HLM Design's Board of Directors.
These directors will have access to regular outside legal counsel of HLM Design,
or independent counsel of their choosing, at the expense of the Company in
either event.

The Board of Directors of the Company is divided into three classes, each
of which, after a transitional period, will serve for three years, with one
class being elected each year. The executive officers are elected annually by,
and serve at the discretion of, HLM Design's Board of Directors.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Since HLM Design's organization in March 1997, all matters concerning
executive officer compensation have been addressed by the entire Board of
Directors. Since HLM Design's organization, Vernon Brannon and Joseph Harris
have been executive officers of HLM Design and, together with Clay R. Caroland
III and Shannon LeRoy, who each represent creditors of HLM Design, have
constituted the majority of the Board of Directors. As soon as practicable after
the Offering, HLM Design intends to maintain two independent directors who will
thereafter comprise its Compensation Committee.

LIMITATIONS OF DIRECTORS' LIABILITY

HLM Design's Certificate of Incorporation includes a provision that
effectively eliminates the liability of directors to HLM Design or to HLM
Design's stockholders for monetary damages for breach of the fiduciary duties of
a director, except for breaches of the duty of loyalty, acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, certain actions with respect to unlawful dividends, stock repurchases or
redemptions and any transaction from which the director derived an improper
personal benefit. This provision does not prevent stockholders from seeking
nonmonetary remedies covering any such action, nor does it affect liabilities
under the federal securities laws. HLM Design's Bylaws (as approved to become
effective upon completion of this Offering) further provide that HLM Design
shall indemnify each of its directors and officers, to the fullest extent
authorized by Delaware law, with respect to any threatened, pending or completed
action, suit or proceeding to which such person may be a party by reason of
serving as a director or officer. Delaware law currently authorizes a
corporation to indemnify its directors and officers against expenses (including
attorney's fees), judgments, fines and amounts paid in settlements actually and
reasonably incurred by them in connection with any action, suit or proceeding
brought by a third party if such officers or directors acted in good faith and
in a manner they reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal action or
proceeding, had no reason to believe their conduct was unlawful. Indemnification
is permitted in more limited circumstances with respect to derivative actions.
HLM Design believes that these provisions of its Certificate of Incorporation
and Bylaws are necessary to attract and retain qualified persons to serve as
directors and officers.

COMMITTEES OF THE BOARD

The Board of Directors of HLM Design intends to establish a Compensation
Committee and an Audit Committee consisting of independent directors. The
Compensation Committee will review and unanimously approve compensation for the
executive officers, and administer, and determine awards under, the Stock Option
Plan and any other incentive compensation plan for employees of the Company. See
" -- Stock Option Plan" and " -- Employee Stock Purchase Plan." The Audit
Committee will recommend the selection of auditors for the Company and will
review the results of the audit and other

<PAGE>
reports and services provided by the Company's independent auditors. HLM Design
has not previously had either of these committees.

DIRECTOR COMPENSATION

Members of the Board of Directors who are not employees of the Company will
be compensated for their services in amounts to be determined. The Company will
also reimburse all directors for their expenses incurred in connection with
their activities as directors of the Company. Directors who are also employees
of the Company receive no compensation for serving on the Board of Directors.

EXECUTIVE COMPENSATION

Set forth below is information for the years ended April 1997, 1996 and
1995 with respect to compensation for services to the Managed Firms:

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------------- NUMBER OF
OTHER SHARES
NAME AND ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION(S) YEAR SALARY(1) BONUS(2) COMPENSATION OPTIONS(3) COMPENSATION(4)
--------------------- ---- --------- -------- ------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Joseph M. Harris 1997 $ 230,878 $ 50,000 -0- -0- -0-
Chairman, President 1996 192,307 0
and Director 1995 188,784 60,000
Vernon B. Brannon 1997 178,847 50,000 -0- -0- -0-
Senior Vice President 1996 144,281 0
Chief Financial Officer 1995 117,614 30,000
and Director
</TABLE>

- ---------------

(1) For additional information, see "--Employment Agreements." Does not include
the dollar value of perquisites and other personal benefits.

(2) The amounts shown are cash bonuses earned in the specified year and paid in
the first quarter of the following year.

(3) The Company's Stock Option Plan was adopted in February 1998. No options
were granted to any of the Company's executive officers in the years ended
April 1997, 1996 or 1995. See "--Employment Agreements."

(4) The aggregate amount of perquisites and other personal benefits received did
not exceed the lesser of $50,000 or 10% of the total annual salary and bonus
reported for such executive officer.

EMPLOYMENT AGREEMENTS

HLM Design has entered into employment agreements with Messrs. Harris and
Brannon (the "Employment Agreements"), which provide for an annual base salary
and certain other benefits. Pursuant to the Employment Agreements, the base
salaries of Messrs. Harris and Brannon will be $300,000 and $250,000,
respectively (consistent with base salaries in effect since March 1997). Messrs.
Harris and Brannon will also receive a monthly automobile allowance of $1,000
and such additional compensation as may be determined by the Board of Directors.
Each of the Employment Agreements is for a term of three years and will
automatically be renewed for successive periods of one year. Additionally,
Messrs. Harris and Brannon each have received options pursuant to the Stock
Option Plan (that are currently effective or will become effective immediately
before completion of the Offering), for 57,954 shares of Common Stock,
exercisable, in the case of incentive stock options, at 110% of the initial
public offering price, and in the case of nonstatutory stock options, at $5.50
per share (but not less than 85% of the initial public offering price). See
" -- Stock Option Plan."

The Employment Agreements contain similar noncompetition provisions. These
provisions, during the term of the Employment Agreement, (i) prohibit the
disclosure or use of confidential Company information, and (ii) prohibit the
solicitation of the Company's clients, the participation or operation in any
business or service provided by the Company and, in the case of Mr. Harris, the
lending of his name to any business which provides architectural and engineering
services to persons who were clients or prospective clients of the Company. The
provisions referred to in (ii) above shall also apply for a period of three
years (with a corresponding severance arrangement tied to the foregoing base
salaries upon a termination or non-renewal without cause) following the
expiration or termination of an Employment Agreement.

<PAGE>
STOCK OPTION PLAN

In February 1998, the Board of Directors and stockholders of HLM Design
adopted the HLM Design, Inc. 1998 Stock Option Plan (the "Stock Option Plan") in
order to attract and retain key personnel. The following discussion of the
material features of the Stock Option Plan is qualified by reference to the text
of such plan filed as an exhibit to the Registration Statement of which this
Prospectus is a part.

Under the Stock Option Plan, options to purchase up to an aggregate of
159,955 shares of Common Stock may be granted to key employees of HLM Design and
its Managed Firms and to officers, directors, consultants and other individuals
providing services to the Company. Unless designated as "incentive stock
options" ("ISOs") intended to qualify under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), options granted under the Stock Option
Plan are intended to be "nonstatutory stock options" ("NSOs").

The Compensation Committee of the Board of Directors of HLM Design will
administer the Stock Option Plan and will determine, among other things, the
persons who are to receive options, the number of shares to be subject to each
option, and the vesting schedule of options; provided, that the Board of
Directors of HLM Design will make such determinations with respect to the
initial grants made under the Stock Option Plan. Members of the Board of
Directors who serve on the Compensation Committee must qualify as "non-employee
directors," as that term is defined in Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended. The Board of Directors of HLM
Design will determine the terms and conditions upon which HLM Design may make
loans to enable an optionee to pay the exercise price of an option. In selecting
individuals for options and determining the terms thereof, the Compensation
Committee may consider any factors it considers relevant, including present and
potential contributions to the success of the Company. Options granted under the
Stock Option Plan must be exercised within a period fixed by the Compensation
Committee, which period, subject to early termination upon the occurrence of
certain events, may not exceed ten years from the date of the grant of the
option or, in the case of ISOs granted to any holder on the date of the grant of
more than ten percent of the total combined voting power of all classes of stock
of HLM Design and its affiliated firms, five years from the date of grant of the
option. Options may be made exercisable in whole or in installments, as
determined by the Compensation Committee. However, the aggregate market value of
the Common Stock with respect to which ISOs are exercisable for the first time
by the holder during any calendar year may not exceed the limitation set forth
in Section 422(d) of the Code (currently $100,000). For this purpose, the market
value shall be determined as of the time the ISOs are granted.

Options generally may not be transferred other than by will or the laws of
descent and distribution and during the lifetime of an optionee may be exercised
only by the optionee. Notwithstanding the foregoing, the Compensation Committee,
in its discretion, subject to certain limitations, may grant transferable
options if such options are not ISOs. The exercise price of options that are
NSOs will be determined at the discretion of the Compensation Committee, but
will not be less than 85% of the market value of the Common Stock on the date of
grant of the NSOs. The exercise price of ISOs may not be less than the market
value of the Common Stock on the date of the grant of the option. In the case of
ISOs granted to any holder on the date of grant of more than ten percent of the
total combined voting power of all classes of stock of HLM Design and its
affiliated firms, the exercise price may not be less than 110% of the market
value of the Common Stock on the date of the grant of the ISOs. The exercise
price may be paid in cash, in shares of Common Stock owned by the optionee, in
NSOs granted under the Stock Option Plan (except that the exercise price of an
ISO may not be paid in NSOs) or in any combination of cash, shares and NSOs.

Options granted under the Stock Option Plan may include the right to
acquire a "reload" option. In such case, if an optionee pays all or part of the
exercise price of an option with shares of Common Stock held by the optionee for
at least six months, then, upon exercise of the option, the optionee is granted
a second option to purchase, at the fair market value as of the date of exercise
of the original option, the number of whole shares used by the optionee in
payment of the exercise price of the original option. A reload option is not
exercisable until one year after the grant date of such reload option or the
expiration date of the original option. If the exercise price of a reload option
is paid for with shares of Common Stock that have been held by the Optionee for
more than six (6) months, then another reload option will be issued. Shares of
Common Stock covered by a reload option will not reduce the number of shares of
Common Stock available under the Stock Option Plan.

The Stock Option Plan provides that, in the event of changes in the
corporate structure of HLM Design or certain events affecting the Common Stock,
adjustments will automatically be made in the number and kind of shares
available for issuance and in the number and kind of shares and option price
thereof covered by outstanding options. It further provides that, in connection
with any merger or consolidation in which HLM Design is not the surviving
corporation and which results in the holders of the Common Stock owning less
than a majority of the surviving corporation or any sale or transfer by HLM
Design of all or substantially all its assets or any tender offer or exchange
offer for or the acquisition, directly or indirectly, by any person or group of
all or a majority of the then-outstanding voting securities of HLM Design, all
outstanding options under the Stock Option Plan will become exercisable in full
on and after (i) the 15th day prior to the effective date of such merger,
consolidation, sale, transfer or acquisition or (ii) the date of commencement of
such tender offer or exchange offer, as the case may be.

The Board of Directors of HLM Design has approved the grant, effective on
or before the consummation of the Offering, of NSOs to purchase 40,568 shares of
Common Stock and ISOs to purchase 17,386 shares of Common Stock to each of
Joseph Harris and Vernon Brannon. No other grants of ISOs or NSOs will be made
on or before the consummation of the Offering.

<PAGE>
The issuance and exercise of ISOs have no federal income tax consequences
to the Company. While the issuance and exercise of ISOs generally have no
ordinary income tax consequences to the holder, upon the exercise of an ISO, the
holder will treat the excess of the Common Stock's fair market value on the date
of exercise over the exercise price as an item of tax adjustment for alternative
minimum tax purposes. If the holder of Common Stock acquired upon the exercise
of an ISO holds such stock until a date that is more than two years following
the grant of the ISO and one year following the exercise of the ISO, the
disposition of such Common Stock will ordinarily result in long-term capital
gain or loss to the holder for federal income tax purposes equal to the
difference between the amount realized on disposition of the Common Stock and
the option exercise price. If the holding period requirements described above
are not met, the holder will recognize ordinary income for federal income tax
purposes upon disposition of the Common Stock in an amount equal to the lesser
of (i) the excess of the Common Stock's fair market value on the date of
exercise over the option exercise price, and (ii) the excess of the amount
realized on disposition of the Common Stock over the option exercise price. Any
additional gain upon the disposition will be taxed as capital gains. Any capital
gain will be subject to reduced rates of tax if such shares were held more than
twelve months, and will be subject to further reduced rates if such shares were
held more than eighteen months. The Company will be entitled to a compensation
expense deduction for the Company's taxable year in which the disposition occurs
equal to the amount of ordinary income recognized by the holder.

The issuance of NSOs has no federal income tax consequences to the Company
or the holder. Upon the exercise of an NSO, NSO holders will recognize ordinary
income for federal income tax purposes at the time of option exercise equal to
the amount by which the fair market value of the underlying shares on the date
of exercise exceeds the exercise price. The Company generally will be allowed a
federal income tax deduction in the same amount. In the event of the disposition
of shares acquired by exercise of a NSO, any appreciation or depreciation after
the exercise date generally will be taxed as capital gain or loss; provided,
that any gain will be subject to reduced rates of tax if such shares were held
for more than twelve months and will be subject to further reduced rates if such
shares were held for more than eighteen months.

If the option exercise price under any NSO is paid for by surrendering
shares of Common Stock previously acquired, then the optionee will recognize
ordinary income on the exercise as described above with respect to any shares
acquired under the NSO in excess of the number of shares surrendered (such
shares being treated as having been acquired without consideration), but will
not recognize any taxable gain or loss on the difference between the optionee's
basis in the surrendered shares and their current fair market value. For federal
income tax purposes, the number of newly acquired shares equal to the number of
shares surrendered will have the same basis and holding period as the
surrendered shares. Any newly acquired shares in excess of the number of shares
surrendered will have a tax basis equal to the amount of ordinary income
recognized on such exercise (i.e., fair market value at exercise) and a holding
period which begins on the date the optionee recognizes ordinary income for tax
purposes.

HLM Design intends to register the shares underlying the Stock Option Plan
if required by the federal securities laws. If such registration is not
required, such shares may be issued upon option exercise in reliance upon the
private offering exemption codified in Section 4(2) of the Securities Act.
Resale of such shares may be permitted subject to the limitations of Rule 144.

Following the effective date of the Registration Statement of which this
Prospectus is a part, the Company will not permit the total number of shares
subject to outstanding warrants (exclusive of the Underwriters' Warrants (as
defined herein)) and options granted or authorized to be granted to exceed 10%
of all shares of Common Stock outstanding.

EMPLOYEE STOCK PURCHASE PLAN

In February 1998, the Board of Directors and stockholders of HLM Design
adopted the HLM Design, Inc. Employee Stock Purchase Plan (the "ESPP"). The ESPP
is intended to promote the interests of the Company by providing employees of
the Company the opportunity to acquire a proprietary interest in the Company
through the purchase of Common Stock. The following discussion of the material
features of the ESPP is qualified by reference to the text of such Plan filed in
an exhibit to the Registration Statement of which this Prospectus is a part.

The ESPP is intended to qualify as an "employee stock purchase plan" under
Section 423 of the Code. The ESPP is administered by the Compensation Committee,
which, subject to the terms of the ESPP, has plenary authority in its discretion
to interpret and construe the ESPP. The Compensation Committee will construe the
provisions of the ESPP so as to extend and limit participation in a manner
consistent with the requirements of Section 423 of the Code. A total of 57,954
shares of Common Stock has been reserved for purchase under the ESPP, provided
that the number of shares issued or issuable under the ESPP and under the Stock
Option Plan shall not at any time exceed in the aggregate 10% of the total
number of shares of Common Stock outstanding.

On January 1 of each year during the term of the ESPP (and also as soon as
administratively practicable following the effective date of the ESPP) (the
"Grant Date"), all eligible employees electing to participate in the ESPP
("Participating Employees") will be granted options to purchase shares of Common
Stock. As of each Grant Date, each Participating Employee will be deemed to have
been granted an option to purchase that number of shares of Common Stock that
equals: (i) the Participating Employee's base pay (as defined in the ESPP) as of
the Grant Date divided by 1000, with fractional amounts of .50 or more rounded
up to the next dollar and fractional amounts of less than .50 disregarded,
multiplied by (ii) two. No Participating Employee may be granted an option which
would permit such employee to purchase stock under the ESPP and all other
employee stock purchase plans of HLM Design and its subsidiaries at a rate which
exceeds $25,000 of the

<PAGE>
fair market value of such stock (determined at the time such option is granted)
for each calendar year in which such option is outstanding at any time.

A Participating Employee may elect to designate a limited percentage of
such employee's base pay (as defined in the ESPP) to be deferred by payroll
deduction as a contribution to the ESPP. To the extent a Participating Employee
has accumulated enough funds, his or her contributions to the ESPP will be used
to exercise the option granted under the ESPP through purchases of Common Stock
on the last business day of March, June, September and December, on which the
principal trading market for the Common Stock is open for trading and on any
other interim dates during the year which the Compensation Committee designates
for such purpose (the "Exercise Date"). Contributions which are not enough to
purchase a whole share of Common Stock will be carried forward and applied on
the next Exercise Date in that calendar year.

The purchase price at which Common Stock will be purchased through the ESPP
shall be eighty-five percent of the lesser of (i) the fair market value of the
Common Stock on the applicable Grant Date, and (ii) the fair market value of the
Common Stock on the applicable Exercise Date. Any option granted to a
Participating Employee will be exercised automatically on each Exercise Date
during the calendar year of the option's Grant Date in whole or in part such
that the Participating Employee's accumulated contributions as of such Exercise
Date will be applied to the purchase of the maximum number of whole shares of
Common Stock that such contribution will permit at the applicable option price,
limited to the number of shares available for purchase under the option.

Any option granted to a Participating Employee will expire on the last
Exercise Date of the calendar year in which granted. However, if a Participating
Employee withdraws from the ESPP or terminates employment prior to such Exercise
Date, the option may expire earlier.

Upon termination of a Participating Employee's employment for any reason
other than cause or death, such employee may, at his or her election, request
the return of contributions not yet used to purchase Common Stock or continue
participation in the ESPP until the Exercise Date next following the date of
termination of employment such that any unexpired option held will be exercised
automatically on such Exercise Date. If a Participating Employee dies while
employed by the Company or prior to the Exercise Date next following the date of
termination of employment, such employee's estate will have the right to elect
to withdraw all contributions not yet used to purchase Common Stock or to
exercise the Participating Employee's option for the purchase of Common Stock on
the Exercise Date next following the date of such employee's death.

The Board of Directors of HLM Design may at any time amend, suspend or
terminate the ESPP; provided, however, that the ESPP may not be amended to
increase the maximum number of shares of Common Stock for which options may be
granted under the ESPP, other than in connection with a change in
capitalization, without obtaining the approval of HLM Design stockholders.

