UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549





FORM 10-K




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| | -------------------------------------------------------------------------------------
| | ANNUAL REPORT PURSUANT TO SECTION 13 OR
	15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31,
2000


OR



| |                                                                                          
| | -----------------------------------------------------------------------------------------
| | TRANSITION REPORT PURSUANT TO SECTION 13
	OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from
 to


Commission File Number 0-23373



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LANDMARK SYSTEMS CORPORATION

(Exact name of Registrant as specified in its
charter)


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|                                                               
|Virginia                                                        |  | 54-1221302                          
|(State or other jurisdiction
	of incorporation or organization) |  | (I.R.S. Employer Identification No.)
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|                                                               
|12700 Sunrise Valley Drive
	Reston, Virginia                    |  | 20191-5804(Zip Code)                
|(Address of principal executive offices)                        |  |                                     

Registrants telephone number, including
area code:703-464-1300

Securities registered pursuant to
Section 12(b) of the Act: None

Securities registered pursuant to
Section 12(g) of the Act:

Title of each class

Common Stock, par value $.01 per share

Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days.  Yes 
  No

Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of
registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.

The aggregate market value of registrants voting stock
held by non-affiliates as of March 2, 2001, was $12,162,884
based on a market price of $3.3125 per share.

The number of shares of the registrants Common Stock
outstanding as of March 2, 2001 was 12,365,411 shares.

The following document is hereby incorporated by reference into
this Form 10-K:

Portions of the Registrants 2001 Proxy Statement to be
filed with the Securities and Exchange Commission
(Part III).

Some of the statements in this Annual Report on Form 10-K
are forward-looking within the meaning of the
Private Securities Litigation Reform Act of 1995 and are related
to anticipated future operating results. Future operating
results may be impeded by single or combined events and/or
circumstances that have not been presently anticipated.
Forward-looking statements are based on Landmark
managements current expectations and assumptions, which
may be affected by a number of factors, including, without
limitation, the significant percentage of sales consummated in
the last few days of each calendar quarter, changes in the
Companys business strategy and focus, continued softness
in the mainframe enterprise software market, competitive product
introductions resulting from rapid technological advances, price
competition, any failure or delay in the Companys ability
to develop and introduce new products, uncertainty of customer
acceptance of new products, seasonal factors affecting the
Companys sales, the Companys ability to attract and
retain qualified technical, sales, managerial and other key
personnel, the Companys ability to manage expenses
effectively, foreign currency risk, and other factors.
Therefore, there can be no assurance that actual future results
will not differ materially from anticipated results.









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PART I

Item 1.  Business.

General

Landmark Systems Corporation (Landmark or the
Company) is a leading provider of software solutions
and services that help organizations manage their critical
information technology systems and solve real systems management
problems. Landmarks complete integrated solutions ensure
that operating systems, applications, databases, middleware, and
servers operate as efficiently and effectively as possible.
Landmarks The Monitorproducts
(TMON) are distinct in their ability to
monitor the key components of a computing environment, provide
early warning of potential system problems, and enable effective
planning for changes in the computing environment. The Company
believes these capabilities improve user productivity, reduce
computing costs, increase system availability, and optimize use
of system resources. Landmarks products provide
performance management capabilities for many critical data
center platforms.

Performance management software can provide early warning and
facilitate resolution of system problems by monitoring a
systems key components, including the central processing
unit, memory and storage, input/ output, disk space, workload,
operating system, and network subsystems. Identifying and
addressing system problems allows businesses to increase system
availability, improve user productivity, reduce computing costs,
and limit the adverse business effects of system degradation.
Performance management tools also enable organizations to model
or predict system and application performance that improves the
acquisition, development, and implementation of new or changed
applications and hardware.

Landmarks TMON products enable businesses to optimize
system performance and resource utilization while maintaining a
high and consistent level of user productivity. Landmarks
products provide the ability to transform raw data into useful
information through an intelligent aggregation and automatic
summarization process, which collects data on a continuous basis
and generates summary information at prescribed intervals. This
data can be measured against a variety of performance thresholds
and easily formatted into understandable reports to facilitate
the quick identification and resolution of performance problems.
In addition, Landmarks products self-manage the
collection, summarization, and distribution of performance data,
and consequently require minimal computing and personnel
resources. As a result of this efficient gathering, storage, and
presentation of performance data, Landmarks products are
scalable to accommodate system growth.

Through its maintenance and support program, Landmark offers its
customers extensive technical support, including telephone
consultation, product maintenance, and product upgrades.
Landmark also provides its customers with consulting and
training services. Historically, 85 to 90% of Landmarks
customers have renewed their support and maintenance
arrangements with the Company.

In November 2000, Landmark announced that it would focus
its resources and future efforts on products and markets that
are aligned best with its core competencies, including
higher-growth niches within the OS/390 mainframe marketplace.
Landmark discontinued offering its PerformanceWorks® for
client/server product line and WebWatcher product and related
services. A product support policy was established to assist
customers of discontinued products through 2001.

Technology and Products

Landmarks TMON family of products enables optimum systems
performance by monitoring current system availability,
diagnosing and preventing problems, and planning for future
enterprise capacity needs. The TMON family includes monitoring
software products for technologies such as CICS, DB2, IMS, MVS,
MQSeries, TCP/IP, USS, VSE and VTAM. Landmark also offers a

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Landmarks TMON products enable businesses to monitor and
analyze performance metrics in three different timeframes:
real-time, recent-past and historical.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Real-time monitoring.Real-time monitoring allows
	users to view the current status of the computing environment.
	To do this, performance metrics are collected from throughout
	the system and displayed graphically at a single workstation.
	The real-time monitoring feature can be used as an early warning
	tool by establishing thresholds against which critical
	performance metrics are measured. If a metric or combination of
	metrics exceeds the established threshold, an alarm is generated
	to notify the user of a potential system or application problem.
	The user is then guided through increasingly detailed levels of
	performance data until the cause of the problem is identified.
	The user can then either solve the problem or an automated
	action can be triggered to correct the problem.
|
| |  | Recent-past monitoring.Recent-past monitoring
	displays the performance metrics collected within the past few
	minutes or hours. If a system has experienced a degradation in
	performance, recent-past monitoring can be used to review the
	performance metrics leading up to the occurrence of the problem
	to help identify its source and to facilitate a resolution.
	Recent-past monitoring can also be used to identify trends in
	system utilization and performance that may result in system
	errors. These trends can be used to predict and prevent future
	system problems.                                                                                                                                                                                                                                  
|
| |  | Historical data analysis.Historical data analysis
	is used to review performance metrics collected over days, weeks
	and months to understand how system resources have been used and
	whether trends have developed which could lead to future
	performance problems. Landmarks products automatically
	store and aggregate performance data so users can quickly
	retrieve and view information over the desired period of time
	from multiple systems on one report.                                                                                                                                                                                                                                                                                                                                                   

Products

TMON for DB2 TMON for DB2 is a
performance management solution for IBMs DB2 relational
database management system. TMON for DB2 provides real-time,
recent-past and historical performance information on DB2
subsystems, threads and objects. With Landmark TMON for DB2, you
can simplify DB2 management and enhance your performance tuning
and problem determination capabilities. In addition, a
separately licensed feature, SQL Capture, introduces new
application tuning and DB2 database design assistance
functionality and greatly enhances the overall performance
management capabilities of Landmark TMON for DB2.

TMON for CICS Landmark TMON for CICS
is a solution for managing IBMs CICS application server.
TMON for CICS monitors every area of CICS activity, including
online and off-line analysis capabilities, problem determination
and resolution support, system and application debugging and
tuning, data management and batch reporting. With Landmark TMON
for CICS you can enhance CICS performance, exploit the
capabilities of CICS and prevent problems before they occur.
Landmark offers TMON for CICS (ESA) and TMON FOR CICS (VSE).
Landmark expects to offer TMON for CICS/TS (VSE) in mid-year
2001.

TMON for IMS Landmark TMON for IMS was
developed specifically to optimize the performance of IMS
applications and provide immediate visibility into application
and IMS subsystem performance. With Landmark TMON for IMS, you
can identify and resolve problems,

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TMON for MQSeries Landmark TMON for
MQSeries is a complete tool for IBMs MQSeries message
queuing middleware. Landmarks MQSeries solution is an
interface for the deployment, administration, configuration and
monitoring of MQSeries. Ideally used during the initial stages
of MQSeries deployment and application development, Landmark
TMON for MQSeries provides detailed information via real-time,
recent-past and historical data collection as well as command
interface to MQSeries. Once MQSeries is deployed, Landmark TMON
for MQSeries provides proactive exception alerting as well as
simple automation to reduce or eliminate system outages or
interruptions.

TMON for MVS Landmark TMON for MVS is
a solution for monitoring every area of IBMs MVS and
OS/390 operating systems. TMON for MVS monitors MVS performance
in real time, provides access to historical data online for
analysis and provides facilities for summarizing and archiving
MVS performance data for historical reporting. Landmark TMON for
MVS is designed to be used by systems programmers, performance
analysts, application tuners and operations personnel and
includes flexible exception processing and
productivity-enhancing system and programmer utilities. Landmark
expects to offer a new version of TMON for MVS in mid-year 2001.

TMON for TCP/IP Landmark TMON for
TCP/IP is a single-point solution to monitor and manage critical
TCP/IP networks. TMON for TCP/IP is the only OS/390-centric
TCP/IP product that monitors and manages non-OS/390 stacks and
devices, and thus, the only complete enterprise-wide TCP/IP
monitor. Using Landmark TMON for TCP/IP, a business can monitor
TCP/IP hosts and routers in real time, analyze resource
utilization and contention, take action before thresholds are
exceeded, identify and correct performance anomalies and perform
historical reporting for trend analysis and service level
agreement verification.

TMON for USS With the introduction of
UNIX running on OS/390, IT professionals have become challenged
to understand the impact of new USS workloads and resource
consumption within their OS/390 enterprises. TMON for USS
monitors and manages critical OS/390 USS resources and processes
allowing users to take action to avoid problems before they
occur. TMON for USS fully optimizes USS resources and workloads,
pinpoints and resolves problems and analyzes processes and
exceptions. Landmark expects to offer TMON for USS in first
quarter 2001.

TMON for VSE Landmark TMON for VSE is
a tool for managing the performance of IBMs VSE operating
system. TMON for VSE provides tools for monitoring every area of
VSE activity, including online and off-line analysis
capabilities, problem determination and resolution support,
system and application debugging support, data management and
batch reporting. With Landmark TMON for VSE businesses can
enhance VSE performance, exploit the capabilities of VSE and
prevent problems before they occur.

TMON for VTAM Landmark TMON for VTAM
monitors both internal and external influences on the
performance of businesses communications environments. It
is also an application monitor, providing in-depth analysis of
all VTAM applications, including dataflow and response time
information. Easy-to-use diagnostic capabilities for problems
with VTAM definitions, configurations, applications, sessions,
routes and input/output devices are available in Landmark TMON
for VTAM as well.

NaviPlex Landmark NaviPlex® is a
tool for viewing and managing the real-time performance of all
critical applications running across the OS/390 enterprise. At a
glance, users can determine the performance of their business
critical applications, obtain notification when service level
agreements are not met and solve problems throughout the
enterprise  all with just a click of the mouse on a
Windows client. Using Landmark NaviPlex, IT staff can respond to
exception conditions faster and

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NaviGraph Landmark NaviGraph®
gives you a single point of access to Landmarks OS/390
suite of products for graphic management reporting and problem
analysis. With these meaningful graphics a business can pinpoint
critically constrained resources and get statistical measures
that help make capacity planning and hardware investment
decisions. Landmark NaviGraph tracks historical application
performance trends and correlates the results to produce
management reports online. Landmark NaviGraph helps verify that
service level agreements are met and alerts appropriate staff
when anomalies occur.

Athene Landmark is a licensed
distributor of the management reporting and capacity-planning
tool, Athene, from Metron Technology LTD in the United States
and internationally with the exception of the United Kingdom.
Athene includes a full range of capacity planning tools, such as
performance analysis, trending, correlation, seasonality and
predictive modeling for Windows, UNIX and MVS operating systems.
Athene captures, collects and transfers performance data from
the target systems to a performance database. Then, it exploits
this data for alert management; performance analysis; Oracle,
Sybase and SQL Server performance reporting; trend analysis and
analytical modeling to project future growth; meeting service
level agreements; and planning future requirements.
Additionally, Athene offers robust Web-based reporting
capabilities on system, user, database and application data.

Customers and Services

The Companys customers consist of organizations across a
wide variety of industries that are developing or have deployed
business-critical applications in complex, multi-user
environments. As of December 31, 2000, Landmark had
approximately 2,700 active customers worldwide.

Landmark offers its customers a maintenance and support program
that provides telephone consultation, product maintenance and
product upgrades. Customers can communicate with Landmark
technical support representatives 24 hours per day,
7 days per week. In addition, Landmark provides its
customers and distributors access to on-line maintenance
information through an Internet-based application.
Landmarks maintenance and support program entitles
participants to product enhancements, support for new releases
and upgrades, as well as maintenance information. Historically,
85 to 90% of Landmarks customers have renewed their
maintenance and support arrangements with the Company.

Landmark provides product support, deployment consulting and
educational services to maximize the value of customers
information systems. Landmarks Professional Services
organization offers consulting services that are designed to
support the effective deployment and implementation of
Landmarks products by assisting in the location of
appropriate components on which to run Landmarks software,
identifying which performance metrics to monitor, establishing
rules concerning how to aggregate, retain and store data and
customizing the presentation of reports generated from the
collected information.

The demand for these consulting services has grown as
business-critical applications are increasingly deployed in
complex, heterogeneous computing environments. The Professional
Services organization offers a variety of education and training
programs to assist customers in implementing Landmarks
performance management tools, including a number of standard
programs and custom presentations to fulfill specific requests.
Training courses are held at Landmarks Reston, VA training
center as well as on-site at customers facilities and in
major cities across the United States and internationally.

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Sales and Marketing

Landmark markets its products and services through its North
American and international sales organizations. The North
American direct sales force, which covers the United States and
Canada, consists of field sales representatives, system
engineers and telesales personnel. Additionally, a telesales
force increases the productivity of the field sales
representatives by undertaking a variety of sales support
activities. These include generating and following up on leads,
handling and closing smaller transactions, maintaining a current
database of existing and potential customers and providing
general assistance and account management. Each telesales
representative supports the efforts of two direct sales
representatives. The Company believes that the telesales force
permits the field sales force to focus on account opportunities
with major businesses involving larger dollar transactions, and
on establishing and maintaining relationships with these
organizations.

Landmark has established subsidiaries in certain strategic
international markets to increase sales levels and gross margins
on products sold in such markets. To date, Landmarks
international direct sales efforts consist of 13 sales offices
located in suburbs of Paris, Stockholm, London, Dusseldorf,
Milan, Utrecht (Netherlands), Rugby (United Kingdom), Madrid,
Bornem (Belgium), Melbourne, Sydney, Singapore and Hong Kong.
Revenues from international sales accounted for 36.2%, 31.6% and
33.1% of total revenues in 2000, 1999 and 1998, respectively. Of
those amounts, 8.3%, 9.5% and 13.4%, respectively, were
attributable to third-party distributors. For additional
information regarding the Companys revenues and long-lived
assets by geographic region, see Note 8  Segment
Information in the Companys Notes to Consolidated
Financial Statements contained elsewhere in this Form 10-K.

The Company maintains relationships with leading vendors
including IBM and Tivoli. These relationships afford the Company
opportunities to participate in joint marketing programs with
the vendors such as sales seminars, tradeshows and other
promotional activities.

Revenues received from individual customers of the Company vary
significantly based on the size of the product installation. The
sales cycle for Landmarks products is lengthy and
unpredictable and may range from a few months to over a year,
depending upon the interest of the prospective customer in the
Companys products, the size of the order (which may
involve a significant commitment of capital by the customer),
the decision-making and acceptance procedures within the
customers organization and other factors.

Product Development

Since its inception in 1983, Landmark has made substantial
investments in performance management software development. In
2000, 1999 and 1998, Landmarks product development
expenditures, including amounts capitalized, totaled $17.3
million, $17.0 million and $15.5 million, respectively. The
Company anticipates that, in the future, it will continue to
commit substantial resources to research and development.

Landmark believes that its future success will depend in large
part on its ability to extend its product line to support
additional hardware and software platforms, respond to changing
customer requirements and develop and introduce in a timely
manner new products that keep pace with technological
developments and emerging industry standards.

As of December 31, 2000, the Company had 83 employees
engaged in product development. Landmark intends to increase the
size and depth of its product development operation. However,
competition for highly qualified technical employees is intense
and there can be no assurance that the Company will be
successful in recruiting or retaining product development
employees.

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Intellectual Property

Landmark and its subsidiaries rely on a combination of
copyright, trademark, patent and trade secret laws,
confidentiality procedures and licensing arrangements to
establish and protect its proprietary rights. To effectively
protect Landmarks intellectual property while allowing for
the distribution of its products in the most flexible and
efficient manner, Landmark formed a new subsidiary in
February 1999, Landmark Technology Holdings Corporation.
This Delaware corporation holds, manages, protects and defends
the intellectual property of Landmark. Additionally, the
Delaware corporation licenses to Landmark and/or present and
future affiliates and/or third parties the use of such
properties for royalties.

As part of its confidentiality procedures, Landmark and its
subsidiaries generally enter into non-disclosure agreements with
its employees, distributors and corporate partners, and license
agreements with its customers, distributors and corporate
partners with respect to its software, product documentation and
other proprietary information. Despite these precautions, it may
be possible for a third party to copy or otherwise obtain and
use the Companys products or technology without
authorization, or to develop similar technology independently.
Policing unauthorized use of the Companys products is
difficult, and Landmark is unable to determine the extent to
which piracy of its software products and misappropriations of
its technology occur. Software piracy and misappropriation may
adversely affect the Companys results of operations.
Landmark and its subsidiaries currently rely on signed license
agreements, but may in the future rely on shrink
wrap licenses that are not signed by licensees and,
therefore, may be unenforceable under the laws of certain
jurisdictions. In addition, effective protection of intellectual
property rights is unavailable or limited in certain foreign
countries. There can be no assurance that the Companys
protection of its proprietary rights, including any patent that
may be issued, will be adequate or that the Companys
competitors will not independently develop similar technology,
duplicate the Companys products or design around any
patents issued to the Company or other intellectual property
rights.

Landmark and its subsidiaries are not aware that any of its
products infringe the proprietary rights of third parties. There
can be no assurance, however, that third parties will not claim
such infringement by the Company with respect to current or
future products. The Company expects that software product
developers will increasingly be subject to such claims as the
number of products and competitors in the Companys
industry segment grows and the functionality of products in the
industry segment overlaps. Any such claims, with or without
merit, could result in costly litigation that could absorb
significant management time, which could have a material adverse
effect on Landmarks business, financial condition and
results of operations. Such claims might require the Company to
enter into royalty or license agreements. Such royalty or
license agreements, if required, may not be available on terms
acceptable to Landmark or at all, which could have a material
adverse effect upon the Companys business, financial
condition and results of operations.

