##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarter ended September 30, 2001
Commission File Number 0-23373

LANDMARK SYSTEMS CORPORATION
(Exact name of registrant as specified in its charter)

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

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

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

YES X   NO

Number of shares outstanding of the issuers classes of common stock as of
October 31, 2001:

|                                       |  |                             
|-------------------------------------- |  | ----------------------------
|Class                                  |  | Number of Shares Outstanding
|Common Stock, par value $.01 per share |  | 12,486,500                  

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LANDMARK SYSTEMS CORPORATION

QUARTER ENDED SEPTEMBER 30, 2001

INDEX

|           |  |                                                                                                                                                       |  |      
|---------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----
|PART I.    |  | FINANCIAL INFORMATION                                                                                                                                 |  | PAGE 
|          
|Item 1.    |  | Financial Statements                                                                                                                                  |  | 3    
|          
|           |  | Condensed Consolidated Statements of Operations for the three and
nine months ended September 30, 2001 (unaudited) and September
30, 2000 (unaudited) |  | 4    
|          
|           |  | Condensed Consolidated Balance Sheets as of September 30,
2001 (unaudited) and December 31, 2000                                                      |  | 5    
|          
|           |  | Condensed Consolidated Statements of Cash Flows for the
nine months ended September 30, 2001 (unaudited) and September
30, 2000 (unaudited)           |  | 6    
|          
|           |  | Notes to Condensed Consolidated Financial Statements (unaudited)                                                                                      |  | 7-9  
|          
|Item 2.    |  | Managements Discussion and Analysis of Results of Operations
and Financial Condition                                                                 |  | 10-13
|          
|Item 3.    |  | Quantitative and Qualitative Disclosures About Market Risk                                                                                            |  | 13   
|          
|PART II.   |  | OTHER INFORMATION                                                                                                                                     |  |      
|          
|Item 1.    |  | Legal Proceedings                                                                                                                                     |  | 14   
|          
|Item 2.    |  | Changes in Securities and Use of Proceeds                                                                                                             |  | 14   
|          
|Item 3.    |  | Defaults Upon Senior Securities                                                                                                                       |  | 14   
|          
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                                                                                   |  | 14   
|          
|Item 5.    |  | Other Information                                                                                                                                     |  | 14   
|          
|Item 6.    |  | Exhibits and Reports on Form 8-K                                                                                                                      |  | 14-15
|          
|SIGNATURES |  |                                                                                                                                                       |  | 16   

2



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##### 



PART I  FINANCIAL INFORMATION

Item 1. Financial Statements

The condensed consolidated financial statements set forth below for the
three and nine-month periods ended September 30, 2001 and 2000 are unaudited,
and have been prepared pursuant to the rules and regulations of the Securities
and Exchange Commission (see Note 1). Certain information and note disclosures
normally included in annual financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to those rules and regulations. Landmark Systems Corporation believes
that the disclosures made are adequate to make the information presented not
misleading. The results for the three and nine-month periods ended September
30, 2001 are not necessarily indicative of the results for the fiscal year.

In the opinion of management, the accompanying condensed consolidated
financial statements reflect all necessary adjustments (consisting only of
normal recurring adjustments) that are necessary for a fair presentation of
results for the periods presented. It is recommended that these financial
statements be read in conjunction with the latest audited consolidated
financial statements and notes thereto (included in the Annual Report on Form
10-K for the year ended December 31, 2000).

3



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LANDMARK SYSTEMS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