No federal taxable income will be recognized by Participating Employees
upon the grant of an option to purchase Common Stock under the ESPP. In
addition, a Participating Employee will not recognize federal taxable income on
the exercise of an option granted under the ESPP.

If the Participating Employee holds shares of Common Stock acquired upon
the exercise of an option granted under the ESPP until a date that is more than
two years from the Grant Date of the relevant option and one year from the date
of option exercise (or dies while owning such shares), the employee must report
as ordinary income in the year of disposition of the shares (or at death) the
lesser of (a) the excess of the fair market value of the shares at the time of
disposition (or death) over the option exercise price and (b) the excess of the
fair market value of the shares on the date the relevant option was granted over
the option exercise price. For this purpose, the option exercise price is 85% of
the fair market value of the shares on the date the relevant option was granted
(assuming the shares are offered at a 15% discount). Any additional income is
treated as long-term capital gain. If these holding period requirements are met,
the Company is not entitled to any deduction for income tax purposes. If the
Participating Employee does not meet the holding period requirements, the
employee recognizes at the time of disposition of the shares ordinary income
equal to the amount by which the fair market value of the shares on the date of
exercise exceeds the option exercise price for the shares, irrespective of the
price at which the employee disposes of the shares, and an amount equal to such
ordinary income is generally deductible by the Company. Any additional gain
realized on the disposition of the shares will generally be capital gain or
loss; provided that any gain will be subject to reduced rates of tax if the
shares were held for more than twelve months and will be subject to further
reduced rates if the shares were held for more than eighteen months.

Because the ESPP is based on voluntary participation, benefits thereunder
are not determinable.

The Company intends to register the shares underlying the ESPP if required
by the federal securities laws. If such registration is not required, such
shares may be issued upon option exercise in reliance upon the private offering
exemption codified in Section 4(2) of the Securities Act. Resale of such shares
may be permitted subject to the limitations of Rule 144.

<PAGE>
CERTAIN TRANSACTIONS

RELATIONSHIPS WITH MANAGED FIRMS

Joseph Harris and Vernon Brannon, executive officers and principal
stockholders of HLM Design, are also the principal stockholders and officers of
the Managed Firms, HLMI, HLMNC and HLMO. As officers of the Managed Firms, they
caused the Managed Firms to enter into Management and Services Agreements with
HLM Design and as stockholders of each of the Managed Firms they entered into
Stockholders' Agreements. The primary purpose of the Stockholders' Agreement is
to restrict the ability of stockholders to exercise the rights commonly
associated with ownership of common stock and to effectively provide
stockholders of the Managed Firms with nominee stockholder status in order to
facilitate the execution and operation of the Management and Services
Agreements.

For information concerning certain advances from Messrs. Harris and Brannon
to HLMI, with respect to which there is a current aggregate outstanding balance
due from the Company of $27,000, see Note 4 to the accompanying combined
financial statements of HLM Design.

HLMI is the tenant under a triple net lease of certain warehouse space in
Charlotte, North Carolina entered into in December 1995 with a partnership of
which Messrs. Harris and Brannon (and family members) are the partners, as
landlord. Rental payments under such lease, which expires in 2005, are $3,500
per month.

Future material transactions between HLM Design or any of the Managed Firms
and any of the Company's officers, directors or controlling persons will be made
or entered into on terms that are no less favorable to HLM Design than those
that can be obtained from unaffiliated third parties. Additionally, any future
material transactions between HLM Design and any of the Company's officers,
directors or controlling persons or any of their affiliates (including
affiliated Managed Firms) will be approved by a majority of HLM Design's
directors and by a majority of its independent directors who do not have an
interest in the transactions.

MERGER TRANSACTION

In April 1997, HLMI and BBH Corp., a Delaware corporation controlled by
Joseph Harris and Vernon Brannon, entered into a Merger Agreement (the "Merger
Agreement") whereby HLMI and BBH Corp. merged, with HLMI being the surviving
corporation. Upon consummation of the transactions contemplated by the Merger
Agreement each share of HLMI common stock (excluding shares of HLMI common stock
held by BBH Corp., which were (i) contributed to BBH Corp. by Messrs. Harris and
Brannon as their initial capital contribution to BBH Corp. and (ii) purchased
from HLMI with the proceeds of a $3.2 million loan from HLM Design (the note
evidencing such loan, bearing interest at a nominal rate of 13.5% per annum and
maturing June 1, 2002, with monthly principal payments commencing June 1, 2000,
referred to herein as the "HLMI Note")) was converted into the right to receive
$64.00 in cash (the "Merger Consideration") and each share of BBH Corp. then
outstanding was converted into one share of HLMI common stock. Following the
consummation of the transactions contemplated by the Merger Agreement, Joseph
Harris and Vernon Brannon owned all of the outstanding common stock of HLMI.

The payment of the Merger Consideration was financed indirectly by the
Pacific/Equitas Loan and the First Charter Loan through the purchase of
additional HLMI capital stock by BBH Corp., effective simultaneously with the
Merger. In connection with the Pacific/Equitas Loan, HLM Design issued the
Pacific/Equitas Warrants to Pacific, Equitas and Messrs. Caroland and LeRoy and
granted certain registration rights which begin in 2000, with respect to the
Common Stock which underlies the Pacific/Equitas Warrants. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Description of Common
Stock -- Warrants." The Company intends to repay the outstanding balance on the
Pacific/Equitas Loan from the proceeds of the Offering. Once such loan is
repaid, Messrs. Harris and Brannon will be released from their personal
guarantees of the Pacific/Equitas Loan, and agreements relating to the
Pacific/Equitas Loan, subjecting the Company to certain affirmative and negative
covenants and providing rights to each of Pacific and Equitas to have a
representative on the HLM Design board and to each of Pacific and Equitas (and
their representatives) to participate in any proposed sale of HLM Design stock
by Messrs. Harris and Brannon, shall terminate.

BERTHEL LEASING LEASE FINANCING

Berthel Leasing, an affiliate of Berthel Fisher & Company Financial
Services, Inc., one of the Underwriters in the Offering, has entered into the
Lease Financing with HLMI and has provided HLM Design with a $0.75 million term
loan for working capital purposes. In addition, Berthel Leasing received the
Berthel Warrants and received certain registration rights

<PAGE>
which begin in 2000, with respect to the Common Stock which underlies the
Berthel Warrants. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources" and
"Description of Common Stock -- Warrants." A portion of the proceeds of the
Offering will be used to repay the $0.75 million term loan. The Company has also
agreed, in connection with the Offering, to sell to the Underwriters, including
Berthel Fisher & Company Financial Services, Inc., certain warrants. See
"Underwriting."

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of HLM Design's Common Stock as of March 27, 1998 by (i) each
stockholder who is known by HLM Design to own beneficially more than five
percent of the outstanding Common Stock, (ii) each director of HLM Design, (iii)
each executive officer of HLM Design, and (iv) all directors and executive
officers of HLM Design as a group, and as adjusted to reflect the sale by HLM
Design of the shares of Common Stock in this Offering.

<TABLE>
<CAPTION>
PERCENTAGE OF ALL
OUTSTANDING
COMMON STOCK
NUMBER OF SHARES -----------------------
OF COMMON STOCK BEFORE AFTER
NAME (1) OWNED(2) OFFERINGP OFFERING(3)
- ------------------------------------------------------------------------------------- ---------------- -------- -----------
<S> <C> <C> <C>
Joseph M. Harris(4)(5) 367,142 39.3% 17.2%
Vernon B. Brannon(4)(5) 367,141 39.3% 17.2%
Clay R. Caroland III(4) 10,991 1.3% *
D. Shannon LeRoy(4)(9) -- -- --
Berthel Leasing(6) 43,631 5.0% 2.1%
Pacific(7)(8) 98,953 10.2% 4.6%
Equitas(9) 73,300 8.4% 3.5%
All directors and executive officers as a group (4 persons) 745,274 85.2% 35.9%
</TABLE>

- ---------------
* Less than one percent.

(1) Unless otherwise noted, each person has sole voting and investment power
over the shares listed opposite his name subject to community property laws
where applicable.

(2) After giving effect to the Stock Split.

(3) If the Underwriters' over-allotment option is exercised in full, then after
the Offering the percentages of shares outstanding would be as follows:
Joseph Harris, 15.9%; Vernon Brannon, 15.9%; Clay Caroland III, less than
1%; Berthel Leasing, 1.9%; Pacific, 4.2%; Equitas, 3.3%; and all directors
and executive officers as a group, 33.0%.

(4) The address of such person is care of HLM Design at 121 West Trade Street,
Suite 2950, Charlotte, North Carolina 28202.

(5) Gives effect to options granted under HLM Design's Stock Option Plan which
will be exercisable upon consummation of the Offering. See
"Management -- Stock Option Plan."

(6) The address of such person is 100 Second Street Southeast, Cedar Rapids,
Iowa 52407.

(7) Includes shares of Common Stock which underlie currently exercisable
Warrants held by such person to be exercised immediately prior to the
effective date of the Registration Statement of which this Prospectus is a
part.

(8) The address of such person is Suite 1070, 3100 West End Avenue, Nashville,
Tennessee 37203.

(9) The address of such person is Suite 100, 2000 Glen Echo Road, Nashville,
Tennessee 37215. Although he serves as president of its general partner,
Mr. LeRoy disclaims beneficial ownership of shares held by Equitas.

DESCRIPTION OF CAPITAL STOCK

HLM Design's authorized capital stock consists of (i) 9,000,000 shares of
Common Stock, $.001 par value, and (ii) 1,000,000 shares of Preferred Stock,
$.10 par value. Upon completion of this Offering, HLM Design will have 2,075,087
outstanding shares of Common Stock (giving effect to the Stock Split and the
exercise by Pacific of its Warrants and not including Common Stock which
underlies the options granted pursuant to the Stock Option Plan) and no shares
of preferred stock.

<PAGE>
The following summary description of HLM Design's capital stock does not
purport to be complete and is qualified in its entirety by reference to HLM
Design's Certificate of Incorporation, which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part, and the Delaware
General Corporation Law (the "DGCL"). Reference is made to such exhibit and the
DGCL for a detailed description of the provisions thereof summarized below.

COMMON STOCK

The holders of validly issued and outstanding shares of Common Stock are
entitled to one vote per share of record on all matters to be voted upon by
stockholders. At a meeting of stockholders at which a quorum is present, a
majority of the votes cast decides all questions, unless the matter is one upon
which a different vote is required by express provision of law or HLM Design's
Certificate of Incorporation or Bylaws. There is no cumulative voting with
respect to the election of directors (or any other matter), but HLM Design's
Board of Directors is classified. The holders of a majority of the shares at a
meeting at which a quorum is present can, therefore, elect all of the directors
of the class then to be elected if they choose to do so, and, in such event, the
holders of the remaining shares would not be able to elect any directors of that
class.

The holders of Common Stock have no preemptive rights and have no rights to
convert their Common Stock into any other securities.

Subject to the rights of holders of Preferred Stock, if any, in the event
of a liquidation, distribution, sale of assets, dissolution or winding up of HLM
Design, holders of Common Stock are entitled to participate equally, share for
share, in all assets remaining after payment of liabilities.

The holders of Common Stock are entitled to receive ratably such dividends
as the Board of Directors may declare out of funds legally available therefor,
when and if so declared. The payment by HLM Design of dividends, if any, rests
within the discretion of its Board of Directors and will depend upon HLM
Design's results of operations, financial condition and capital expenditure
plans, as well as other factors considered relevant by the Board of Directors.
See "Dividends."

TRANSFER AGENT AND REGISTRAR

HLM Design has appointed First Union National Bank as the transfer agent
and registrar for the Common Stock.

WARRANTS

In May 1997, September 1997 and December 1997, HLM Design issued Warrants
to purchase an aggregate of 226,875 shares of Common Stock at an exercise price
of $.01 per share to Pacific, Equitas and Berthel Leasing and Messrs. Caroland
and Leroy in connection with financing arrangements. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources." By their terms, the
Pacific/Equitas Warrants expire in July 2002 and the Berthel Warrants expire in
September of that year; however, for a period of 30 days prior to expiration the
holder of any or all of the Warrants has the right and option to sell to HLM
Design any or all of the Warrants at a purchase price equal to the Fair Market
Value (as defined therein) of the shares of Common Stock issuable to the holder
upon exercise of the Warrant less the exercise price. The kind of securities
purchasable upon the exercise of the Warrants and the number of shares of Common
Stock purchasable upon exercise of the Warrants is subject to adjustment upon
the occurrence of certain events such as reclassification of securities,
consolidation or merger of HLM Design, subdivision or combination of Common
Stock or stock dividends. Additionally, if the indebtedness pursuant to which
the Warrants were issued is not repaid in full on or before May 30, 1999, the
number of shares of Common Stock each Warrant holder is able to purchase
increase and further increase on each May 30 thereafter until such indebtedness
is repaid in full. The Common Stock underlying the Berthel Warrants and the
Pacific/Equitas Warrants are subject to certain registration rights which begin
in 2000. Pursuant to the applicable registration rights agreement, upon the
request of holders of at least 50% of Registrable Securities (as defined
therein) HLM Design will, at its expense, within 90 days, effect registration
under the Securities Act. Such holders may require that HLM Design effect two
such requested registrations (which may be underwritten or non-underwritten).
Additionally, such agreements provide Berthel Leasing, Pacific and Equitas with
certain piggyback registration rights that permit them to have their shares of
Common Stock, as selling security holders, included in any registration
statements pertaining to the registration of Common Stock for issuance by the
Company or for resale by other selling security holders. These registration
rights will be limited or restricted to the extent an underwriter of an
offering, if an underwritten offering, determines that marketing factors require
a limitation of the number of shares to be underwritten.

As of the date hereof, (i) all of the Warrants issued to Berthel Leasing,
Equitas and Messrs. Caroland and Leroy have been exercised and the shares
underlying such Warrants are included in the currently outstanding shares
reflected elsewhere in this Prospectus, and (ii) Pacific has undertaken that it
will exercise all of its Warrants immediately prior to the effective

<PAGE>
date of the Registration Statement of which this Prospectus is a part. Except as
the context otherwise requires, the shares underlying the Warrants held by
Pacific are included in the outstanding shares reflected elsewhere in this
Prospectus.

PREFERRED STOCK

No shares of Preferred Stock are outstanding. HLM Design's Certificate of
Incorporation authorizes the Board of Directors to issue up to 1,000,000 shares
of Preferred Stock in one or more series and to establish such designations and
such relative voting, dividend, liquidation, conversion and other rights,
preferences and limitations as the Board of Directors may determine without
further approval of the stockholders of HLM Design. The issuance of Preferred
Stock by the Board of Directors could, among other things, adversely affect the
voting power of the holders of Common Stock and, under certain circumstances,
make it more difficult for a person or group to gain control of HLM Design.

The issuance of any series of Preferred Stock, and the relative
designations, rights, preferences and limitations of such series, if and when
established, will depend upon, among other things, the future capital needs of
the Company, the then-existing market conditions and other factors that, in the
judgment of the Board of Directors, might warrant the issuance of Preferred
Stock. As of the date of this Prospectus, there are no plans, agreements or
understandings for the issuance of any shares of Preferred Stock. Any issue of
Preferred Stock will be approved by the independent directors of HLM Design.

DELAWARE LAW AND CERTAIN CHARTER AND BYLAW PROVISIONS

Certain provisions of the DGCL and of HLM Design's Certificate of
Incorporation and Bylaws (as approved to become effective upon completion of
this Offering, summarized in the following paragraphs, may be considered to have
an antitakeover effect and may delay, deter or prevent a tender offer, proxy
contest or other takeover attempt that a stockholder might consider to be in
such stockholder's best interest, including such an attempt as might result in
payment of a premium over the market price for shares held by stockholders.

DELAWARE ANTITAKEOVER LAW. HLM Design, a Delaware corporation, is subject
to the provisions of the DGCL, including Section 203. In general, Section 203
prohibits a public Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which such person became an interested
stockholder unless: (i) prior to such date, the Board of Directors approved
either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder; or (ii) upon becoming an
interested stockholder, the stockholder then owned at least 85% of the voting
stock, as defined in Section 203; or (iii) subsequent to such date, the business
combination is approved by both the Board of Directors and by holders of at
least 66 2/3% of the corporation's outstanding voting stock, excluding shares
owned by the interested stockholder. For these purposes, the term "business
combination" includes mergers, asset sales and other similar transactions with
an "interested stockholder." An "interested stockholder" is a person who,
together with affiliates and associates, owns (or, within the prior three years,
did own) 15% or more of the corporation's voting stock. Although Section 203
permits a corporation to elect not to be governed by its provisions, HLM Design
to date has not made this election.

SPECIAL MEETINGS OF STOCKHOLDERS. HLM Design's Bylaws provide that special
meetings of stockholders, unless otherwise prescribed by law or its Certificate
of Incorporation, may be called only by the President at the request in writing
of a majority of the Board of Directors of HLM Design. This provision may make
it more difficult for stockholders to take action opposed by the Board of
Directors.

ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS. HLM Design's Bylaws provide that stockholders seeking to bring
business before an annual meeting of stockholders, or to nominate candidates for
election as directors at an annual or a special meeting of stockholders, must
provide timely notice thereof in writing. To be timely, a stockholder's notice
must be delivered to, or mailed and received at, the principal executive office
of the Company, (i) in the case of an annual meeting that is called for a date
that is within 30 days before or after the anniversary date of the immediately
preceding annual meeting of stockholders, not less than 60 days nor more than 90
days prior to such anniversary date, and, (ii) in the case of an annual meeting
that is called for a date that is not within 30 days before or after the
anniversary date of the immediately preceding annual meeting, or in the case of
a special meeting of stockholders called for the purpose of electing directors,
not later than the close of business on the tenth day following the day on which
notice of the date of the

<PAGE>
meeting was mailed or public disclosure of the date of the meeting was made,
whichever occurs first. The Bylaws also specify certain requirements for a
stockholder's notice to be in proper written form. These provisions may preclude
some stockholders from bringing matters before the stockholders at an annual
meeting or from making nominations for directors at an annual or special
meeting.