Competition

The market for performance management software is intensely
competitive, fragmented and characterized by increasingly rapid
technological developments, evolving standards and rapid changes
in customer requirements. To maintain and improve its position
in this market, Landmark is enhancing current products and the
inter-operability of its products with one another and
developing new products. Landmark competes primarily with
vendors that provide mainframe performance management software.
The Company believes that principal competitors with respect to
mainframe performance management software products include
Candle Corporation, BMC Software, Inc., Compuware Corporation
and Computer Associates International, Inc.

Some of the Companys competitors have longer operating
histories and substantially greater financial, technical, sales,
marketing and other resources, as well as greater name
recognition and a

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The principal competitive factors affecting the market for
Landmarks products are functionality and features
(including breadth of data collection, data management,
integration and modeling), product quality, platform coverage,
product architecture, price, customer support and name
recognition. Based on these factors, the Company believes that
it has competed effectively to date. In the future, Landmark
will be required to respond promptly and effectively to the
challenges of technological change, its competitors
innovations and customer requirements. There can be no assurance
that Landmark will be able to provide products that compare
favorably with the products of the Companys competitors or
that competitive pressures will not require the Company to
reduce its prices.

Employees

As of December 31, 2000, the Company employed 299 full time
personnel, including 83 in product development, 34 in technical
support, 130 in sales and marketing, and 52 in finance and
administration. The Companys employees are not represented
by any collective bargaining organization, and the Company has
never experienced a work stoppage. The Company believes its
success will depend in part on its continued ability to attract
and retain highly qualified personnel in an intensely
competitive market for experienced and talented software
engineers and sales and marketing personnel. The Company
believes that its relationship with its employees is
satisfactory.

Item 2.  Properties.

Landmark relocated its corporate headquarters to a facility in
Reston, Virginia in June 1999. Landmark entered into a
lease agreement whereby it has leased the entire four-story
office building, approximately 100,000 square feet situated on a
five-acre development site, for a term of 12 years, with
two renewal options each for an additional five years. The
Company has sublet approximately 7,500 square feet of the Reston
facility to an unrelated party under a lease that expires in
April 2002. Landmark executed a coterminous sublease of its
previous office space in Vienna, Virginia, which took effect
upon the commencement of the new lease, under a lease expiring
in June 2003, with a renewal option for an additional five
years.

The Company also leases approximately 4,000 square feet of
office space in Oakbrook, Illinois under a lease expiring in
April 2002, and 2,000 square feet in Irvine, California
under a lease expiring in April 2002. Landmark leases
international office space in London and Rugby, UK; Nieuwegein,
the Netherlands; Sevres, France; Kaarst, Germany; Central Hong
Kong; Singapore; Bagvaerd,

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Item 3.  Legal Proceedings.

The Company is not currently engaged in any material legal
proceedings.

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

There were no matters submitted to stockholders for vote during
the fourth quarter of 2000.

Executive Officers of the Company

The following table lists the executive officers of the Company.

|                          |  |     |    |          |  |                                                      
|------------------------- |  | --- | -- | -------- |  | -----------------------------------------------------
|Name                      |  | Age |    | Position
|                          |  |     |    |         
|Katherine K. Clark        |  |     | 43 |          |  | President, Chief Executive Officer and Director      
|                         
|                         
|                         
|                         
|James R. Bowerman         |  |     | 45 |          |  | Vice President, Research and Development             
|                         
|                         
|                         
|                         
|Donald E. Brown           |  |     | 45 |          |  | Vice President, Customer Operations                  
|                         
|                         
|                         
|                         
|Daniel C. Carayiannis     |  |     | 44 |          |  | Vice President, Worldwide Sales                      
|                         
|                         
|                         
|                         
|Bruce E. Lovett           |  |     | 43 |          |  | Vice President, Marketing                            
|                         
|                         
|                         
|                         
|Frederick S. Rolandi, III |  |     | 49 |          |  | Secretary, Vice President and Chief Financial Officer

Katherine K. Clark, a co-founder of Landmark, has
headed product development, technical support, finance and human
resources at various times over Landmarks history, has
been a director of Landmark since 1983 and from
November 1993 to September 1997 was President of the
Company. In 1994, Ms. Clark assumed her current role as
Chief Executive Officer of the Company and is responsible for
the long-term strategic direction of the Company. In
November 1999, Ms. Clark reassumed the role of
President of the Company.

James R. Bowerman is Landmarks Vice
President, Research and Development and is responsible for
strategy, development, maintenance and planning for
Landmarks product lines. Mr. Bowerman joined Landmark
in March 2000 after eight years as the Vice President of
Engineering of AXENT Technologies.

Donald E. Brown is Landmarks Vice
President, Customer Operations and is responsible for managing a
worldwide organization that offers professional services that
enhance the delivery of solutions to customers. Prior to joining
Landmark in April 2000, Mr. Brown served as Director
of Professional Services for Maincontrol, Inc., an asset
management software provider. Mr. Brown served as a
Managing Consultant for Headstrong (formerly James Martin &
Co.), a systems integration firm, from October 1997 until
June 1999. From June 1995 to October 1997,
Mr. Brown served as the Director of Applications Consulting
Services for PowerCerv, Inc. an enterprise resource planning
software developer.

Daniel C. Carayiannis is Landmarks Vice
President, Worldwide Sales and is responsible for sales and
sales support throughout the world. Mr. Carayiannis was
Landmarks Vice President, North American Sales from
October 1998 until January 2000. Prior to joining
Landmark, Mr. Carayiannis served from July 1994 to
October 1998 as Vice President of SPOT Image Corporation, a
satellite imagery and information data products firm. From
April 1993 to July 1994, Mr. Carayiannis served as
Vice President of Sales for Falcon Microsystems, a federal
computer technology value-added reseller.

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Bruce E. Lovett is Landmarks Vice
President, Marketing and is responsible for the strategic
planning and implementation of Landmarks marketing
programs for all software product lines. Prior to joining
Landmark in May 1999, Mr. Lovett served as Vice
President, Worldwide Marketing at TenFour, a company that
specializes in e-mail and Web security and connectivity software
and services from 1998 to 1999. From 1996 to 1998,
Mr. Lovett was employed with Versatility, a provider of
call center and customer care software and services, where he
served as Vice President of Marketing and Customer Programs.
Mr. Lovett served as the Director of Marketing for GRCI, a
network design software and consulting services firm during
1996, and he served as the Marketing Programs Manager for LEGENT
from 1993 to 1995.

Frederick S. Rolandi, III has served as
Landmarks Vice President and Chief Financial Officer since
November 1998. In September 1999, Mr. Rolandi was
elected to serve as Secretary of the Company. Prior to his
employment with Landmark, Mr. Rolandi served as Vice
President, Controller of Intersolv, Inc., a software tools
company, from November 1997 to October 1998. From 1991
to October 1997 Mr. Rolandi was employed with
Honeywell Measurex DMC where he served as Vice President and
Chief Financial Officer from May 1991 to December 1995 and
as Vice President and General Manager from January 1996 to
October 1997.

9



---



PART II

Item 5.  Market for Registrants Common
Equity and Related Stockholder Matters.

Landmarks common stock (the Common Stock) has
been traded on the Nasdaq National Market since the
Companys initial public offering on November 18, 1997
under the symbol LDMK. The following table sets
forth the high and low sale prices, as reported on the Nasdaq
National Market during each of the quarters indicated:

|     |                |      |   |        |  |  |   |       | 
|---- | -------------- | ---- | - | ------ |  |  | - | ----- | 
|     |                | High |   | Low   
|     |                |      |   |       
|2000 |                |      |   |        |  |  |   |      
|    
|    
|    
|    
|     | Fourth Quarter |      | $ | 4.563  |  |  | $ | 2.375 | 
|    
|    
|    
|    
|     | Third Quarter  |      |   | 6.00   |  |  |   | 3.25  | 
|    
|    
|    
|    
|     | Second Quarter |      |   | 7.375  |  |  |   | 4.50  | 
|    
|    
|    
|    
|     | First Quarter  |      |   | 10.50  |  |  |   | 4.75  | 
|1999 |                |      |   |        |  |  |   |      
|    
|    
|    
|    
|     | Fourth Quarter |      | $ | 11.188 |  |  | $ | 3.50  | 
|    
|    
|    
|    
|     | Third Quarter  |      |   | 11.25  |  |  |   | 6.75  | 
|    
|    
|    
|    
|     | Second Quarter |      |   | 13.25  |  |  |   | 8.75  | 
|    
|    
|    
|    
|     | First Quarter  |      |   | 14.25  |  |  |   | 8.50  | 

On March 2, 2001, there were 209 holders of record of the
Companys Common Stock.

Landmark has never paid or declared any cash dividends and does
not anticipate paying cash dividends on its Common Stock in the
foreseeable future. The Company currently intends to retain its
future earnings, if any, to fund the development and finance the
growth of its business. The amount and timing of any future
dividends will depend on general business conditions encountered
by the Company, as well as the financial condition, earnings and
capital requirements of the Company and such other factors as
the Board may deem relevant.

Item 6.  Selected Financial Data.

The following selected financial data of the Company are
qualified by reference to and should be read in conjunction with
the Consolidated Financial Statements and Notes thereto and
Managements Discussion and Analysis of Results of
Operations and Financial Condition included elsewhere in this
Form 10-K. The consolidated statements of operations data
for the years ended December 31, 1998, 1999 and 2000, and
the consolidated balance sheet data at December 31, 1999
and 2000 were derived, and are qualified by reference to,
Consolidated Financial Statements of the Company which were
audited by PricewaterhouseCoopers LLP and are included elsewhere
in this Form 10-K. The consolidated statements of
operations data for the years ended December 31, 1996 and
1997 and the consolidated balance sheet data at
December 31, 1996, 1997 and 1998 are derived from the
Companys audited financial statements not included in this
Form 10-K.

10



---



|                                 |                                  |                                          |        |        |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |        |        | 
|-------------------------------- | -------------------------------- | ---------------------------------------- | ------ | ------ | ------ | ---- | ------ | ------ | ------ | ---- | ------ | ------ | ------ | - | ------ | ------ | ------ | - | ------ | ------ | ------ | 
|                                 |                                  |                                         
|                                 |                                  | Year Ended December 31,                 
|                                 |                                  |                                         
|                                 |                                  | 1996                                     |        | 1997   |        | 1998 |        | 1999   |        | 2000
|                                 |                                  |                                          |        |        |        |      |        |        |        |     
|                                 |                                  |                                         
|                                 |                                  | (in thousands, except per-share amounts)
|                                
|                                
|                                
|                                
|Statements of Operations Data    |                                  |                                          |        |        |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |       
|                                
|                                
|                                
|                                
|Total revenues                   |                                  | $                                        | 36,556 |        |        | $    | 43,362 |        |        | $    | 49,832 |        |        | $ | 55,202 |        |        | $ | 56,415 |       
|                                
|                                
|                                
|                                
|Gross profit                     |                                  |                                          | 27,643 |        |        |      | 37,478 |        |        |      | 44,359 |        |        |   | 47,306 |        |        |   | 43,123 |       
|Operating expenses               |                                  |                                          |        |        |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |       
|                                
|                                
|                                
|                                
|                                 | Sales and marketing              |                                          |        | 11,671 |        |      |        | 14,310 |        |      |        | 17,125 |        |   |        | 20,881 |        |   |        | 25,448 |       
|                                
|                                
|                                
|                                
|                                 | Product research and development |                                          |        | 13,924 |        |      |        | 13,478 |        |      |        | 15,247 |        |   |        | 16,129 |        |   |        | 14,844 |       
|                                
|                                
|                                
|                                
|                                 | General and administrative       |                                          |        | 4,776  |        |      |        | 5,258  |        |      |        | 5,561  |        |   |        | 5,995  |        |   |        | 6,637  |       
|                                
|                                
|                                
|                                
|                                 | Restructuring charges            |                                          |        |       |        |      |        |       |        |      |        |       |        |   |        |       |        |   |        | 965    |       
|                                 |                                  |                                          |        |        |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |       
|                                 |                                  | Total operating expenses                 |        |        | 30,371 |      |        |        | 33,046 |      |        |        | 37,933 |   |        |        | 43,005 |   |        |        | 47,894 | 
|                                 |                                  |                                          |        |        |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |       
|Operating (loss) income          |                                  |                                          | (2,728 | )      |        |      | 4,432  |        |        |      | 6,426  |        |        |   | 4,301  |        |        |   | (4,771 | )     
|                                
|                                
|                                
|                                
|Net (loss) income (1)            |                                  | $                                        | (1,202 | )      |        | $    | 3,006  |        |        | $    | 5,122  |        |        | $ | 4,077  |        |        | $ | (2,551 | )     
|(Loss) earnings per share (1)(2) |                                  |                                          |        |        |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |       
|                                
|                                
|                                
|                                
|                                 | Basic                            |                                          | $      | (0.18  | )      |      | $      | 0.19   |        |      | $      | 0.45   |        |   | $      | 0.33   |        |   | $      | (0.20  | )     
|                                
|                                
|                                
|                                
|                                 | Diluted                          |                                          | $      | (0.18  | )      |      | $      | 0.17   |        |      | $      | 0.41   |        |   | $      | 0.31   |        |   | $      | (0.20  | )     

|                                       |  |                |        |      |  |      |        |      |  |      |        |  |  |   |        |  |  |   |        | 
|-------------------------------------- |  | -------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ |  |  | - | ------ |  |  | - | ------ | 
|                                       |  |               
|                                       |  | December 31,  
|                                       |  |               
|                                       |  | 1996           |        | 1997 |  | 1998 |        | 1999 |  | 2000
|                                       |  |                |        |      |  |      |        |      |  |     
|                                       |  |               
|                                       |  | (in thousands)
|                                      
|                                      
|                                      
|                                      
|Balance Sheet Data                     |  |                |        |      |  |      |        |      |  |      |        |  |  |   |        |  |  |   |        | 
|                                      
|                                      
|                                      
|                                      
|Cash and cash equivalents              |  | $              | 339    |      |  | $    | 17,243 |      |  | $    | 28,322 |  |  | $ | 32,136 |  |  | $ | 28,079 | 
|                                      
|                                      
|                                      
|                                      
|Working capital (deficit)              |  |                | (4,138 | )    |  |      | 11,218 |      |  |      | 24,198 |  |  |   | 29,246 |  |  |   | 24,840 | 
|                                      
|                                      
|                                      
|                                      
|Total assets                           |  |                | 25,076 |      |  |      | 44,508 |      |  |      | 59,307 |  |  |   | 76,507 |  |  |   | 76,870 | 
|                                      
|                                      
|                                      
|                                      
|Deferred revenue                       |  |                | 18,705 |      |  |      | 20,392 |      |  |      | 26,625 |  |  |   | 33,396 |  |  |   | 34,512 | 
|                                      
|                                      
|                                      
|                                      
|Long-term debt (less current portion)  |  |                | 592    |      |  |      | 51     |      |  |      |       |  |  |   |       |  |  |   |       | 
|                                      
|                                      
|                                      
|                                      
|Redeemable common stock instruments    |  |                | 704    |      |  |      |       |      |  |      |       |  |  |   |       |  |  |   |       | 
|                                      
|                                      
|                                      
|                                      
|Mandatorily redeemable preferred stock |  |                | 5,865  |      |  |      |       |      |  |      |       |  |  |   |       |  |  |   |       | 
|                                      
|                                      
|                                      
|                                      
|Stockholders equity (deficit)         |  |                | (6,290 | )    |  |      | 18,378 |      |  |      | 26,829 |  |  |   | 37,942 |  |  |   | 34,249 | 




|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The 2000 amounts include the asset disposals and restructuring
	charges associated with the Companys discontinuance of the
	client/server products; such charges are $3,052 included in cost
	of revenues for the write-off of capitalized software and
	prepaid royalties, $965 included in operating expenses for
	severance and related costs and $326 for the disposal of fixed
	assets. See Note 3 of Notes to Consolidated Financial
	Statements  Discontinuance of Client/ Server Products.
|   
|(2) | See Note 2 of Notes to Consolidated Financial Statements for an
	explanation of the method used to determine the number of shares
	used to compute basic and diluted earnings per share.                                                                                                                                                                                                                                                                                                            

11



---





|        |                                                                                        
|------- | ---------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Results of
	Operations and Financial Condition.