|                                  |                                     |                              |            |                          |          |                                  |            |                                 |        |      |            |            |        |   |            |            |        |  |            | 
|--------------------------------- | ----------------------------------- | ---------------------------- | ---------- | ------------------------ | -------- | -------------------------------- | ---------- | ------------------------------- | ------ | ---- | ---------- | ---------- | ------ | - | ---------- | ---------- | ------ |  | ---------- | 
|                                  |                                     |                              |            |                          |          | Three Months Ended September 30, |            | Nine Months Ended September 30,
|                                  |                                     |                              |            |                          |          |                                  |            |                                
|                                  |                                     |                              |            |                          |          | 2001                             |            | 2000                            |        | 2001 |            | 2000      
|                                  |                                     |                              |            |                          |          |                                  |            |                                 |        |      |            |           
|Revenues                          |                                     |                              |            |                          |          |                                  |            |                                 |        |      |            |            |        |   |            |           
|                                  | License revenues                    |                              | $          | 5,480,337                |          |                                  | $          | 6,115,350                       |        |      | $          | 18,557,120 |        |   | $          | 16,032,634 |       
|                                  | Maintenance revenues                |                              |            | 7,522,312                |          |                                  |            | 7,896,825                       |        |      |            | 23,252,011 |        |   |            | 23,632,219 |       
|                                  |                                     |                              |            |                          |          |                                  |            |                                 |        |      |            |            |        |   |            |           
|                                  |                                     |                              |            | Total revenues           |          |                                  | 13,002,649 |                                 |        |      | 14,012,175 |            |        |   | 41,809,131 |            |        |  | 39,664,853 | 
|                                  |                                     |                              |            |                          |          |                                  |            |                                 |        |      |            |            |        |   |            |           
|Cost of revenues                  |                                     |                              |            |                          |          |                                  |            |                                 |        |      |            |            |        |   |            |           
|                                  | Cost of license revenues            |                              |            | 260,073                  |          |                                  |            | 633,388                         |        |      |            | 1,098,079  |        |   |            | 1,508,205  |       
|                                  | Cost of maintenance revenues        |                              |            | 1,475,681                |          |                                  |            | 1,518,931                       |        |      |            | 4,378,465  |        |   |            | 4,447,713  |       
|                                  | Cost to acquire distribution rights |                              |            | 680,490                  |          |                                  |            | 601,372                         |        |      |            | 1,849,239  |        |   |            | 1,714,759  |       
|                                  |                                     |                              |            |                          |          |                                  |            |                                 |        |      |            |            |        |   |            |           
|                                  |                                     |                              |            | Total cost of revenues   |          |                                  | 2,416,244  |                                 |        |      | 2,753,691  |            |        |   | 7,325,783  |            |        |  | 7,670,677  | 
|                                  |                                     |                              |            |                          |          |                                  |            |                                 |        |      |            |            |        |   |            |           
|Gross profit                      |                                     |                              | 10,586,405 |                          |          |                                  | 11,258,484 |                                 |        |      | 34,483,348 |            |        |   | 31,994,176 |           
|                                  |                                     |                              |            |                          |          |                                  |            |                                 |        |      |            |            |        |   |            |           
|Operating expenses                |                                     |                              |            |                          |          |                                  |            |                                 |        |      |            |            |        |   |            |           
|                                  | Sales and marketing                 |                              |            | 6,337,382                |          |                                  |            | 6,366,175                       |        |      |            | 19,902,559 |        |   |            | 17,607,665 |       
|                                  | Product research and development    |                              |            | 4,266,145                |          |                                  |            | 3,667,428                       |        |      |            | 11,968,041 |        |   |            | 11,132,823 |       
|                                  | General and administrative          |                              |            | 1,797,035                |          |                                  |            | 1,515,825                       |        |      |            | 5,627,869  |        |   |            | 4,761,984  |       
|                                  |                                     |                              |            |                          |          |                                  |            |                                 |        |      |            |            |        |   |            |           
|                                  |                                     |                              |            | Total operating expenses |          |                                  | 12,400,562 |                                 |        |      | 11,549,428 |            |        |   | 37,498,469 |            |        |  | 33,502,472 | 
|                                  |                                     |                              |            |                          |          |                                  |            |                                 |        |      |            |            |        |   |            |           
|Operating loss                    |                                     |                              | (1,814,157 | )                        |          |                                  | (290,944   | )                               |        |      | (3,015,121 | )          |        |   | (1,508,296 | )         
|License of source code of         |                                     |                              |            |                          |          |                                  |            |                                 |        |      |            |            |        |   |            |           
|discontinued
products             |                                     |                              |           |                          |          |                                  |           |                                 |        |      | 1,618,756  |            |        |   |           |           
|Interest and other income, net    |                                     |                              | 473,319    |                          |          |                                  | 542,948    |                                 |        |      | 1,507,085  |            |        |   | 1,643,384  |           
|                                  |                                     |                              |            |                          |          |                                  |            |                                 |        |      |            |            |        |   |            |           
|(Loss) income before income taxes |                                     |                              | (1,340,838 | )                        |          |                                  | 252,004    |                                 |        |      | 110,720    |            |        |   | 135,088    |           
|                                  |                                     | (Benefit from) provision for |            |                          |          |                                  |            |                                 |        |      |            |            |        |   |            |            |        | 
|                                  |                                     | income
taxes                 |            |                          | (569,856 | )                                |            |                                 | 95,732 |      |            |            | 47,056 |   |            |            | 51,304 | 
|                                  |                                     |                              |            |                          |          |                                  |            |                                 |        |      |            |            |        |   |            |           
|Net (loss) income                 |                                     | $                            | (770,982   | )                        |          | $                                | 156,272    |                                 |        | $    | 63,664     |            |        | $ | 83,784     |           
|                                  |                                     |                              |            |                          |          |                                  |            |                                 |        |      |            |            |        |   |            |           
|Earnings per share                |                                     |                              |            |                          |          |                                  |            |                                 |        |      |            |            |        |   |            |           
|                                  |                                     | Basic                        |            | $                        | (0.06    | )                                |            | $                               | 0.01   |      |            | $          | 0.01   |   |            | $          | 0.01   | 
|                                  |                                     | Diluted                      |            | $                        | (0.06    | )                                |            | $                               | 0.01   |      |            | $          | 0.01   |   |            | $          | 0.01   | 

See accompanying notes to condensed consolidated financial statements.

4



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LANDMARK SYSTEMS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS

|                                           |                                           |                           |                                   |            |                    |            |                   |            |           |            | 
|------------------------------------------ | ----------------------------------------- | ------------------------- | --------------------------------- | ---------- | ------------------ | ---------- | ----------------- | ---------- | --------- | ---------- | 
|                                           |                                           |                           |                                   |            | September 30, 2001 |            | December 31, 2000
|                                           |                                           |                           |                                   |            |                    |            |                  
|                                           |                                           |                           |                                   |            | (unaudited)        |            |                   |            |          
|ASSETS                                     |                                           |                           |                                   |            |                    |            |                   |           
|Current assets:                            |                                           |                           |                                   |            |                    |            |                   |           
|                                           | Cash and cash equivalents                 |                           | $                                 | 23,263,820 |                    |            | $                 | 28,078,594 |          
|                                           | Accounts receivable, net of allowance for |                           |                                   |            |                    |            |                   |            |          
|                                           |                                           |                           | doubtful accounts of $513,000 and |            |                    |            |                   |            |           |            | 
|                                           |                                           |                           | $509,000                          |            |                    | 10,459,779 |                   |            |           | 15,399,070 | 
|                                           | Unbilled accounts receivable              |                           |                                   | 9,607,197  |                    |            |                   | 9,677,138  |          
|                                           | Other current assets                      |                           |                                   | 6,698,679  |                    |            |                   | 3,186,357  |          
|                                           |                                           |                           |                                   |            |                    |            |                   |           
|                                           |                                           |                           | Total current assets              |            |                    | 50,029,475 |                   |            |           | 56,341,159 | 
|                                          
|Unbilled accounts receivable - noncurrent  |                                           |                           | 8,136,343                         |            |                    |            | 8,154,395         |           
|Fixed assets, net                          |                                           |                           | 4,905,221                         |            |                    |            | 5,315,662         |           
|Capitalized software costs, net            |                                           |                           | 1,843,030                         |            |                    |            | 504,086           |           
|Intangible assets, net                     |                                           |                           | 3,452,379                         |            |                    |            | 4,513,521         |           
|Other assets                               |                                           |                           | 659,068                           |            |                    |            | 2,040,798         |           
|                                           |                                           |                           |                                   |            |                    |            |                   |           
|Total assets                               |                                           | $                         | 69,025,516                        |            |                    | $          | 76,869,621        |           
|                                           |                                           |                           |                                   |            |                    |            |                   |           
|LIABILITIES AND STOCKHOLDERS EQUITY       |                                           |                           |                                   |            |                    |            |                   |           
|Current liabilities:                       |                                           |                           |                                   |            |                    |            |                   |           
|                                           | Accounts payable, accrued expenses and    |                           |                                   |            |                    |            |                   |            |          
|                                           |                                           | other current liabilities |                                   | $          | 3,797,280          |            |                   | $          | 7,948,459 |           
|                                           | Deferred revenue                          |                           |                                   | 19,421,010 |                    |            |                   | 23,552,449 |          
|                                           |                                           |                           |                                   |            |                    |            |                   |           
|                                           |                                           |                           | Total current liabilities         |            |                    | 23,218,290 |                   |            |           | 31,500,908 | 
|                                          
|Deferred revenue - noncurrent              |                                           |                           | 11,416,447                        |            |                    |            | 10,959,332        |           
|Other liabilities                          |                                           |                           | 98,627                            |            |                    |            | 160,518           |           
|                                           |                                           |                           |                                   |            |                    |            |                   |           
|Total liabilities                          |                                           |                           | 34,733,364                        |            |                    |            | 42,620,758        |           
|                                           |                                           |                           |                                   |            |                    |            |                   |           
|Stockholders equity:                      |                                           |                           |                                   |            |                    |            |                   |           
|                                           | Common stock, $0.01 par value, 30,000,000 |                           |                                   |            |                    |            |                   |            |          
|                                           |                                           |                           | shares authorized, 13,268,500 and |            |                    |            |                   |            |           |            | 
|                                           |                                           |                           | 13,147,411 issued and outstanding |            |                    | 132,685    |                   |            |           | 131,474    | 
|                                           | Additional paid-in capital                |                           |                                   | 35,753,573 |                    |            |                   | 35,499,092 |          
|                                           | Retained earnings                         |                           |                                   | 1,471,410  |                    |            |                   | 1,407,746  |          
|                                           | Accumulated other comprehensive loss      |                           |                                   | (621,762   | )                  |            |                   | (345,695   | )        
|                                           | Treasury stock, at cost; 782,000 shares   |                           |                                   | (2,443,754 | )                  |            |                   | (2,443,754 | )        
|                                           |                                           |                           |                                   |            |                    |            |                   |           
|Total stockholders equity                 |                                           |                           | 34,292,152                        |            |                    |            | 34,248,863        |           
|                                           |                                           |                           |                                   |            |                    |            |                   |           
|Total liabilities and stockholders equity |                                           | $                         | 69,025,516                        |            |                    | $          | 76,869,621        |           
|                                           |                                           |                           |                                   |            |                    |            |                   |           