CLASSIFIED BOARD OF DIRECTORS. HLM Design's Bylaws provide for the Board of
Directors to be divided into three classes of directors serving staggered
three-year terms. As a result, approximately one-third of the Board of Directors
will be elected each year. Classification of the Board of Directors,
particularly coupled with the provision of the Bylaws authorizing only the Board
of Directors to fill vacant directorships, generally expands the time required
to change the composition of a majority of directors and may tend to discourage
a takeover bid for HLM Design, provided, that under HLM Design's Certificate of
Incorporation and Bylaws, notwithstanding the classified board of directors, the
stockholders may, by the affirmative vote of a majority of the outstanding
shares of Common Stock, remove a director with or without cause.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this Offering, HLM Design will have outstanding
2,075,087 shares of Common Stock (excluding shares of Common Stock which
underlie options granted under the Stock Option Plan (115,908 shares) and
assuming no exercise of the Underwriters' over-allotment option). Of such
amount, the 1,200,000 Shares sold in this Offering will be freely transferable
and may be resold without further registration under the Securities Act, except
for any shares purchased by an "affiliate" of HLM Design (as defined below),
which shares will be subject to the resale limitations of Rule 144 under the
Securities Act ("Rule 144"). The 745,274 shares of Common Stock currently held
by affiliates of the Company or which underlie options granted to affiliates are
also subject to the resale limitations of Rule 144. The 245,721 shares of Common
Stock, which are held by non-affiliates of the Company are also "restricted
securities" within the meaning of Rule 144. Such "restricted securities" may be
resold only pursuant to a registration statement under the Securities Act or
applicable exemption from registration thereunder, such as an exemption provided
by Rule 144.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned "restricted securities"
for at least one year may, under certain circumstances, resell within any
three-month period, such number of shares as does not exceed the greater of one
percent of the then-outstanding shares of Common Stock or the average weekly
trading volume of Common Stock during the four calendar weeks prior to such
resale. Rule 144 also permits, under certain circumstances, the resale of shares
without any quantity limitation by a person who has satisfied a two-year holding
period and who is not, and has not been for the preceding three months, an
affiliate of HLM Design. In addition, holding periods of successive
non-affiliate owners are aggregated for purposes of determining compliance with
these one-and two-year holding period requirements.

Upon completion of this Offering, 618,375 of the 875,087 shares of Common
Stock outstanding on the date of this Prospectus and not sold in the Offering
will have been held for at least one year. The remaining 256,712 (including
10,991 shares held by an affiliate) shares are "restricted securities", and
therefore may not be resold pursuant to Rule 144 upon completion of this
Offering.

The availability of shares for sale or actual sales under Rule 144 and the
perception that such shares may be sold may have an adverse effect on the market
price of the Common Stock. Sales under Rule 144 also could impair the Company's
ability to market additional equity securities.

HLM Design has agreed, subject to certain exceptions relating to the
execution of new Management and Services Agreements, not to offer, sell or
otherwise dispose of, and Messrs. Harris and Brannon have agreed not to offer or
sell, any shares of Common Stock or other equity securities of HLM Design, for
365 days from the date of this Prospectus without the prior written consent of
Berthel Fisher. Additionally, Messrs. Harris and Brannon and Berthel Leasing
have agreed to escrow all Common Stock owned by each of them for a period of
three years from the date of acquisition thereof, subject to prior release if
(i) the market price of the Common Stock exceeds 175% of the initial public
offering price for at least 90 consecutive trading days after at least one year
from the date of effectiveness of this Registration Statement, or (ii) the
Company achieves certain earnings results for two consecutive fiscal years.
Notwithstanding the foregoing, Messrs. Harris and Brannon and Berthel Leasing
have agreed with HLM Design that such Common Stock shall not be released from
escrow pursuant to (i) or (ii) above to the extent such release would result
in the recognition of compensation expense to the Company in connection
therewith.

<PAGE>
UNDERWRITING

Each of the underwriters named below (the "Underwriters") have severally
agreed, subject to the terms and conditions of the Underwriting Agreement, to
purchase from the Company the number of shares of Common Stock set forth
opposite their respective names below. The nature of the obligations of the
Underwriters is such that if any of such shares are purchased, all must be
purchased.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- ------------------------------------------------------------------------------------------ ---------
<S> <C>
Berthel Fisher & Company Financial Services, Inc..........................................
Westport Resources Investment Services, Inc...............................................
Marion Bass Securities Corporation........................................................
---------

Total................................................................................
---------
</TABLE>

The Underwriters have advised HLM Design that they propose initially to
offer the Common Stock offered hereby to the public at the price to the public
set forth on the cover page of this Prospectus. The Underwriters may allow a
concession to selected dealers who are members of the National Association of
Securities Dealers, Inc. ("NASD") not in excess of $
per share, and the Underwriters may allow, and such dealers may reallow, to
members of the NASD a concession not in excess of $ per share. After the
public offering, the price to the public, the concession and the reallowance may
be changed by the Underwriters.

HLM Design has granted an option to the Underwriters, exercisable within 45
business days after the date of the Prospectus, to purchase up to an aggregate
of 180,000 additional shares of Common Stock at the initial price to the public,
less the underwriting discount, set forth on the cover page of this Prospectus.
The Underwriters may exercise the option only for the purpose of covering
over-allotments. To the extent that the Underwriters exercise such option, each
Underwriter will be committed, subject to certain conditions, to purchase from
HLM Design on a pro rata basis that number of additional shares of Common Stock
which is proportionate to such Underwriters' initial commitment.

HLM Design has agreed, subject to certain exceptions relating to the
execution of new Management and Services Agreements, not to offer, sell or
otherwise dispose of, and Messrs. Harris and Brannon have agreed not to offer or
sell, any shares of Common Stock or other equity securities of HLM Design,
without the prior written consent of Berthel Fisher, for a period of 365 days
after the date of this Prospectus. Additionally, Messrs. Harris and Brannon and
Berthel Leasing have agreed to escrow all Common Stock owned by each of them for
a period of three years from the date of acquisition thereof, subject to prior
release if (i) the market price of the Common Stock exceeds 175% of the initial
public offering price for at least 90 consecutive trading days after at least
one year from the date of effectiveness of this Registration Statement, or (ii)
the Company achieves certain earnings results for two consecutive fiscal years.
Notwithstanding the foregoing, Messrs. Harris and Brannon and Berthel Leasing
have agreed with HLM Design that such Common Stock shall not be released from
escrow pursuant to (i) or (ii) above to the extent such release would result
in the recognition of compensation expense to the Company in connection
therewith.

At the request of HLM Design, the Underwriters have reserved up to 9,273
shares of the Common Stock for sale at the initial public offering price, and
otherwise on the same terms as sales pursuant to the Offering, to persons
designated by HLM Design. The number of shares of Common Stock available for
sale to the general public will be reduced to the extent such persons purchase
such reserved shares. Any reserved shares which are not so purchased will be
offered by the Underwriters to the general public on the same basis as the other
shares offered hereby.

Prior to this Offering, there has been no market for the Common Stock and
there can be no assurance that a regular trading market will develop upon the
completion of this Offering. The initial public offering price was determined by
negotiations between the Company and the Underwriters. The primary factors
considered in determining such offering price included the history of and
prospects for the Company's business and the industry in which the Company
competes, market valuation of comparable companies, market conditions for public
offerings, the prospects for future earnings of the Company, an assessment of
the Company's management, the general condition of the securities markets, the
demand for similar securities of comparable companies and other relevant
factors.

HLM Design has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act or to contribute to
payments the Underwriter may be required to make in respect thereof. Generally,
such indemnification or contribution rights relate to losses, claims, damages or
liabilities resulting from untrue statements of material fact contained in the
Registration Statement or any application or other document filed to qualify the
Common Stock under "blue sky" or securities laws of any state, or the omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading.

<PAGE>
The Underwriters have advised HLM Design that they do not intend to confirm
sales of Common Stock offered hereby to any accounts over which they exercise
discretionary authority.

Until the distribution of the Common Stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriter and
certain selling group members to bid for and purchase the Common Stock. As an
exception to these rules, the Underwriters are permitted to engage in certain
transactions that stabilize the price of the Common Stock. Such transactions
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of the Common Stock.

If the Underwriters create a short position in the Common Stock in
connection with the Offering, I.E., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus, the Underwriters may
reduce that short position by purchasing Common Stock in the open market. The
Underwriters may also elect to reduce any short position by exercising all or
part of the over-allotment option described above.

The Underwriters may also impose a penalty bid on certain members of the
underwriting group and selling group members. This means that if an Underwriter
purchases shares of Common Stock in the open market to reduce the Underwriter's
short position or to stabilize the price of the Common Stock, they may reclaim
the amount of the selling concession from the underwriting group and selling
group members who sold those shares as part of the Offering.

In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.

Neither HLM Design nor the Underwriters make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition, neither
HLM Design nor any of the Underwriters make any representation that the
Underwriters will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.

HLM Design has agreed to reimburse the Underwriters for actual out of
pocket expenses incurred by the Underwriters in connection with the Offering (up
to a maximum of 1.365% of the gross proceeds of the Offering without giving
effect to the Underwriters' over-allotment option), none of which has been paid
as of the date of this Prospectus. HLM Design has also agreed to pay all
expenses in connection with qualifying the Common Stock offered hereby for sale
under the laws of such states as the Underwriters may designate, including
filing fees and fees and expenses of counsel retained for such purposes by the
Underwriters, and registering the Offering with the NASD.

In connection with this Offering, HLM Design has agreed to sell to the
Underwriters, for a price of $.01 per warrant, warrants (the "Underwriters'
Warrants") to purchase shares of Common Stock equal to 10% of the total number
of shares of Common Stock sold pursuant to this Offering, excluding shares
subject to the over-allotment option. The Underwriters' Warrants are exercisable
at a price equal to 120% of the initial public offering price ($7.20 assuming an
initial public offering price of $6.00 per share (the low point of the range set
forth on the cover of this Prospectus)) for a period of four years commencing
one year from the date of this Prospectus (the "Exercise Period") subject to
customary terms and conditions including limitations on transfer, provisions
relating to fundamental corporate changes and antidilution protection. HLM
Design has also agreed that Berthel Fisher shall be entitled, for a period of
three (3) years following consummation of the Offering to have a representative
receive notice of, attend and observe, all Board meetings of HLM Design. Such
representative shall not be a Board member and shall have no voting rights at
any such meeting.

Berthel Leasing, an affiliate of Berthel Fisher & Company Financial
Services, Inc., provided lease financing to HLMI in an aggregate principal
amount of $2.8 million under the Lease Financing and provided HLM Design with a
$0.75 million term loan for working capital purposes. More than 10% of the net
proceeds of the Offering will be received by Berthel Leasing, by reason of the
use of such proceeds to repay a portion of such borrowings. In addition, the
$0.75 million term loan constitutes more than 10% of the subordinated debt of
the Company. Accordingly, the Offering will be conducted in accordance with NASD
Conduct Rule 2720, which requires that the public offering price of the Common
Stock be no higher than the price recommended by a Qualified Independent
Underwriter which has participated in the preparation of the Registration
Statement and performed its usual standard of due diligence with respect
thereto. Westport Resources Investment Services,

41
<PAGE>

Inc. will act as the Qualified Independent Underwriter for the Offering, and the
public offering price will not be higher than the price recommended by Westport
Resources Investment Services, Inc.

California investors participating in the Offering or seeking to purchase
shares of Common Stock in the secondary market must have a minimum net worth of
$250,000, exclusive of home(s), home furnishings and automobiles, and gross
income of $65,000, or, in the alternative, a minimum net worth of $500,000,
exclusive of home(s), home furnishings and automobiles. The Shares have not been
qualifed for sales in California by dealers following the Offering.

LEGAL MATTERS

Parker, Poe, Adams & Bernstein L.L.P., Charlotte, North Carolina, counsel
to the Company, will render an opinion that the Shares offered hereby, when
issued and paid for in accordance with the terms of the Underwriting Agreement,
will be duly authorized, validly issued, fully paid and nonassessable. Bradley &
Riley, P.C., Cedar Rapids, Iowa, has served as counsel to the Underwriters in
connection with this Offering.

EXPERTS

The audited financial statements of HLMI (Predecessor) as of April 25, 1997
and for each of the years in the three-year period ended April 25, 1997, and the
audited financial statements of HLM Design, Inc. as of April 25, 1997 and from
inception, March 6, 1997, to the period ended April 25, 1997, included in this
Prospectus and elsewhere in the Registration Statement of which this Prospectus
is a part, have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports appearing herein and elsewhere in the Registration
Statement, and have been so included in reliance upon the reports of such firm
given upon their authority as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"SEC") a Registration Statement on Form S-1 under the Securities Act with
respect to the Shares offered hereby. This Prospectus does not contain all of
the information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and the
Shares offered hereby, reference is made to the Registration Statement,
including the exhibits and schedules filed as part thereof. Statements contained
in this Prospectus as to the contents of any contract or any other documents are
not necessarily complete, and, in each such instance, reference is made to the
copy of the contract or document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such reference
thereto. The Registration Statement, together with its exhibits and schedules,
may be inspected at the Public Reference Section of the SEC at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the
SEC located at 7 World Trade Center, Suite 1300, New York, New York 10048 and at
the Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of all or any part of such materials may be obtained from
any such office upon payment of the fees prescribed by the SEC. Such information
may also be inspected and copied at the office of Nasdaq at 1735 K Street, NW
Washington, DC 20006-1500. The Commission also maintains a Website
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.

<PAGE>
INDEX TO FINANCIAL INFORMATION

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
HLM DESIGN, INC. AND AFFILIATES:
INDEPENDENT AUDITORS' REPORT......................................................................................... F-2
FINANCIAL STATEMENTS:
Balance Sheet at April 25, 1997 and unaudited Combined Balance Sheet at January 30, 1998.......................... F-3
Statements of Operations (unaudited) for the nine months ended January 24, 1997 (Predecessor), the one month ended
May 30, 1997 (Predecessor) and the Combined Statements of Income for the nine months ended January 30, 1998 (HLM
Design Inc.)..................................................................................................... F-4
Statements of Stockholders' Equity for the period ended April 25, 1997 and (unaudited) Combined statement of
stockholder's equity for the nine months ended January 30, 1998.................................................. F-5
Statements of Cash Flows (unaudited) for the nine months ended January 24, 1997 (unaudited) (Predecessor), the one
month ended May 30, 1997 (Predecessor) and Combined Statements of Cash Flows for the nine months ended January
30, 1998 (HLM Design Inc.)....................................................................................... F-6
Notes to Financial Statements..................................................................................... F-7

HANSEN LIND MEYER, INC. ("HLMI")
INDEPENDENT AUDITORS' REPORT......................................................................................... F-15
FINANCIAL STATEMENTS:
Balance Sheets at April 26, 1996 and April 25, 1997............................................................... F-16
Statements of Operations for the years ended April 30, 1995, April 26, 1996 and April 25, 1997.................... F-17
Statements of Stockholders' Equity for the years ended April 30, 1995, April 26, 1996 and April 25, 1997.......... F-18
Statements of Cash Flows for the years ended April 30, 1995, April 26, 1996 and April 25, 1997.................... F-19
Notes to Financial Statements..................................................................................... F-20
</TABLE>

F-1

<PAGE>
INDEPENDENT AUDITORS' REPORT

BOARD OF DIRECTORS
HLM DESIGN, INC.
Charlotte, North Carolina

We have audited the accompanying balance sheet of HLM Design, Inc. (the
"Company") as of April 25, 1997, and the related statements of stockholders'
equity, for the period from inception March 6, 1997 to April 25, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of April 25,
1997, and the changes in stockholders equity for the period from inception March
6, 1997 to April 25, 1997 in conformity with generally accepted accounting
principles.

DELOITTE & TOUCHE LLP
November 11, 1997 (January 30, 1998, February 13, 1998 and February 27, 1998 as
to the last paragraph in Note 1)
Charlotte, North Carolina

F-2

<PAGE>
HLM DESIGN, INC. AND AFFILIATES

BALANCE SHEETS

APRIL 25, 1997 AND JANUARY 30, 1998

<TABLE>
<CAPTION>
HLM
DESIGN COMBINED
APRIL 25, JANUARY 30,
1997 1998
--------- -----------
<S> <C> <C>
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash.............................................................................................. $ 2,771
Trade and other receivables, less allowance for doubtful accounts of $150,000 at January 30,
1998........................................................................................... 6,338,342
Costs and estimated earnings in excess of billings on uncompleted projects (Note 3)............... 5,471,799
Prepaid expenses.................................................................................. 591,819
-----------
Total current assets......................................................................... 12,404,731
-----------
OTHER ASSETS:
Deferred income taxes (Note 8).................................................................... 562,821
Goodwill, less amortization of $114,549 at January 30, 1998 (Note 2).............................. 2,467,513
Other noncurrent assets........................................................................... 774,950
-----------
Total other assets........................................................................... 3,805,284
-----------
PROPERTY AND EQUIPMENT:
Leasehold improvements............................................................................ 701,119
Furniture and fixtures............................................................................ 1,560,298
-----------
Total property and equipment................................................................. 2,261,417
-----------
Less accumulated depreciation..................................................................... (427,877)
-----------
Property and equipment, net.................................................................. 1,833,540
-----------
TOTAL ASSETS........................................................................................ $18,043,555
-----------
-----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable (Note 4)............................................................................ $ 2,250,000
Accounts payable.................................................................................. 3,547,171
Accrued expenses.................................................................................. 1,444,022
Income taxes payable.............................................................................. 19,353
Billings in excess of costs and estimated earnings on uncompleted projects (Note 3)............... 3,188,791
Deferred income taxes (Note 8).................................................................... 1,644,953
Current maturities of long-term debt (Note 4)..................................................... 743,311
-----------
Total current liabilities.................................................................... 12,837,601
-----------
LONG-TERM DEBT (Note 4)............................................................................. 4,357,057
-----------
TOTAL LIABILITIES................................................................................... 17,194,658
-----------
COMMITMENTS AND CONTINGENCIES (Note 5, 6)
WARRANTS OUTSTANDING (Note 4)....................................................................... 200,068
-----------
STOCKHOLDERS' EQUITY:
HLM Design, Inc. Capital Stock
Common, $.001 par value, voting, authorized 9,000,000 shares; issued 618,375 and 702,834,
respectively.................................................................................. 618 703
Preferred, $.10 par value, voting, authorized 1,000,000, no shares outstanding.................
HLMNC and HLMO, Capital Stock, common, $.01 par value, authorized, outstanding 600................ 6
Hansen Lind Meyer Inc. Capital stock, common, $.01 par value:
Class A, voting, authorized 2,000,000 shares; issued 200....................................... 2
Class B, nonvoting, authorized 1,000,000 shares, no shares outstanding......................... -- --
Additional paid in capital........................................................................ 2,382 101,031
Retained earnings................................................................................. 556,611
Stock Subscription Receivable..................................................................... (3,000) (9,524)
--------- -----------
Total stockholders' equity.......................................................................... 648,829
--------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.......................................................... $ $18,043,555
--------- -----------
--------- -----------
</TABLE>

See notes to financial statements.