Results of Operations for 2000, 1999 and 1998

The following table sets forth the Companys Consolidated
Statements of Operations expressed as percentages of total
revenues for the periods indicated. The Companys revenues
are derived from licensing mainframe and client/ server computer
software, and providing related maintenance and other services.
In November 2000, the Company determined that its client/
server products were no longer sufficiently competitive in the
marketplace and discontinued the sale of those products. The
Company recorded a $4.3 million charge during the fourth quarter
2000 to reflect asset disposal and restructuring costs
associated with the discontinuance of its client/ server
products. The individual elements of the charge are discussed
below.

|                                          |                                                        |                          |      |      |       |      |      |      |       |  |      |      |       | 
|----------------------------------------- | ------------------------------------------------------ | ------------------------ | ---- | ---- | ----- | ---- | ---- | ---- | ----- |  | ---- | ---- | ----- | 
|                                          |                                                        |                         
|                                          |                                                        | Year Ended December 31, 
|                                          |                                                        |                         
|                                          |                                                        | 2000                     |      | 1999 |       | 1998
|                                          |                                                        |                          |      |      |       |     
|Revenues                                  |                                                        |                          |      |      |       |      |      |      |       |  |      |     
|                                         
|                                         
|                                         
|                                         
|                                          | License revenues                                       |                          |      | 45.4 | %     |      |      | 45.9 | %     |  |      | 44.3 | %    
|                                         
|                                         
|                                         
|                                         
|                                          | Maintenance revenues                                   |                          |      | 54.6 |       |      |      | 54.1 |       |  |      | 55.7 |      
|                                          |                                                        |                          |      |      |       |      |      |      |       |  |      |     
|                                          |                                                        | Total revenues           |      |      | 100.0 |      |      |      | 100.0 |  |      |      | 100.0 | 
|                                          |                                                        |                          |      |      |       |      |      |      |       |  |      |     
|Cost of revenues                          |                                                        |                          |      |      |       |      |      |      |       |  |      |     
|                                         
|                                         
|                                         
|                                         
|                                          | Cost of license revenues                               |                          |      | 3.5  |       |      |      | 2.4  |       |  |      | 2.3  |      
|                                         
|                                         
|                                         
|                                         
|                                          | Cost of maintenance revenues                           |                          |      | 10.6 |       |      |      | 8.3  |       |  |      | 7.4  |      
|                                         
|                                         
|                                         
|                                         
|                                          | Cost to acquire distribution rights                    |                          |      | 4.1  |       |      |      | 3.6  |       |  |      | 1.3  |      
|                                         
|                                         
|                                         
|                                         
|                                          | Disposal of capitalized software and associated assets |                          |      | 5.4  |       |      |      |     |       |  |      |     |      
|                                          |                                                        |                          |      |      |       |      |      |      |       |  |      |     
|                                          |                                                        | Total cost of revenues   |      |      | 23.6  |      |      |      | 14.3  |  |      |      | 11.0  | 
|                                          |                                                        |                          |      |      |       |      |      |      |       |  |      |     
|                                          | Gross profit                                           |                          |      | 76.4 |       |      |      | 85.7 |       |  |      | 89.0 |      
|                                          |                                                        |                          |      |      |       |      |      |      |       |  |      |     
|Operating expenses                        |                                                        |                          |      |      |       |      |      |      |       |  |      |     
|                                         
|                                         
|                                         
|                                         
|                                          | Sales and marketing                                    |                          |      | 45.1 |       |      |      | 37.8 |       |  |      | 34.4 |      
|                                         
|                                         
|                                         
|                                         
|                                          | Product research and development                       |                          |      | 26.3 |       |      |      | 29.2 |       |  |      | 30.6 |      
|                                         
|                                         
|                                         
|                                         
|                                          | General and administrative                             |                          |      | 11.8 |       |      |      | 10.9 |       |  |      | 11.1 |      
|                                         
|                                         
|                                         
|                                         
|                                          | Restructuring charges                                  |                          |      | 1.7  |       |      |      |     |       |  |      |     |      
|                                          |                                                        |                          |      |      |       |      |      |      |       |  |      |     
|                                          |                                                        | Total operating expenses |      |      | 84.9  |      |      |      | 77.9  |  |      |      | 76.1  | 
|                                          |                                                        |                          |      |      |       |      |      |      |       |  |      |     
|Operating (loss) income                   |                                                        |                          | (8.5 | )    |       |      | 7.8  |      |       |  | 12.9 |     
|                                         
|                                         
|                                         
|                                         
|Net interest and other income             |                                                        |                          | 4.1  |      |       |      | 3.8  |      |       |  | 3.6  |     
|                                         
|                                         
|                                         
|                                         
|Disposal of fixed assets                  |                                                        |                          | (0.6 | )    |       |      |     |      |       |  |     |     
|                                          |                                                        |                          |      |      |       |      |      |      |       |  |      |     
|(Loss) income before income taxes         |                                                        |                          | (5.0 | )    |       |      | 11.6 |      |       |  | 16.5 |     
|                                         
|                                         
|                                         
|                                         
|(Benefit from) provision for income taxes |                                                        |                          | (0.5 | )    |       |      | 4.2  |      |       |  | 6.2  |     
|                                          |                                                        |                          |      |      |       |      |      |      |       |  |      |     
|Net (loss) income                         |                                                        |                          | (4.5 | )%   |       |      | 7.4  | %    |       |  | 10.3 | %   
|                                          |                                                        |                          |      |      |       |      |      |      |       |  |      |     

Total revenues.Total revenues in 2000 were $56.4
million, an increase of 2.2% from the prior year. Total revenues
in 1999 were $55.2 million, an increase of 10.8% from 1998.
Revenues in 2000 from mainframe products and services were $53.5
million, an increase of 4.5% from the prior year, and revenues
in 2000 from client/ server products and services were $2.9
million, a decrease of 27.0% from the prior year. Although
revenues continued to increase in 2000, the Company experienced
a slowdown in sales growth due to the lengthening of the sales
cycle which may have been attributable to certain Year 2000
issues, as described below, and to the greater time required to
consummate more complex and higher dollar transactions. The
Company believes that in 1999 many of its customers may have
bought more mainframe-oriented products than they actually
needed in

12



---





License revenues. License revenues in 2000 were
$25.6 million, an increase of 1.0% over the prior year. During
1999, license revenues were $25.3 million, an increase of 14.7%
from 1998. The increases in 2000 and 1999 were affected by the
Year 2000 rollover event. The Company believes that demand for
its products was elevated in anticipation of Year 2000 during
the early part of 1999. However, demand began to slow in the
fourth quarter of 1999 and did not resume historic growth
patterns until the fourth quarter of 2000. Additionally, as
previously discussed, sales of client/server products declined
in 2000 compared to 1999. During 2000, the Company continued to
generate revenue from capacity upgrades of products to existing
customers, sales to new customers, sales of new products and
customer conversions to new license agreements. In
December 2000, the Company made available for sale two new
mainframe products: a monitor for the internet protocol, TCP/IP,
and a monitor for the transactional database IMS. Sales of these
products contributed $0.8 million and $0.2 million to
fourth-quarter 2000 license revenues, respectively.

A conversion of a license agreement is, in effect, a migration
from either a site or CPU license to a MIPS (millions of
instructions per second) or MSU (measured service units)
license. A site or CPU license allows the customer to use the
licensed software only in one designated location. A MIPS or MSU
license, however, allows the customer to use the licensed
software in a multi-site environment (these licenses are often
selected by customers who can reasonably anticipate their
computing capacity needs, and this license is priced in
proportion to the computing capacity of the machine). If a
customer elects to convert to a MIPS or MSU license, the
customer is required to pay the Company an additional fee
whenever the customer increases the size of their computing
environment. The list price of the new license and the
associated maintenance may be lower than that of the original
license and maintenance because of changes in fair values over
time.

Maintenance revenues. Maintenance revenues in 2000
were $30.8 million, an increase of 3.2% over the prior year.
During 1999, maintenance revenues were $29.9 million, an
increase of 7.6% from 1998. In 2000 and 1999, maintenance
revenues were favorably affected by the volume of prior
years license sales and the effects of increases in the
Companys maintenance prices, partially offset by an
increase in conversions of license agreements, which often may
result in lower maintenance fees. As discussed above, due to
changes in fair values over time, the new license and associated
maintenance may be lower than that of the original
(pre-conversion) license and maintenance. Maintenance renewal
rates have historically been 85% to 90%, and management believes
future maintenance renewal rates will continue at this level. In
2000, however, the Company experienced a decline in maintenance
renewal rates for the client/server products to the 60% level.
Management attributes this decline to the limited market
acceptance of the Companys client/server products.

Cost of license revenues. Cost of license revenues
includes amortization of capitalized software costs, third-party
product royalties and materials and packaging expenses. Cost of
license revenues in 2000, 1999 and 1998 was $2.0 million, $1.3
million and $1.2 million, respectively, representing 7.6%, 5.2%
and 5.2% of license revenues. The increase from 1999 to 2000 is
the result of an increase in third-party product royalties
resulting from increased sales of products covered by the
various royalty agreements. The slight increase from 1998 to
1999 is primarily due to an increase in product royalties offset
by a decrease in amortization of capitalized software costs.

Cost of maintenance revenues. Cost of maintenance
revenues consists of personnel and related costs for customer
support, training and consulting services. Cost of maintenance
revenues in 2000, 1999 and 1998 was $6.0 million, $4.6 million
and $3.7 million, respectively, representing 19.5%, 15.3% and
13.3% of maintenance revenues. The $1.4 million increase from
1999 to 2000 was primarily

13



---





Cost to acquire distribution rights.Cost to
acquire distribution rights includes royalties paid related to
the acquisition of distribution rights and the straight-line
amortization of international distribution rights that have been
reacquired from third-party resellers. Cost to acquire
distribution rights in 2000, 1999 and 1998 was $2.3 million,
$2.0 million and $0.6 million, respectively. The increases in
1999 and 2000 are primarily due to the amortization of
distribution rights acquired in January and October 1999
from the Companys former distributors in the United
Kingdom and France, respectively, and increases in royalties
paid to the Companys former distributor in the Nordic
region.

Disposal of capitalized software and associated
assets. In November 2000, the Company decided to
discontinue the sale of its client/server products. As part of
the $4.3 million asset disposal and restructuring charges
associated with this action, the Company wrote off approximately
$3.1 million of capitalized software and prepaid royalties
during the fourth quarter of 2000.

Sales and marketing. Sales and marketing expenses
include personnel and related costs for the Companys
direct sales organization, marketing staff and promotional
expenses. Sales and marketing expenses were $25.4 million, $20.9
million and $17.1 million in 2000, 1999 and 1998, respectively,
representing 45.1%, 37.8% and 34.4% of total revenues. The $4.5
million increase from 1999 to 2000 was composed of an increase
of $2.9 million in additional sales personnel expenses and a
$1.6 million increase in product management and business
development costs. The $3.8 million increase from 1998 to 1999
is primarily due to an increase in personnel in the
international direct sales organization, an increase in
marketing activities, and an increase in commission expenses to
the Companys direct sales forces as a result of increased
sales.

Product research and development. Product research
and development expenses include personnel and related costs for
the Companys development staff. Product research and
development expenses were $14.8 million, $16.1 million and $15.2
million in 2000, 1999 and 1998, respectively, representing
26.3%, 29.2% and 30.6% of total revenues. The $1.3 million
decrease from 1999 to 2000 was due to an increase of $1.6
million in capitalized software development costs associated
with new offerings in both the mainframe and client/ server
products offset by a $0.3 million increase in development
personnel expenses. The $0.9 million increase from 1998 to 1999
was primarily the result of increased investment in client/
server products. The Company capitalized software development
costs of $2.5 million, $0.9 million and $0.3 million in 2000,
1999 and 1998, respectively. Amounts capitalized in 1999 and
2000 were primarily related to the development of new client/
server products that were eventually discontinued at the end of
2000.

General and administrative. General and
administrative expenses include salaries and related costs of
administration, finance and management personnel, as well as
legal and accounting fees. General and administrative expenses
were $6.6 million, $6.0 million and $5.6 million in 2000, 1999
and 1998, respectively, representing 11.8%, 10.9% and 11.1% of
total revenues. The increase from 1999 to 2000 was due to normal
wage increases and an increase in occupancy costs at the
Companys new and larger corporate headquarters. The
increase from 1998 to 1999 is due to a continued increase in
personnel in the Companys information systems department
and costs associated with the relocation of the Companys
headquarters that occurred in June 1999.

14



---



Restructuring charges. As part of the $4.3 million
asset disposal and restructuring charges associated with the
discontinuance of its client/ server products, the Company
incurred approximately $1.0 million in severance and related
costs resulting from the dismissal of 40 employees assigned to
these products. These employees represented approximately 11% of
the Companys worldwide workforce at the time of their
dismissal.

Disposal of fixed assets.As part of the $4.3
million asset disposal and restructuring charges associated with
the discontinuance of its client/ server products, the Company
disposed of approximately $0.3 million of computer equipment
dedicated to those products.

Net interest and other income. Net interest and
other income includes interest income earned on cash balances,
interest income recorded on installment receivables, interest
expense incurred on term and revolving credit facilities, bank
fees, interest earned on tax refunds and exchange gains (losses)
incurred by the Company on transactions denominated in foreign
currencies. Net interest and other income were $2.3 million,
$2.1 million and $1.8 million for 2000, 1999 and 1998,
respectively. Of these amounts, $1.6 million, $1.2 million and
$0.9 million represent interest earned on the Companys
bank balances in 2000, 1999 and 1998, respectively. The
increases from 1999 to 2000 and from 1998 to 1999 reflect higher
levels of interest income earned by the Company on its cash
balances and the reduction of interest expense due to the
repayment of the Companys debt obligations during 1998.

(Benefit from) provision for income taxes. The
Companys effective rates were 9.5%, 36.3% and 37.7% for
2000, 1999 and 1998, respectively. The effective tax rates
differ from the federal and state statutory income tax rates
primarily as a result of the adjustments of valuation allowances
to reflect managements judgment as to whether certain net
operating loss carryforwards would expire before utilization by
the Company, and as to the relative likelihood that foreign
subsidiary and state net operating losses would be recovered.
Effective January 1, 2001, the German tax rate decreased,
which will affect the Companys reporting. In 2000, the
Company increased its valuation allowances for foreign and state
net operating loss carryforwards by $0.7 million. In 1999, the
Company reduced its valuation allowance by $0.1 million
primarily due to the release of its liability for competent
authority. See Note 9 to the Consolidated Financial
Statements  Income Taxes.

Liquidity and Capital Resources

At December 31, 2000, the Company had cash and cash
equivalents of $28.1 million, a decrease of 12.6% from the prior
year, and working capital of $24.8 million. During 2000, net
cash provided by operating activities was $1.6 million, while
net cash used in investing and financing activities was $4.6
million and $1.2 million, respectively. Cash used in financing
activities included $2.4 million for the repurchase of 782,000
shares of the Companys common stock in December 2000;
at December 31, 2000, the shares repurchased were held as
treasury shares. The Company invests its cash in a money market
fund. The Company had no debt as of December 31, 2000,
other than normal trade payables and accrued liabilities. At
December 31, 2000, stockholders equity was $34.2
million.

The Company continues to finance its growth through funds
generated from operations and cash reserves. During 2000, 1999
and 1998, cash flow from operations was $1.6 million, $9.6
million, and $12.3 million, respectively. Net cash flow from
operating activities is primarily composed of net income (loss),
depreciation and amortization, the loss on the write-off of
assets, the sale of unbilled receivables, and increases in
deferred revenue, partially offset by increases in accounts
receivable and unbilled accounts receivable. During 2000, 1999
and 1998, the Company augmented operating cash flows with the
sale of $3.7 million, $8.8 million and $7.8 million,
respectively, of unbilled accounts receivable. The sale of the
unbilled receivables resulted in immaterial gains and losses for
the Company. The general rise of interest rates during 2000 made
it more difficult to identify financial institutions willing to
buy the unbilled receivables at terms favorable to the Company;
there can be no

15



---





The Companys investing activities include primarily
expenditures for fixed assets in support of the Companys
product development activities and infrastructure, and for
capitalized software development costs. During 2000, 1999 and
1998, the Company invested $2.0 million, $2.9 million and $2.3
million, respectively, in fixed assets, consisting primarily of
computer equipment to expand and upgrade the Companys
development activities and, in 1999, for leasehold improvements
associated with the Companys new headquarters. The Company
expects to upgrade, on an ongoing basis, its development
environments to meet changing customer and market requirements.
In 1999, the Company also entered into operating leases with an
aggregate value of $2.1 million to partially finance its move to
its new headquarters. In 2001, the Company expects to continue
to make additional investments in its IT infrastructure of
approximately $2.0 million. The Companys investing
activities also include amounts recorded as capitalized software
development costs. Of the total research and development
expenditures of $17.3 million, $17.0 million and $15.5 million
during 2000, 1999 and 1998, the Company capitalized costs of
$2.5 million, $0.9 million and $0.3 million in 2000, 1999 and
1998, respectively.

During 1999, the Company acquired distribution rights from its
former international distributors in the United Kingdom and
France. As partial consideration for these acquisitions, the
Company paid the former distributor in the United Kingdom $4.0
million in cash and paid the former distributor in France $1.2
million in cash. For additional discussion of the Companys
acquisition of distribution rights, see Note 2 to the
Consolidated Financial Statements  Summary of
Significant Accounting Policies, Intangible Assets.

The Company believes that cash and cash equivalents at
December 31, 2000 and cash flow generated from operations
will provide sufficient liquidity to meet its needs for at least
the next twelve months. To the extent the Company makes
acquisitions of other companies, products or technologies, the
Company may use working capital, sell or issue additional equity
or debt securities or use credit facilities.

Introduction of the Euro Currency

On January 1, 1999, certain members of the European Union
established irrevocable, fixed conversion rates between their
existing currencies and the European Unions common
currency, the Euro.

The introduction of the Euro is scheduled to be phased in over a
period ending January 1, 2002, when Euro notes will come
into circulation. The existing currencies are due to be
completely removed from circulation on February 28, 2002.
The Company has been preparing for the introduction of the Euro
for several years. The timing of the Companys phasing out
all uses of the existing currencies will comply with the legal
requirements and will also be scheduled to facilitate optimal
coordination with the plans of the Companys vendors,
distributors and customers. The Companys work with respect
to the introduction of the Euro and the phasing out of the other
currencies includes converting information technology systems;
recalculating currency risk; evaluating and taking action, if
needed, regarding the continuity of contracts; and modifying the
Companys processes for preparing tax, accounting, payroll
and customer records.

Based on the Companys work to date, the Company believes
that the Euro replacing the other currencies will not have a
material impact on the Companys operations or Consolidated
Financial Statements.

16



---



New Accounting Pronouncements

In December 1998, the American Institute of Certified
Public Accountants (the AICPA) issued Statement of
Position (SOP) 98-9, Modification of SOP 97-2,
Software Revenue Recognition, With Respect to Certain
Transactions. SOP 98-9 modifies SOP 97-2 by
requiring revenue to be recognized using the residual
method if certain conditions are met. The Company adopted
SOP 98-9 on January 1, 2000. The adoption did not have
a material effect on the Companys financial condition or
results of operations.

In December 1999, the Securities and Exchange Commission
issued Staff Accounting Bulletin 101, Revenue Recognition
in Financial Statements (SAB 101), as
amended by SAB 101A and SAB 101B. SAB 101
provides guidance regarding the recognition, presentation and
disclosure of revenue in financial statements. The Company
adopted SAB 101 on October 1, 2000. The adoption did
not have a material effect on the Companys financials
condition or results of operations.

In March 2000, the Financial Accounting Standards Board
(the FASB) issued FASB Interpretation
(FIN) 44, Accounting for Certain
Transactions Involving Stock Compensation: Interpretation of APB
Opinion No. 25. The Interpretation is intended to
clarify certain problems that have arisen in practice since the
issuance of APB Opinion No. 25, Accounting for Stock
Issued to Employees. The effective date of the
Interpretation is July 1, 2000. The provisions of the
Interpretation will apply prospectively but will also cover
certain events occurring after December 15, 1998 and other
certain events occurring after January 12, 2000. The
Company adopted FIN 44 on July 1, 2000. The adoption
did not have a material effect on the Companys financial
condition or results of operations.

In September 2000, the FASB issued Statement of Financial
Accounting Standards (SFAS) No. 140,
Accounting for the Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities. SFAS 140
is effective for transfers occurring after March 31, 2001
and for disclosures relating to securitizations transactions and
collateral for fiscal years ending after December 15, 2000.
The Company is reviewing the provisions of SFAS 140.

Item 7A.  Quantitative and Qualitative Disclosures
About Market Risk.

The Company has subsidiaries in the United Kingdom, Germany,
France, The Netherlands, Sweden, Spain, Italy, Australia, Hong
Kong and Singapore that act as distributors of its products.
Additionally, the Company uses third-party distributors to
market and distribute its products in other international
regions. Transactions conducted by the subsidiaries are
typically denominated in the local country currency, while
royalty payments from the distributors are typically denominated
in U.S. dollars. As a result, the Company is primarily exposed
to foreign exchange rate fluctuations as the financial results
of its subsidiaries are translated into U.S. dollars in
consolidation. As exchange rates vary, these results, when
translated, may vary from expectations and affect overall
expected profitability. Through and as of December 31,
2000, the Companys exposure was not material to the
overall financial statements taken as a whole. The Company has
not entered into any foreign currency hedging transactions with
respect to its foreign currency market risk.