See accompanying notes to condensed consolidated financial statements.

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LANDMARK SYSTEMS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

|                                               |                                             |                                           |                            |            |                                 |   |            |            |            |   | 
|---------------------------------------------- | ------------------------------------------- | ----------------------------------------- | -------------------------- | ---------- | ------------------------------- | - | ---------- | ---------- | ---------- | - | 
|                                               |                                             |                                           |                            |            | Nine Months Ended September 30,
|                                               |                                             |                                           |                            |            |                                
|                                               |                                             |                                           |                            |            | 2001                            |   | 2000      
|                                               |                                             |                                           |                            |            |                                 |   |           
|Cash flows from operating activities           |                                             |                                           |                            |            |                                 |   |            |           
|                                               | Net income                                  |                                           | $                          | 63,664     |                                 |   | $          | 83,784     |           
|                                               | Adjustments to reconcile net income to net  |                                           |                            |            |                                 |   |            |            |           
|                                               |                                             |                                           | cash flows from operations |            |                                 |   |            |            |            |   | 
|                                               | Depreciation and amortization               |                                           |                            | 2,660,199  |                                 |   |            | 2,588,717  |           
|                                               | Provision for losses on accounts receivable |                                           |                            | 814,134    |                                 |   |            | 585,674    |           
|                                               | Tax benefit for exercise of stock options   |                                           |                            |           |                                 |   |            | 253,312    |           
|                                               | Sale of unbilled accounts receivable        |                                           |                            | 1,767,830  |                                 |   |            | 3,398,286  |           
|                                               | Changes in working capital                  |                                           |                            | (7,930,167 | )                               |   |            | (7,249,118 | )         
|                                               |                                             |                                           |                            |            |                                 |   |            |           
|                                               |                                             | Net cash used in operating activities     |                            |            | (2,624,340                      | ) |            |            | (339,345   | )
|                                               |                                             |                                           |                            |            |                                 |   |            |           
|Cash flows from investing activities           |                                             |                                           |                            |            |                                 |   |            |           
|                                               | Acquisition of distribution rights          |                                           |                            |           |                                 |   |            | (78,201    | )         
|                                               | Capitalized software development costs      |                                           |                            | (1,633,277 | )                               |   |            | (2,103,731 | )         
|                                               | Capital expenditures                        |                                           |                            | (894,283   | )                               |   |            | (1,567,242 | )         
|                                               |                                             |                                           |                            |            |                                 |   |            |           
|                                               |                                             | Net cash used in investing activities     |                            |            | (2,527,560                      | ) |            |            | (3,749,174 | )
|                                               |                                             |                                           |                            |            |                                 |   |            |           
|Cash flows from financing activities           |                                             |                                           |                            |            |                                 |   |            |           
|                                               | Proceeds from sale of common stock          |                                           |                            | 255,692    |                                 |   |            | 1,108,833  |           
|                                               |                                             |                                           |                            |            |                                 |   |            |           
|                                               |                                             | Net cash provided by financing activities |                            |            | 255,692                         |   |            |            | 1,108,833  |  
|                                               |                                             |                                           |                            |            |                                 |   |            |           
|Effect of exchange rate changes on cash        |                                             |                                           | 81,434                     |            |                                 |   | 310,443    |           
|                                               |                                             |                                           |                            |            |                                 |   |            |           
|Net decrease in cash and cash equivalents      |                                             |                                           | (4,814,774                 | )          |                                 |   | (2,669,243 | )         
|Cash and cash equivalents, beginning of period |                                             |                                           | 28,078,594                 |            |                                 |   | 32,135,952 |           
|                                               |                                             |                                           |                            |            |                                 |   |            |           
|Cash and cash equivalents, end of period       |                                             | $                                         | 23,263,820                 |            |                                 | $ | 29,466,709 |           
|                                               |                                             |                                           |                            |            |                                 |   |            |           

See accompanying notes to condensed consolidated financial statements.