F-3

<PAGE>
HLM DESIGN, INC. AND AFFILIATES

STATEMENTS OF OPERATIONS

ONE MONTH ENDED MAY 30, 1997 (PREDECESSOR) AND NINE MONTHS ENDED
JANUARY 24, 1997 (PREDECESSOR) AND JANUARY 30, 1998 (COMBINED)

<TABLE>
<CAPTION>
(HLM
(PREDECESSOR (PREDECESSOR DESIGN)
COMPANY) COMPANY) COMBINED
----------- ---------- -----------
NINE MONTHS ONE MONTH NINE MONTHS
ENDED ENDED ENDED
----------- ---------- -----------
JANUARY 24, MAY 30, JANUARY 30,
1997 1997 1998
----------- ---------- -----------
<S> <C> <C> <C>
(UNAUDITED) (UNAUDITED) (UNAUDITED)
REVENUES (Note 1):
Fee income..................................................................... $18,439,931 $1,998,611 $16,160,923
Reimbursable income............................................................ 1,002,349 234,425 5,382,493
----------- ---------- -----------
Total revenues............................................................ 19,442,280 2,233,036 21,543,416
----------- ---------- -----------
CONSULTANT EXPENSES.............................................................. 3,573,159 192,862 3,802,734
----------- ---------- -----------
PROJECT EXPENSES:
Direct expenses................................................................ 522,063 35,404 744,579
Reimbursable expenses.......................................................... 877,693 68,617 630,190
----------- ---------- -----------
Total project expenses.................................................... 1,399,756 104,021 1,374,769
----------- ---------- -----------
NET PRODUCTION INCOME............................................................ 14,469,365 1,936,153 16,365,913
DIRECT LABOR..................................................................... 4,944,712 602,096 4,802,078
INDIRECT EXPENSES................................................................ 9,848,192 1,172,712 9,744,540
----------- ---------- -----------
OPERATING INCOME (LOSS).......................................................... (323,539) 161,345 1,819,295
----------- ---------- -----------
OTHER INCOME (EXPENSE):
Interest income................................................................ 3,575 54 1,888
Interest expense............................................................... (283,602) (37,005) (750,509)
----------- ---------- -----------
Total other income (expense), net......................................... (280,027) (36,951) (748,621)
----------- ---------- -----------
INCOME (LOSS) BEFORE TAXES....................................................... (603,566) 124,394 1,070,674
INCOME TAXES (Note 8):
Current tax expense (benefit).................................................. (23,713) (11,907) 58,000
Deferred tax expense (benefit)................................................. (119,804) 54,907 456,063
----------- ---------- -----------
Total income tax expense (benefit)........................................ (143,517) 43,000 514,063
----------- ---------- -----------
NET INCOME (LOSS)................................................................ $ (460,049) $ 81,394 $ 556,611
----------- ---------- -----------
----------- ---------- -----------
PRO FORMA NET INCOME PER SHARE (NOTE 1).......................................... $ .65
-----------
-----------
PRO FORMA NUMBER OF SHARES USED TO COMPUTE PER SHARE DATA (NOTE 1)............... 859,973
-----------
-----------
</TABLE>

See notes to financial statements.

F-4

<PAGE>
HLM DESIGN, INC. AND AFFILIATES

STATEMENTS OF STOCKHOLDERS' EQUITY

INCEPTION MARCH 6, 1997 TO APRIL 25, 1997 AND THE
NINE MONTHS ENDED JANUARY 30, 1998 (COMBINED)

<TABLE>
<CAPTION>
COMMON STOCK STOCK TOTAL
------------------ ADDITIONAL RETAINED SUBSCRIPTION STOCKHOLDERS'
SHARES AMOUNT PAID-IN-CAPITAL EARNINGS RECEIVABLE EQUITY
-------- ------ --------------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
ORGANIZATION OF HLM DESIGN,
MARCH 6, 1997................................ $ $ $ $ $
Issuance of HLM Design, Inc. shares.......... 618,375 618 2,382 (3,000)
-------- ------ --------------- ------------
BALANCE, APRIL 25, 1997........................ 618,375 618 2,382 (3,000)
-------- ------ --------------- -------- ------------ -------------
Equity of Combining Entities May 31, 1997
(UNAUDITED):
HLMI.................................... 200 2 2
HLMNC................................... 300 3 297 (300)
HLMO.................................... 300 3 297 (300)
Stock Issuance - HLM Design (unaudited)...... 84,459 85 98,055 (5,924) 92,216
Net Income -- Combined (unaudited)........... 556,611 556,611
-------- ------ --------------- -------- ------------ -------------
BALANCE JANUARY 30, 1998 -- COMBINED
(UNAUDITED).................................. 703,634 $ 711 $ 101,031 $556,611 $ (9,524) $ 648,829
-------- ------ --------------- -------- ------------ -------------
-------- ------ --------------- -------- ------------ -------------
</TABLE>

See notes to financial statements.

F-5

<PAGE>
HLM DESIGN, INC. AND AFFILIATES

STATEMENTS OF CASH FLOWS

ONE MONTH ENDED MAY 30, 1997 (PREDECESSOR),
AND THE NINE MONTHS ENDED JANUARY 24, 1997 (PREDECESSOR) AND JANUARY 30, 1998
(COMBINED)

<TABLE>
<CAPTION>
(PREDECESSOR COMPANY) (HLM
-------------------------- DESIGN)
COMBINED
NINE MONTHS ONE MONTH NINE MONTHS
ENDED ENDED ENDED
----------- ----------- -----------
JANUARY 29, MAY 30, JANUARY 30,
1997 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
(UNAUDITED) (UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................................................... $ (460,049) $ 81,394 $ 556,611
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation................................................................. 431,073 55,544 247,463
Amortization of goodwill..................................................... 77,589 9,571 114,549
Amortization of deferred loan fees........................................... 108,526
Deferred rent................................................................ 4,249
Deferred income taxes........................................................ (110,228) 54,907 (17,844)
Changes in certain working capital items:
Increase in trade and other receivables.................................... (326,971) (1,500,472) (622,088)
Increase in costs and estimated earnings compared to billings on
uncompleted contracts, net................................................ 1,162,905 1,199,028 38,310
(Increase) decrease in refundable income taxes............................. (42,465) (11,157) 504,400
Increase in prepaid expenses............................................... (545,813) (10,427) (333,837)
(Increase) decrease in other assets........................................ 352,700 (1,152) (170,668)
Increase (decrease) in accounts payable.................................... (808,446) 233,659 (913,522)
Increase (decrease) in accrued expenses.................................... 718,998 (278,500) 643,475
Increase (decrease) in other non-current liabilities....................... (15,000) 15,000
----------- ----------- -----------
Net cash (used in) provided by operating activities..................... 438,542 (152,605) 155,375
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment............................................. (600,377) (2,023) (549,848)
Note receivable from officer.................................................... (130,000) 30,000
----------- ----------- -----------
Net cash used in investing activities................................... (730,377) (2,023) (519,848)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment on line of credit....................................................... 400,000 (2,360,000)
Proceeds from long-term borrowings.............................................. 100,000 2,800,000 6,712,307
Payments on long-term borrowings................................................ (216,974) (285,372) (3,305,100)
Payment of deferred loan fees................................................... (56,300)
Payment on ESOP buyback......................................................... (3,221,824)
Proceeds from issuance of notes payable to shareholders......................... 182,308
Proceeds from the issuance of warrants.......................................... 24,757
Proceeds from exercise of warrants.............................................. (135)
Proceeds from issuance of common stock.......................................... 28,910
----------- ----------- -----------
Net cash provided by financing activities............................... 283,026 154,628 364,923
----------- ----------- -----------
INCREASE (DECREASE) in Cash....................................................... (8,809) 450
CASH BALANCE:
Beginning of year............................................................... 11,130 2,321 2,321
----------- ----------- -----------
End of year..................................................................... $ 2,321 $ 2,321 $ 2,771
----------- ----------- -----------
----------- ----------- -----------
SUPPLEMENTAL DISCLOSURES:
Cash paid (received) during the year for:
Interest..................................................................... $ 280,042 $ 6,827 $ 584,695
Income tax payments (refunds)................................................ $ 18,752 $ (750) $ 21,244
Noncash investing and financing transactions:
Retirement of common stock through issuance of note payable.................. $ 36,047
Reduction of ESOP debt....................................................... $ 336,231
Issuance of warrants to certain debtholders.................................. $ 238,752
</TABLE>

See notes to financial statements.

F-6

<PAGE>
HLM DESIGN, INC. AND AFFILIATES

NOTES TO FINANCIAL STATEMENTS

INCEPTION MARCH 6, 1997 TO APRIL 25, 1997 AND THE NINE MONTHS ENDED JANUARY 24,
1997
(PREDECESSOR -- UNAUDITED), THE ONE MONTH PERIOD ENDED MAY 30, 1997
(PREDECESSOR -- UNAUDITED) AND THE NINE MONTHS ENDED JANUARY 30, 1998
COMBINED -- UNAUDITED

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BUSINESS -- HLM Design, Inc. ("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 services agreement.

In May 1997, Design executed long term management and services agreements
with Hansen Lind Meyer Inc. ("HLMI"), HLM of North Carolina, P.C. ("HLMNC") and
HLM of Oregon, Architecture and Planning, P.C. ("HLMO"). HLMNC and HLMO,
organized in 1996 and have had no operations as of January 30, 1998 (HLMI, HLMNC
and HLMO are referred to herein collectively as "AEP"). Design and AEP are
referred to herein collectively as "the Company". In May 1997, HLMI entered into
a merger agreement with BBH Corp., a newly formed entity controlled by the
principal shareholders of Design, whereby Design loaned BBH Corp $3.2 million
which BBH Corp utilized to buy common stock in HLMI. Under the merger agreement,
BBH Corp merged into HLMI with HLMI being the surviving entity. As a part of the
merger agreement, HLMI redeemed previously outstanding common stock of HLMI,
from its' employee Stock Ownership Plan ("ESOP") and other shareholders, except
the shareholders of BBH Corp. the shares redeemed represented over 90% of the
pre-merger voting interest. As a result of the change in control, the assets and
liabilities of HLMI were fair valued using purchase accounting principles and
the excess of the fair value over the identified tangible net assets was
reflected as goodwill.

The management and service agreements are for 40 years. HLM Design is the
sole and exclusive manager and administrator of all of the Managed Firm's
day-to-day business functions including financial planning, facilities,
equipment and supplies, and management and administrative services (bookkeeping
and accounts, general administration services, contract negotiation and
administration for all non-architectural and non-engineering aspects of all
agreements (pertaining to the provision of architectural and engineering
services by Managed Firms to third parties), personnel, security and
maintenance, architectural and engineering recruiting and training, insurance,
issuance of debt and capital stock, billing and collections). For these
services, HLM Design receives all but 1% of the firm's positive cash flow (as
determined in accordance with generally accepted accounting principles applied
on a consistent basis) following the payment by the Managed Firm of all such
firm's expenses.

In addition, as a result of the consummation of the Management and Services
Agreements and the stockholders' agreements with the AEP's, the financial
statements of Design and the managed firm's are presented on a Combined basis
from May 31, 1997.

FINANCIAL STATEMENT PRESENTATION

The financial statements included herein reflect the following:

(Bullet) HLM Design, Inc. as of April 25, 1997, HLM Design, Inc. had no
operations or cash flows from March 6, 1997, date of inception, to
April 25, 1997

(Bullet) Hansen Lind Meyer Inc. (Predecessor Company) for the one month
ended May 30, 1997 (unaudited) and for the nine months ended
January 24, 1997 (unaudited)

(Bullet) HLM Design, Inc. combined with HLMI, HLMNC and HLMO, all from May
31, 1997 the effective date of the Management Services Agreements
a shareholders agreements, as of January 30, 1998 and for the nine
months then ended (unaudited). All significant balances and
transactions between HLM Design and HLMI, HLMNC and HLMO have been
eliminated in the combined financial statements.

HLMI provides architectural and engineering consulting and design services,
which constitutes one business segment nationally from offices in Iowa City,
Chicago, Denver, Orlando, Atlanta, Bethesda, Philadelphia, Portland and
Sacramento.

PROPOSED STOCK OFFERING -- HLM Design intends to undertake an initial
public offering of HLM Design's Common Stock (the "Offering"). In connection
with the anticipated Offering, HLM Design intends to issue shares of its common
stock.

F-7

<PAGE>
HLM DESIGN, INC. AND AFFILIATES

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES -- Continued

FISCAL YEAR-END POLICY -- The Company uses a 52-53 week fiscal year for
accounting purposes which defines the fiscal year-end date as the last Friday in
April. Thus, the current fiscal year-end is April 25, 1997. In fiscal 1998, the
Company changed its year-end to the Friday nearest the end of April.

OPERATING CYCLE -- Assets and liabilities related to long-term contracts
are included in current assets and current liabilities in the accompanying
balance sheets, as they will be liquidated in the normal course of contract
completion, although this may require more than one year.

REVENUE RECOGNITION -- Revenue is recognized, at estimated collectible
amounts, in the period the services are performed. More specifically, the
Company recognizes revenues either on the percentage-of-completion method
measured by the percentage of cost incurred to date to estimated total cost for
each contract, or based upon a fixed hourly rate. Consultant expenses, project
expenses, direct labor and indirect expenses are charged to expense as incurred.
Provisions for estimated losses on uncompleted projects are made in the period
in which such losses are first subject to reasonable estimation. Unanticipated
changes in project performance, project conditions and estimated profitability
may result in revisions to costs and income and are recognized in the period in
which the revisions are determined.

The asset "costs and estimated earnings in excess of billings on
uncompleted projects" represents revenues recognized in excess of amounts
billed. The liability "billings in excess of costs and estimated earnings on
uncompleted projects" represents billings in excess of revenues recognized.

USE OF ESTIMATES -- The preparation of 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 at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
The most significant estimate impacting the accompanying financial statements
relates to revenue recognition.

PROPERTY AND EQUIPMENT -- Leasehold improvements and equipment are stated
at cost. Depreciation is computed using the double-declining balance or
straight-line method over the estimated useful lives of the assets or the lease
term, including anticipated renewals. The estimated useful lives are as follows:

<TABLE>
<CAPTION>
PREDECESSOR COMBINED
----------------------------- -----------------------------
<S> <C> <C>
Computer equipment and
software..................... 5 years 5 years
Furniture...................... 7 years 5 years
Lease term, not to exceed Lease term, not to exceed
Leasehold improvements......... the useful life of the asset the useful life of the asset
</TABLE>

GOODWILL -- Goodwill represents the excess of purchase price over the
estimated fair value of the net assets acquired (HLMI) and is being amortized
over a fifteen-year period (Combined) and over a four year period for
predecessor acquisition of MPB Architects.

DEFERRED INCOME TAXES -- Deferred income tax assets and liabilities are
calculated based upon differences between the financial statement and tax basis
of assets and liabilities that will result in taxable or deductible amounts in
the future. Such deferred income tax asset or liability computations are based
on enacted tax laws and rates applicable to periods in which the differences are
expected to affect taxable income.

FINANCIAL INSTRUMENTS -- The carrying amount of cash, accounts receivable,
accounts payable and accrued liabilities approximates fair value because of the
short maturities of these instruments. The Company's bank borrowings approximate
fair value because their interest rates are based on variable reference rates.

PREFERRED STOCK -- HLM Design's Certificate of Incorporation authorizes the
Board of Directors of HLM Design to issue 1,000,000 shares of preferred stock
with such designations, rights and preferences as may be determined from time to
time by the Board of Directors. Accordingly, the Board of Directors is
empowered, without stockholder approval, to issue preferred stock with dividend,
liquidation, conversion, voting or other rights that could adversely effect the
voting power or

F-8

<PAGE>
HLM DESIGN, INC. AND AFFILIATES

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES -- Continued
other rights of the holders of HLM Design's Common Stock. As of January 30, 1998
there were no preferred shares outstanding.

STOCK SUBSCRIPTIONS RECEIVABLE -- The amount due from shareholders for
outstanding Common Stock.

NEW ACCOUNTING STANDARD -- Effective April 27, 1996, HLMI adopted Statement
of Financial Accounting Standards ("SFAS") No. 121, ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF,
during the year. It requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Management has reviewed all long-lived assets and
intangible assets as of January 24, 1997 and January 30, 1998 and believes that
the carrying amounts reported in the balance sheet will be recovered over the
remaining useful lives of those assets.

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Standards No. 128, "Earnings Per Share." This Statement specifies
the computation, presentation and disclosure requirements for earnings per
share. It will be effective for periods ending December 15, 1997. The Company
believes that the adoption of such statement would not result in earnings
materially different than pro forma earnings per share presented in accompanying
statements of income.

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income." This
Standard establishes standards of reporting and display of comprehensive income
and its components in a full set of general-purpose financial statements. This
Statement will be effective for the Company's fiscal year ending May 1, 1998,
and the Company does not intend to adopt this Statement prior to the effective
date.

On November 20, 1997, EITF 97-2, "Application of FASB Statement No. 94,
CONSOLIDATION OF ALL MAJORITY-OWNED SUBSIDIARIES, and APB Opinion No. 16,
BUSINESS COMBINATIONS, to Physician Practice Management Entities and Certain
Other Entities with Contractual Management Arrangements", was issued which
reached a consensus that arrangements similar to HLM Design and the Managed
Firms should be accounted for on a consolidated basis. The Company intends to
reflect this change prospectively in the fiscal year ended May 1, 1998 financial
statements. If the change had been effected for the nine months ended January
30, 1998, the effect would have been a reduction to Stockholder's Equity by
approximately $10,511, an increase in minority interest by approximately $10,511
and a decrease in Net Income of approximately $10,509.

INTERIM FINANCIAL INFORMATION -- The accompanying unaudited financial
information for the nine months ended January 24, 1997 (Predecessor) and January
30, 1998 (Combined) has been prepared on substantially the same basis as the
audited financial statements, and include all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the financial
information set forth therein. The results for interim periods are not
necessarily indicative of the results to be expected for the entire fiscal year.

STOCK SPLIT AND PRO FORMA NET INCOME PER SHARE -- All share and per share
amounts included in the accompanying financial statements for all periods
presented have been adjusted to reflect an 11 for 1 stock split of the HLM
Design Common Stock effective as of January 30, 1998 and a 1.75 for 1 stock
split effective as of February 13, 1998, and a reverse stock split of .66 for 1
effective as of February 27, 1998 for an effective 12.75 for 1 stock split
("Stock Split"). In addition, there was a reduction in Common Stock par value to
$.001 effective as of February 13, 1998. Pro forma net income per share in the
accompanying financial statements has been prepared based upon the shares
outstanding without giving effect to the issuance of common stock related to the
offering.