The Companys exposure to market risk for changes in
interest rates relates primarily to unbilled accounts
receivable. At December 31, 2000, the Company had $17.8
million of unbilled accounts receivable; the estimated fair
market value of these receivables was $18.3 million. If market
interest rates increase 10% from the levels at December 31,
2000, the fair market value of the unbilled accounts receivable
would decline by an immaterial amount.

See Note 2  Summary of Significant Accounting
Policies, Fair Value of Financial Instruments, in the
Companys Notes to Consolidated Financial Statements
contained elsewhere in this Form 10-K.

17



---



Item 8.  Financial Statements and Supplementary
Data.

Report of Independent Accountants

To the Board of Directors and Stockholders of Landmark Systems
Corporation

In our opinion, the accompanying consolidated financial
statements listed in the index appearing under Item 14(a)1
present fairly, in all material respects, the financial position
of Landmark Systems Corporation and its subsidiaries at
December 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the three years in
the period ended December 31, 2000, in conformity with
accounting principles generally accepted in the United States of
America. In addition, in our opinion, the financial statement
schedule listed in the index appearing under Item 14(a)2
presents fairly, in all material respects, the information set
forth therein when read in conjunction with the related
consolidated financial statements. These financial statements
and financial statement schedule are the responsibility of the
Companys management; our responsibility is to express an
opinion on these financial statements and financial statement
schedule based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally
accepted in the United States of America, which 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

PRICEWATERHOUSECOOPERS LLP

McLean, Virginia



18



---



Landmark Systems Corporation

Consolidated Statements of Operations

|                                          |                                                        |                          |            |            |            |      |           |            |            |   |           |            |            | 
|----------------------------------------- | ------------------------------------------------------ | ------------------------ | ---------- | ---------- | ---------- | ---- | --------- | ---------- | ---------- | - | --------- | ---------- | ---------- | 
|                                          |                                                        |                         
|                                          |                                                        | Year Ended December 31, 
|                                          |                                                        |                         
|                                          |                                                        | 2000                     |            | 1999       |            | 1998
|                                          |                                                        |                          |            |            |            |     
|Revenues                                  |                                                        |                          |            |            |            |      |           |            |            |   |           |           
|                                         
|                                         
|                                         
|                                         
|                                          | License revenues                                       |                          | $          | 25,595,866 |            |      | $         | 25,340,034 |            |   | $         | 22,083,944 |           
|                                         
|                                         
|                                         
|                                         
|                                          | Maintenance revenues                                   |                          |            | 30,819,312 |            |      |           | 29,862,400 |            |   |           | 27,748,290 |           
|                                          |                                                        |                          |            |            |            |      |           |            |            |   |           |           
|                                          |                                                        | Total revenues           |            |            | 56,415,178 |      |           |            | 55,202,434 |   |           |            | 49,832,234 | 
|                                          |                                                        |                          |            |            |            |      |           |            |            |   |           |           
|Cost of revenues                          |                                                        |                          |            |            |            |      |           |            |            |   |           |           
|                                         
|                                         
|                                         
|                                         
|                                          | Cost of license revenues                               |                          |            | 1,955,456  |            |      |           | 1,324,108  |            |   |           | 1,154,828  |           
|                                         
|                                         
|                                         
|                                         
|                                          | Cost of maintenance revenues                           |                          |            | 5,997,569  |            |      |           | 4,570,971  |            |   |           | 3,702,575  |           
|                                         
|                                         
|                                         
|                                         
|                                          | Cost to acquire distribution rights                    |                          |            | 2,286,997  |            |      |           | 2,001,518  |            |   |           | 615,996    |           
|                                         
|                                         
|                                         
|                                         
|                                          | Disposal of capitalized software and associated assets |                          |            | 3,052,393  |            |      |           |           |            |   |           |           |           
|                                          |                                                        |                          |            |            |            |      |           |            |            |   |           |           
|                                          |                                                        | Total cost of revenues   |            |            | 13,292,415 |      |           |            | 7,896,597  |   |           |            | 5,473,399  | 
|                                          |                                                        |                          |            |            |            |      |           |            |            |   |           |           
|                                          | Gross profit                                           |                          |            | 43,122,763 |            |      |           | 47,305,837 |            |   |           | 44,358,835 |           
|                                          |                                                        |                          |            |            |            |      |           |            |            |   |           |           
|Operating expenses                        |                                                        |                          |            |            |            |      |           |            |            |   |           |           
|                                         
|                                         
|                                         
|                                         
|                                          | Sales and marketing                                    |                          |            | 25,448,093 |            |      |           | 20,880,796 |            |   |           | 17,124,823 |           
|                                         
|                                         
|                                         
|                                         
|                                          | Product research and development                       |                          |            | 14,843,947 |            |      |           | 16,129,310 |            |   |           | 15,247,055 |           
|                                         
|                                         
|                                         
|                                         
|                                          | General and administrative                             |                          |            | 6,636,536  |            |      |           | 5,994,432  |            |   |           | 5,560,788  |           
|                                         
|                                         
|                                         
|                                         
|                                          | Restructuring charges                                  |                          |            | 964,804    |            |      |           |           |            |   |           |           |           
|                                          |                                                        |                          |            |            |            |      |           |            |            |   |           |           
|                                          |                                                        | Total operating expenses |            |            | 47,893,380 |      |           |            | 43,004,538 |   |           |            | 37,932,666 | 
|                                          |                                                        |                          |            |            |            |      |           |            |            |   |           |           
|Operating (loss) income                   |                                                        |                          | (4,770,617 | )          |            |      | 4,301,299 |            |            |   | 6,426,169 |           
|                                         
|                                         
|                                         
|                                         
|                                          | Interest and other income                              |                          |            | 2,315,857  |            |      |           | 2,135,516  |            |   |           | 1,832,310  |           
|                                         
|                                         
|                                         
|                                         
|                                          | Interest expense                                       |                          |            | (36,888    | )          |      |           | (41,442    | )          |   |           | (41,668    | )         
|                                         
|                                         
|                                         
|                                         
|                                          | Disposal of fixed assets                               |                          |            | (326,442   | )          |      |           |           |            |   |           |           |           
|                                          |                                                        |                          |            |            |            |      |           |            |            |   |           |           
|(Loss) income before income taxes         |                                                        |                          | (2,818,090 | )          |            |      | 6,395,373 |            |            |   | 8,216,811 |           
|                                         
|                                         
|                                         
|                                         
|(Benefit from) provision for income taxes |                                                        |                          | (267,318   | )          |            |      | 2,318,321 |            |            |   | 3,094,698 |           
|                                          |                                                        |                          |            |            |            |      |           |            |            |   |           |           
|Net (loss) income                         |                                                        | $                        | (2,550,772 | )          |            | $    | 4,077,052 |            |            | $ | 5,122,113 |           
|                                          |                                                        |                          |            |            |            |      |           |            |            |   |           |           
|(Loss) earnings per share                 |                                                        |                          |            |            |            |      |           |            |            |   |           |           
|                                         
|                                         
|                                         
|                                         
|                                          | Basic                                                  |                          | $          | (0.20      | )          |      | $         | 0.33       |            |   | $         | 0.45       |           
|                                         
|                                         
|                                         
|                                         
|                                          | Diluted                                                |                          | $          | (0.20      | )          |      | $         | 0.31       |            |   | $         | 0.41       |           

The accompanying notes are an integral part of the consolidated
financial statements.

19



---



Landmark Systems Corporation

Consolidated Balance Sheets

|                                          |                                                                                                           |                                            |            |            |            |  |            |            |            | 
|----------------------------------------- | --------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ---------- | ---------- | ---------- |  | ---------- | ---------- | ---------- | 
|                                          |                                                                                                           |                                           
|                                          |                                                                                                           | December 31,                              
|                                          |                                                                                                           |                                           
|                                          |                                                                                                           | 2000                                       |            | 1999      
|                                          |                                                                                                           |                                            |            |           
|                                         
|                                         
|                                         
|                                         
|ASSETS                                   
|                                         
|                                         
|                                         
|                                         
|Current assets:                           |                                                                                                           |                                            |            |            |            |  |            |           
|                                         
|                                         
|                                         
|                                         
|                                          | Cash and cash equivalents                                                                                 |                                            | $          | 28,078,594 |            |  | $          | 32,135,952 |           
|                                         
|                                         
|                                         
|                                         
|                                          | Accounts receivable, net of allowance for doubtful accounts of
	$509,000 and $795,000                     |                                            |            | 15,399,070 |            |  |            | 13,987,545 |           
|                                         
|                                         
|                                         
|                                         
|                                          | Unbilled accounts receivable                                                                              |                                            |            | 9,677,138  |            |  |            | 5,353,362  |           
|                                         
|                                         
|                                         
|                                         
|                                          | Income taxes receivable                                                                                   |                                            |            |           |            |  |            | 2,148,431  |           
|                                         
|                                         
|                                         
|                                         
|                                          | Deferred income taxes, net                                                                                |                                            |            | 2,688,042  |            |  |            | 1,333,482  |           
|                                         
|                                         
|                                         
|                                         
|                                          | Other current assets                                                                                      |                                            |            | 498,315    |            |  |            | 619,283    |           
|                                          |                                                                                                           |                                            |            |            |            |  |            |           
|                                          |                                                                                                           | Total current assets                       |            |            | 56,341,159 |  |            |            | 55,578,055 | 
|                                         
|                                         
|                                         
|                                         
|Unbilled accounts receivable  noncurrent |                                                                                                           |                                            | 8,154,395  |            |            |  | 7,063,059  |           
|                                         
|                                         
|                                         
|                                         
|Fixed assets, net                         |                                                                                                           |                                            | 5,315,662  |            |            |  | 5,363,273  |           
|                                         
|                                         
|                                         
|                                         
|Capitalized software costs, net           |                                                                                                           |                                            | 504,086    |            |            |  | 866,959    |           
|                                         
|                                         
|                                         
|                                         
|Deferred income taxes, net  noncurrent   |                                                                                                           |                                            | 1,757,666  |            |            |  | 1,493,397  |           
|                                         
|                                         
|                                         
|                                         
|Intangible assets, net                    |                                                                                                           |                                            | 4,513,521  |            |            |  | 5,854,112  |           
|                                         
|                                         
|                                         
|                                         
|Other assets                              |                                                                                                           |                                            | 283,132    |            |            |  | 287,900    |           
|                                          |                                                                                                           |                                            |            |            |            |  |            |           
|                                          |                                                                                                           | Total assets                               |            | $          | 76,869,621 |  |            | $          | 76,506,755 | 
|                                          |                                                                                                           |                                            |            |            |            |  |            |           
|                                         
|                                         
|                                         
|                                         
|LIABILITIES AND STOCKHOLDERS EQUITY     
|                                         
|                                         
|                                         
|                                         
|Current liabilities:                      |                                                                                                           |                                            |            |            |            |  |            |           
|                                         
|                                         
|                                         
|                                         
|                                          | Accounts payable                                                                                          |                                            | $          | 2,087,467  |            |  | $          | 1,775,415  |           
|                                         
|                                         
|                                         
|                                         
|                                          | Accrued expenses and other current liabilities                                                            |                                            |            | 5,538,519  |            |  |            | 3,026,871  |           
|                                         
|                                         
|                                         
|                                         
|                                          | Deferred revenue                                                                                          |                                            |            | 23,552,449 |            |  |            | 21,529,799 |           
|                                         
|                                         
|                                         
|                                         
|                                          | Income taxes payable                                                                                      |                                            |            | 322,473    |            |  |            |           |           
|                                          |                                                                                                           |                                            |            |            |            |  |            |           
|                                          |                                                                                                           | Total current liabilities                  |            |            | 31,500,908 |  |            |            | 26,332,085 | 
|                                         
|                                         
|                                         
|                                         
|Deferred revenue  noncurrent             |                                                                                                           |                                            | 10,959,332 |            |            |  | 11,866,661 |           
|                                         
|                                         
|                                         
|                                         
|Other liabilities                         |                                                                                                           |                                            | 160,518    |            |            |  | 366,115    |           
|                                          |                                                                                                           |                                            |            |            |            |  |            |           
|                                          |                                                                                                           | Total liabilities                          |            |            | 42,620,758 |  |            |            | 38,564,861 | 
|                                          |                                                                                                           |                                            |            |            |            |  |            |           
|Commitments                               |                                                                                                           |                                            |            |            |            |  |            |           
|                                         
|                                         
|                                         
|                                         
|Stockholders equity:                     |                                                                                                           |                                            |            |            |            |  |            |           
|                                         
|                                         
|                                         
|                                         
|                                          | Common stock, $.01 par value; 30,000,000 shares authorized;
	13,147,411 and 12,838,090 shares outstanding |                                            |            | 131,474    |            |  |            | 128,381    |           
|                                         
|                                         
|                                         
|                                         
|                                          | Additional paid-in capital                                                                                |                                            |            | 35,499,092 |            |  |            | 34,049,244 |           
|                                         
|                                         
|                                         
|                                         
|                                          | Retained earnings                                                                                         |                                            |            | 1,407,746  |            |  |            | 3,958,518  |           
|                                         
|                                         
|                                         
|                                         
|                                          | Accumulated other comprehensive loss                                                                      |                                            |            | (345,695   | )          |  |            | (194,249   | )         
|                                         
|                                         
|                                         
|                                         
|                                          | Treasury stock, at cost; 782,000 shares                                                                   |                                            |            | (2,443,754 | )          |  |            |           |           
|                                          |                                                                                                           |                                            |            |            |            |  |            |           
|                                          |                                                                                                           | Total stockholders equity                 |            |            | 34,248,863 |  |            |            | 37,941,894 | 
|                                          |                                                                                                           |                                            |            |            |            |  |            |           
|                                          |                                                                                                           | Total liabilities and stockholders equity |            | $          | 76,869,621 |  |            | $          | 76,506,755 | 
|                                          |                                                                                                           |                                            |            |            |            |  |            |           

The accompanying notes are an integral part of the consolidated
financial statements.

20



---



Landmark Systems Corporation

Consolidated Statements of Changes in Stockholders
Equity

|                             |                                                                          |                              |            |            |   |          |         |               |   |               |            |           |   |       |            |   |            |   |          |   |          |   |            |            |   |   |            |            |   | 
|---------------------------- | ------------------------------------------------------------------------ | ---------------------------- | ---------- | ---------- | - | -------- | ------- | ------------- | - | ------------- | ---------- | --------- | - | ----- | ---------- | - | ---------- | - | -------- | - | -------- | - | ---------- | ---------- | - | - | ---------- | ---------- | - | 
|                             |                                                                          |                              |            |            |   |          |         | Accumulated   |   |               |            |          
|                             |                                                                          | Common Shares                |            | Additional |   | Retained |         | Other         |   |               |            |          
|                             |                                                                          |                              |            | Paid-in    |   | Earnings |         | Comprehensive |   | Treasury      |            |          
|                             |                                                                          | Issued                       |            | Par Value  |   | Capital  |         | (Deficit)     |   | Income (Loss) |            | Stock     |   | Total
|                             |                                                                          |                              |            |            |   |          |         |               |   |               |            |           |   |      
|Balance at December 31, 1997 |                                                                          |                              | 11,213,331 |            |   | $        | 112,133 |               |   | $             | 23,413,955 |           |   | $     | (5,240,647 | ) |            | $ | 92,743   |   |          | $ |           |            |   | $ | 18,378,184 |           
|                            
|                            
|                            
|                            
|                             | Comprehensive income:                                                    |                              |            |            |   |          |         |               |   |               |            |           |   |       |            |   |            |   |          |   |          |   |            |            |   |   |            |            |  
|                            
|                            
|                            
|                            
|                             |                                                                          | Net income                   |            |            |  |          |         |               |  |               |            |           |  |       |            |   | 5,122,113  |   |          |   |         |   |            |            |  |   |            |            |  | 
|                            
|                            
|                            
|                            
|                             |                                                                          | Foreign currency translation |            |            |  |          |         |               |  |               |            |           |  |       |            |   |           |   |          |   | 44,188   |   |            |            |  |   |            |            |  | 
|                            
|                            
|                            
|                            
|                             | Total comprehensive income                                               |                              |            |           |   |          |         |              |   |               |            |          |   |       |            |  |            |   |          |  |          |   |            |           |   |   |            | 5,166,301  |  
|                            
|                            
|                            
|                            
|                             | Common stock issued upon exercise of non-qualified stock options         |                              |            | 529,742    |   |          |         | 5,298         |   |               |            | 2,099,515 |   |       |            |  |            |   |          |  |          |   |            |           |   |   |            | 2,104,813  |  
|                            
|                            
|                            
|                            
|                             | Tax benefit from exercise of non-qualified stock options                 |                              |            |           |   |          |         |              |   |               |            | 904,852   |   |       |            |  |            |   |          |  |          |   |            |           |   |   |            | 904,852    |  
|                            
|                            
|                            
|                            
|                             | Issuance of common stock pursuant to the 1998 SPP                        |                              |            | 39,512     |   |          |         | 395           |   |               |            | 274,496   |   |       |            |  |            |   |          |  |          |   |            |           |   |   |            | 274,891    |  
|                             |                                                                          |                              |            |            |   |          |         |               |   |               |            |           |   |       |            |   |            |   |          |   |          |   |            |            |   |   |            |           
|Balance at December 31, 1998 |                                                                          |                              | 11,782,585 |            |   |          | 117,826 |               |   |               | 26,692,818 |           |   |       | (118,534   | ) |            |   | 136,931  |   |          |   |           |            |   |   | 26,829,041 |           
|                            
|                            
|                            
|                            
|                             | Comprehensive income:                                                    |                              |            |            |   |          |         |               |   |               |            |           |   |       |            |   |            |   |          |   |          |   |            |            |   |   |            |            |  
|                            
|                            
|                            
|                            
|                             |                                                                          | Net income                   |            |            |  |          |         |               |  |               |            |           |  |       |            |   | 4,077,052  |   |          |   |         |   |            |            |  |   |            |            |  | 
|                            
|                            
|                            
|                            
|                             |                                                                          | Foreign currency translation |            |            |  |          |         |               |  |               |            |           |  |       |            |   |           |   |          |   | (331,180 | ) |            |            |  |   |            |            |  | 
|                            
|                            
|                            
|                            
|                             | Total comprehensive income                                               |                              |            |           |   |          |         |              |   |               |            |          |   |       |            |  |            |   |          |  |          |   |            |           |   |   |            | 3,745,872  |  
|                            
|                            
|                            
|                            
|                             | Common stock issued upon exercise of non-qualified stock options         |                              |            | 892,385    |   |          |         | 8,924         |   |               |            | 3,255,436 |   |       |            |  |            |   |          |  |          |   |            |           |   |   |            | 3,264,360  |  
|                            
|                            
|                            
|                            
|                             | Common stock and warrants issued upon repurchase of distribution
	rights |                              |            | 91,586     |   |          |         | 916           |   |               |            | 1,722,084 |   |       |            |  |            |   |          |  |          |   |            |           |   |   |            | 1,723,000  |  
|                            
|                            
|                            
|                            
|                             | Tax benefit from exercise of non-qualified stock options                 |                              |            |           |   |          |         |              |   |               |            | 1,833,384 |   |       |            |  |            |   |          |  |          |   |            |           |   |   |            | 1,833,384  |  
|                            
|                            
|                            
|                            
|                             | Issuance of common stock pursuant to the 1998 SPP                        |                              |            | 71,534     |   |          |         | 715           |   |               |            | 545,522   |   |       |            |  |            |   |          |  |          |   |            |           |   |   |            | 546,237    |  
|                             |                                                                          |                              |            |            |   |          |         |               |   |               |            |           |   |       |            |   |            |   |          |   |          |   |            |            |   |   |            |           
|Balance at December 31, 1999 |                                                                          |                              | 12,838,090 |            |   |          | 128,381 |               |   |               | 34,049,244 |           |   |       | 3,958,518  |   |            |   | (194,249 | ) |          |   |           |            |   |   | 37,941,894 |           
|                            
|                            
|                            
|                            
|                             | Comprehensive loss:                                                      |                              |            |            |   |          |         |               |   |               |            |           |   |       |            |   |            |   |          |   |          |   |            |            |   |   |            |            |  
|                            
|                            
|                            
|                            
|                             |                                                                          | Net loss                     |            |            |  |          |         |               |  |               |            |           |  |       |            |   | (2,550,772 | ) |          |   |         |   |            |            |  |   |            |            |  | 
|                            
|                            
|                            
|                            
|                             |                                                                          | Foreign currency translation |            |            |  |          |         |               |  |               |            |           |  |       |            |   |           |   |          |   | (151,446 | ) |            |            |  |   |            |            |  | 
|                            
|                            
|                            
|                            
|                             | Total comprehensive loss                                                 |                              |            |           |   |          |         |              |   |               |            |          |   |       |            |  |            |   |          |  |          |   |            |           |   |   |            | (2,702,218 | )
|                            
|                            
|                            
|                            
|                             | Common stock issued upon exercise of non-qualified stock options         |                              |            | 218,230    |   |          |         | 2,182         |   |               |            | 893,199   |   |       |            |  |            |   |          |  |          |   |            |           |   |   |            | 895,381    |  
|                            
|                            
|                            
|                            
|                             | Tax benefit from exercise of non-qualified stock options                 |                              |            |           |   |          |         |              |   |               |            | 253,351   |   |       |            |  |            |   |          |  |          |   |            |           |   |   |            | 253,351    |  
|                            
|                            
|                            
|                            
|                             | Issuance of common stock pursuant to the 1998 SPP                        |                              |            | 91,091     |   |          |         | 911           |   |               |            | 303,298   |   |       |            |  |            |   |          |  |          |   |            |           |   |   |            | 304,209    |  
|                            
|                            
|                            
|                            
|                             | Purchase of treasury stock, at cost                                      |                              |            |           |   |          |         |              |   |               |            |          |   |       |            |  |            |   |          |  |          |   |            | (2,443,754 | ) |   |            | (2,443,754 | )
|                             |                                                                          |                              |            |            |   |          |         |               |   |               |            |           |   |       |            |   |            |   |          |   |          |   |            |            |   |   |            |           
|Balance at December 31, 2000 |                                                                          |                              | 13,147,411 |            |   | $        | 131,474 |               |   | $             | 35,499,092 |           |   | $     | 1,407,746  |   |            | $ | (345,695 | ) |          | $ | (2,443,754 | )          |   | $ | 34,248,863 |           
|                             |                                                                          |                              |            |            |   |          |         |               |   |               |            |           |   |       |            |   |            |   |          |   |          |   |            |            |   |   |            |           