6



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LANDMARK SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Note 1  Basis of Presentation

The accompanying unaudited interim condensed consolidated financial
statements of Landmark Systems Corporation and its subsidiaries (collectively,
the Company) reflect all adjustments which, in the opinion of management, are
necessary for a fair presentation of the results of the interim periods
presented in conformity with generally accepted accounting principles for
interim financial information. Such adjustments are of a normal recurring
nature. Intercompany balances and transactions have been eliminated in
consolidation.

The results of the interim periods presented are not necessarily
indicative of the results for the year. The Companys interim financial
statements should be read in conjunction with the Companys audited
consolidated financial statements and notes thereto for the year ended December
31, 2000, as filed with the Securities and Exchange Commission on Form 10-K.

Note 2  New Accounting Pronouncements

In June 2001, the
Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) 141, Business Combinations, which
addresses the accounting and reporting for business combinations, and SFAS
142, Goodwill and Other Intangible Assets, which addresses the accounting and
reporting for acquired goodwill and other intangible assets. SFAS 141 and SFAS
142 are effective January 1, 2002 for the Company. The Company is in the
process of reviewing the provisions of SFAS 141 and SFAS 142 and does not
anticipate that adoption will have a material impact on the Companys financial
condition or results of operations.

In October 2001, the FASB issued SFAS 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which supersedes SFAS 121
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of. SFAS 144 addresses the accounting and reporting for the
impairment or disposal of long-lived assets, including discontinued operations.
SFAS 144 is effective January 1, 2002 for the Company. The Company is
reviewing the provisions of SFAS 144 and does not anticipate that the
adoption will have a material impact on the Companys financial condition or
results of operations.

Note 3  Earnings Per Share

The following reconciliation of the numerators and denominators is
provided for basic and diluted earnings per share for the three and nine months
ended September 30, 2001 and 2000. Basic earnings per share is computed by
dividing the net income by the weighted-average number of common shares
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 and resulted in the
issuance of common stock.

7



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|                                              |                                |                                |                            |        |             |   |               |            |            |         |   |      |       |   | 
|--------------------------------------------- | ------------------------------ | ------------------------------ | -------------------------- | ------ | ----------- | - | ------------- | ---------- | ---------- | ------- | - | ---- | ----- | - | 
|                                              |                                |                                |                            |        | Income      |   | Shares        |            | Per-Share 
|                                              |                                |                                |                            |        | (Numerator) |   | (Denominator) |            | Amount    
|                                              |                                |                                |                            |        |             |   |               |            |           
|For the three months ended September 30, 2001 |                                |                                |                            |        |             |   |               |            |            |         |   |     
|                                              |                                | Basic earnings per share       |                            | $      | (770,982    | ) |               |            | 12,449,310 |         |   | $    | (0.06 | )
|                                              |                                |                                |                            |        |             |   |               |            |            |         |   |      |      
|                                              |                                | Effect of dilutive securities: |                            |        |             |   |               |            |            |         |   |      |       |  
|                                              |                                |                                | Stock options and warrants |        |             |  |               |            |            |        |   |      |       |   | 
|                                              |                                |                                |                            |        |             |   |               |            |            |         |   |      |      
|                                              |                                | Diluted earnings per share     |                            | $      | (770,982    | ) |               |            | 12,449,310 |         |   | $    | (0.06 | )
|                                              |                                |                                |                            |        |             |   |               |            |            |         |   |      |      
|                                             
|For the three months ended September 30, 2000 |                                |                                |                            |        |             |   |               |            |            |         |   |     
|                                              |                                | Basic earnings per share       |                            | $      | 156,272     |   |               |            | 13,094,503 |         |   | $    | 0.01  |  
|                                              |                                |                                |                            |        |             |   |               |            |            |         |   |      |      
|                                              |                                | Effect of dilutive securities: |                            |        |             |   |               |            |            |         |   |      |       |  
|                                              |                                |                                | Stock options and warrants |        |             |  |               |            |            | 52,912  |   |      |       |   | 
|                                              |                                |                                |                            |        |             |   |               |            |            |         |   |      |      
|                                              |                                | Diluted earnings per share     |                            | $      | 156,272     |   |               |            | 13,147,415 |         |   | $    | 0.01  |  
|                                              |                                |                                |                            |        |             |   |               |            |            |         |   |      |      
|                                             
|For the nine months ended September 30, 2001  |                                |                                |                            |        |             |   |               |            |            |         |   |     
|                                              | Basic earnings per share       |                                | $                          | 63,664 |             |   |               | 12,411,461 |            |         | $ | 0.01 |      
|                                              |                                |                                |                            |        |             |   |               |            |            |         |   |      |      
|                                             
|                                              | Effect of dilutive securities: |                                |                            |        |             |   |               |            |            |         |   |      |      
|                                              |                                |                                | Stock options and warrants |        |             |  |               |            |            | 18,515  |   |      |       |   | 
|                                              |                                |                                |                            |        |             |   |               |            |            |         |   |      |      
|                                              | Diluted earnings per share     |                                | $                          | 63,664 |             |   |               | 12,429,976 |            |         | $ | 0.01 |      
|                                              |                                |                                |                            |        |             |   |               |            |            |         |   |      |      
|                                             
|For the nine months ended September 30, 2000  |                                |                                |                            |        |             |   |               |            |            |         |   |     
|                                              | Basic earnings per share       |                                | $                          | 83,784 |             |   |               | 12,997,098 |            |         | $ | 0.01 |      
|                                              |                                |                                |                            |        |             |   |               |            |            |         |   |      |      
|                                             
|                                              | Effect of dilutive securities: |                                |                            |        |             |   |               |            |            |         |   |      |      
|                                              |                                |                                | Stock options and warrants |        |             |  |               |            |            | 213,414 |   |      |       |   | 
|                                              |                                |                                |                            |        |             |   |               |            |            |         |   |      |      
|                                              | Diluted earnings per share     |                                | $                          | 83,784 |             |   |               | 13,210,512 |            |         | $ | 0.01 |      
|                                              |                                |                                |                            |        |             |   |               |            |            |         |   |      |      