F-9

<PAGE>
HLM DESIGN, INC. AND AFFILIATES

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

2. BUSINESS ACQUISITION

Effective May 23, 1997, HLMI sold 50,000 newly issued shares to BBH Corp.,
a Delaware corporation, for approximately $3.2 million. On May 23, 1997, BBH
Corp. merged into HLMI and each BBH Corp. share outstanding at the time of
merger was converted into one share of HLMI's stock. All HLMI shares held by BBH
Corp. were canceled and retired.

Effective as of May 31, 1997, HLMI repurchased all 46,858 shares from the
ESOP for $64 per share as part of a merger agreement with BBH Corp. As a result
of this transaction, the ESOP will effectively cease once the proceeds of the
sale have been distributed by the Trustee to the ESOP's participants following
IRS approval of the ESOP's termination.

The total purchase price as well as acquisition costs has been allocated to
the assets and liabilities acquired at their estimated fair market value at
acquisition date as follows:

<TABLE>
<S> <C>
Accounts receivable........................................................ $ 5,716,254
Property and equipment..................................................... 1,531,155
Other assets............................................................... 6,320,087
Liabilities assumed........................................................ (12,761,346)
Goodwill................................................................... 2,573,867
-----------
Total...................................................................... $ 3,380,017
-----------
-----------
</TABLE>

The following unaudited pro forma financial data is presented as if the
transaction had occured at the beginning of the respective nine month periods.

<TABLE>
<CAPTION>
9 MONTHS ENDED JANUARY 30,
--------------------------
1997 1998
----------- -----------
<S> <C> <C>
Revenues................................................... $19,442,280 $23,776,453
----------- -----------
----------- -----------
Net Income (loss).......................................... $ (397,590) $ 617,655
----------- -----------
----------- -----------
</TABLE>

The pro forma information presented above is not necessarily indicative of
the operating results that would have occurred had the transaction occurred at
the beginning of the respective nine month periods. These results are also not
necessarily indicative of the results of future operations.

3. CONTRACTS IN PROGRESS

Information relative to contracts in progress at January 30, 1998 is as
follows:

<TABLE>
<CAPTION>
JANAURY 30,
1998
-----------
<S> <C>
Costs incurred on uncompleted projects (excluding overhead).................................................... $35,988,413
Estimated earnings thereon..................................................................................... 38,170,640
-----------
Total.......................................................................................................... 74,159,053
Less billings to date.......................................................................................... 71,876,045
-----------
Net underbillings.............................................................................................. $ 2,283,008
-----------
-----------
</TABLE>

Net underbillings are included in the accompanying balance sheet as
follows:

<TABLE>
<CAPTION>
JANUARY 30,
1998
-----------
<S> <C>
Costs and estimated earnings in excess of billings on
uncompleted projects......................................................................................... $ 5,471,799
Billings in excess of costs and estimated earnings on
uncompleted projects......................................................................................... (3,188,791)
-----------
Net underbillings.............................................................................................. $ 2,283,008
-----------
-----------
</TABLE>

F-10

<PAGE>
HLM DESIGN, INC. AND AFFILIATES

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

4. FINANCING ARRANGEMENTS

A summary of notes payable at January 30, 1998 is as follows:

In September 1996, the Company entered into a financing facility with First
Charter National Bank which provides a line of credit of up to $500,000.
Interest is charged at the bank's prime rate plus 1.5% and principal payments
are to be made at the Company's discretion. The loan has an annual maturity date
which is subject to review.

In May 1997, the Company entered into a financing facility with First
Charter National Bank which provides a line of credit of up to $1,000,000.
Interest is charged at the bank's prime rate plus 1.5% and principal payments
are to be made at the Company's discretion. The loan has maturity date of May
1998.

In September 1997, the Company entered into debt agreements with Berthel
Fisher, a planned Underwriter of the Offering, of $250,000 and $500,000.
Interest is charged at 12%, and monthly interest payments are due through May 1,
1998. The final payment for all accrued interest and principal is due on May 1,
1998.

A summary of long-term debt at January 30, 1998 is as follows:

<TABLE>
<CAPTION>
1/30/98
----------
<S> <C>
Notes payable to Messrs. Harris and Brannon at 15%, with a final payment due July 31, 1998 in full.............. $ 125,000
Notes payable to a former stockholder, due in annual payments of $49,522, plus interest at the prime interest
rate of Chase Manhattan Bank as of the date each installment is due (8.25% at April 25, 1997 and April 26,
1996); collateralized by 3,088 shares of the Company's unissued common stock, with a final payment due April
2000.......................................................................................................... 148,567
Notes payable to former stockholders, due in installments plus interest at prime plus 1% at various dates to
October 1999.................................................................................................. 13,594
Notes payable, MPB Architects, due in annual payments, including interest at a rate of 10.5%, with a final
payment due April 1, 1998..................................................................................... 114,850
Notes payable to Pacific Capital/Equitas, payable June 1, 2002 including interest of 13.5% due in monthly
payments...................................................................................................... 1,980,000
Notes payable to shareholders at 6% with final payment due at various dates to August 2002...................... 182,308
Lease financing with Berthel Fisher, due in monthly payments of $64,501, including interest at 14.07%, with
final lease and interest payments made on 4/30/2002........................................................... 2,536,049
----------
Total long-term debt............................................................................................ 5,100,368
----------
Less current maturities (based on refinanced terms)............................................................. 743,311
----------
Long-term portion............................................................................................... $4,357,057
----------
----------
</TABLE>

In May 1997 HLMI entered into a financing arrangement, in the form of a
capital lease agreement, with Berthel Fisher Leasing, a subsidiary of Berthel
Fisher, the proposed underwriter, for $2.8 million. The substance of such
agreement is a financing arrangement and has been presented as such in the
financial statements.

Substantially all assets are pledged under lending agreements.

Under certain of the lending arrangements the company is restricted from
paying cash dividends. Certain of the financing agreements contain debt service
coverage ratios. As of January 30, 1998 the Company was in compliance with such
covenants.

Repayment of the various financing agreements are as follows:

<TABLE>
<S> <C>
Three months ended May 1, 1998.................................. $ 401,675
Fiscal 1999..................................................... 517,255
Fiscal 2000..................................................... 579,679
Fiscal 2001..................................................... 976,438
Fiscal 2002..................................................... 2,463,660
Thereafter...................................................... 161,661
----------
Total......................................................... $5,100,368
----------
----------
</TABLE>

F-11

<PAGE>
HLM DESIGN, INC. AND AFFILIATES

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

4. FINANCING ARRANGEMENTS -- Continued
In May 1997, warrants to purchase 14,372 shares of common stock (183,244
shares after giving effect to the Stock Split) were attached to the notes issued
to Pacific Capital and Equitas. In addition, warrants to purchase 3,422 shares
of common stock (43,630 shares after giving effect to the Stock Split) were
attached to the notes issued to Berthel Fisher in September 1997 and in December
1997. Each warrant allows holders to purchase a share of stock for $.01 a share
for a five year period. At January 30, 1998, all of the warrants held by Berthel
Fisher were exercised. All other warrants issued with debt were outstanding at
January 30, 1998.

In the event that the indebtedness owed by HLM Design to the Holder
pursuant to that Note issued to Holder from HLM Design is not repaid in full on
or before the two year anniversary of the issuance then the number of shares of
HLM Design's Common Stock that may be purchased by the Holder of this Warrant
shall increase by a predetermined amount on each annual anniversary thereafter,
until the indebtedness is paid in full.

HLM Design issued to the Holders the right and option to sell to HLM Design
this warrant for a period of 30 days immediately prior to the expiration at a
purchase price equal to the fair market value of the shares of common stock
issuable to the Holder upon exercise of this warrant less the exercise price.

The Company obtained, as of May 1997, a valuation of the Company as a basis
for assigning value to the warrants. The portion of such determined value in
excess of the amounts paid for the warrants was $238,753 and has been reflected
as deferred financing fees and is being amortized over the respective loan terms
using an effective yield method.

See Note 9 for discussion of warrant activity subsequent to January 30,
1998.

5. LEASE COMMITMENTS

The total minimum rental commitment under non-cancellable operating leases
at January 30, 1998, which has been reduced by minimum rentals to be received
under subleases, are as follows:

<TABLE>
<S> <C>
3 months ended May 1, 1998............................................................. $ 531,441
Fiscal 1999............................................................................ 1,960,201
Fiscal 2000............................................................................ 1,939,163
Fiscal 2001............................................................................ 1,852,952
Fiscal 2002............................................................................ 1,714,856
Thereafter............................................................................. 6,539,818
-----------
Total $14,538,431
-----------
-----------
</TABLE>

6. CONTINGENCIES

The Company is involved in various disputes and legal actions related to
contract operations. In the opinion of Company management, the ultimate
resolution of these actions will not have a material effect on the Company's
financial position or future results of operations.

7. RELATED PARTY TRANSACTIONS

During the nine months ended January 30, 1998, the Company incurred $22,911
in financing advisory fees related to debt financings, for services provided by
a director. Such director resigned effective October 1997.

See Note 4 for related party transactions with respect to debt financing.

8. INCOME TAXES

The provision for income taxes is as follows:

F-12

<PAGE>
HLM DESIGN, INC. AND AFFILIATES

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

8. INCOME TAXES -- Continued

<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
JANUARY 24, JANUARY 30,
1997 1998
------------ -----------
<S> <C> <C>
Current:
Federal................................................................ $ (20,749) $ 50,750
State.................................................................. (2,964) 7,250
Deferred................................................................. (119,804) 456,063
------------ -----------
Provision for Income Taxes............................................... $ (143,517) $ 514,063
------------ -----------
------------ -----------
</TABLE>

The reconciliation of the statutory federal income tax rate with the
Company's federal and state overall effective income rate is as follows:

<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
JANUARY 24, JANUARY 30,
1997 1998
----------- -----------
<S> <C> <C>
Statutory federal rate...................................................... (35.0)% 35.0%
State Income Taxes, net of federal benefit.................................. (3.3) 3.3
Penalties................................................................... 9.8 2.7
Meals and Entertainment..................................................... 4.6 2.7
Other....................................................................... 0.1 4.3
----------- -----------
Effective Tax Rates....................................................... (23.8)% 48.0%
----------- -----------
----------- -----------
</TABLE>

The tax effect of temporary differences giving rise to deferred income tax
assets and liabilities as of January 30, 1998 is as follows:

<TABLE>
<CAPTION>
JANUARY 30,
1998
-----------
<S> <C>
Deferred income tax liabilities -- difference between the accrual basis and cash basis
of accounting related to certain assets and liabilities.............................. $(1,644,953)
-----------
Deferred income tax assets:
Contribution carryforwards........................................................... 46,410
Property and equipment............................................................... 257,598
Net operating loss carryforward...................................................... 258,812
-----------
Total deferred income tax assets....................................................... 562,820
-----------
Deferred income tax liabilities, net................................................... $(1,082,133)
-----------
-----------
</TABLE>

Management believes it is probable that the Company will realize the tax
benefits of these deductible differences that were available as of January 30,
1998.

At January 30, 1998, the Company has federal net operating loss
carryforwards of approximately $677,000 expiring in various amounts beginning in
2012; however, net operating loss carryforwards are subject to restriction under
Section 382 and the separate return limitation year rules of the Internal
Revenue Code due to the merger transaction.

HLM Design, Inc. and its Affiliates will file separate company federal and
state income tax returns.

9. SUBSEQUENT EVENTS (UNAUDITED)

In February 1998, 3,422 warrants were exercised resulting in the issuance
of 3,422 shares of common stock (43,630 shares after giving effect to the stock
split).

F-13

<PAGE>
HLM DESIGN, INC. AND AFFILIATES

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

10. HLM DESIGN FINANCIAL INFORMATION (UNAUDITED)

HLM Design's balance sheet and income statement for the nine months ended
January 30, 1998 are as follows:

<TABLE>
<S> <C>
BALANCE SHEET
Current assets........................................................................... 42,561
---------
Non-current assets....................................................................... 5,141,018
---------
Total assets............................................................................. 5,183,579
---------
---------
Current liabilities...................................................................... 2,182,886
---------
Non-current liabilities.................................................................. 2,162,307
---------
Total liabilities........................................................................ 4,345,193
---------
---------
Total stockholders equity................................................................ 838,386
---------
Total liabilities & S/E.................................................................. 5,183,579
---------
---------
INCOME STATEMENT
Equity in Earnings of Affiliate.......................................................... 1,034,008
Net interest, tax and other expense...................................................... 487,906
---------
Net income............................................................................... 546,102
---------
---------
</TABLE>

F-14

<PAGE>
INDEPENDENT AUDITORS' REPORT

BOARD OF DIRECTORS
HANSEN LIND MEYER INC.
Charlotte, North Carolina

We have audited the accompanying balance sheets of Hansen Lind Meyer Inc.
("HLMI") as of April 25, 1997 and April 26, 1996, and the related statements of
operations, stockholders' equity, and cash flows for each of the three years in
the period ended April 25, 1997. These financial statements are the
responsibility of HLMI's management. Our responsibility is to express an opinion
on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of HLMI as of April 25, 1997
and April 26, 1996, and the results of its operations and its cash flows for
each of the three years in the period ended April 25, 1997 in conformity with
generally accepted accounting principles.

DELOITTE & TOUCHE LLP
October 31, 1997
Charlotte, North Carolina

F-15

<PAGE>
HLMI

BALANCE SHEETS

APRIL 26, 1996 AND APRIL 25, 1997

<TABLE>
<CAPTION>
APRIL 26, APRIL 25,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash......................................................................................... $ 11,130 $ 2,321
Trade and other receivables, less allowance for doubtful accounts of $399,000 at April 26,
1996; $111,000 at April 25, 1997.......................................................... 5,559,290 4,215,782
Costs and estimated earnings in excess of billings on uncompleted projects (Note 3).......... 3,512,711 5,181,432
Refundable income taxes...................................................................... 141,521 59,891
Prepaid expenses............................................................................. 106,250 205,381
----------- -----------
Total current assets.................................................................... 9,330,902 9,664,807
----------- -----------
OTHER ASSETS:
Deferred income taxes (Note 8)............................................................... 492,505 464,694
Goodwill, less amortization of $93,193 at April 26, 1996; $196,646 at April 25, 1997......... 345,807 242,354
Other noncurrent assets...................................................................... 352,700 511,972
----------- -----------
Total other assets...................................................................... 1,191,012 1,219,020
----------- -----------
PROPERTY AND EQUIPMENT:
Leasehold improvements....................................................................... 2,153,312 2,307,040
Furniture and fixtures....................................................................... 6,953,360 7,365,909
Automobiles.................................................................................. 16,813 16,813
Construction in progress..................................................................... 28,309
----------- -----------
Total property and equipment............................................................ 9,151,794 9,689,762
----------- -----------
Less accumulated depreciation................................................................ (7,095,716) (7,699,086)
----------- -----------
Property and equipment, net............................................................. 2,056,078 1,990,676
----------- -----------
TOTAL ASSETS................................................................................... $12,577,992 $12,874,503
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable (Note 4)....................................................................... $ 2,450,000 $ 2,860,000
Current maturities of long-term debt (Note 4)................................................ 778,392 642,432
Accounts payable............................................................................. 4,579,651 4,227,034
Accrued expenses............................................................................. 1,139,812 920,853
Billings in excess of costs and estimated earnings on uncompleted projects (Note 3).......... 876,245 1,661,086
Deferred income taxes (Note 8)............................................................... 1,059,316 1,255,765
Deferred rent (Note 5)....................................................................... 67,974
----------- -----------
Total current liabilities............................................................... 10,951,390 11,567,170
----------- -----------
LONG-TERM DEBT (Note 4)........................................................................ 564,577 103,792
----------- -----------
DEFERRED RENT (Note 5)......................................................................... 288,829
----------- -----------
OTHER NONCURRENT LIABILITIES................................................................... 15,000
----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 5, 7, 9 and 10)
STOCKHOLDERS' EQUITY:
Capital stock, common, $.01 par value (Note 6):
Class A, voting, authorized 2,000,000 shares; issued 55,998 and 54,700, respectively...... 560 547
Class B, nonvoting, authorized 1,000,000 shares; issued 740 and 1,111, respectively....... 7 11
Retained earnings......................................................................... 1,140,403 1,202,983
----------- -----------
1,140,970 1,203,541
Less ESOP debt guarantee (Notes 4 and 9)....................................................... (382,774)
----------- -----------
Total stockholders' equity.............................................................. 758,196 1,203,541
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................................................... $12,577,992 $12,874,503
----------- -----------
----------- -----------
</TABLE>

See notes to financial statements.

F-16

<PAGE>
HLMI

STATEMENTS OF OPERATIONS

YEARS ENDED APRIL 30, 1995, APRIL 26, 1996 AND APRIL 25, 1997

<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------------------
APRIL 30, APRIL 26, APRIL 25,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES:
Fee income.................................................................... $27,388,379 $27,206,637 $24,839,560
Reimbursable income........................................................... 1,734,178 1,347,787 1,915,150
----------- ----------- -----------
Total revenues........................................................... 29,122,557 28,554,424 26,754,710
----------- ----------- -----------
CONSULTANT EXPENSES............................................................. 5,351,073 4,782,482 4,857,891
----------- ----------- -----------
PROJECT EXPENSES:
Direct expenses............................................................... 854,540 936,962 716,449
Reimbursable expenses......................................................... 1,529,272 928,479 1,183,618
----------- ----------- -----------
Total project expenses................................................... 2,383,812 1,865,441 1,900,067
----------- ----------- -----------
NET PRODUCTION INCOME........................................................... 21,387,672 21,906,501 19,996,752
DIRECT LABOR.................................................................... 7,950,786 7,614,029 6,618,293
INDIRECT EXPENSES............................................................... 14,678,518 13,787,625 12,931,174
----------- ----------- -----------
OPERATING INCOME (LOSS)......................................................... (1,241,632) 504,847 447,285
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest income............................................................... 13,936 10,516 6,502
Interest expense.............................................................. (156,680) (394,068) (402,509)
Gain on lease termination (Note 5)............................................ 841,809 344,059
Gain (loss) on sale of property............................................... 428,475 8,464 (58,424)
----------- ----------- -----------
Total other income (expense), net........................................ 285,731 466,721 (110,372)
----------- ----------- -----------
INCOME (LOSS) BEFORE TAXES...................................................... (955,901) 971,568 336,913
INCOME TAXES (Note 8):
Current tax benefit........................................................... (3,080) (114,560) (4,461)
Deferred tax expense (benefit)................................................ (357,000) 550,019 224,260
----------- ----------- -----------
Total income tax expense (benefit)....................................... (360,080) 435,459 219,799
----------- ----------- -----------
NET INCOME (LOSS)............................................................... $ (595,821) $ 536,109 $ 117,114
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

See notes to financial statements.