The accompanying notes are an integral part of the consolidated
financial statements.

21



---



Landmark Systems Corporation

Consolidated Statements of Cash Flows

|                                               |                                                                                    |                                                   |                                                     |            |            |            |            |            |            |            |            |            |            |            |  
|---------------------------------------------- | ---------------------------------------------------------------------------------- | ------------------------------------------------- | --------------------------------------------------- | ---------- | ---------- | ---------- | ---------- | ---------- | ---------- | ---------- | ---------- | ---------- | ---------- | ---------- | -
|                                               |                                                                                    |                                                  
|                                               |                                                                                    | Year Ended December 31,                          
|                                               |                                                                                    |                                                  
|                                               |                                                                                    | 2000                                              |                                                     | 1999       |            | 1998      
|                                               |                                                                                    |                                                   |                                                     |            |            |           
|Cash flows from operating activities:          |                                                                                    |                                                   |                                                     |            |            |            |            |            |            |            |            |           
|                                              
|                                              
|                                              
|                                              
|                                               | Net (loss) income                                                                  |                                                   | $                                                   | (2,550,772 | )          |            | $          | 4,077,052  |            |            | $          | 5,122,113  |           
|                                              
|                                              
|                                              
|                                              
|                                               | Adjustments to reconcile net income to net cash provided by
	operating activities: |                                                   |                                                     |            |            |            |            |            |            |            |            |            |           
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                    | Depreciation and amortization                     |                                                     |            | 3,565,788  |            |            |            | 3,689,830  |            |            |            | 2,396,549  |           
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                    | Provision for losses on accounts receivable       |                                                     |            | 1,137,374  |            |            |            | 727,506    |            |            |            | 603,015    |           
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                    | Loss on write-off of assets due to restructuring  |                                                     |            | 3,378,835  |            |            |            |           |            |            |            |           |           
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                    | Stock compensation expense                        |                                                     |            |           |            |            |            |           |            |            |            | 99,687     |           
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                    | Change in net deferred income taxes               |                                                     |            | (1,597,104 | )          |            |            | (88,000    | )          |            |            | (527,861   | )         
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                    | Tax benefit from exercise of stock options        |                                                     |            | 253,351    |            |            |            | 1,833,384  |            |            |            | 904,852    |           
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                    | Increase in accounts receivable                   |                                                     |            | (2,777,518 | )          |            |            | (3,968,056 | )          |            |            | (1,150,436 | )         
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                    | Change in income taxes receivable/payable         |                                                     |            | 2,469,688  |            |            |            | (3,068,887 | )          |            |            | 54,410     |           
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                    | Sale of unbilled accounts receivable              |                                                     |            | 3,682,931  |            |            |            | 8,772,492  |            |            |            | 7,820,975  |           
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                    | Increase in unbilled accounts receivable          |                                                     |            | (9,099,870 | )          |            |            | (9,979,084 | )          |            |            | (9,591,237 | )         
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                    | Increase in accounts payable and accrued expenses |                                                     |            | 2,603,124  |            |            |            | 673,088    |            |            |            | 750,326    |           
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                    | Increase in deferred revenue                      |                                                     |            | 1,110,691  |            |            |            | 6,642,507  |            |            |            | 6,232,930  |           
|                                              
|                                              
|                                              
|                                              
|                                               |                                                                                    | (Decrease) increase in other, net                 |                                                     |            | (619,992   | )          |            |            | 268,823    |            |            |            | (370,450   | )         
|                                               |                                                                                    |                                                   |                                                     |            |            |            |            |            |            |            |            |           
|                                               |                                                                                    |                                                   | Net cash provided by operating activities           |            |            | 1,556,526  |            |            |            | 9,580,655  |            |            |            | 12,344,873 |  
|                                               |                                                                                    |                                                   |                                                     |            |            |            |            |            |            |            |            |           
|Cash flows from investing activities:          |                                                                                    |                                                   |                                                     |            |            |            |            |            |            |            |            |           
|                                              
|                                              
|                                              
|                                              
|                                               | Acquisition of distribution rights                                                 |                                                   |                                                     | (78,688    | )          |            |            | (5,788,418 | )          |            |            | (488,082   | )         
|                                              
|                                              
|                                              
|                                              
|                                               | Purchase of fixed assets                                                           |                                                   |                                                     | (2,034,010 | )          |            |            | (2,920,339 | )          |            |            | (2,252,225 | )         
|                                              
|                                              
|                                              
|                                              
|                                               | Capitalized software costs                                                         |                                                   |                                                     | (2,459,808 | )          |            |            | (856,295   | )          |            |            | (257,722   | )         
|                                               |                                                                                    |                                                   |                                                     |            |            |            |            |            |            |            |            |           
|                                               |                                                                                    |                                                   | Net cash used in investing activities               |            |            | (4,572,506 | )          |            |            | (9,565,052 | )          |            |            | (2,998,029 | )
|                                               |                                                                                    |                                                   |                                                     |            |            |            |            |            |            |            |            |           
|Cash flows from financing activities:          |                                                                                    |                                                   |                                                     |            |            |            |            |            |            |            |            |           
|                                              
|                                              
|                                              
|                                              
|                                               | Issuance of common stock pursuant to exercise of stock options                     |                                                   |                                                     | 895,381    |            |            |            | 3,264,360  |            |            |            | 2,005,126  |           
|                                              
|                                              
|                                              
|                                              
|                                               | Issuance of common stock pursuant to employee stock purchase
	plans                |                                                   |                                                     | 304,209    |            |            |            | 546,237    |            |            |            | 274,891    |           
|                                              
|                                              
|                                              
|                                              
|                                               | Purchase of treasury stock                                                         |                                                   |                                                     | (2,443,754 | )          |            |            |           |            |            |            |           |           
|                                              
|                                              
|                                              
|                                              
|                                               | Principal payment on loans                                                         |                                                   |                                                     |           |            |            |            |           |            |            |            | (591,496   | )         
|                                               |                                                                                    |                                                   |                                                     |            |            |            |            |            |            |            |            |           
|                                               |                                                                                    |                                                   | Net cash (used in) provided by financing activities |            |            | (1,244,164 | )          |            |            | 3,810,597  |            |            |            | 1,688,521  |  
|                                               |                                                                                    |                                                   |                                                     |            |            |            |            |            |            |            |            |           
|Effect of exchange rate changes on cash        |                                                                                    |                                                   | 202,786                                             |            |            |            | (12,482    | )          |            |            | 44,188     |           
|                                               |                                                                                    |                                                   |                                                     |            |            |            |            |            |            |            |            |           
|Net increase in cash and cash equivalents      |                                                                                    |                                                   | (4,057,358                                          | )          |            |            | 3,813,718  |            |            |            | 11,079,553 |           
|                                              
|                                              
|                                              
|                                              
|Cash and cash equivalents, beginning of period |                                                                                    |                                                   | 32,135,952                                          |            |            |            | 28,322,234 |            |            |            | 17,242,681 |           
|                                               |                                                                                    |                                                   |                                                     |            |            |            |            |            |            |            |            |           
|Cash and cash equivalents, end of period       |                                                                                    | $                                                 | 28,078,594                                          |            |            | $          | 32,135,952 |            |            | $          | 28,322,234 |           
|                                               |                                                                                    |                                                   |                                                     |            |            |            |            |            |            |            |            |           

The accompanying notes are an integral part of the consolidated
financial statements;



22



---



Landmark Systems Corporation

Notes to Consolidated Financial Statements

Note 1  Organization and Operations

Landmark Systems Corporation (the Company) was
incorporated in the Commonwealth of Virginia in
November 1982 and commenced operations in 1983. The Company
is engaged in the development, marketing and distribution of
computer software products and the provision of related
services. The Company is a supplier of performance management
software products that measure, analyze, report and predict
performance in both the mainframe and, through November 2000,
the client/server computing environments. See
Note 3  Discontinuance of Client/ Server
Products.

The Company has subsidiaries in the United Kingdom, Spain,
Germany, The Netherlands, Sweden, France, Italy, Australia, Hong
Kong and Singapore that act as distributors of its products in
Europe, the Middle East, Africa, Australia, New Zealand and
Southeast Asia. Additionally, the subsidiaries provide technical
support, marketing and distribution support in their geographic
markets.

Note 2  Summary of Significant Accounting
Policies

Basis of Presentation

The accompanying consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries.
Intercompany transactions and balances have been eliminated.
Certain prior year amounts have been reclassified to conform
with current year presentation.

Cash and Cash Equivalents

For purposes of the consolidated balance sheets and statements
of cash flows, the Company considers all highly-liquid
investment instruments with an original maturity of three months
or less to be cash equivalents.

Revenue Recognition

Revenues are recognized in accordance with Statement of Position
(SOP) 97-2, Software Revenue Recognition. Sales
of perpetual software licenses are recorded as revenues when
persuasive evidence of an arrangement exists, delivery has
occurred, the fee is fixed and determinable and collectibility
is probable. Revenue is deferred if any of the aforementioned
conditions are not met. For transactions involving both license
and maintenance revenues, the Company defers the fair value of
the maintenance services, based upon renewal maintenance rates
charged, and recognizes the maintenance ratably over the term of
the agreement. Renewal maintenance revenues generally are
collected prior to the performance of the related services and
are recorded as deferred revenue and recognized ratably over the
period during which the services are performed.

In December 1998, the American Institute of Certified
Public Accountants (the AICPA) issued SOP 98-9,
Modification of SOP 97-2, Software Revenue
Recognition, With Respect to Certain Transactions.
SOP 98-9 modifies SOP 97-2 by requiring revenue to be
recognized using the residual method if certain
conditions are met. The Company adopted SOP 98-9 on
January 1, 2000. The adoption did not have a material
effect on the Companys financial condition or results of
operations.

In December 1999, the Securities and Exchange Commission
issued Staff Accounting Bulletin 101, Revenue
Recognition in Financial Statements
(SAB 101), as amended by SAB 101A and
SAB 101B. SAB 101 provides guidance regarding the
recognition, presentation and disclosure of revenue in financial
statements. The Company adopted SAB 101 on October 1,
2000.

23



---



Landmark Systems Corporation


Notes to Consolidated Financial Statements 
(Continued)



Note 2  Summary of Significant Accounting
Policies  (Continued)


The adoption did not have a material effect on the
Companys financials condition or results of operations.

In certain circumstances, the Company enters into a long-term
payment arrangement with a licensee. Under these types of
arrangements, the Company allows the licensee to pay the license
fees plus maintenance fees over a three-to-five-year period,
generally in annual installments. If collectibility by the
Company is probable, the Company records the present value of
the contracted stream of payments as an unbilled account
receivable in its financial statements. Of this amount, the
Company recognizes the underlying license fee as license revenue
and defers the underlying maintenance fee. As installments are
invoiced to the licensee in accordance with the payment
arrangement, the Company reflects a reduction in its unbilled
accounts receivable and an increase in its accounts receivable.
Historically, the Company has not granted concessions nor
experienced significant bad debts associated with these
long-term payment arrangements. At December 31, 2000 and
1999, unbilled accounts receivable have been reduced by
$1,357,000 and $1,313,000, respectively, to reflect such amounts
at their present values. The Company imputes interest based only
on that portion of the receivable allocated to the license
element as (a) the license is delivered immediately but
paid for over an extended period and (b) the license
revenue is the only portion of the fee that is recognized at the
time the license agreement is entered. Imputed interest income
on long-term receivables is reported within Interest and
Other Income on the Consolidated Statements of Operations.

The Company has relationships with a number of third-party
distributors to market and distribute its products
internationally. Under such arrangements, the distributors
report to, are invoiced by and remit payments to the Company
based on transactions with the ultimate customer. The Company
records revenues from international distributors net of
royalties paid to the distributors based upon transactions
reported to the Company.

The Company records an accrual for estimated sales returns.
Historically, such amounts have not been material.

Fixed Assets

Fixed assets are stated at cost less accumulated depreciation
and amortization. Depreciation is computed using the
straight-line method over the estimated useful lives of the
assets. The estimated useful lives used to compute depreciation
are generally five years for computer equipment, office
equipment and furniture. Amortization of leasehold improvements
is computed using the straight-line method over the shorter of
the estimated useful lives of the improvements or the term of
the related lease. Fully depreciated assets are retained in
property and accumulated depreciation accounts until removed
from service.

Intangible Assets

In January 1997, the Company signed an agreement to acquire
certain rights and related assets from Infarmedica Holding AG
(Infarmedica), a former distributor of the
Companys products. Under the terms of the agreement
governing this relationship, Infarmedica held exclusive rights
to market certain of the Companys products in Austria, the
Benelux countries, Germany and Switzerland. As a result of the
1997 agreement, the Company gained access to a significant
customer base in these European countries (including an
assignment of license and maintenance agreements)

24



---



Landmark Systems Corporation


Notes to Consolidated Financial Statements 
(Continued)



Note 2  Summary of Significant Accounting
Policies  (Continued)


and established subsidiaries in Germany and The Netherlands to
support these customers directly. In consideration for the
acquisition of these rights, the Company paid Infarmedica
$1,800,000 in installment payments from 1997 through 1999, of
which $497,000 was paid in 1999, $488,000 was paid in 1998 and
$815,000 was paid in 1997. In addition, in January 1997,
the Company granted Infarmedica a warrant to purchase 225,000
shares of the Companys common stock at $4.00 per share,
which was fully vested upon issuance, expires on January 1,
2007, and is transferable only with the Companys consent.
The fair value of the warrant was $48,000, calculated using an
option pricing model. The Company recorded the acquisition of
the customer base as an intangible asset representing the
present value of the cash payments plus the fair value of the
warrant issued. The related intangible asset was amortized over
three years.

In January 1999, the Company signed an agreement to acquire
certain rights and related assets from Software Products Ltd.
(Software Products), a former international
distributor of the Companys products. Under terms of the
agreement governing the distribution relationship, Software
Products held exclusive rights to market certain of the
Companys products in the United Kingdom. As a result of
the 1999 agreement, the Company gained direct access to its
mainframe customers in the United Kingdom. As consideration for
the acquisition of these rights, the Company paid Software
Products $4,000,000 in cash. As further consideration, the
Company issued to Software Products 91,586 shares of Company
common stock, with a fair value of $850,000 and subject to
certain resale restrictions and registration rights.
Additionally, the Company granted Software Products a warrant to
purchase 150,000 shares of the Companys common stock at
the then fair market value of $10.00 per share, which vested
upon issuance and expires in January 2009. The fair value
of the warrant was $540,000, calculated using an option pricing
model assuming an expected warrant life of two years, a
risk-free interest rate of 4.6% and stock volatility of 60%. The
Company recorded the acquisition of the customer base as an
intangible asset representing the cash payment and the fair
value of the stock and warrant issued and is amortizing the
intangible asset over a five-year period.

In May 1999, the Company established a subsidiary, Landmark
Systems France, SARL, to act as a distributor of the
Companys client/server products in France. In
October 1999, the Company acquired the distribution rights
for its mainframe products from its international distributor in
France. Under terms of the agreement to acquire the distribution
rights, the Company paid the former distributor $1,200,000.
Additionally, the Company granted the former distributor a
warrant to purchase 100,000 shares of Company common stock at
the then fair market value of $7.50 per share, which vested upon
issuance. The warrant expires in October 2002 or
October 2004 if certain conditions are met. The fair value
of the warrant was $333,000, calculated using an option pricing
model assuming an expected warrant life of three years, a risk
free interest rate of 5.9% and stock volatility of 60%. The
Company recorded the acquisition of the customer base as an
intangible asset representing the cash payment and the fair
value of the warrant issued, and is amortizing the intangible
asset over a five-year period.