Note 4  Comprehensive Income

The Companys total comprehensive income is comprised of net income and
other comprehensive income, which consists of foreign currency translation
adjustments. Total comprehensive (loss) income for the three months ended
September 30, 2001 and 2000 was $(963,440) and $181,172, respectively. Total
comprehensive (loss) income for the nine months ended September 30, 2001 and
2000 was $(212,403) and $94,998, respectively

Note 5  Segment Reporting

The Company classifies its operations into one industry segment, software
development and related services. The Company categorizes its products and
services into two groups: OS/390 (formerly referred to as mainframe) and
client/server. The Companys revenues by product group consist of the
following:

|              |                |   |                                  |            |                                 |   |            |            |      |   |            |            |  |   |            |            | 
|------------- | -------------- | - | -------------------------------- | ---------- | ------------------------------- | - | ---------- | ---------- | ---- | - | ---------- | ---------- |  | - | ---------- | ---------- | 
|              |                |   | Three Months Ended September 30, |            | Nine Months Ended September 30,
|              |                |   |                                  |            |                                
|              |                |   | 2001                             |            | 2000                            |   | 2001       |            | 2000
|              |                |   |                                  |            |                                 |   |            |            |     
|OS/390        |                | $ | 12,781,879                       |            |                                 | $ | 13,130,684 |            |      | $ | 40,654,071 |            |  | $ | 37,289,362 |           
|Client/server |                |   | 220,770                          |            |                                 |   | 881,491    |            |      |   | 1,155,060  |            |  |   | 2,375,491  |           
|              |                |   |                                  |            |                                 |   |            |            |      |   |            |            |  |   |            |           
|              | Total revenues |   | $                                | 13,002,649 |                                 |   | $          | 14,012,175 |      |   | $          | 41,809,131 |  |   | $          | 39,664,853 | 
|              |                |   |                                  |            |                                 |   |            |            |      |   |            |            |  |   |            |           

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The Company sells its products outside the United States through its
subsidiaries and international distributors. Revenues from international
distributors are presented net of royalties retained by the distributors. The
Companys revenues by country or geographic region are as follows:

|               |                |   |                                  |            |                                 |   |           |            |      |   |            |            |  |   |            |            | 
|-------------- | -------------- | - | -------------------------------- | ---------- | ------------------------------- | - | --------- | ---------- | ---- | - | ---------- | ---------- |  | - | ---------- | ---------- | 
|               |                |   | Three Months Ended September 30, |            | Nine Months Ended September 30,
|               |                |   |                                  |            |                                
|               |                |   | 2001                             |            | 2000                            |   | 2001      |            | 2000
|               |                |   |                                  |            |                                 |   |           |            |     
|United States  |                | $ | 8,437,254                        |            |                                 | $ | 8,830,099 |            |      | $ | 27,339,477 |            |  | $ | 25,429,840 |           
|Germany        |                |   | 930,494                          |            |                                 |   | 747,605   |            |      |   | 2,649,998  |            |  |   | 2,487,683  |           
|United Kingdom |                |   | 815,768                          |            |                                 |   | 830,586   |            |      |   | 2,352,600  |            |  |   | 2,501,092  |           
|Benelux        |                |   | 384,131                          |            |                                 |   | 504,492   |            |      |   | 1,140,535  |            |  |   | 1,240,382  |           
|France         |                |   | 315,715                          |            |                                 |   | 365,430   |            |      |   | 1,397,384  |            |  |   | 1,301,836  |           
|Australia      |                |   | 304,498                          |            |                                 |   | 235,671   |            |      |   | 1,000,974  |            |  |   | 928,506    |           
|Other          |                |   | 1,814,789                        |            |                                 |   | 2,498,292 |            |      |   | 5,928,163  |            |  |   | 5,775,514  |           
|               |                |   |                                  |            |                                 |   |           |            |      |   |            |            |  |   |            |           
|               | Total revenues |   | $                                | 13,002,649 |                                 |   | $         | 14,012,175 |      |   | $          | 41,809,131 |  |   | $          | 39,664,853 | 
|               |                |   |                                  |            |                                 |   |           |            |      |   |            |            |  |   |            |           

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

|              |                         |   |               |            |      |   |            |            | 
|------------- | ----------------------- | - | ------------- | ---------- | ---- | - | ---------- | ---------- | 
|              |                         |   | September 30,
|              |                         |   |              
|              |                         |   | 2001          |            | 2000
|              |                         |   |               |            |     
|United States |                         | $ | 9,926,220     |            |      | $ | 12,950,134 |           
|Europe        |                         |   | 245,679       |            |      |   | 265,089    |           
|Other         |                         |   | 28,731        |            |      |   | 29,578     |           
|              |                         |   |               |            |      |   |            |           
|              | Total long-lived assets |   | $             | 10,200,630 |      |   | $          | 13,244,801 | 
|              |                         |   |               |            |      |   |            |           

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

Results of Operations

The following table sets forth the Companys Condensed Consolidated
Statements of Operations expressed as percentages of total revenues for the
periods indicated:

|                                  |                                           |                       |                          |      |                                  |       |                                 |      |      |       |      |      |     |       |      |      |   |       | 
|--------------------------------- | ----------------------------------------- | --------------------- | ------------------------ | ---- | -------------------------------- | ----- | ------------------------------- | ---- | ---- | ----- | ---- | ---- | --- | ----- | ---- | ---- | - | ----- | 
|                                  |                                           |                       |                          |      | Three Months Ended September 30, |       | Nine Months Ended September 30,
|                                  |                                           |                       |                          |      |                                  |       |                                
|                                  |                                           |                       |                          |      | 2001                             |       | 2000                            |      | 2001 |       | 2000
|                                  |                                           |                       |                          |      |                                  |       |                                 |      |      |       |     
|Revenues                          |                                           |                       |                          |      |                                  |       |                                 |      |      |       |      |      |     |       |      |     
|                                  | License revenues                          |                       |                          | 42.2 | %                                |       |                                 | 43.6 | %    |       |      | 44.4 | %   |       |      | 40.4 | %
|                                  | Maintenance revenues                      |                       |                          | 57.8 |                                  |       |                                 | 56.4 |      |       |      | 55.6 |     |       |      | 59.6 |  
|                                  |                                           |                       |                          |      |                                  |       |                                 |      |      |       |      |      |     |       |      |     
|                                  |                                           |                       | Total revenues           |      |                                  | 100.0 |                                 |      |      | 100.0 |      |      |     | 100.0 |      |      |   | 100.0 | 
|                                  |                                           |                       |                          |      |                                  |       |                                 |      |      |       |      |      |     |       |      |     
|Cost of revenues                  |                                           |                       |                          |      |                                  |       |                                 |      |      |       |      |      |     |       |      |     
|                                  | Cost of license revenues                  |                       |                          | 2.0  |                                  |       |                                 | 4.5  |      |       |      | 2.6  |     |       |      | 3.8  |  
|                                  | Cost of maintenance revenues              |                       |                          | 11.4 |                                  |       |                                 | 10.9 |      |       |      | 10.5 |     |       |      | 11.2 |  
|                                  | Cost to acquire distribution rights       |                       |                          | 5.2  |                                  |       |                                 | 4.3  |      |       |      | 4.4  |     |       |      | 4.3  |  
|                                  |                                           |                       |                          |      |                                  |       |                                 |      |      |       |      |      |     |       |      |     
|                                  |                                           |                       | Total cost of revenues   |      |                                  | 18.6  |                                 |      |      | 19.7  |      |      |     | 17.5  |      |      |   | 19.3  | 
|                                  |                                           |                       |                          |      |                                  |       |                                 |      |      |       |      |      |     |       |      |     
|Gross profit                      |                                           |                       | 81.4                     |      |                                  |       | 80.3                            |      |      |       | 82.5 |      |     |       | 80.7 |     
|                                  |                                           |                       |                          |      |                                  |       |                                 |      |      |       |      |      |     |       |      |     
|Operating expenses                |                                           |                       |                          |      |                                  |       |                                 |      |      |       |      |      |     |       |      |     
|                                  | Sales and marketing                       |                       |                          | 48.7 |                                  |       |                                 | 45.4 |      |       |      | 47.6 |     |       |      | 44.4 |  
|                                  | Product research and development          |                       |                          | 32.8 |                                  |       |                                 | 26.2 |      |       |      | 28.6 |     |       |      | 28.1 |  
|                                  | General and administrative                |                       |                          | 13.8 |                                  |       |                                 | 10.8 |      |       |      | 13.5 |     |       |      | 12.0 |  
|                                  |                                           |                       |                          |      |                                  |       |                                 |      |      |       |      |      |     |       |      |     
|                                  |                                           |                       | Total operating expenses |      |                                  | 95.3  |                                 |      |      | 82.4  |      |      |     | 89.7  |      |      |   | 84.5  | 
|                                 
|Operating loss                    |                                           |                       | (13.9                    | )    |                                  |       | (2.1                            | )    |      |       | (7.2 | )    |     |       | (3.8 | )   
|                                  | License of source code of                 |                       |                          |      |                                  |       |                                 |      |      |       |      |      |     |       |      |      |  
|                                  |                                           | discontinued products |                          |      |                                 |       |                                 |      |     |       |      |      | 3.9 |       |      |      |  |      
|                                  | Interest and other income, net            |                       |                          | 3.6  |                                  |       |                                 | 3.9  |      |       |      | 3.6  |     |       |      | 4.1  |  
|                                  |                                           |                       |                          |      |                                  |       |                                 |      |      |       |      |      |     |       |      |     
|(Loss) income before income taxes |                                           |                       | (10.3                    | )    |                                  |       | 1.8                             |      |      |       | 0.3  |      |     |       | 0.3  |     
|                                  | (Benefit from) provision for income
taxes |                       |                          | (4.4 | )                                |       |                                 | 0.7  |      |       |      | 0.1  |     |       |      | 0.1  |  
|                                  |                                           |                       |                          |      |                                  |       |                                 |      |      |       |      |      |     |       |      |     
|Net (loss) income                 |                                           |                       | (5.9                     | )%   |                                  |       | 1.1                             | %    |      |       | 0.2  | %    |     |       | 0.2  | %   
|                                  |                                           |                       |                          |      |                                  |       |                                 |      |      |       |      |      |     |       |      |     

TOTAL REVENUES. Total revenues decreased 7.2% from $14.0 million for the
three months ended September 30, 2000, to $13.0 million for the three months
ended September 30, 2001, and increased 5.4% from $39.7 million to $41.8
million for the nine months ended September 30, 2000 and 2001, respectively.
Revenues for the three months ended September 30, 2001 from OS/390 (formerly
referred to as mainframe) products and services were $12.8 million, a
decrease of 2.7% from the same period in the prior year; revenues for the
three-month period ended September 30, 2001 from client/server products and
services were $0.2 million, a decrease of 75.0% from the same period in the
prior year. Revenues for the first nine months of 2001 from OS/390 products and
services were $40.7 million, an increase of 9.0% from the same period in the
prior year; revenues for the first nine months of 2001 from client/server
products and services were $1.2 million, a decrease of 51.4% from the same
period in the prior year.

LICENSE REVENUES. License revenues decreased 10.4% from $6.1 million for
the three months ended September 30, 2000, to $5.5 million for the three months
ended September 30, 2001, and increased 15.7% from $16.0 million to $18.6
million for the nine months ended September 30, 2000 and 2001, respectively.
 As the Company generally closes a larger
portion of transactions in the final two weeks of any given quarter, management believes the decrease in license revenues during the three months
ended September 30, 2001 is primarily due to customers deferral of software
purchases in response to the incidents that occurred on September 11, 2001, and
to general declines in IT spending associated with the current challenging
economic environment. Management believes the increase in license revenues
during the nine months ended September 30, 2001 is primarily due to the
continued acceptance of three new products introduced in the fourth quarter of
2000 and first quarter 2001; the products are TMON for TCP/IP (a network
product), TMON for USS (an e-business infrastructure product) and TMON for IMS
(a transaction processing product). The slow down of revenue growth
on a year to date basis is also due to several
large transactions that were closed during the first and second quarters of 2001.

MAINTENANCE REVENUES. Maintenance revenues decreased 4.7% from $7.9
million for the three months ended September 30, 2000 to $7.5 million for the
three months ended September 30, 2001, and decreased 1.6% from $23.6 million to
$23.3 million for the nine months ended September 30, 2000 and 2001,
respectively. Management believes the decreases in maintenance revenues is
primarily due to loss of maintenance revenues from products that were
discontinued in the fourth quarter of 2001.