F-17

<PAGE>
HLMI

STATEMENTS OF STOCKHOLDERS' EQUITY

YEARS ENDED APRIL 30, 1995, APRIL 26, 1996 AND APRIL 25, 1997
<TABLE>
<CAPTION>
COMMON STOCK ESOP DEBT
------------------ RETAINED GUARANTEE
CLASS A CLASS B EARNINGS (NOTES 4 AND 9)
------- ------- ---------- ---------------
<S> <C> <C> <C> <C>
BALANCE, APRIL 30, 1994....................................... $ 638 $ 3 $1,693,915 $(1,260,925)
Net Loss.................................................... (595,821)
Issuance of 2,119 shares of common stock.................... 21 135,616
Retirement of 7,782 shares of common stock.................. (75) (3) (528,185)
Class A common stock exchanged for Class B
common stock............................................. (11) 11
Proceeds on Employee Stock Ownership Plan debt.............. (106,000)
Payments on Employee Stock Ownership Plan debt.............. 490,603
------- ------- ---------- ---------------
BALANCE, APRIL 30, 1995....................................... 573 11 705,525 (876,322)
Net income.................................................. 536,109
Issuance of 44 shares of common stock....................... 2,489
Retirement of 1,743 shares of common stock.................. (10) (7) (103,720)
Payments on Employee Stock Ownership Plan debt.............. 493,548
Class A common stock exchanged for Class B
common stock............................................. (3) 3
------- ------- ---------- ---------------
BALANCE, APRIL 26, 1996....................................... 560 7 1,140,403 (382,774)
Net income.................................................. 117,114
Retirement of 927 shares of common stock.................... (9) (54,534)
Payments on Employee Stock Ownership Plan debt.............. 382,774
Class A common stock exchanged for Class B
common stock............................................. (13) 13
------- ------- ---------- ---------------
BALANCE, APRIL 25, 1997....................................... $ 547 $11 $1,202,983 $
------- ------- ---------- ---------------
------- ------- ---------- ---------------

<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
-------------
<S> <C>
BALANCE, APRIL 30, 1994....................................... $ 433,631
Net Loss.................................................... (595,821)
Issuance of 2,119 shares of common stock.................... 135,637
Retirement of 7,782 shares of common stock.................. (528,263)
Class A common stock exchanged for Class B
common stock.............................................
Proceeds on Employee Stock Ownership Plan debt.............. (106,000)
Payments on Employee Stock Ownership Plan debt.............. 490,603
-------------
BALANCE, APRIL 30, 1995....................................... (170,213)
Net income.................................................. 536,109
Issuance of 44 shares of common stock....................... 2,489
Retirement of 1,743 shares of common stock.................. (103,737)
Payments on Employee Stock Ownership Plan debt.............. 493,548
Class A common stock exchanged for Class B
common stock.............................................
-------------
BALANCE, APRIL 26, 1996....................................... 758,196
Net income.................................................. 117,114
Retirement of 927 shares of common stock.................... (54,543)
Payments on Employee Stock Ownership Plan debt.............. 382,774
Class A common stock exchanged for Class B
common stock.............................................
-------------
BALANCE, APRIL 25, 1997....................................... $ 1,203,541
-------------
-------------
</TABLE>

See notes to financial statements.

F-18

<PAGE>
HLMI

STATEMENTS OF CASH FLOWS

YEARS ENDED APRIL 30, 1995, APRIL 26, 1996 AND APRIL 25, 1997

<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------
APRIL 30, APRIL 26, APRIL 25,
1995 1996 1997
----------- ----------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................................................... $ (595,821) $ 536,109 $ 117,114
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation................................................................. 515,636 680,779 671,877
Amortization................................................................. 5,952 99,145 107,670
Deferred rent................................................................ (384,644) (1,093,278) (356,803)
Loss (gain) on sale of property.............................................. (428,475) (8,464) 58,424
Deferred income taxes........................................................ (357,000) 550,019 224,260
Other, net................................................................... 3,229 (49,345) (15,000)
Changes in certain working capital items:
(Increase) decrease in trade and other receivables......................... 990,949 (1,181,640) 1,343,508
Increase in costs and estimated earnings compared to billings on
uncompleted contracts, net................................................ (1,540,637) (1,857,829) (883,880)
(Increase) decrease in refundable income taxes............................. 144,707 87,777 72,056
(Increase) decrease in prepaid expenses.................................... 160,417 (176,989) (99,131)
Increase in other assets................................................... (159,272)
Increase (decrease) in accounts payable.................................... 401,561 2,642,228 (352,617)
Increase (decrease) in accrued expenses.................................... 410,559 (455,379) (218,959)
----------- ----------- ----------
Net cash (used in) provided by operating activities..................... (673,567) (226,867) 509,247
----------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of business............................................................ (206,500)
Proceeds from sale of equipment................................................. 600,000 12,084 2,635
Purchases of property and equipment............................................. (882,719) (708,479) (662,179)
Note receivable from officer.................................................... (30,000)
----------- ----------- ----------
Net cash used in investing activities................................... (489,219) (726,395) (659,544)
----------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on line of credit................................................ 1,600,000 700,000 410,000
Proceeds from long-term borrowings.............................................. 500,000 145,000
Payments on long-term borrowings................................................ (90,189) (238,134) (410,952)
Proceeds from issuance of common stock.......................................... 135,616 2,489
Retirement of common stock...................................................... (528,185) (5,650) (2,560)
----------- ----------- ----------
Net cash provided by financing activities............................... 1,117,242 958,705 141,488
----------- ----------- ----------
(DECREASE) INCREASE IN CASH....................................................... (45,544) 5,443 (8,809)
CASH BALANCE:
Beginning of year............................................................... 51,231 5,687 11,130
----------- ----------- ----------
End of year..................................................................... $ 5,687 $ 11,130 $ 2,321
----------- ----------- ----------
----------- ----------- ----------
SUPPLEMENTAL DISCLOSURES:
Cash paid (received) during the year for:
Interest..................................................................... $ 138,783 $ 392,292 $ 370,167
Interest on Employee Stock Ownership Plan debt............................... $ 82,459 $ 55,199 $ 24,243
Income tax refunds........................................................... $ (150,867) $ (280,466) $ (86,091)
Noncash investing and financing transactions:
Retirement of common stock through issuance of note payable.................. $ $ 98,087 $ 51,983
Reduction of ESOP debt....................................................... $ 384,603 $ 493,548 $ 382,774
Purchase of business financed through issuance of note payable............... $ 311,500
</TABLE>

See notes to financial statements.

F-19

<PAGE>
HLMI

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED APRIL 25, 1997 AND APRIL 26, 1996

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS -- Hansen Lind Meyer Inc. ("HLMI") provides
architectural and engineering consulting and design services nationally from
offices in Iowa City, Chicago, Denver, Orlando, Philadelphia, Atlanta, Bethesda,
Sacramento and Portland. Approximately 75%, 70% and 73% of HLMI's 1997, 1996 and
1995 revenues, respectively, are related to health care projects and
approximately 25%, 30% and 27% are from criminal justice and other projects. The
Company operates in one business segment.

FISCAL YEAR-END POLICY -- HLMI uses a 52-53 week fiscal year for accounting
purposes which defines the fiscal year-end date as the last Friday in April.
Thus, the current fiscal year-end is April 25, 1997. There were 52 weeks in this
fiscal year.

REVENUE RECOGNITION -- Revenue is recognized, at estimated collectible
amounts, in the period the services are performed. More specifically, HLMI
recognizes revenues either on the percentage-of-completion method measured by
the percentage of cost incurred to date to estimated total cost for each
contract, or based upon a fixed hourly rate. Consultant expenses, project
expenses, direct labor and indirect expenses are charged to expense as incurred.
Provisions for estimated losses on uncompleted projects are made in the period
in which such losses are first subject to reasonable estimation. Unanticipated
changes in project performance, project conditions and estimated profitability
may result in revisions to costs and income and are recognized in the period in
which the revisions are determined.

<TABLE>
<S> <C>
Computer equipment and software......................... 5 years
Furniture............................................... 7 years
Leasehold improvements.................................. Lease term, not to exceed the useful life of the asset
</TABLE>

GOODWILL -- Goodwill represents the excess of purchase price over the
estimated fair value of the net assets acquired from MPB Architects and is being
amortized over a four-year period.

DEFERRED INCOME TAXES -- Deferred income tax assets and liabilities are
calculated based upon differences between the financial statement and tax bases
of assets and liabilities that will result in taxable or deductible amounts in
the future. Such deferred income tax asset or liability computations are based
on enacted tax laws and rates applicable to periods in which the differences are
expected to affect taxable income.

FINANCIAL INSTRUMENTS -- The carrying amount of cash, accounts receivable,
accounts payable and accrued liabilities approximates fair value because of the
short maturities of these instruments. HLMI's bank borrowings approximate fair
value because their interest rates are based on variable reference rates.

F-20

<PAGE>
HLMI

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES -- Continued
RECLASSIFICATION -- Certain amounts in the 1996 financial statements have
been reclassified to conform with the 1997 financial statement presentation.

NEW ACCOUNTING STANDARD -- Effective April 27, 1996, HLMI adopted Statement
of Financial Accounting Standards ("SFAS") No. 121, ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF,
during the year. It requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Management has reviewed all long-lived assets and
intangible assets as of April 25, 1997 and April 26, 1996 and believes that the
carrying amounts reported in the balance sheet will be recovered over the
remaining useful lives of those assets.

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income." This
Standard establishes standards of reporting and display of comprehensive income
and its components in a full set of general-purpose financial statements. This
Statement will be effective for HLMI's fiscal year ending April 24, 1998, and
HLMI does not intend to adopt this Statement prior to the effective date.

2. BUSINESS ACQUISITIONS

On April 1, 1995, HLMI acquired MPB Architects, Inc., an architectural firm
located in Philadelphia, Pennsylvania, for a total purchase price of $518,000.
The acquisition has been accounted for as a purchase and the results of
operations of MPB Architects, Inc., have been included in the accompanying
financial statements from the date of acquisition. The total purchase price has
been allocated to the assets acquired at their estimated fair market value at
acquisition date as follows:

<TABLE>
<S> <C>
Property and equipment........................................................ $ 79,000
Goodwill...................................................................... 439,000
--------
Total......................................................................... $518,000
--------
--------
</TABLE>

The following unaudited pro forma financial data is presented as if MPB
Architects, Inc. was acquired on May 1, 1994.

<TABLE>
<CAPTION>
YEAR ENDED APRIL 30, 1995
-------------------------
<S> <C>
Revenues......................................................... $31,743,366
-------------------------
Net Loss......................................................... $ (782,024)
-------------------------
-------------------------
</TABLE>

The pro forma information presented above is not necessarily indicative of
the operating results that would have occurred had MPB Architects, Inc. been
acquired on May 1, 1994. These results are also not necessarily indicative of
the results of future operations.

3. CONTRACTS IN PROGRESS

Information relative to contracts in progress at April 30, 1995, April 26,
1996 and April 25, 1997 is as follows:

<TABLE>
<CAPTION>
APRIL 30, APRIL 26, APRIL 25,
1995 1996 1997
------------ ------------ -----------
<S> <C> <C> <C>
Costs incurred on uncompleted projects....................................... $ 77,486,548 $ 67,612,169 $53,448,215
Estimated earnings thereon................................................... 46,358,806 42,252,119 33,500,189
------------ ------------ -----------
Total........................................................................ 123,845,354 109,864,288 86,948,404
Less billings to date........................................................ 123,066,717 107,227,822 83,428,058
------------ ------------ -----------
Net underbillings............................................................ $ 778,637 $ 2,636,466 $ 3,520,346
------------ ------------ -----------
------------ ------------ -----------
</TABLE>

F-21

<PAGE>
HLMI

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

3. CONTRACTS IN PROGRESS -- Continued
Net underbillings are included in the accompanying balance sheet as
follows:

<TABLE>
<CAPTION>
APRIL 30, APRIL 26, APRIL 25,
1995 1996 1997
----------- ---------- -----------
<S> <C> <C> <C>
Costs and estimated earnings in excess of billings on
uncompleted projects............................................................ $ 2,571,447 $3,512,711 $ 5,181,432
Billings in excess of costs and estimated earnings on
uncompleted projects............................................................ (1,792,810) (876,245) (1,661,086)
----------- ---------- -----------
Net underbillings................................................................. $ 778,637 $2,636,466 $ 3,520,346
----------- ---------- -----------
----------- ---------- -----------
</TABLE>

4. FINANCING ARRANGEMENTS

Effective October 14, 1996, HLMI entered into a new financing arrangement
with Firstar Bank Iowa, N.A. ("Firstar"). In connection with this new financing
arrangement, two previous lines of credit, with a combined balance outstanding
at April 26, 1996 of $2,450,000, were consolidated into one revolving line of
credit providing for availability up to the lesser of $2,450,000 or 80% of
eligible accounts receivable through March 1, 1997. The line of credit will be
payable in full on May 1, 1998. Interest is payable monthly at Firstar's prime
rate plus 3% (11.5% at April 25, 1997).

Three term loans payable to Firstar with a combined amount outstanding at
April 26, 1996 of $423,903 were consolidated into one new term loan. Interest is
charged at the bank's prime rate plus 2%, and monthly principal and interest
payments of $45,000 are payable through February 1, 1997. The original loans
were made to enable the Company's ESOP (see Note 8) to acquire common stock from
certain stockholders.

This financing facility is collateralized by substantially all of HLMI's
assets.

In September 1996, HLMI entered into a financing facility with First
Charter National Bank which provides a line of credit of up to $500,000.
Interest is charged at the bank's prime rate plus 1.5% and principal payments
are to be made at HLMI's discretion. The loan has an annual maturity date which
is subject to review.

See Note 12 for financing events occurring subsequent to April 25, 1997.

A summary of notes payable at April 26, 1996 and April 25, 1997 is as
follows:

<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Line of credit -- Firstar......................................................................... $$2,450,000 $2,360,000
Line of credit -- First Charter................................................................... 500,000
---------- ----------
Total............................................................................................. $2,450,000 $2,860,000
---------- ----------
---------- ----------
</TABLE>

F-22

<PAGE>
HLMI

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

4. FINANCING ARRANGEMENTS -- Continued
A summary of long-term debt at April 25, 1997 and April 26, 1996 is as
follows:

<TABLE>
<CAPTION>
1996 1997
---------- --------
<S> <C> <C>
Term loan payable to Firstar, due in monthly payments of $45,000, including interest at 2% over the
Bank's prime rate................................................................................. $ 423,903 $
Note payable to Firstar, due in monthly payments of $16,405, including interest at 2.5% over the
Bank's prime rate................................................................................. 428,399 271,134
Notes payable to Messrs. Harris and Brannon at 15%, with a final payment due December 31, 1997 in
full.............................................................................................. 145,000
Notes payable to a former stockholder, due in annual payments of $49,522, plus interest at the prime
interest rate of Chase Manhattan Bank as of the date each installment is due (8.25% at April 25,
1997 and April 26, 1996); collateralized by 3,088 shares of the Company's unissued common stock,
with a final payment due April 2000............................................................... 198,090 148,567
Notes payable to former stockholders, due in installments plus interest at prime plus 1% at various
dates to October 1999............................................................................. 74,270 66,673
Notes payable, MPB Architects, due in annual payments of $127,500, including interest at a rate of
10.5%, with a final payment due April 1, 1998..................................................... 218,307 114,850
---------- --------
Total long-term debt................................................................................ 1,342,969 746,224
Less current maturities (based on refinanced terms)................................................. 778,392 642,432
---------- --------
Long-term portion................................................................................... $ 564,577 $103,792
---------- --------
---------- --------
</TABLE>

Scheduled maturities of long-term debt based on refinanced terms are as
follows:

<TABLE>
<S> <C>
Fiscal Year:
1999........................................................................... $642,432
2000........................................................................... 49,522
Thereafter..................................................................... 54,270
--------
Total............................................................................ $746,224
--------
--------
</TABLE>

Borrowings from Firstar are subject to certain restrictive covenants. At
April 25, 1997, HLMI was in violation of the negative working capital and the
current ratio requirements. As set forth in Note 12, all outstanding debt due to
Firstar has been repaid subsequent to April 25, 1997.

On May 30, 1997, HLMI entered into financing arrangement in the form of a
sale-leaseback agreement. Under this arrangement, HLMI sold all of its property,
excluding leasehold improvements, for $2.8 million. This property is being
leased back over 60 months. The proceeds of this transaction were used to repay
the line of credit and the note payable due to Firstar.

Under certain of the lending arrangements the Company is restricted from
paying cash dividends.

5. LEASE COMMITMENTS

At April 26, 1996, rent payments due under certain leases were less than
the amount of rent expense computed on a straight-line basis. The deferred rent
liability at April 26, 1996 was $356,803. There was no deferred rent liability
as of April 25, 1997.

In 1996, and 1997, HLMI terminated facility leases which were being
accounted for as operating leases, resulting in a gain of $841,809 and $344,059,
respectively. There were no facility lease terminations in 1995 which resulted
in a gain. The recorded gains represent the cumulative excess of lease expense
over the lease payments made as of the termination dates.

The Iowa City, Orlando, McLean and Charlotte facilities require the payment
of certain operating expenses in addition to the base rents.

F-23

<PAGE>
HLMI

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

5. LEASE COMMITMENTS -- Continued
Rent expense of $2,946,542 $1,112,562 and $1,606,678 as of April 30, 1995,
April 26, 1996 and April 25, 1997 is included in indirect expenses.

The total minimum rental commitment under non-cancellable operating leases,
at April 25, 1997, which has been reduced by minimum rentals to be received
under subleases, are as follows:

<TABLE>
<S> <C>
Fiscal Year:
1998..................................................................... $ 2,172,403
1999..................................................................... 1,899,397
2000..................................................................... 1,881,442
2001..................................................................... 1,798,392
2002..................................................................... 1,721,236
Thereafter............................................................... 6,664,881
-----------
Total...................................................................... $16,137,751
-----------
-----------
</TABLE>

6. CAPITAL STOCK

HLMI's authorized capital consists of 3,000,000 shares of $.01 par value
common stock, consisting of two classes, 2,000,000 shares of Class A voting and
1,000,000 shares of Class B nonvoting. Class A stock may only be owned by
employees of the Company. Class A stock will be immediately converted to Class B
stock following the termination of a shareholder's employment with the Company.
See Note 12 for subsequent events regarding HLMI's ESOP.