In June 1999, the Company acquired the distribution rights
from its international distributor in the Scandinavian countries
and established a subsidiary, Landmark Systems Nordic, AB, to
act as a distributor of the Companys products in the
Scandinavian countries. Under terms of the agreement to acquire
the distribution rights, the Company will pay the former
distributor a royalty through June 2003 ranging from 65% to
85% of revenue received from the licensing of certain products
to, and the receipt of maintenance revenue attributed to those
products from, the former distributors

25



---



Landmark Systems Corporation


Notes to Consolidated Financial Statements 
(Continued)



Note 2  Summary of Significant Accounting
Policies  (Continued)


customers. Royalty expense to the former distributor was
$840,000 and $225,000 for the years ended December 31, 2000
and 1999, respectively.

Amortization expense of costs to acquire distribution rights was
$1,419,000, $1,776,000, and $616,000 for the years ended
December 31, 2000, 1999 and 1998, respectively.

Software Development Costs

The Company accounts for its software development activities in
accordance with Statement of Financial Accounting Standards
(SFAS) No. 86, Accounting for the Cost of
Computer Software to be Sold, Leased or Otherwise
Marketed. The Company capitalizes costs from the point of
demonstrated technological feasibility up to the time the
product is available for release to customers. Amortization is
computed on an individual product basis and is the greater of
(i) the ratio of current gross revenues for a product to
the total current and anticipated future gross revenues for the
product or (ii) the straight-line method over the estimated
economic life of the product. The Company amortizes capitalized
software costs over an 18-month period.

Impairment of Long-Lived Assets

The Company has adopted Statement of Financial Standards
No. 121 Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of
(SFAS 121). SFAS 121 prescribes that an
impairment loss is recognized in the event that facts and
circumstances indicate that the carrying amount of an asset may
not be recoverable, and an estimate of future undiscounted cash
flows is less than the carrying amount of the asset. Impairment
is recorded based on an estimate of future discounted cash flows.

Stock-Based Compensation

The Company accounts for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board
Opinion (APB) No. 25, Accounting for Stock
Issued to Employees, and related Interpretations. Under
APB No. 25, compensation expense is measured as the excess,
if any, of the market price of the Companys stock at the
date of grant over the exercise price of the option granted.
Compensation expense for stock options, if any, is recognized
ratably over the vesting period. The Company provides additional
pro forma disclosures as required under SFAS No. 123,
Accounting for Stock-Based Compensation; see Note
11  Stockholders Equity.

Transactions for which non-employees are issued equity
instruments for goods or services received are recorded by the
Company based upon the fair value of the equity instruments
issued or the fair value of the goods or services received,
whichever is more reliably measured.

Income Taxes

The Company provides for income taxes using the asset and
liability approach. The asset and liability approach requires
the recognition of deferred tax assets and liabilities for the
expected future tax consequences of temporary differences
between the carrying amounts and the tax bases of the assets and
liabilities. A valuation allowance is recorded if, based on the
evidence available, it is more likely than not that some portion
or all of the deferred tax asset will not be realized.

26



---



Landmark Systems Corporation


Notes to Consolidated Financial Statements 
(Continued)



Note 2  Summary of Significant Accounting
Policies  (Continued)


Comprehensive Income (Loss)

Effective January 1, 1998, the Company adopted SFAS
No. 130, Reporting Comprehensive Income. SFAS
No. 130 establishes standards for the reporting and display
of comprehensive income and its components. The Companys
total comprehensive income is comprised of net income and other
comprehensive income (loss), which consists of foreign currency
translation adjustments, and is presented in the Consolidated
Statement of Changes in Stockholders Equity.

Foreign Currency Translations

The functional currency for the Companys international
subsidiaries is the applicable local currency. The financial
statements of international subsidiaries are translated into
U.S. dollars using exchange rates in effect at period end for
assets and liabilities and average exchange rates during each
reporting period for results of operations. Adjustments
resulting from translation of financial statements are included
in stockholders equity as other comprehensive income
(loss). The Company does not attempt to hedge its foreign
currency exposures. Foreign currency transaction losses of
$45,000, $32,000 and $6,000 in 2000, 1999 and 1998,
respectively, are included in other income.

Fair Value of Financial Instruments

The carrying amounts reported in the consolidated balance sheets
for cash and cash equivalents, accounts receivable and accounts
payable approximate their fair value due to the short maturity
of those instruments.

The Company had $17,832,000 and $12,416,000 of unbilled accounts
receivable outstanding at December 31, 2000 and 1999,
respectively; the estimated fair values of these receivables are
$18,296,000 and $12,698,000, respectively, calculated using
discounted cash flows.

Concentrations of Credit Risk

Financial instruments that expose the Company to concentrations
of credit risk consist principally of accounts receivable and
unbilled receivables. Credit risk is limited due to the large
number and geographic dispersion of customers comprising the
Companys customer base. No distributor or customer
accounted for more than 10% of the Companys total
outstanding receivables.

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 revenue and expenses during the reporting
periods. Actual results could differ from those estimates and
assumptions.

Earnings Per Share

Basic earnings per share is computed by dividing the net income
available to common stockholders by the weighted-average number
of shares of common stock outstanding. Diluted earnings per
share is computed by additionally reflecting the potential
dilution that could occur, using the treasury stock method, if
warrants and options to acquire common stock were exercised or

27



---



Landmark Systems Corporation


Notes to Consolidated Financial Statements 
(Continued)

Note 2  Summary of Significant Accounting
Policies  (Continued)

resulted in the issuance of common stock that then shared in the
earnings of the Company. The following is a reconciliation of
the numerators and denominators for basic and diluted earnings
per share for 2000, 1999 and 1998:

|                                     |                               |                                   |            |               |            |           |            |  |            |   |       |   |       |  
|------------------------------------ | ----------------------------- | --------------------------------- | ---------- | ------------- | ---------- | --------- | ---------- |  | ---------- | - | ----- | - | ----- | -
|                                     |                               | Income                            |            | Shares        |            | Per-Share
|                                     |                               | (Numerator)                       |            | (Denominator) |            | Amount   
|                                     |                               |                                   |            |               |            |          
|For the year ended December 31, 2000 |                               |                                   |            |               |            |           |            |  |            |   |       |  
|Basic EPS                            |                               |                                   |            |               |            |           |            |  |            |   |       |  
|                                    
|                                    
|                                    
|                                    
|                                     |                               | Net loss                          |            | $             | (2,550,772 | )         |            |  | 12,973,471 |   |       | $ | (0.20 | )
|                                     | Effect of dilutive securities |                                   |            |               |            |           |            |  |            |   |       |   |      
|                                    
|                                    
|                                    
|                                    
|                                     |                               | Common stock options and warrants |            |               |           |           |            |  |           |   |       |   |       |  
|                                     |                               |                                   |            |               |            |           |            |  |            |   |       |  
|Diluted EPS                          |                               | $                                 | (2,550,772 | )             |            |           | 12,973,471 |  |            | $ | (0.20 | )
|                                     |                               |                                   |            |               |            |           |            |  |            |   |       |  
|For the year ended December 31, 1999 |                               |                                   |            |               |            |           |            |  |            |   |       |  
|Basic EPS                            |                               |                                   |            |               |            |           |            |  |            |   |       |  
|                                    
|                                    
|                                    
|                                    
|                                     |                               | Net income                        |            | $             | 4,077,052  |           |            |  | 12,407,132 |   |       | $ | 0.33  |  
|                                     | Effect of dilutive securities |                                   |            |               |            |           |            |  |            |   |       |   |      
|                                    
|                                    
|                                    
|                                    
|                                     |                               | Common stock options and warrants |            |               |           |           |            |  | 736,252    |   |       |   |       |  
|                                     |                               |                                   |            |               |            |           |            |  |            |   |       |  
|Diluted EPS                          |                               | $                                 | 4,077,052  |               |            |           | 13,143,384 |  |            | $ | 0.31  |  
|                                     |                               |                                   |            |               |            |           |            |  |            |   |       |  
|For the year ended December 31, 1998 |                               |                                   |            |               |            |           |            |  |            |   |       |  
|Basic EPS                            |                               |                                   |            |               |            |           |            |  |            |   |       |  
|                                    
|                                    
|                                    
|                                    
|                                     |                               | Net income                        |            | $             | 5,122,113  |           |            |  | 11,491,395 |   |       | $ | 0.45  |  
|                                     | Effect of dilutive securities |                                   |            |               |            |           |            |  |            |   |       |   |      
|                                    
|                                    
|                                    
|                                    
|                                     |                               | Common stock options and warrants |            |               |           |           |            |  | 881,634    |   |       |   |       |  
|                                     |                               |                                   |            |               |            |           |            |  |            |   |       |  
|Diluted EPS                          |                               | $                                 | 5,122,113  |               |            |           | 12,373,029 |  |            | $ | 0.41  |  
|                                     |                               |                                   |            |               |            |           |            |  |            |   |       |  

At December 31, 2000, the Company had options and warrants
outstanding which could potentially dilute basic earnings per
share in the future, but were excluded from the computation of
diluted net loss per share for 2000 as their effect would have
been antidilutive. See a summary of the options outstanding in
Note 11  Stockholders Equity, and a summary of
the warrants outstanding in Note 2  Summary of
Accounting Principles, Intangible Assets.

Note 3  Discontinuance of Client/ Server
Products

In November 2000, the Company determined that its
client/server products were not competitive in the marketplace
and discontinued the sale of those products. The Company
recorded a $4,343,000 charge during the fourth quarter of 2000
to reflect asset disposal and restructuring costs associated
with the discontinuance of its client/server products. As part
of the charge, the Company wrote off approximately $3,052,000 of
capitalized software and prepaid royalty expenses, incurred
approximately $965,000 in severance and related costs resulting
from the dismissal of 40 employees assigned to these products
and disposed of approximately $326,000 of computer equipment
dedicated to those products. At December 31, 2000, accrued
liabilities included $535,000 for accrued severance, most of
which was paid by the end of February 2001.

28



---



Landmark Systems Corporation


Notes to Consolidated Financial Statements 
(Continued)

Note 4  Sale of Unbilled Accounts Receivable

During 2000, 1999 and 1998, the Company sold, without recourse,
unbilled accounts receivables with a book value of $3,863,000,
$8,745,000 and $7,821,000, respectively, to augment the
Companys cash flow. The unbilled receivables sold were
from customers in the U.S. with remaining payments of up to four
years. The transactions were accounted for pursuant to SFAS
No. 125, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities, and
resulted in immaterial gains and losses for the Company.

Note 5  Fixed Assets

Fixed assets consist of the following:

|                              |                   |              |             |           |  |   |             |           | 
|----------------------------- | ----------------- | ------------ | ----------- | --------- |  | - | ----------- | --------- | 
|                              |                   |             
|                              |                   | December 31,
|                              |                   |             
|                              |                   | 2000         |             | 1999     
|                              |                   |              |             |          
|Computer equipment            |                   | $            | 6,762,425   |           |  | $ | 7,138,539   |          
|                             
|                             
|                             
|                             
|Office equipment              |                   |              | 6,574,828   |           |  |   | 5,731,046   |          
|                             
|                             
|                             
|                             
|Furniture and equipment       |                   |              | 3,418,438   |           |  |   | 3,410,396   |          
|                             
|                             
|                             
|                             
|Leasehold improvements        |                   |              | 2,577,997   |           |  |   | 2,575,885   |          
|                              |                   |              |             |           |  |   |             |          
|                              |                   |              | 19,333,688  |           |  |   | 18,855,866  |          
|                             
|                             
|                             
|                             
|Less accumulated depreciation |                   |              | (14,018,026 | )         |  |   | (13,492,593 | )        
|                              |                   |              |             |           |  |   |             |          
|                              | Fixed assets, net |              | $           | 5,315,662 |  |   | $           | 5,363,273 | 
|                              |                   |              |             |           |  |   |             |          

Depreciation expense was approximately $1,766,000, $1,666,000
and $1,385,000 in 2000, 1999 and 1998, respectively.

Note 6  Capitalized Software Costs

Capitalized software costs consist of the following:

|                              |                           |              |         |         |  |   |            |         | 
|----------------------------- | ------------------------- | ------------ | ------- | ------- |  | - | ---------- | ------- | 
|                              |                           |             
|                              |                           | December 31,
|                              |                           |             
|                              |                           | 2000         |         | 1999   
|                              |                           |              |         |        
|Capitalized software costs    |                           | $            | 504,086 |         |  | $ | 2,613,707  |        
|                             
|                             
|                             
|                             
|Less accumulated amortization |                           |              |        |         |  |   | (1,746,748 | )      
|                              |                           |              |         |         |  |   |            |        
|                              | Capitalized software, net |              | $       | 504,086 |  |   | $          | 866,959 | 
|                              |                           |              |         |         |  |   |            |        

The Company capitalized software development costs of
approximately $2,460,000, $856,000 and $258,000 during 2000,
1999 and 1998, respectively. As discussed in Note 3, the Company
wrote-off $2,442,000 of unamortized software development costs
in 2000 as part of the non-recurring restructuring charge.
Amortization expense of capitalized software costs was
approximately $380,000, $247,000 and $400,000 in 2000, 1999 and
1998, respectively.

Note 7  Debt

In December 1998, the Company paid the remaining balance of
its debt. This debt consisted of a note payable with an interest
rate of 9%, which was secured by fixed assets and was due in
monthly

29



---



Landmark Systems Corporation


Notes to Consolidated Financial Statements 
(Continued)



Note 7  Debt  (Continued)


installments from February 1996 through January 1999.
The Company did not pay any interest in 2000 and 1999. The
Company paid interest of approximately $42,000 in 1998.

In March 1999, the Company obtained a revolving line of
credit in the amount of $10,000,000. The line of credit, which
is unsecured, has a floating interest rate of LIBOR plus 1.35%
and had an expiration of June 30, 2000. In June 2000,
the line of credit was extended until June 30, 2001. No
advances have been made on the line of credit. The line of
credit includes administrative fees of 0.25% on the unused
balance.

Note 8  Segment Information

The Company classifies its operations into one industry segment,
software development and related services. The Company
categorizes its products and services into two groups: mainframe
and client/server. The Companys revenues by product group
consist of the following:

|              |                |                         |            |            |  |      |            |            |  |   |            |            | 
|------------- | -------------- | ----------------------- | ---------- | ---------- |  | ---- | ---------- | ---------- |  | - | ---------- | ---------- | 
|              |                |                        
|              |                | Year Ended December 31,
|              |                |                        
|              |                | 2000                    |            | 1999       |  | 1998
|              |                |                         |            |            |  |     
|Mainframe     |                | $                       | 53,504,251 |            |  | $    | 51,212,770 |            |  | $ | 47,122,009 |           
|             
|             
|             
|             
|Client/server |                |                         | 2,910,927  |            |  |      | 3,989,664  |            |  |   | 2,710,225  |           
|              |                |                         |            |            |  |      |            |            |  |   |            |           
|              | Total revenues |                         | $          | 56,415,178 |  |      | $          | 55,202,434 |  |   | $          | 49,832,234 | 
|              |                |                         |            |            |  |      |            |            |  |   |            |           

The Company sells its products outside the United States through
its subsidiaries and international distributors. The
Companys revenues by country or geographic region are as
follows:

|               |               |                         |            |            |  |      |            |            |  |   |            |            | 
|-------------- | ------------- | ----------------------- | ---------- | ---------- |  | ---- | ---------- | ---------- |  | - | ---------- | ---------- | 
|               |               |                        
|               |               | Year Ended December 31,
|               |               |                        
|               |               | 2000                    |            | 1999       |  | 1998
|               |               |                         |            |            |  |     
|United States  |               | $                       | 35,971,810 |            |  | $    | 37,763,652 |            |  | $ | 33,316,805 |           
|              
|              
|              
|              
|Germany        |               |                         | 3,994,549  |            |  |      | 3,665,206  |            |  |   | 4,165,628  |           
|              
|              
|              
|              
|United Kingdom |               |                         | 3,651,101  |            |  |      | 2,836,637  |            |  |   | 2,391,301  |           
|              
|              
|              
|              
|Benelux        |               |                         | 2,197,373  |            |  |      | 1,815,552  |            |  |   | 2,126,476  |           
|              
|              
|              
|              
|France         |               |                         | 1,904,651  |            |  |      | 1,261,589  |            |  |   | 686,921    |           
|              
|              
|              
|              
|Sweden         |               |                         | 1,395,687  |            |  |      | 448,602    |            |  |   | 229,278    |           
|              
|              
|              
|              
|Australia      |               |                         | 1,215,447  |            |  |      | 1,782,883  |            |  |   | 1,553,149  |           
|              
|              
|              
|              
|Other          |               |                         | 6,084,560  |            |  |      | 5,628,313  |            |  |   | 5,362,676  |           
|               |               |                         |            |            |  |      |            |            |  |   |            |           
|               | Total revenue |                         | $          | 56,415,178 |  |      | $          | 55,202,434 |  |   | $          | 49,832,234 | 
|               |               |                         |            |            |  |      |            |            |  |   |            |           

30



---



Landmark Systems Corporation


Notes to Consolidated Financial Statements 
(Continued)



Note 8  Segment Information 
(Continued)


The Companys long-lived assets, which consist of fixed
assets, capitalized software and intangible assets, by country
or geographic region are as follows:

|              |                   |              |            |            |  |      |            |            |  |   |           |           | 
|------------- | ----------------- | ------------ | ---------- | ---------- |  | ---- | ---------- | ---------- |  | - | --------- | --------- | 
|              |                   |             
|              |                   | December 31,
|              |                   |             
|              |                   | 2000         |            | 1999       |  | 1998
|              |                   |              |            |            |  |     
|United States |                   | $            | 10,031,879 |            |  | $    | 11,815,246 |            |  | $ | 4,760,777 |          
|             
|             
|             
|             
|Europe        |                   |              | 275,061    |            |  |      | 220,807    |            |  |   | 185,372   |          
|             
|             
|             
|             
|Other         |                   |              | 26,329     |            |  |      | 48,291     |            |  |   | 48,863    |          
|              |                   |              |            |            |  |      |            |            |  |   |           |          
|              | Long-lived assets |              | $          | 10,333,269 |  |      | $          | 12,084,344 |  |   | $         | 4,995,012 | 
|              |                   |              |            |            |  |      |            |            |  |   |           |          

Note 9  Income Taxes

Income before income taxes consists of the following:

|                           |                     |                         |            |            |   |      |           |           |  |   |           |           | 
|-------------------------- | ------------------- | ----------------------- | ---------- | ---------- | - | ---- | --------- | --------- |  | - | --------- | --------- | 
|                           |                     |                        
|                           |                     | Year Ended December 31,
|                           |                     |                        
|                           |                     | 2000                    |            | 1999       |   | 1998
|                           |                     |                         |            |            |   |     
|United States              |                     | $                       | (2,846,558 | )          |   | $    | 6,791,643 |           |  | $ | 7,848,582 |          
|                          
|                          
|                          
|                          
|International subsidiaries |                     |                         | 28,468     |            |   |      | (396,270  | )         |  |   | 368,229   |          
|                           |                     |                         |            |            |   |      |           |           |  |   |           |          
|                           | Income before taxes |                         | $          | (2,818,090 | ) |      | $         | 6,395,373 |  |   | $         | 8,216,811 | 
|                           |                     |                         |            |            |   |      |           |           |  |   |           |          