COST OF LICENSE REVENUES. Cost of license revenues includes amortization
of capitalized software costs, product royalties,

10



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materials and packaging expenses. Costs of license revenues were $0.6
million and $0.3 million for the three months ended September 30, 2000 and
2001, representing 10.4% and 4.7% of license revenues in such periods. Costs of
license revenues were $1.5 million and $1.1 million for the nine months ended
September 30, 2000 and 2001, respectively, representing 9.4% and 5.9% of
license revenues in such periods. The decrease in cost of license revenues
from 2000 to 2001 is primarily due to decreases in royalty payments for third
party products.

COST OF MAINTENANCE REVENUES. Cost of maintenance revenues consists of
personnel and related costs for customer support, training and consulting
services. Costs of service revenues were $1.5 million for each of the three
months ended September 30, 2000 and 2001, representing 19.2% and 19.6% of
service revenues in such periods. Costs of maintenance revenues were $4.4
million for each of the nine months ended September 30, 2000 and 2001,
representing 18.8% of service revenues in such periods. The slight decrease in
cost of maintenance revenues is primarily due to elevated costs related to the
start-up during 2000 of the professional services group to provide post sales
training and consulting services for some of the Companys client/server
products. Since the discontinuation of these products in November 2000, the
professional services organization has been reduced in size and refocused to
provide training for the Companys OS/390 products.

COST TO ACQUIRE DISTRIBUTION RIGHTS. Cost to acquire distribution rights
includes royalties paid related to the acquisition of distribution rights as
well as the straight-line amortization of international distribution rights
that have been reacquired from third party resellers. Cost to acquire
distribution rights for the three months ended September 30, 2000 and 2001 were
$0.6 million and $0.7 million, respectively. Cost to acquire distribution
rights for the nine months ended September 30, 2000 and 2001 were $1.7 million
and $1.8 million, respectively. The increases in cost to acquire distribution
rights are primarily due to increased royalties paid to the Companys former
distributor in the Nordic region.

SALES AND MARKETING. Sales and marketing includes personnel and related
costs for the Companys direct sales organization, marketing staff and
promotional expenses. Sales and marketing expenses were $6.4 million and $6.3
million for the three months ended September 30, 2000 and 2001, respectively,
representing 45.4% and 48.7% of total revenues in such periods. Sales and
marketing expenses were $17.6 million and $19.9 million for the nine months
ended September 30, 2000 and 2001, respectively, representing 44.4% and 47.6%
of total revenues in such periods. The decrease in sales and marketing
expenses for the three months ended September 30, 2001 is primarily due to
lower sales commission expense, partially offset by increased product
management expenses. The increase in sales and marketing expenses for the nine
months ended September 30, 2001 is primarily due to an increase in commission
expense caused by increased license revenue and increased staff in the product
management area.

PRODUCT RESEARCH AND DEVELOPMENT. Product research and development
includes personnel and related costs for the Companys development staff.
Product research and development expenses were $3.7 million and $4.3 million
for the three months ended September 30, 2000 and 2001, respectively,
representing 26.2% and 32.8% of total revenues in such periods. Product
research and development expenses were $11.1 million and $12.0 million for the
nine months ended September 30, 2000 and 2001, respectively, representing 28.1%
and 28.6% of total revenues in such periods. The increase in product research
and development expenses from 2000 to 2001 is primarily due to the
capitalization of $1.0 million of software development costs during the three
months ended September 30, 2000, while less than $0.1 million of software
development costs were capitalized during the same period in 2001.
Additionally, in April 2001, the Company purchased for $1.5 million the source
code for one of the third-party products that the Company resells. The Company
is using this source code to develop its own product for sale.

GENERAL AND ADMINISTRATIVE. General and administrative includes salaries
and related costs of administration, finance and management personnel, as well
as legal and accounting fees. General and administrative expenses were $1.5
million and $1.8 million for the three months ended September 30, 2000 and
2001, representing 10.8% and 13.8% of total revenues in such periods. General
and administrative expenses were $4.8 million and $5.6 million for the nine
months ended September 30, 2000 and 2001, respectively, representing 12.0% and
13.5% of total revenues in such periods. The increase in general and
administrative expenses during the three and nine month periods ended September 30, 2001 is
primarily due to management and supervisory training expenses, and costs
associated with upgrading the Companys mainframe development box to a new
Z-series computer.

SALE OF SOURCE CODE LICENSE. During the quarter ended June 30, 2001, the
Company concluded an agreement with Hitachi in Japan to sell the source code
for parts of the Companys PerformanceWorks for Unix and NT products which were
discontinued in the fourth quarter of 2000. This agreement gives Hitachi the
non-exclusive right to use the source code and to create derivative software
products for sale in the Japanese and Asian markets and to branches of
Japanese-owned companies outside of that territory. The total sales price for
this source code was $2.0 million. Of that amount, the Company recognized
$1.85 million as revenue and deferred $0.15 million to account for the
Companys commitment of the time of one of its engineers to assist Hitachi in
their commercialization efforts over a 12-month period. Direct costs
associated with the Hitachi sale amounted to $0.2 million

11



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comprising banking, legal and sales incentive costs; these costs were
included as a reduction of the revenue. The sale is not considered to be part
of the Companys normal business operations; similar transactions are not
expected to occur in the future.

INTEREST AND OTHER INCOME, NET. 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 and exchange gains (losses) incurred by the Company on
transactions denominated in foreign currencies. Net interest and other income
was $0.5 million for each of the three months ended September 30, 2000 and
2001. Net interest and other income was $1.6 million and $1.5 million for the
nine months ended September 30, 2000 and 2001, respectively. Of these amounts,
$0.2 million and $0.4 million represent interest earned on the Companys bank
balances for the three months ended September 30, 2001 and 2000,
respectively. The decrease in interest income for the three and nine
month periods ended September 30, 2001 is due primarily to decreases
in market interest rates.