7. RESTRICTIONS OF TRANSFER OF COMMON STOCK

The bylaws of HLMI contain certain restrictions on transfer of common
stock. Upon the death, disability or retirement of a stockholder, HLMI is
obligated to purchase the common stock if the estate of the stockholder or the
stockholder offers to sell. The stockholder's estate or the stockholder has the
right to offer the shares to the Employee Stock Ownership Plan which has the
right of first refusal with regard to this stock. The sale price shall be based
upon the most recent appraised value of HLMI stock. If a stockholder voluntarily
terminates employment, the employee shall sell, and the ESOP may acquire the
shares, or HLMI shall purchase all of the stockholder's stock based on the most
recent appraisal. If a stockholder is involuntarily terminated, the stockholder
may offer his stock to the ESOP or HLMI, and the ESOP may, or HLMI shall
purchase all of the shares based on the most recent appraisal. A stockholder who
is terminated from employment for cause shall sell, and the ESOP may, or HLMI
shall purchase all of the stockholder's shares at a price equal to 80% of the
most recent appraisal. The purchase price of any purchase will be paid by first
applying life insurance proceeds, if any, with the balance being paid in a
single payment or installments depending upon the circumstances of the sale and
upon the amount of the purchase price. If the aggregate of principal payments
for the purchase of stock shall exceed $120,000 within any six-month period,
HLMI may adjust downward all current payments proportionately to limit the
payments to the $120,000 amount. Transfers of shares of HLMI's stock to or from
the Employee Stock Ownership Plan Trust are exempt from the provisions of the
bylaws on restrictions of transfer.

8. INCOME TAXES

The provision for income taxes is as follows:

<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- --------
<S> <C> <C> <C>
Current:
Federal............................................................................... $ (2,695) $(100,240) $ (3,903)
State................................................................................. (385) (14,320) (558)
Deferred................................................................................ (357,000) 550,019 224,260
--------- --------- --------
Provision for income taxes.............................................................. $(360,080) $ 435,459 $219,799
--------- --------- --------
--------- --------- --------
</TABLE>

F-24

<PAGE>
HLMI

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

8. INCOME TAXES -- Continued
The reconciliation of the statutory federal income tax rate with the
Company's federal and state overall effective income rate is as follows:

<TABLE>
<CAPTION>
1995 1996 1997
------ ----- -----
<S> <C> <C> <C>
Statutory federal rate.............................................................................. (35.0)% 35.0% 35.0%
State Income Taxes.................................................................................. (2.0) 3.3 3.3
Penalties........................................................................................... .2 .4 17.4
Meals and Entertainment............................................................................. 4.3 4.4 9.3
Other............................................................................................... (5.1) 1.8 .3
------ ----- -----
Effective Tax rates............................................................................... (37.6)% 44.9% 65.3%
------ ----- -----
------ ----- -----
</TABLE>

The tax effect of temporary differences giving rise to deferred income tax
assets and liabilities as of April 25, 1997 and April 26, 1996 is as follows:

<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Deferred income tax liabilities -- difference between the accrual basis and cash basis of
accounting related to certain assets and liabilities.......................................... $(1,059,316) $(1,255,765)
----------- -----------
Deferred income tax assets:
Contribution carryforwards.................................................................... 52,892 64,361
Property and equipment........................................................................ 63,368 96,177
Deferred rent liability....................................................................... 136,477 --
Net operating loss carryforward............................................................... 239,768 304,156
----------- -----------
Total deferred income tax assets................................................................ 492,505 464,694
----------- -----------
Deferred income tax liabilities, net............................................................ $ (566,811) $ (791,071)
----------- -----------
----------- -----------
</TABLE>

As of April 26, 1996 and April 25, 1997, HLMI had approximately $627,000
and $795,000 of net operating loss carryforwards, respectively, for federal tax
purposes and no loss carryforwards for financial reporting purposes. These tax
net operating losses will respectively expire in fiscal years 2012 and 2011.

9. EMPLOYEE STOCK OWNERSHIP PLAN

In September 1987, HLMI established an Employee Stock Ownership Plan to
provide retirement benefits to its employees. In October 1987, the Plan obtained
a $4,800,000 bank loan, the proceeds of which were used to purchase 32,000
shares of common stock from certain stockholders. During the year ended April
30, 1991, the Plan acquired 11,597 shares of common stock from a shareholder at
a cost of $1,054,389, a portion of which was financed by borrowings from a bank
in the amount of $687,389. During the year ended April 30, 1995, the Plan
acquired 2,000 shares of common stock from a shareholder at a cost of $106,000,
which was financed by borrowings from a bank. HLMI is committed to make cash
payments to the Plan in an amount sufficient for the Plan to meet the debt
service requirements of these three notes. Accordingly, the debt was recorded in
the accompanying financial statements with a corresponding deduction from
stockholders' equity. The debt and the deduction from stockholders' equity are
reduced as principal payments are made on the loans. The terms of the notes
payable are disclosed in Note 4. These notes were repaid in full during the year
ended April 25, 1997.

Subject to certain provisions of the Plan, in the event a terminated plan
participant desires to sell his or her shares of HLMI's stock, or for certain
employees who elect to diversify their account balances, HLMI may be required to
purchase the shares from the participant at their fair market value. During the
year ended April 26, 1996, HLMI had stock purchases of 557 shares from plan
participants. As of April 26, 1996, 43,343 shares were allocated to participant
accounts and the fair value per share was $56.50 based on an April 30, 1995
valuation.

During the year ended April 25, 1997, HLMI did not purchase any shares from
plan participants and as of April 25, 1997, 46,858 shares were allocated to
participant accounts.

F-25

<PAGE>
HLMI

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

10. CONTINGENCIES

HLMI is involved in various disputes and legal actions related to contract
operations. In the opinion of HLMI management, the ultimate resolution of these
actions will not have a material effect on HLMI's financial position or future
results of operations.

11. RELATED PARTY TRANSACTIONS

During the years ended April 26, 1996 and April 25, 1997, HLMI incurred
$254,137 and $257,017, respectively, in financing advisory fees related to debt
financings, for services provided by a director.

12. OTHER MATTERS

On May 29, 1997, HLMI executed a Management and Services Agreement with HLM
Design Inc ("HLM, Design"). The majority shareholders of Design are officers of
HLMI and own 100% of the common stock of HLMI. Under the Management and Services
Agreement, Design will manage all functions of HLMI except for architectural
services regulated by the various states in which HLMI operates. As compensation
for such management services, Design will be entitled to substantially all the
net cash flow generated by HLMI. In addition, HLM, Design and the shareholders
of HLMI have entered into agreements that provide HLM Design with the right of
first refusal, by selection of qualified individuals, for any purchase or sale
of shares of HLMI's stock.

Effective May 23, 1997, HLMI sold 50,000 newly issued shares to BBH Corp.,
a Delaware corporation, purchased 50,000 shares in HLMI for $3.2 million. On May
23, 1997, BBH Corp. merged into HLMI and each BBH Corp. share outstanding at the
time of merger was converted into one share of HLMI's stock. All of HLMI's
shares held by BBH Corp. were canceled and retired.

F-26

<PAGE>
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------

NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY HLM DESIGN OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.

------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary................................... 3
Risk Factors......................................... 7
Use of Proceeds...................................... 12
Dividend Policy...................................... 12
Capitalization....................................... 13
Dilution............................................. 14
Selected Financial Data.............................. 15
Management's Discussion and Analysis of Financial
Condition and Results of Operations................ 19
Business............................................. 24
Management........................................... 29
Certain Transactions................................. 35
Principal Stockholders............................... 36
Description of Capital Stock......................... 36
Shares Eligible for Future Sale...................... 39
Underwriting......................................... 40
Legal Matters........................................ 42
Experts.............................................. 42
Additional Information............................... 42
Index to Financial Statements........................ F-1
</TABLE>

------------------

UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

1,200,000 SHARES

COMMON STOCK
----------------
PROSPECTUS
----------------
BERTHEL FISHER & COMPANY
FINANCIAL SERVICES, INC.

WESTPORT RESOURCES
INVESTMENT SERVICES, INC.

MARION BASS
SECURITIES CORPORATION
, 1998
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------

<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the expenses to be borne by the Registrant
in connection with the issuance and distribution of the securities being
registered hereby other than underwriting discounts and commissions. All the
amounts shown are estimates, except for the registration fee with the Securities
and Exchange Commission, the NASD filing fee and the Nasdaq fees.

<TABLE>
<S> <C>
SEC Registration fee................................................................... $ 2,121.22
NASD filing fee........................................................................ 1,200
Nasdaq fees............................................................................ 7,500
Transfer agent and registrar fees...................................................... 15,000
Accounting fees and expenses........................................................... 195,000
Legal fees and expenses................................................................ 120,000
"Blue Sky" fees and expenses (including legal fees).................................... 25,000
Costs of printing and engraving........................................................ 90,000
Reimbursable underwriters' expenses.................................................... 98,280
Miscellaneous.......................................................................... 4,178.78
-----------
Total............................................................................. $ 558,280
-----------
-----------
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Registrant's Bylaws effectively provide that the Registrant shall, to
the full extent permitted by Section 145 of the General Corporation Law of the
State of Delaware, as amended from time to time ("Section 145"), indemnify all
persons whom it may indemnify pursuant thereto. In addition, the Registrant's
Certificate of Incorporation eliminates personal liability of its directors to
the full extent permitted by Section 102(b)(7) of the General Corporation Law of
the State of Delaware, as amended from time to time ("Section 102(b)(7)").

Section 145 permits a corporation to indemnify its directors and officers
against expenses (including attorney's fees), judgments, fines and amounts paid
in settlements actually and reasonably incurred by them in connection with any
action, suit or proceeding brought by a third party if such directors or
officers acted in good faith and in a manner they reasonably believed to be in
or not opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reason to believe their conduct was
unlawful. In a derivative action, indemnification may be made only for expenses
actually and reasonably incurred by directors and officers in connection with
the defense or settlement of an action or suit and only with respect to matters
as to which they shall have acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interest of the corporation, except
that no indemnification shall be made if such person shall have been adjudged
liable to the corporation, unless and only to the extent that the court in which
the action or suit was brought shall determine upon application that the
defendant officers or directors are reasonably entitled to indemnification for
such expenses despite such adjudication of liability.

Section 102(b)(7) provides that a corporation may eliminate or limit the
personal liability of a director to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, provided that such
provision shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for willful or negligent conduct
in paying dividends or repurchasing stock out of other than lawfully available
funds or (iv) for any transaction from which the director derived an improper
personal benefit. No such provisions shall eliminate or limit the liability of a
director for any act or omission occurring prior to the date when such provision
becomes effective.

The Company intends to obtain, prior to the effective date of the
Registration Statement, insurance against liabilities under the Securities Act
of 1933 for the benefit of its officers and directors.

Section 6.01 of the Underwriting Agreement (filed as Exhibit 1.1 to this
Registration Statement) provides that the Underwriters severally and not jointly
will indemnify and hold harmless the Registrant and each director, officer or
controlling person of the Registrant from and against any liability caused by
any statement or omission in the Registration Statement or Prospectus based upon
information furnished to the Registrant by the Underwriters for use therein.

II-1

<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Except as hereinafter set forth, there have been no sales of unregistered
securities by the Registrant within the past three years. The information set
forth in the second and third paragraphs of this Item 15 is provided on a
pre-Stock Split basis.

As of March 20, 1997, as part of the original organization of HLM Design,
the Registrant issued 20,500 shares of Common Stock to Joseph Harris, 20,500
shares of Common Stock to Vernon Brannon and 7,500 shares of Common Stock to
William Blalock in exchange for $1,000 from each person.

On May 16, 1997, May 19, 1997, May 28, 1997, July 7, 1997, July 8, 1997,
July 14, 1997, August 22, 1997 and November 1, 1997 the Registrant issued an
aggregate of 2,340 shares of Common Stock to senior level employees of the
Company in exchange for $14.81 per share (except that in the case of the
November 1, 1997 issuance, 200 shares of Common Stock were issued in the form of
a stock bonus). As of May 30, 1997, September 10, 1997 and December 24, 1997,
the Registrant issued warrants to purchase 17,794 shares of Common Stock for an
aggregate of $23,500 in connection with financing arrangements. On November 10,
1997, Clay R. Caroland exercised his Warrant and purchased 862 shares of Common
Stock. On December 26, 1997 Berthel Leasing exercised its Warrant and purchased
3,422 shares of Common Stock. On February 12, 1998 Equitas exercised its Warrant
and purchased 5,749 shares of Common Stock. In connection with each such
exercise of Warrants, the Company received consideration of $11.00, $43.64 and
$110.67, respectively. In each of the foregoing transactions, the securities
were not registered under the Securities Act, in reliance upon the exemption
from registration provided by Section 4(2) of said Act in view of the
sophistication of the foregoing purchasers, their access to material
information, the disclosures actually made to them by the Registrant and the
absence of any general solicitation or advertising.

On or before the consummation of the Offering, the Registrant will issue to
Joseph Harris and Vernon Brannon, two of its officers and employees, pursuant to
the Registrant's Stock Option Plan, options to purchase 115,908 shares (taking
into account the Stock Split) of Common Stock in the aggregate. Such securities
will not be registered under the Securities Act because such grants will be
without consideration to the Registrant and, consequently, will not constitute
offers or sales within Section 5 of the Securities Act.

Pacific has undertaken that it will exercise Warrants to purchase 98,953
shares of Common Stock (taking into account the Stock Split) immediately prior
to the effective date of this Registration Statement. Such securities will not
be registered under the Securities Act, in reliance upon the exemption from
registration provided by Section 4(2) of said Act in view of the sophistication
of Pacific, its access to material information, the disclosures actually made to
it by the Registrant and the absence of any general solicitation or advertising.

For information concerning the Stock Split and the issuance of shares in
connection therewith, see the Prospectus which is included as part of this
Registration Statement.

ITEM 16. EXHIBITS.

II-2

<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ---------- ---------------------------------------------------------------------------------------------------------
<C> <S>
10.6* Stockholders' Agreement dated as of May 29, 1997 by and among Joseph M. Harris, Vernon B. Brannon, Viktor
A. Lituczy and HLM of Oregon, Architecture and Planning, P.C.
10.7* Form of Security Escrow Agreement among HLM Design, Inc., certain security holders and First Union
National Bank, as escrow agent.
10.8* Note Purchase Agreement dated as of May 30, 1997 by and among HLM Design, Inc., Hansen Lind Meyer Inc.,
BBH Corp., Pacific Capital, L.P., and Equitas, L.P.
10.9* Promissory Note A-1 dated as of May 30, 1997 by HLM Design, Inc. in favor of Pacific Capital, L.P.
10.10* Promissory Note A-2 dated as of May 30, 1997 by HLM Design, Inc. in favor of Equitas, L.P.
10.11* Collateral Assignment of Contract Rights dated as of May 30, 1997 by and between HLM Design, Inc. and
Pacific Capital, L.P. and Equitas, L.P.
10.12* Security Agreement dated as of May 30, 1997 by and between HLM Design, Inc. and Pacific Capital, L.P. and
Equitas, L.P.
10.13* Affiliate Promissory Note dated May 30, 1997 by BBH Corp. in favor of HLM Design, Inc.
10.14* Collateral Assignment of Promissory Note dated as of May 30, 1997 by and between HLM Design, Inc. and
Pacific Capital, L.P. and Equitas, L.P.
10.15* Unconditional Guaranty dated as of May 30, 1997 by and between Hansen Lind Meyer Inc. and BBH Corp. in
favor of Pacific Capital, L.P. and Equitas, L.P.
10.16* Guaranty dated as of May 30, 1997 by Joe Harris in favor of Pacific Capital, L.P. and Equitas, L.P.
10.17* Guaranty dated as of May 30, 1997 by Vernon Brannon in favor of Pacific Capital, L.P. and Equitas, L.P.
10.18* Noncompetition Agreement dated as of May 30, 1997 by and between HLM Design, Inc., Hansen Lind Meyer Inc.
and Joseph M. Harris.
10.19* Noncompetition Agreement dated as of May 30, 1997 by and between HLM Design, Inc., Hansen Lind Meyer Inc.
and Vernon B. Brannon.
10.20* Guaranty (Limited in Amount) dated as of May 30, 1997 by and among Vernon B. Brannon, Joseph M. Harris,
and a former director.
10.20.1* Addendum B to Lease Agreement dated as of May 30, 1997 by and between Berthel Fisher & Company Leasing,
Inc. and Hansen Lind Meyer, Inc.
10.20.2* Letter Agreement dated as of January 9, 1998 amending the Berthel Lease.
10.21* Security Agreement dated as of May 30, 1997 by and between Berthel Fisher & Company Leasing, Inc. and
Hansen Lind Meyer Inc.
10.22* Lease Agreement dated as of May 30, 1997 by and between Berthel Fisher & Company Leasing, Inc. and Hansen
Lind Meyer Inc. (the "Berthel Lease").
10.23* Form of HLM Design, Inc. Stock Option Plan.
10.24* Form of HLM Design, Inc. Employee Stock Purchase Plan.
10.25* Employment Agreement between HLM Design, Inc. and Joseph M. Harris, as amended to date.
10.26* Employment Agreement between HLM Design, Inc. and Vernon B. Brannon, as amended to date.
10.27* Promissory Note dated as of May 30, 1997 issued by HLM Design, Inc. in favor of First Charter National
Bank.
10.28* First Amendment to Management and Services Agreement dated as of May 29, 1997 by and between HLM Design
of Northamerica, Inc. (formerly Hansen Lind Meyer Inc.) and HLM Design.
10.29* First Amendment to Management and Services Agreement dated as of May 29, 1997 by and between HLM Design
of the Southeast, P.C. (formerly HLM of North Carolina, P.C.) and HLM Design.
10.30* First Amendment to Management and Services Agreement dated as of May 29, 1997 by and between HLM Design
of the Northwest, Architecture, Engineering and Planning, P.C. (formerly HLM of Oregon Architecture and
Planning, P.C.) and HLM Design.
10.31* Form of Statutory Incentive Stock Option Agreement and Grant pursuant to HLM Design, Inc. 1998 Stock
Option Plan between HLM Design, Inc. and Joseph M. Harris.
10.32* Form of Statutory Incentive Stock Option Agreement and Grant pursuant to HLM Design, Inc. 1998 Stock
Option Plan between HLM Design, Inc. and Vernon B. Brannon.
10.33* Form of Nonstatutory Stock Option Agreement and Grant pursuant to HLM Design, Inc. 1998 Stock Plan
between HLM Design, Inc. and Joseph M. Harris.
10.34* Form of Nonstatutory Stock Option Agreement and Grant pursuant to HLM Design, Inc. 1998 Stock Option Plan
between HLM Design, Inc. and Vernon B. Brannon.
10.35* Stockholders Agreement dated as of July 29, 1997 among HLM Design, Inc., Joseph M. Harris, Vernon B.
Brannon, Pacific Capital, L.P., Equitas, L.P., Clay Caroland, Shannon LeRoy, and a former director.
10.36* Promissory Note dated as of December 10, 1996 issued by Hansen Lind Meyer, Inc. in favor of First Charter
National Bank.
10.37* Modification and Extension Agreement dated as of June 2, 1997 between First Charter National Bank and
Hansen Lind Meyer, Inc.
</TABLE>