The (benefit from) provision for income taxes consists of the
following:

|                                          |                 |                         |            |            |   |      |           |           |   |   |           |           |  
|----------------------------------------- | --------------- | ----------------------- | ---------- | ---------- | - | ---- | --------- | --------- | - | - | --------- | --------- | -
|                                          |                 |                        
|                                          |                 | Year Ended December 31,
|                                          |                 |                        
|                                          |                 | 2000                    |            | 1999       |   | 1998
|                                          |                 |                         |            |            |   |     
|Current taxes payable:                    |                 |                         |            |            |   |      |           |           |   |   |           |          
|                                         
|                                         
|                                         
|                                         
|                                          | U.S. Federal    |                         | $          |           |   |      | $         | 1,447,293 |   |   | $         | 2,664,377 |  
|                                         
|                                         
|                                         
|                                         
|                                          | Foreign         |                         |            | 975,729    |   |      |           | 702,674   |   |   |           | 762,284   |  
|                                         
|                                         
|                                         
|                                         
|                                          | State and local |                         |            | 122,631    |   |      |           | 256,335   |   |   |           | 195,898   |  
|                                          |                 |                         |            |            |   |      |           |           |   |   |           |          
|                                          |                 |                         | 1,098,360  |            |   |      | 2,406,302 |           |   |   | 3,622,559 |          
|                                          |                 |                         |            |            |   |      |           |           |   |   |           |          
|                                         
|                                         
|                                         
|                                         
|Deferred tax (benefit) provision:         |                 |                         |            |            |   |      |           |           |   |   |           |          
|                                         
|                                         
|                                         
|                                         
|                                          | U.S. Federal    |                         |            | (1,299,072 | ) |      |           | 128,388   |   |   |           | (527,255  | )
|                                         
|                                         
|                                         
|                                         
|                                          | Foreign         |                         |            | 44,743     |   |      |           | (227,373  | ) |   |           | 44,587    |  
|                                         
|                                         
|                                         
|                                         
|                                          | State and local |                         |            | (111,349   | ) |      |           | 11,004    |   |   |           | (45,193   | )
|                                          |                 |                         |            |            |   |      |           |           |   |   |           |          
|                                          |                 |                         | (1,365,678 | )          |   |      | (87,981   | )         |   |   | (527,861  | )        
|                                          |                 |                         |            |            |   |      |           |           |   |   |           |          
|(Benefit from) provision for income taxes |                 | $                       | (267,318   | )          |   | $    | 2,318,321 |           |   | $ | 3,094,698 |          
|                                          |                 |                         |            |            |   |      |           |           |   |   |           |          

The Company paid income taxes of approximately $663,000,
$3,446,000 and $2,795,000 in 2000, 1999 and 1998, respectively.
Foreign taxes paid relate primarily to taxes withheld from
revenues remitted by international distributors.

The Company provides deferred taxes for temporary differences
between the bases of assets and liabilities for financial
reporting purposes and the bases of assets and liabilities for
tax return purposes.

31



---



Landmark Systems Corporation


Notes to Consolidated Financial Statements 
(Continued)



Note 9  Income Taxes  (Continued)


The net deferred tax assets (liabilities) at
December 31, 2000 and 1999 are attributable to the
following:

|                                |                                                    |              |           |            |   |   |           |           |  
|------------------------------- | -------------------------------------------------- | ------------ | --------- | ---------- | - | - | --------- | --------- | -
|                                |                                                    |             
|                                |                                                    | December 31,
|                                |                                                    |             
|                                |                                                    | 2000         |           | 1999      
|                                |                                                    |              |           |           
|Deferred tax assets:            |                                                    |              |           |            |   |   |           |          
|                               
|                               
|                               
|                               
|                                | Deferred revenue                                   |              | $         | 1,310,384  |   |   | $         | 938,515   |  
|                               
|                               
|                               
|                               
|                                | Allowance for doubtful accounts                    |              |           | 135,787    |   |   |           | 278,960   |  
|                               
|                               
|                               
|                               
|                                | Tax credit carryforwards                           |              |           | 861,419    |   |   |           | 319,491   |  
|                               
|                               
|                               
|                               
|                                | Federal and state net operating loss carryforwards |              |           | 1,065,542  |   |   |           |          |  
|                               
|                               
|                               
|                               
|                                | Capitalized software development costs             |              |           | 190,834    |   |   |           | 82,947    |  
|                               
|                               
|                               
|                               
|                                | Losses from subsidiaries not utilized              |              |           | 925,753    |   |   |           | 606,057   |  
|                               
|                               
|                               
|                               
|                                | Depreciation and amortization                      |              |           | 1,300,559  |   |   |           | 1,004,499 |  
|                               
|                               
|                               
|                               
|                                | Other                                              |              |           | (97,254    | ) |   |           | 115,824   |  
|                               
|                               
|                               
|                               
|                                | Valuation allowance                                |              |           | (1,053,667 | ) |   |           | (333,000  | )
|                                |                                                    |              |           |            |   |   |           |          
|                                |                                                    |              | 4,639,357 |            |   |   | 3,013,293 |          
|                                |                                                    |              |           |            |   |   |           |          
|Deferred tax liabilities:       |                                                    |              |           |            |   |   |           |          
|                               
|                               
|                               
|                               
|                                | Sublease and general sales tax accrual             |              |           | (14,577    | ) |   |           | (29,154   | )
|                               
|                               
|                               
|                               
|                                | Depreciation and amortization                      |              |           | (179,072   | ) |   |           | (157,260  | )
|                                |                                                    |              |           |            |   |   |           |          
|                                |                                                    |              | (193,649  | )          |   |   | (186,414  | )        
|                                |                                                    |              |           |            |   |   |           |          
|Net deferred tax assets         |                                                    | $            | 4,445,708 |            |   | $ | 2,826,879 |          
|                                |                                                    |              |           |            |   |   |           |          
|                               
|                               
|                               
|                               
|Current deferred tax assets     |                                                    | $            | 2,688,042 |            |   | $ | 1,333,482 |          
|                               
|                               
|                               
|                               
|Non-current deferred tax assets |                                                    |              | 1,757,666 |            |   |   | 1,493,397 |          
|                                |                                                    |              |           |            |   |   |           |          
|                                | Net deferred tax assets                            |              | $         | 4,445,708  |   |   | $         | 2,826,879 |  
|                                |                                                    |              |           |            |   |   |           |          

As of December 31, 2000 and 1999, the Company had a
valuation allowance of $1,054,000 and $333,000, respectively, to
reflect state and foreign net operating loss carryforwards that,
in the Companys estimation, would more likely than not
expire prior to utilization. The Company recorded an increase to
the valuation allowance of approximately $721,000 in 2000 to
reflect the tax effect of estimated state and international net
operating losses.

At December 31, 2000 and 1999, the Company had federal and
state net operating loss carryforwards of approximately
$1,810,000 and $380,000, respectively, which are available to
offset future taxable income.

At December 31, 2000, the Company also had foreign net
operating loss carryforwards of approximately $2,665,000, of
which $875,000 expires between the years 2001 and 2005. The
remaining $1,790,000 carryforwards indefinitely and is available
to offset future foreign taxable income.

Competent authority is a process to resolve unintended results
between the U.S. and foreign taxing jurisdictions. In 1996, the
Company established a provision for competent authority of
$129,000 to reflect managements belief that the outcome of
this process would likely result in a

32



---



Landmark Systems Corporation


Notes to Consolidated Financial Statements 
(Continued)



Note 9  Income Taxes  (Continued)


liability. In 1999, it was determined that the issues were
resolved and the provision for competent authority of $129,000
was released. In 2000, the Company received a payment of
approximately $23,000 as payment for a portion of the amounts
under question.

The (benefit from) provision for income taxes differs from the
amount of taxes determined by applying the U.S. Federal
statutory rate of 34% to income (loss) before income taxes
as a result of the following:

|                                                               |                    |                         |       |      |   |      |      |      |   |  |      |      |  
|-------------------------------------------------------------- | ------------------ | ----------------------- | ----- | ---- | - | ---- | ---- | ---- | - |  | ---- | ---- | -
|                                                               |                    |                        
|                                                               |                    | Year Ended December 31,
|                                                               |                    |                        
|                                                               |                    | 2000                    |       | 1999 |   | 1998
|                                                               |                    |                         |       |      |   |     
|Computation of U.S. Federal income taxes at the statutory rate |                    |                         | 34.0  | %    |   |      | 34.0 | %    |   |  | 35.0 | %   
|                                                              
|                                                              
|                                                              
|                                                              
|State and local taxes, net of Federal income tax benefit       |                    |                         | 3.8   |      |   |      | 2.7  |      |   |  | 1.6  |     
|                                                              
|                                                              
|                                                              
|                                                              
|Change in valuation allowance                                  |                    |                         | (26.7 | )    |   |      | 0.2  |      |   |  | (0.1 | )   
|                                                              
|                                                              
|                                                              
|                                                              
|Change in provision for competent authority                    |                    |                         |      |      |   |      | (2.0 | )    |   |  |     |     
|                                                              
|                                                              
|                                                              
|                                                              
|Foreign tax rate differential                                  |                    |                         | (1.5  | )    |   |      |     |      |   |  |     |     
|                                                              
|                                                              
|                                                              
|                                                              
|Other                                                          |                    |                         | (0.1  | )    |   |      | 1.4  |      |   |  | 1.2  |     
|                                                               |                    |                         |       |      |   |      |      |      |   |  |      |     
|                                                               | Effective tax rate |                         |       | 9.5  | % |      |      | 36.3 | % |  |      | 37.7 | %
|                                                               |                    |                         |       |      |   |      |      |      |   |  |      |     

Note 10  Employee Benefit Plan

The Company has a 401(k) defined contribution plan. During 2000,
1999 and 1998, the Company matched 50% of the first 3% of
employees deferred contributions. Employees are fully
vested in all Company contributions. The Company recorded
expense for its matching contributions of approximately
$253,000, $273,000 and $228,000 during 2000, 1999 and 1998,
respectively.

Note 11  Stockholders Equity

Stock Purchase Plans

During 1998, the Company adopted the 1998 Stock Purchase Plan
(1998 SPP), which replaced the 1991 Employee Stock
Purchase Plan (1991 ESPP). Under the 1998 SPP,
eligible employees may use up to 10% of their gross cash
compensation to purchase shares of the Companys common
stock at a purchase price equal to 85% (90% during 1998 and the
first three quarters of 1999) of the fair value of the stock as
of the last day of the previous quarter or the day before the
last day of the current quarter, whichever is lower. For the
plan year ended April 30, 1998, the Board made 75,000
shares available for purchase under the 1991 ESPP. Under the
1991 ESPP, eligible employees could purchase shares valued at up
to 10% of their gross cash compensation at fair value as
determined by the Board. During 2000, 1999 and 1998, 91,091,
71,534 and 39,512 shares, respectively, were purchased under the
stock purchase plans.

Stock Incentive Plans

The Company has two stock incentive plans that provide for the
granting of stock options to employees and executives of the
Company: the 1994 Stock Incentive Plan (1994 SIP)
and the 1989 Stock Incentive Plan (1989 SIP).
Options under these plans are granted at the fair market value
of the Companys common stock at the date of grant, vest
over a four-year period and expire ten years after the grant
date. The 1994 SIP replaced the 1989 SIP and no additional
grants will be

33



---



Landmark Systems Corporation


Notes to Consolidated Financial Statements 
(Continued)



Note 11  Stockholders Equity 
(Continued)


made under the 1989 SIP. Options outstanding under the 1989 SIP
will remain outstanding until the options terminate or are
exercised.

As of December 31, 2000, a total of 4,500,000 shares of
common stock can be issued under the 1994 SIP through
(i) qualified stock options, which qualify as incentive
stock options and have an exercise price equal to or greater
than the fair market value of the common stock at the date of
grant, (ii) non-qualified stock options, which have an
exercise price equal to or greater than 85% of the fair market
value of the common stock on the date of grant,
(iii) restricted stock awards for common stock at a price
determined by the Board, but not less than 85% of the fair
market value of the stock at the date of grant, which is
nontransferable and subject to repurchase at the holders
cost until Board designated conditions have been met, or
(iv) stock bonuses. As of December 31, 2000, 1,512,891
options were available for future grant under the 1994 SIP.

1996 Advisory Board and Directors Stock Incentive Plan

Options granted under the 1996 Advisory Board and Directors
Stock Incentive Plan (the 1996 ABP) are granted at
the market value of the Companys common stock on the date
of grant, vest over a four-year period and expire ten years
after the grant date. In 2000, 1999 and 1998, the Company
granted options totaling 54,000, 66,000 and 36,000,
respectively, to its Board members. As of December 31,
2000, 102,000 options were available for future grant under the
1996 ABP.

Options Outstanding and Exercisable

The following table summarizes option grants, exercises and
cancellations during 1998, 1999 and 2000 for all stock option
plans:

|                             |                         |              |           |              |   |                  |               |               |  |   |      |       | 
|---------------------------- | ----------------------- | ------------ | --------- | ------------ | - | ---------------- | ------------- | ------------- |  | - | ---- | ----- | 
|                             |                         | Shares       |           | Price Per    |   | Weighted-Average
|                             |                         | Outstanding  |           | Share        |   | Exercise Price  
|                             |                         | Under Option |           | Under Option |   | Per Share       
|                             |                         |              |           |              |   |                 
|Balance at December 31, 1997 |                         |              | 2,510,953 |              |   | $                | 3.00  $ 4.97 |               |  | $ | 3.76 |      
|                            
|                            
|                            
|                            
|                             | Stock options granted   |              |           | 839,875      |   |                  |               | 6.13   10.75 |  |   |      | 8.27  | 
|                            
|                            
|                            
|                            
|                             | Stock options exercised |              |           | (529,742     | ) |                  |               | 3.17    8.63 |  |   |      | 3.79  | 
|                            
|                            
|                            
|                            
|                             | Stock options canceled  |              |           | (344,103     | ) |                  |               | 3.33    8.63 |  |   |      | 5.45  | 
|                             |                         |              |           |              |   |                  |               |               |  |   |      |      
|Balance at December 31, 1998 |                         |              | 2,476,983 |              |   |                  | 3.00   10.75 |               |  |   | 5.01 |      
|                            
|                            
|                            
|                            
|                             | Stock options granted   |              |           | 1,300,402    |   |                  |               | 7.44   13.38 |  |   |      | 10.55 | 
|                            
|                            
|                            
|                            
|                             | Stock options exercised |              |           | (892,385     | ) |                  |               | 3.00    8.63 |  |   |      | 3.66  | 
|                            
|                            
|                            
|                            
|                             | Stock options canceled  |              |           | (276,871     | ) |                  |               | 4.00   12.88 |  |   |      | 9.08  | 
|                             |                         |              |           |              |   |                  |               |               |  |   |      |      
|Balance at December 31, 1999 |                         |              | 2,608,129 |              |   |                  | 3.17   13.38 |               |  |   | 7.78 |      
|                            
|                            
|                            
|                            
|                             | Stock options granted   |              |           | 417,500      |   |                  |               | 3.94    7.06 |  |   |      | 5.16  | 
|                            
|                            
|                            
|                            
|                             | Stock options exercised |              |           | (218,230     | ) |                  |               | 3.59    8.63 |  |   |      | 4.10  | 
|                            
|                            
|                            
|                            
|                             | Stock options canceled  |              |           | (726,117     | ) |                  |               | 3.94   12.88 |  |   |      | 8.74  | 
|                             |                         |              |           |              |   |                  |               |               |  |   |      |      
|Balance at December 31, 2000 |                         |              | 2,081,282 |              |   | $                | 3.17  $13.38 |               |  | $ | 7.32 |      
|                             |                         |              |           |              |   |                  |               |               |  |   |      |      

34



---



Landmark Systems Corporation


Notes to Consolidated Financial Statements 
(Continued)

The following table summarizes information about options
outstanding at December 31, 2000:

|                |  |                     |           |                     |  |          |           |             |  |          |       |  |  |  |         |  |  |   |       | 
|--------------- |  | ------------------- | --------- | ------------------- |  | -------- | --------- | ----------- |  | -------- | ----- |  |  |  | ------- |  |  | - | ----- | 
|                |  |                     |           |                    
|                |  | Options Outstanding |           | Options Exercisable
|                |  |                     |           |                    
|                |  |                     |           | Weighted average    |  | Weighted |           |             |  | Weighted
|                |  |                     |           | remaining           |  | average  |           |             |  | average 
|Range of        |  | Options             |           | contractual         |  | exercise |           | Options     |  | exercise
|exercise price  |  | outstanding         |           | life                |  | price    |           | exercisable |  | price   
|                |  |                     |           |                     |  |          |           |             |  |         
|$ 3.17  $ 4.19 |  |                     | 645,028   |                     |  |          | 5.8 years |             |  | $        | 3.85  |  |  |  | 496,833 |  |  | $ | 3.76  | 
|$ 4.96  $ 7.63 |  |                     | 432,625   |                     |  |          | 8.6 years |             |  | $        | 6.15  |  |  |  | 108,688 |  |  | $ | 6.77  | 
|$ 7.75  $ 9.63 |  |                     | 615,125   |                     |  |          | 8.2 years |             |  | $        | 8.48  |  |  |  | 241,750 |  |  | $ | 8.50  | 
|$10.12  $13.38 |  |                     | 388,504   |                     |  |          | 8.1 years |             |  | $        | 12.55 |  |  |  | 110,636 |  |  | $ | 12.59 | 
|                |  |                     |           |                     |  |          |           |             |  |          |       |  |  |  |         |  |  |   |       | 
|$ 3.17  $13.38 |  |                     | 2,081,282 |                     |  |          | 7.5 years |             |  | $        | 7.32  |  |  |  | 957,907 |  |  | $ | 6.32  | 
|                |  |                     |           |                     |  |          |           |             |  |          |       |  |  |  |         |  |  |   |       | 

The unvested options vest primarily over a four-year period and
will be fully vested in the year 2004.

The weighted-average fair value of stock options granted under
the employee stock option plans during 2000, 1999 and 1998 was
$3.79, $6.57 and $4.64, respectively. Had the Company determined
compensation costs for these option plans and the stock purchase
plans in accordance with SFAS No. 123 (Note 2), the
Companys net (loss) for 2000 would have been
approximately $(4,617,000) or $(0.36) per basic and diluted
share. The Companys net income for 1999 would have been
approximately $2,076,000, or $0.17 per basic share and $0.16 per
diluted share. The Companys net income for 1998 would have
been approximately $4,418,000, or $0.38 per basic and $0.36 per
diluted share. The SFAS No. 123 method of accounting does
not apply to options granted prior to January 1, 1995 and,
accordingly, the resulting pro forma compensation cost may not
be representative of future amounts.