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2001, the Company had cash and cash equivalents of $23.3
million and working capital of $26.8 million. During the nine months ended
September 30, 2001, net cash provided by financing activities was $0.3 million,
while net cash used in operating and investing activities were $2.6 million and
$2.5 million, respectively. The Company invests its cash, which includes the
$12.0 million proceeds from the Companys initial public offering in November
1997, in a money market fund. The Company had no debt as of September 30,
2001, other than normal trade payables and accrued liabilities. Stockholders
equity at September 30, 2001 was $34.3 million.

In March 1999, the Company obtained a revolving line of credit in the
amount of $10.0 million. The line of credit, which was granted on an unsecured
basis, has a floating interest rate of LIBOR plus 1.35% and had an expiration
date of June 30, 2001. In June 2001, the line of credit was extended until June
30, 2002. No advances have been made on the line of credit.

For the nine months ended September 30, 2001, cash flow used in operations
was $2.6 million. The Company periodically sells unbilled accounts receivable,
on a non-recourse basis, to augment its operating cash flows. In August 2001,
the Company sold $1.8 million of unbilled accounts receivable. The sales of
unbilled receivables resulted in an immaterial loss. In the future, the
Company may sell additional unbilled accounts receivable from time to time
depending on the Companys cash flow requirements and whether the terms are
financially acceptable to the Company.

The Companys investing activities primarily include expenditures for
fixed assets in support of the Companys product development activities and
infrastructure, capitalized software development costs and costs related to the
acquisition of distribution rights. During the nine months ended September 30,
2001, the Company invested $0.9 million in fixed assets, consisting primarily
of computer equipment to expand and upgrade the Companys development
activities. In April 2001, the Company purchased for $1.5 million the source
code for one of the third-party products that the Company resells. The Company
is using this source code to develop its own product for sale. Additionally
the Company capitalized $0.1 million of software development costs during the
nine months ended September 30, 2001.

The Company believes that cash and cash equivalents at September 30, 2001,
cash flow generated from operations and the line of credit 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.

NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, the
Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) 141, Business Combinations, which
addresses the accounting and reporting for business combinations, and
SFAS 142, Goodwill and Other Intangible Assets, which addresses the accounting and
reporting for acquired goodwill and other intangible assets. SFAS 141 and SFAS
142 are effective January 1, 2002 for the Company. The Company is in the
process of reviewing the new accounting pronouncements and does not anticipate
that adoption will have a material impact on the Companys financial condition
or results of operations.

In October 2001, the FASB issued SFAS 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which supersedes
SFAS 121
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of. SFAS 144 addresses the accounting and reporting for the
impairment or disposal of long-lived assets, including discontinued

12



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operations. SFAS 144 is effective January 1, 2002 for the Company.
The Company is reviewing the provisions of SFAS 144 and does not anticipate
that the adoption will have a material impact on the Companys financial
condition or results of operations.

CAUTIONARY STATEMENT PURSUANT TO THE PRIVATE LITIGATION REFORM ACT OF 1995

Some of the statements in this Quarterly Report on Form 10-Q 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, adverse changes in general
economic conditions in the U.S. and internationally, possible disruption in
commercial activities occasioned by terrorist activity and armed conflict, such
as reduced end-user purchases relative to expectations, 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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The Company has subsidiaries in the United Kingdom, Italy, Germany,
France, The Netherlands, Sweden, Spain, 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
impact overall expected profitability. Through and as of September 30, 2001,
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 or any
other derivative financial instruments.

The Companys exposure to market risk for changes in interest rates
relates primarily to unbilled accounts receivable. At September 30, 2001, the
Company had $17.7 million of unbilled accounts receivable, which approximates
their estimated fair market value. If market interest rates had been 10%
higher at September 30, 2001, the fair market value of the unbilled accounts
receivable would have decreased by approximately $0.1 million.

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PART II  OTHER INFORMATION

|        |     |                                                     |                                                                                                                                                                                                                                                                                   
|------- | --- | --------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Item 1. |     | Legal Proceedings                                  
|       
|        |     |                                                     | None                                                                                                                                                                                                                                                                              
|       
|Item 2. |     | Changes in Securities and Use of Proceeds          
|       
|        |     |                                                     | (d) The net proceeds to the Company from the initial public offering
(SEC File No. 333-35629 effective November 18, 1997) were
approximately $12 million and have been deposited by the Company in a
money market fund investing solely in short-term U.S. government
obligations.
|       
|Item 3. |     | Defaults Upon Senior Securities                    
|       
|        |     |                                                     | None                                                                                                                                                                                                                                                                              
|       
|Item 4. |     | Submission of Matters to a Vote of Security Holders
|       
|        |     |                                                     | None                                                                                                                                                                                                                                                                              
|       
|Item 5. |     | Other Information                                  
|       
|        |     |                                                     | None                                                                                                                                                                                                                                                                              
|       
|Item 6. |     | Exhibits and Reports of Form 8-K                   
|       
|        | (a) | Exhibits                                            |                                                                                                                                                                                                                                                                                   

|     |  |                                                                                                                                                                                                                                                                        
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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                                                                                    

14



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##### 



|     |  |                                                                                                                                                                                                                                                                                                                              
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |  | 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, as amended (incorporated by reference to Exhibit 99.1 forming part of the Companys
registration statement on Form S-8 (File No. 333-37950) 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, as amended (incorporated by reference to Exhibit 10.7 forming part of the Companys
Form 10-Q for the quarter ended March 31, 1999.)                                                                                                                                                      
|    
|10.8 |  | Deed of Lease between Boston Properties Limited Partnership
and Landmark Systems Corporation dated January 30, 1998
(incorporated by reference to Exhibit 10.8 forming a part of
the Companys Form 10-K for the year ended December 31, 1999)                                                                               
|    
|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.)

(b)  Reports on Form 8-K

None

15



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##### 



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

LANDMARK SYSTEMS CORPORATION

|      |  |                   |  |     |  |                                                                                                                              
|----- |  | ----------------- |  | --- |  | -----------------------------------------------------------------------------------------------------------------------------
|Date: |  | November 14, 2001 |  | By: |  | /s/ Katherine K. ClarkKatherine K. Clark
President and Chief Executive Officer (Duly
Authorized Officer)                     
|     
|Date: |  | November 14, 2001 |  | By: |  | /s/ Frederick S. Rolandi, III
Frederick S. Rolandi, III
Vice President and Chief Financial Officer
(Chief Accounting Officer)

16