II-3

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ---------- ---------------------------------------------------------------------------------------------------------
<S> <C>
10.38* Commercial Guaranty dated as of May 30, 1997 by Hansen Lind Meyer, Inc. in favor of First Charter
National Bank.
10.39* Security Agreement dated as of June 2, 1997 between Hansen Lind Meyer, Inc. and First Charter National
Bank.
10.40* Commercial Security Agreement dated as of May 30, 1997 between Hansen Lind Meyer, Inc. and First Charter
National Bank.
10.41* Subordination Agreement dated as of May 30, 1997 among Berthel Fisher & Company Leasing, Inc., First
Charter National Bank, HLM Design, Inc. and Hansen Lind Meyer, Inc.
10.42* Note and Security Agreement dated as of September 10, 1997 by and among HLM Design, Inc., Hansen Lind
Meyer, Inc., certain individual guarantors and Berthel Fisher & Company Leasing, Inc., as amended to
date.
10.43* Note and Security Agreement dated as of September 16, 1997 by and among HLM Design, Inc., Hansen Lind
Meyer, Inc., certain individual guarantors and Berthel Fisher & Company Leasing, Inc., as amended to
date.
10.44* Intercreditor Agreement dated as of September 10, 1997 between and among Berthel Fisher & Company
Leasing, Inc., Pacific Capital, L.P. and Equitas L.P.
10.45* Commercial Guaranty dated as of May 30, 1997 by Joseph M. Harris in favor of First Charter National Bank
(relating to Promissory Note of HLM Design, Inc. of even date therewith).
10.46* Commercial Guaranty dated as of May 30, 1997 by Vernon B. Brannon in favor of First Charter National Bank
(relating to Promissory Note of HLM Design, Inc. of even date therewith).
10.47* Modification and Extension Agreement dated as of May 30, 1998 between First Charter National Bank and HLM
Design, Inc.
10.48* Modification and Extension Agreement dated as of May 30, 1998 between First Charter National Bank and
Hansen Lind Meyer, Inc.
10.49* Lease Agreement dated as of December 18, 1995 between CTHL Properties and Hanson Lind Meyer, Inc.
10.50* Promissory Note dated as of March 20, 1997 issued by Hansen Lind Meyer, Inc. in favor of Joseph M.
Harris, as extended to date.
10.51* Promissory Note dated as of March 20, 1997 issued by Hansen Lind Meyer, Inc. in favor of Vernon B.
Brannon, as extended to date.
10.52* Guaranty dated as of December 10, 1996 by Joseph M. Harris in favor of First Charter National Bank
(relating to Promissory Note of Hansen Lind Meyer, Inc. of even date therewith).
10.53* Guaranty dated as of December 10, 1996 by Vernon B. Brannon in favor of First Charter National Bank
(relating to Promissory Note of Hansen Lind Meyer, Inc. of even date therewith).
10.54* Common Stock Purchase Warrant dated as of May 30, 1997 issued to Pacific Capital, L.P.
10.55* Second Amendment to Management and Services Agreement dated as of June 5, 1998 by and between HLM Design
of Northamerica, Inc. and HLM Design.
10.56* Second Amendment to Management and Services Agreement dated as of June 5, 1998 by and between HLM Design
of the Southeast, P.C. and HLM Design.
10.57* Second Amendment to Management and Services Agreement dated as of June 5, 1998 by and between HLM Design
of the Northwest, Architecture, Engineering and Planning, P.C. and HLM Design.
10.58 Form of Letter Agreement among Messrs. Harris and Brannon, Berthel Leasing and HLM Design.
21.1* Subsidiaries of the Registrant.
23.1 Consent of Deloitte & Touche LLP.
23.2* Consent of Parker, Poe, Adams & Bernstein L.L.P. (included in Exhibit 5.1 to this Registration
Statement).
24.1* Power of Attorney (contained on the signature page to the Registration Statement).
</TABLE>

- ---------------

* Filed previously

ITEM 17. UNDERTAKINGS.

The undersigned Registrant hereby undertakes to provide to the
Underwriters, at the closing or closings specified in the Underwriting
Agreement, certificates in such denominations and registered in such names as
may be required by the Underwriters in order to permit prompt delivery to each
purchaser.

The undersigned Registrant hereby further undertakes that:

(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed part of this Registration Statement as
of the time it was declared effective.

II-4

<PAGE>
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

II-5

<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 6 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Charlotte, North
Carolina on June 11, 1998.

HLM DESIGN, INC.

By: /s/_______VERNON B. BRANNON________
VERNON B. BRANNON
SENIOR VICE PRESIDENT, TREASURER
AND CHIEF FINANCIAL OFFICER

POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 5 Registration Statement has been signed by the following persons in the
capacities and on the date indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ ------------------------------------------------- --------------

<S> <C> <C>
/s/* President, Chief Executive Officer (principal June 11, 1998
JOSEPH M. HARRIS executive officer) and Chairman

/s/VERNON B. BRANNON Senior Vice President, Treasurer, Chief Financial June 11, 1998
VERNON B. BRANNON Officer (principal financial and accounting
officer) and Director

/s/* Director June 11, 1998
CLAY R. CAROLAND III

/s/* Director June 11, 1998
SHANNON LEROY
</TABLE>

*By: /s/_____VERNON B. BRANNON______
VERNON B. BRANNON
(ATTORNEY-IN-FACT FOR EACH
OF THE PERSONS INDICATED)

II-6

<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ---------- ---------------------------------------------------------------------------------------------------------
<S> <C>
1.1* Form of Underwriting Agreement
1.2* Form of Agreement Among Underwriters
3.1* Certificate of Incorporation of the Registrant, as amended to date.
3.2* Bylaws of the Registrant, as amended to date (as approved to become effective upon completion of this
Offering).
4.1* Form of Common Stock Certificate
4.2* Form of Common Stock Purchase Warrant
4.3* Registration Rights Agreement dated as of May 30, 1997 by and among HLM Design, Inc., Pacific Capital,
L.P. and Equitas, L.P.
4.4* Registration Rights Agreement dated as of September 10, 1997 by and among HLM Design, Inc. and Berthel
Fisher & Company Leasing, Inc.
5.1* Opinion letter of Parker, Poe, Adams & Bernstein L.L.P. regarding the legality of the securities
registered.
10.1* Management and Services Agreement dated as of May 29, 1997 by and between Hansen Lind Meyer Inc. and HLM
Design.
10.2* Management and Services Agreement dated as of May 29, 1997 by and between HLM of North Carolina, P.C. and
HLM Design.
10.3* Management and Services Agreement dated as of May 29, 1997 by and between HLM of Oregon, Architecture and
Planning, P.C. and HLM Design.
10.4* Stockholders' Agreement dated as of May 29, 1997 by and among Joseph M. Harris, Vernon B. Brannon and
Hansen Lind Meyer Inc.
10.5* Stockholders' Agreement dated as of May 29, 1997, by and among Joseph M. Harris, Vernon B. Brannon,
Phillip J. Antis and HLM of North Carolina, P.C.
10.6* Stockholders' Agreement dated as of May 29, 1997 by and among Joseph M. Harris, Vernon B. Brannon, Viktor
A. Lituczy and HLM of Oregon, Architecture and Planning, P.C.
10.7* Form of Security Escrow Agreement among HLM Design, Inc., certain security holders and First Union
National Bank, as escrow agent.
10.8* Note Purchase Agreement dated as of May 30, 1997 by and among HLM Design, Inc., Hansen Lind Meyer Inc.,
BBH Corp., Pacific Capital, L.P., and Equitas, L.P.
10.9* Promissory Note A-1 dated as of May 30, 1997 by HLM Design, Inc. in favor of Pacific Capital, L.P.
10.10* Promissory Note A-2 dated as of May 30, 1997 by HLM Design, Inc. in favor of Equitas, L.P.
10.11* Collateral Assignment of Contract Rights dated as of May 30, 1997 by and between HLM Design, Inc. and
Pacific Capital, L.P. and Equitas, L.P.
10.12* Security Agreement dated as of May 30, 1997 by and between HLM Design, Inc. and Pacific Capital, L.P. and
Equitas, L.P.
10.13* Affiliate Promissory Note dated May 30, 1997 by BBH Corp. in favor of HLM Design, Inc.
10.14* Collateral Assignment of Promissory Note dated as of May 30, 1997 by and between HLM Design, Inc. and
Pacific Capital, L.P. and Equitas, L.P.
10.15* Unconditional Guaranty dated as of May 30, 1997 by and between Hansen Lind Meyer Inc. and BBH Corp. in
favor of Pacific Capital, L.P. and Equitas, L.P.
10.16* Guaranty dated as of May 30, 1997 by Joe Harris in favor of Pacific Capital, L.P. and Equitas, L.P.
10.17* Guaranty dated as of May 30, 1997 by Vernon Brannon in favor of Pacific Capital, L.P. and Equitas, L.P.
10.18* Noncompetition Agreement dated as of May 30, 1997 by and between HLM Design, Inc., Hansen Lind Meyer Inc.
and Joseph M. Harris.
10.19* Noncompetition Agreement dated as of May 30, 1997 by and between HLM Design, Inc., Hansen Lind Meyer Inc.
and Vernon B. Brannon.
10.20* Guaranty (Limited in Amount) dated as of May 30, 1997 by and among Vernon B. Brannon, Joseph M. Harris,
and a former director.
10 20.1* Addendum B to Lease Agreement dated as of May 30, 1997 by and between Berthel Fisher & Company Leasing,
Inc. and Hansen Lind Meyer, Inc.
10 20.2* Letter Agreement dated as of January 9, 1998 amending the Berthel Lease.
10.21* Security Agreement dated as of May 30, 1997 by and between Berthel Fisher & Company Leasing, Inc. and
Hansen Lind Meyer Inc.
10.22* Lease Agreement dated as of May 30, 1997 by and between Berthel Fisher & Company Leasing, Inc. and Hansen
Lind Meyer Inc. (the "Berthel Lease").
10.23* Form of HLM Design, Inc. Stock Option Plan.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ---------- ---------------------------------------------------------------------------------------------------------
<S> <C>
10.24* Form of HLM Design, Inc. Employee Stock Purchase Plan.
10.25* Employment Agreement between HLM Design, Inc. and Joseph M. Harris, as amended to date.
10.26* Employment Agreement between HLM Design, Inc. and Vernon B. Brannon, as amended to date.
10.27* Promissory Note dated as of May 30, 1997 issued by HLM Design, Inc. in favor of First Charter National
Bank.
10.28* First Amendment to Management and Services Agreement dated as of May 29, 1997 by and between HLM Design
of Northamerica, Inc. (formerly Hansen Lind Meyer Inc.) and HLM Design formerly.
10.29* First Amendment to Management and Services Agreement dated as of May 29, 1997 by and between HLM Design
of the Southeast, P.C. (formerly HLM of North Carolina, P.C.) and HLM Design.
10.30* First Amendment to Management and Services Agreement dated as of May 29, 1997 by and between HLM Design
of the Northwest, Architecture, Engineering and Planning, P.C. (formerly HLM of Oregon Architecture and
Planning, P.C.) and HLM Design.
10.31* Form of Statutory Incentive Stock Option Agreement and Grant pursuant to HLM Design, Inc. 1998 Stock
Option Plan between HLM Design, Inc. and Joseph M. Harris.
10.32* Form of Statutory Incentive Stock Option Agreement and Grant pursuant to HLM Design, Inc. 1998 Stock
Option Plan between HLM Design, Inc. and Vernon B. Brannon.
10.33* Form of Nonstatutory Stock Option Agreement and Grant pursuant to HLM Design, Inc. 1998 Stock Plan
between HLM Design, Inc. and Joseph M. Harris.
10.34* Form of Nonstatutory Stock Option Agreement and Grant pursuant to HLM Design, Inc. 1998 Stock Option Plan
between HLM Design, Inc. and Vernon B. Brannon.
10.35* Stockholders Agreement dated as of July 29, 1997 among HLM Design, Inc., Joseph M. Harris, Vernon B.
Brannon, Pacific Capital, L.P., Equitas, L.P., Clay Caroland, Shannon LeRoy, and a former director.
10.36* Promissory Note dated as of December 10, 1996 issued by Hansen Lind Meyer, Inc. in favor of First Charter
National Bank.
10.37* Modification and Extension Agreement dated as of June 2, 1997 between First Charter National Bank and
Hansen Lind Meyer, Inc.
10.38* Commercial Guaranty dated as of May 30, 1997 by Hansen Lind Meyer, Inc. in favor of First Charter
National Bank.
10.39* Security Agreement dated as of June 2, 1997 between Hansen Lind Meyer, Inc. and First Charter National
Bank.
10.40* Commercial Security Agreement dated as of May 30, 1997 between Hansen Lind Meyer, Inc. and First Charter
National Bank.
10.41* Subordination Agreement dated as of May 30, 1997 among Berthel Fisher & Company Leasing, Inc., First
Charter National Bank, HLM Design, Inc. and Hansen Lind Meyer, Inc.
10.42* Note and Security Agreement dated as of September 10, 1997 by and among HLM Design, Inc., Hansen Lind
Meyer, Inc., certain individual guarantors and Berthel Fisher & Company Leasing, Inc., as amended to
date.
10.43* Note and Security Agreement dated as of September 16, 1997 by and among HLM Design, Inc., Hansen Lind
Meyer, Inc., certain individual guarantors and Berthel Fisher & Company Leasing, Inc., as amended to
date.
10.44* Intercreditor Agreement dated as of September 10, 1997 between and among Berthel Fisher & Company
Leasing, Inc., Pacific Capital, L.P. and Equitas L.P.
10.45* Commercial Guaranty dated as of May 30, 1997 by Joseph M. Harris in favor of First Charter National Bank
(relating to Promissory Note of HLM Design, Inc. of even date therewith).
10.46* Commercial Guaranty dated as of May 30, 1997 by Vernon B. Brannon in favor of First Charter National Bank
(relating to Promissory Note of HLM Design, Inc. of even date therewith).
10.47* Modification and Extension Agreement dated as of May 30, 1998 between First Charter National Bank and HLM
Design, Inc.
10.48* Modification and Extension Agreement dated as of May 30, 1998 between First Charter National Bank and
Hansen Lind Meyer, Inc.
10.49* Lease Agreement dated as of December 18, 1995 between CTHL Properties and Hanson Lind Meyer, Inc.
10.50* Promissory Note dated as of March 20, 1997 issued by Hansen Lind Meyer, Inc. in favor of Joseph M.
Harris, as extended to date.
10.51* Promissory Note dated as of March 20, 1997 issued by Hansen Lind Meyer, Inc. in favor of Vernon B.
Brannon, as extended to date.
10.52* Guaranty dated as of December 10, 1996 by Joseph M. Harris in favor of First Charter National Bank
(relating to Promissory Note of Hansen Lind Meyer, Inc. of even date therewith).
10.53* Guaranty dated as of December 10, 1996 by Vernon B. Brannon in favor of First Charter National Bank
(relating to Promissory Note of Hansen Lind Meyer, Inc. of even date therewith).
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ---------- ---------------------------------------------------------------------------------------------------------
<S> <C>
10.54* Common Stock Purchase Warrant dated as of May 30, 1997 issued to Pacific Capital, L.P.
10.55* Second Amendment to Management and Services Agreement dated as of June 5, 1998 by and between HLM Design
of Northamerica, Inc. and HLM Design.
10.56* Second Amendment to Management and Services Agreement dated as of June 5, 1998 by and between HLM Design
of the Southeast, P.C. and HLM Design.
10.57* Second Amendment to Management and Services Agreement dated as of June 5, 1998 by and between HLM Design
of the Northwest, Architecture, Engineering and Planning, P.C. and HLM Design.
10.58 Form of Letter Agreement among Messrs. Harris and Brannon, Berthel Leasing and HLM Design.
21.1* Subsidiaries of the Registrant.
23.1 Consent of Deloitte & Touche LLP.
23.2* Consent of Parker, Poe, Adams & Bernstein L.L.P. (included in Exhibit 5.1 to this Registration
Statement).
24.1* Power of Attorney (contained on the signature page to the Registration Statement).
</TABLE>

- ---------------

* Filed previously

Exhibit 10.58

June __, 1998

HLM Design, Inc.
121 West Trade Street
Suite 2850
Charlotte, North Carolina 28202

Ladies and Gentlemen:

This will confirm the agreement and understanding of the undersigned that,
notwithstanding the provisions of Section 3 of that certain Security Escrow
Agreement dated the date hereof among the undersigned, HLM Design, Inc. and
First Union National Bank, as escrow agent (the "Agreement") the Shares (as
defined in the Agreement) shall not be released from escrow under the Agreement
pursuant to such Section 3 to the extent such release would result in the
recognition of compensation expense to the Company in connection therewith.

Very truly yours,

Joseph M. Harris

Vernon B. Brannon

BERTHEL FISHER & COMPANY LEASING, INC.

By __________________________________

Acknowledged and agreed, the
day and year first above written
HLM Design, Inc.

By _____________________________

EXHIBIT 23.1

INDEPENDENT AUDITORS' CONSENT

To the Board of Directors and Stockholders

We consent to the use in this Amendment No. 6 to the Registration Statement
relating to the shares of Common Stock of HLM Design, Inc. on Form S-1 of our
report dated (i) November 11, 1997 (January 30, 1998, February 13, 1998 and
February 27, 1998 as to the last paragraph in Note 1) on the financial
statements of HLM Design, Inc. as of April 25, 1997 and for the period ended
April 25, 1997, (ii) our report dated October 31, 1997 on the financial
statements of Hansen Lind Meyer, Inc. as of April 26, 1996 and April 25, 1997
and for each of the three years in the period ended April 25, 1997 appearing in
the Prospectus, which is a part of this Amendment No. 5 to the Registration
Statement, and to the reference to us under the heading "Experts" in such
Prospectus.

DELOITTE & TOUCHE LLP

Charlotte, North Carolina
June 11, 1998