The weighted-average assumptions included in the Companys
fair value calculations are as follows:

|                        |  |      |     |      |  |      |      |   |  |  |      |  
|----------------------- |  | ---- | --- | ---- |  | ---- | ---- | - |  |  | ---- | -
|                        |  | 2000 |     | 1999 |  | 1998
|                        |  |      |     |      |  |     
|Expected life (years)   |  |      | 5   |      |  |      | 5    |   |  |  | 5    |  
|                       
|                       
|                       
|                       
|Risk-free interest rate |  |      | 5-7 | %    |  |      | 4- 6 | % |  |  | 4- 6 | %
|                       
|                       
|                       
|                       
|Volatility              |  |      | 90  | %    |  |      | 70   | % |  |  | 60   | %
|                       
|                       
|                       
|                       
|Dividend yield          |  |      | 0   | %    |  |      | 0    | % |  |  | 0    | %

Stock Compensation Expense

The Company records stock compensation expense for the amount,
if any, by which the fair market value of the Companys
common stock exceeds the option exercise price at the date of
the option grant. The Company records stock compensation benefit
to reflect any forfeitures of unvested stock options. The
Company did not record stock compensation expense in 2000 and
1999. The Company recorded stock compensation expense of
approximately $100,000 in 1998.

Note 12  Treasury Stock

In December 2000, the Board authorized management to
purchase for a 90-day period up to $3.5 million worth of the
Companys common stock at no more than $3.75 per share. In
December 2000, the Company repurchased 782,000 shares of
the Companys common stock for

35



---



Landmark Systems Corporation


Notes to Consolidated Financial Statements 
(Continued)



Note 12  Treasury Stock  (Continued)


approximately $2,444,000. At December 31, 2000, the shares
repurchased were held as treasury shares.

Note 13  Commitments

During 1988, the Company entered into a ten-year lease for
office space that included a rent abatement for one and one half
years. Rental expense has been calculated as total rental
payments spread ratably over the life of the lease. An accrued
rent expense is created in years when rent expense exceeds cash
payments. In 1996, the Company extended the lease commitment by
five years. The current and long-term portions of the deferred
rent abatement at December 31, 2000 are approximately
$87,000 and $131,000, respectively, and have been included in
accrued expenses or other liabilities, as appropriate.

During 1998, the Company entered into a lease for office space
for the Companys new headquarters facility and
concurrently subleased the Companys existing headquarters
facility at terms that are comparable to those contained within
the Companys existing lease. The Company moved into the
new facility in June 1999 and turned its existing premises
over to the sublessee at that time. The lease for the new
facility has a twelve-year term.

The Company is committed for the payment of minimum rentals,
exclusive of escalation charges and renewal options and net of
sublease income, under office space, computer and other
equipment operating lease agreements through 2005 for the
following amounts:

|                         |       |   |            |            | 
|------------------------ | ----- | - | ---------- | ---------- | 
|Year ending December 31, |       |  
|                         |       |  
|2001                     |       | $ | 3,800,000  |           
|                        
|                        
|                        
|                        
|2002                     |       |   | 1,900,000  |           
|                        
|                        
|                        
|                        
|2003                     |       |   | 1,900,000  |           
|                        
|                        
|                        
|                        
|2004                     |       |   | 1,800,000  |           
|                        
|                        
|                        
|                        
|2005                     |       |   | 1,800,000  |           
|                        
|                        
|                        
|                        
|Thereafter               |       |   | 10,300,000 |           
|                         |       |   |            |           
|                         | Total |   | $          | 21,500,000 | 
|                         |       |   |            |           

Additionally, the Company leases certain equipment under
cancelable operating leases. The total rental expense under all
equipment and office space operating leases was approximately
$3,800,000, $3,800,000 and $3,200,000 in 2000, 1999 and 1998,
respectively.

36



---



Landmark Systems Corporation


Notes to Consolidated Financial Statements 
(Continued)

Note 14  Unaudited Quarterly Results

The following table sets forth unaudited quarterly consolidated
statements of operations data for the years ended
December 31, 2000, 1999 and 1998 (in thousands, except per
share amounts):

|     |                           |         |   |         |      |         |   |         |       |   |   |        |      |  |   |        |       |  
|---- | ------------------------- | ------- | - | ------- | ---- | ------- | - | ------- | ----- | - | - | ------ | ---- |  | - | ------ | ----- | -
|     |                           | Mar 31, |   | Jun 30, |      | Sep 30, |   | Dec 31,
|     |                           |         |   |         |      |         |   |        
|2000 |                           |         |   |         |      |         |   |         |       |   |   |        |      |  |   |       
|    
|    
|    
|    
|     | Total revenues            |         | $ | 12,465  |      |         | $ | 13,188  |       |   | $ | 14,012 |      |  | $ | 16,750 |      
|    
|    
|    
|    
|     | Gross profit              |         |   | 10,385  |      |         |   | 10,350  |       |   |   | 11,258 |      |  |   | 14,182 |      
|    
|    
|    
|    
|     | Net income (loss)         |         |   | 222     |      |         |   | (294    | )     |   |   | 252    |      |  |   | (2,630 | )    
|     | Earnings (loss) per share |         |   |         |      |         |   |         |       |   |   |        |      |  |   |        |      
|    
|    
|    
|    
|     |                           | Basic   |   |         | 0.02 |         |   |         | (0.02 | ) |   |        | 0.01 |  |   |        | (0.20 | )
|    
|    
|    
|    
|     |                           | Diluted |   |         | 0.02 |         |   |         | (0.02 | ) |   |        | 0.01 |  |   |        | (0.20 | )
|    
|1999 |                           |         |   |         |      |         |   |         |       |   |   |        |      |  |   |       
|    
|    
|    
|    
|     | Total revenues            |         | $ | 13,798  |      |         | $ | 14,325  |       |   | $ | 13,001 |      |  | $ | 14,078 |      
|    
|    
|    
|    
|     | Gross profit              |         |   | 11,900  |      |         |   | 12,382  |       |   |   | 11,052 |      |  |   | 11,972 |      
|    
|    
|    
|    
|     | Net income                |         |   | 1,452   |      |         |   | 1,439   |       |   |   | 300    |      |  |   | 886    |      
|     | Earnings per share        |         |   |         |      |         |   |         |       |   |   |        |      |  |   |        |      
|    
|    
|    
|    
|     |                           | Basic   |   |         | 0.12 |         |   |         | 0.12  |   |   |        | 0.02 |  |   |        | 0.07  |  
|    
|    
|    
|    
|     |                           | Diluted |   |         | 0.11 |         |   |         | 0.11  |   |   |        | 0.02 |  |   |        | 0.07  |  
|    
|1998 |                           |         |   |         |      |         |   |         |       |   |   |        |      |  |   |       
|    
|    
|    
|    
|     | Total revenues            |         | $ | 10,300  |      |         | $ | 12,144  |       |   | $ | 12,369 |      |  | $ | 15,019 |      
|    
|    
|    
|    
|     | Gross profit              |         |   | 8,893   |      |         |   | 10,642  |       |   |   | 11,225 |      |  |   | 13,599 |      
|    
|    
|    
|    
|     | Net income                |         |   | 692     |      |         |   | 954     |       |   |   | 1,423  |      |  |   | 2,053  |      
|     | Earnings per share        |         |   |         |      |         |   |         |       |   |   |        |      |  |   |        |      
|    
|    
|    
|    
|     |                           | Basic   |   |         | 0.06 |         |   |         | 0.08  |   |   |        | 0.12 |  |   |        | 0.18  |  
|    
|    
|    
|    
|     |                           | Diluted |   |         | 0.06 |         |   |         | 0.08  |   |   |        | 0.11 |  |   |        | 0.16  |  

37



---



Landmark Systems Corporation


Notes to Consolidated Financial Statements 
(Continued)



Note 14  Unaudited Quarterly Results 
(Continued)




|        |                                                                                       
|------- | --------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with Accountants on Accounting
	and Financial Disclosure.

None.

PART III

Item 10.  Directors and Executive Officers of the
Registrant.

The information with respect to directors required by this item
is incorporated by reference from the Companys 2001 Proxy
Statement to be filed with the Securities and Exchange
Commission by April 30, 2001.

The information with respect to officers required by this item
is included at the end of Part I of this document under the
heading Executive Officers of the Company.

Item 11.  Executive Compensation.

The information required by this item is incorporated by
reference from the Companys 2001 Proxy Statement to be
filed with the Securities and Exchange Commission by
April 30, 2001.

Item 12.  Security Ownership of Certain Beneficial
Owners and Management.

The information required by this item is incorporated by
reference from the Companys 2001 Proxy Statement to be
filed with the Securities and Exchange Commission by
April 30, 2001.

Item 13.  Certain Relationships and Related
Transactions.

The information required by this item is incorporated by
reference from the Companys 2001 Proxy Statement to be
filed with the Securities and Exchange Commission by
April 30, 2001.

38



---



PART IV

Item 14.  Exhibits, Financial Statement Schedules,
and Reports on Form 8-K.

(a)  Listed below are the documents filed as a part of this
report:



| |                                                                
| | ---------------------------------------------------------------
| | 1. Financial Statements and the Independent Accountants Report:

| |                                                           
| | ----------------------------------------------------------
| | Report of Independent Accountants                         
| | Consolidated Statements of Operations                     
| | Consolidated Balance Sheets                               
| | Consolidated Statements of Changes in Stockholders Equity
| | Consolidated Statements of Cash Flows                     
| | Notes to Consolidated Financial Statements                



| |                                  
| | ---------------------------------
| | 2. Financial Statement Schedules:

| |                                                
| | -----------------------------------------------
| | Schedule II  Valuation and Qualifying Accounts



| |             
| | ------------
| | 3. Exhibits:

|        |      |                         |  |                                                                                                                                                                                                                                                                                               
|------- | ---- | ----------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |                        
|Number  |      | Description of Document
|        |      |                        
|        | 3.1  |                         |  | Articles of Incorporation (incorporated by reference to
	Exhibit 3.1 forming a part of the Companys
	registration statement on Form S-1 (File
	No. 333-35629) filed with the Securities and Exchange
	Commission under the Securities Act of 1933, as amended.)                              
|        | 3.2  |                         |  | Amended and Restated Bylaws (incorporated by reference to
	Exhibit 3.2 forming a part of the Companys
	registration statement on Form S-1 (File
	No. 333-35629) filed with the Securities and Exchange
	Commission under the Securities Act of 1933, as amended.)                            
|        | 4.1  |                         |  | Reference is made to Exhibits 3.1 and 3.2                                                                                                                                                                                                                                                     
|        | 4.2  |                         |  | Specimen certificate of Common Stock (incorporated by reference
	to Exhibit 4.2 forming a part of the Companys
	registration statement on Form S-1 (File
	No. 333-35629) filed with the Securities and Exchange
	Commission under the Securities Act of 1933, as amended.)                   
|        | 10.2 | *                       |  | 1989 Stock Incentive Plan (incorporated by reference to
	Exhibit 10.2 forming a part of the Companys
	registration statement on Form S-1 (File
	No. 333-35629) filed with the Securities and Exchange
	Commission under the Securities Act of 1933, as amended.)                             
|        | 10.3 | *                       |  | 1991 Employee Stock Purchase Plan (incorporated by reference to
	Exhibit 10.3 forming a part of the Companys
	registration statement on Form S-1 (File
	No. 333-35629) filed with the Securities and Exchange
	Commission under the Securities Act of 1933, as amended.)                     
|        | 10.4 | *                       |  | 1992 Executive Stock Incentive Plan (incorporated by reference
	to Exhibit 10.4 forming a part of the Companys
	registration statement on Form S-1 (File
	No. 333-35629) filed with the Securities and Exchange
	Commission under the Securities Act of 1933, as amended.)                   
|        | 10.5 | *                       |  | 1994 Stock Incentive Plan (incorporated by reference to Exhibit
	10.5 forming a part of the Companys registration statement
	on Form S-1 (File No. 333-35629) filed with the
	Securities and Exchange Commission under the Securities Act of
	1933, as amended.)                             
|        | 10.6 | *                       |  | 1996 Advisory Board and directors Stock Incentive Plan
	(incorporated by reference to Exhibit 10.6 forming a part
	of the Companys registration statement on Form S-1
	(File No. 333-35629) filed with the Securities and Exchange
	Commission under the Securities Act of 1933, as amended.)
|        | 10.7 | *                       |  | 1998 Employee Stock Purchase Plan (incorporated by reference to
	Exhibit 99 forming a part of the Companys
	registration statement on Form S-8 (File
	No. 333-61161) filed with the Securities and Exchange
	Commission under the Securities Act of 1933, as amended.)                       
|        | 10.8 | *                       |  | Deed of Lease between Boston Properties Limited Partnership and
	Landmark Systems Corporation dated January 30, 1998                                                                                                                                                                          

39



---



|        |      |                         |  |                                                                                                                                                                                                                                                                                                                                   
|------- | ---- | ----------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |                        
|Number  |      | Description of Document
|        |      |                        
|        | 10.9 | *                       |  | Employment agreement between the Company and Frederick S.
	Rolandi, III dated June 2, 2000 (incorporated by
	reference to Exhibit 10.1 forming a part of the
	Companys registration statement on Form S-1 (File
	No. 333-35629) filed with the Securities and Exchange
	Commission under the Securities Act of 1933, as amended.)
|        | 22.1 |                        |  | Subsidiaries of the Company                                                                                                                                                                                                                                                                                                       
|        | 23.1 |                        |  | Consent of PricewaterhouseCoopers LLP                                                                                                                                                                                                                                                                                             




|  |                                                                                                                                              
|- | ---------------------------------------------------------------------------------------------------------------------------------------------
|* | Reflects management contract or other compensatory arrangement
	required to be filed as an exhibit pursuant to Item 14(c)
	of this Form 10-K.

|  |                
|- | ---------------
| | Filed herewith.

(b)  Reports on Form 8-K:

On December 4, 2000, the Company filed a Current Report on
Form 8-K containing a press release announcing its decision
to discontinue the offering and sale of its client/server
products.

On December 7, 2000, the Company filed a Current Report on
Form 8-K containing a press release announcing a $3.5
million share repurchase program.

40



---



Signatures

Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.



| |                             
| | ----------------------------
| | LANDMARK SYSTEMS CORPORATION



| |     |                       
| | --- | ----------------------
| | By: | /s/ KATHERINE K. CLARK

| |                                                 
| | ------------------------------------------------
| |                                                 
| | Katherine K. Clark                              
| | President, Chief Executive Officer and
	Director
| | (Duly Authorized Officer)                       



Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities
indicated on March 30, 2001.

|                                                                             |  |                                                                               
|---------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------
|Signature                                                                    |  | Title                                                                         
|                                                                             |  |                                                                               
|/s/ PATRICK H. MCGETTIGANPatrick H. McGettigan                               |  | Chairman of the Board                                                         
|/s/ KATHERINE K. CLARK
	                  
	Katherine K. Clark               |  | President, Chief Executive Officer and Director (Principal
	Executive Officer)
|/s/ T. EUGENE BLANCHARD
	                  
	T. Eugene Blanchard             |  | Director                                                                      
|/s/ DENNIS J. BOWMAN
	                  
	Dennis J. Bowman                   |  | Director                                                                      
|/s/ JAMES P. DONEHEY
	                  
	James P. Donehey                   |  | Director                                                                      
|/s/ PATRICK W. GROSS
	                  
	Patrick W. Gross                   |  | Director                                                                      
|/s/ SUDHAKAR V. SHENOY
	                  
	Sudhakar V. Shenoy               |  | Director                                                                      
|/s/ FREDERICK S. ROLANDI, III
	                  
	Frederick S. Rolandi, III |  | Vice President and Chief Financial Officer (Principal Accounting
	Officer)    

41



---



LANDMARK SYSTEMS CORPORATION

Schedule II  Valuation and Qualifying Accounts

for the Years Ended December 31, 1998, 1999 and 2000


|                             |                                        |            |   |            |  |            |   |           |   |               |   |            |   |  |     |  |   |           | 
|---------------------------- | -------------------------------------- | ---------- | - | ---------- |  | ---------- | - | --------- | - | ------------- | - | ---------- | - |  | --- |  | - | --------- | 
|Col. A                       |                                        | Col. B     |   | Col. C     |  | Col. D     |   |           |   | Col. E       
|                             |                                        |            |   |            |  |            |   |           |   |              
|                             |                                        | Balance at |   |            |  |            |   |           |   |              
|                             |                                        | Beginning  |   | Charged to |  |            |   |           |   | Balance at   
|Description                  |                                        | of Period  |   | Operations |  | Deductions |   |           |   | End of Period
|                             |                                        |            |   |            |  |            |   |           |   |              
|Year Ended December 31, 1998 |                                        |            |   |            |  |            |   |           |   |               |   |            |   |  |     |  |   |          
|                            
|                            
|                            
|                            
|                             | Allowance for uncollectible
	accounts  |            | $ | 620,699    |  |            | $ | 1,315,193 |   |               | $ | (612,673   | ) |  | (A) |  | $ | 1,323,219 | 
|                            
|                            
|                            
|                            
|                             | Deferred tax asset valuation allowance |            |   | 454,000    |  |            |   | (5,000    | ) |               |   |           |   |  |     |  |   | 449,000   | 
|Year Ended December 31, 1999 |                                        |            |   |            |  |            |   |           |   |               |   |            |   |  |     |  |   |          
|                            
|                            
|                            
|                            
|                             | Allowance for uncollectible
	accounts  |            |   | 1,323,219  |  |            |   | 727,506   |   |               |   | (1,255,405 | ) |  | (A) |  |   | 795,320   | 
|                            
|                            
|                            
|                            
|                             | Deferred tax asset valuation allowance |            |   | 449,000    |  |            |   |          |   |               |   | (116,000   | ) |  | (B) |  |   | 333,000   | 
|Year Ended December 31, 2000 |                                        |            |   |            |  |            |   |           |   |               |   |            |   |  |     |  |   |          
|                            
|                            
|                            
|                            
|                             | Allowance for uncollectible
	accounts  |            |   | 795,320    |  |            |   | 1,137,374 |   |               |   | (1,423,691 | ) |  | (A) |  |   | 509,003   | 
|                            
|                            
|                            
|                            
|                             | Deferred tax asset valuation allowance |            |   | 333,000    |  |            |   | 720,667   |   |               |   |           |   |  | (B) |  |   | 1,053,667 | 




|    |                                                     
|--- | ----------------------------------------------------
|(A) | Uncollectible accounts written off and sales returns



|    |                                  
|--- | ---------------------------------
|(B) | Change in tax valuation allowance

42



---



INDEX TO EXHIBITS

|        |      |          |  |                                      
|------- | ---- | -------- |  | -------------------------------------
|Exhibit |      |         
|Number  |      | Exhibits
|        |      |         
|        | 22.1 |          |  | Subsidiaries of the Company          
|        | 23.1 |          |  | Consent of PricewaterhouseCoopers LLP

43