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 March 31, 2001
Commission File Number 0-23373

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

|                                                                               |  |                                                
|------------------------------------------------------------------------------ |  | -----------------------------------------------
|VIRGINIA
(State or other jurisdiction of
incorporation or organization)        |  | 54-1221302
(I.R.S. Employer Identification No.)
|                                                                               |  |                                                
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|12700 Sunrise Valley Drive
Reston, VA
(Address of principal executive offices) |  | 20191
(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
April 30, 2001:

|                                       |  |                             
|-------------------------------------- |  | ----------------------------
|Class                                  |  | Number of Shares Outstanding
|                                       |  |                             
|Common Stock, par value $.01 per share |  | 12,407,047                  

1



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LANDMARK SYSTEMS CORPORATION

QUARTER ENDED MARCH 31, 2001

INDEX

|           |  |                                                                                                                                      |  |      |       | 
|---------- |  | ------------------------------------------------------------------------------------------------------------------------------------ |  | ---- | ----- | 
|           |  |                                                                                                                                      |  | PAGE
|           |  |                                                                                                                                      |  |     
|PART I     |  | FINANCIAL INFORMATION                                                                                                               
|           |  |                                                                                                                                      |  |     
|Item 1.    |  | Financial Statements                                                                                                                
|           |  | Condensed Consolidated Statements of Operations for the
three months ended March 31, 2001 (unaudited) and March 31,
2000 (unaudited) |  |      | 4     | 
|          
|          
|          
|          
|           |  | Condensed Consolidated Balance Sheets as of March 31,
2001 (unaudited) and December 31, 2000                                         |  |      | 5     | 
|          
|          
|          
|          
|           |  | Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 2001 (unaudited) and March 31,
2000 (unaudited) |  |      | 6     | 
|          
|          
|          
|          
|           |  | Notes to Condensed Consolidated Financial Statements (unaudited)                                                                     |  |      | 7-8   | 
|          
|          
|          
|          
|Item 2.    |  | Managements Discussion and Analysis of Results of Operations
and Financial Condition                                                |  |      | 9-11  | 
|          
|          
|          
|          
|Item 3.    |  | Quantitative and Qualitative Disclosures About Market Risk                                                                           |  |      | 11    | 
|          
|          
|          
|          
|           |  |                                                                                                                                      |  |     
|PART II    |  | OTHER INFORMATION                                                                                                                   
|           |  |                                                                                                                                      |  |     
|          
|          
|          
|          
|Item 1.    |  | Legal Proceedings                                                                                                                    |  |      | 11    | 
|          
|          
|          
|          
|Item 2.    |  | Changes in Securities and Use of Proceeds                                                                                            |  |      | 11    | 
|          
|          
|          
|          
|Item 3.    |  | Defaults Upon Senior Securities                                                                                                      |  |      | 12    | 
|          
|          
|          
|          
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                                                                  |  |      | 12    | 
|          
|          
|          
|          
|Item 5.    |  | Other Information                                                                                                                    |  |      | 12    | 
|          
|          
|          
|          
|Item 6.    |  | Exhibits and Reports on Form 8-K                                                                                                     |  |      | 12-13 | 
|           |  |                                                                                                                                      |  |     
|SIGNATURES |  |                                                                                                                                      |  |      | 14    | 

2



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PART I  - FINANCIAL INFORMATION

Item 1. Financial Statements

The condensed consolidated financial statements set forth below for the
three-month periods ended March 31, 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-month period ended March 31, 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 March 31,
|                               |                                     |                          |           |                             
|                               |                                     |                          |           | 2001                         |            | 2000
|                               |                                     |                          |           |                              |            |     
|Revenues                      
|                               | License revenues                    |                          | $         | 6,345,975                    |            |      | $        | 4,439,903  |           
|                               | Maintenance revenues                |                          |           | 8,757,405                    |            |      |          | 8,024,741  |           
|                               |                                     |                          |           |                              |            |      |          |           
|                               |                                     | Total revenues           |           |                              | 15,103,380 |      |          |            | 12,464,644 | 
|Cost of revenues              
|                               | Cost of license revenues            |                          |           | 450,977                      |            |      |          | 254,239    |           
|                              
|                              
|                              
|                              
|                               | Cost of maintenance revenues        |                          |           | 1,443,858                    |            |      |          | 1,273,262  |           
|                               | Cost to acquire distribution rights |                          |           | 580,677                      |            |      |          | 551,891    |           
|                               |                                     |                          |           |                              |            |      |          |           
|                               |                                     | Total cost of revenues   |           |                              | 2,475,512  |      |          |            | 2,079,392  | 
|                               |                                     |                          |           |                              |            |      |          |           
|                               | Gross profit                        |                          |           | 12,627,868                   |            |      |          | 10,385,252 |           
|                               |                                     |                          |           |                              |            |      |          |           
|Operating
expenses            
|                               | Sales and marketing                 |                          |           | 6,726,296                    |            |      |          | 5,436,699  |           
|                               | Product research
and development    |                          |           | 3,675,484                    |            |      |          | 3,609,345  |           
|                               | General and administrative          |                          |           | 1,638,642                    |            |      |          | 1,530,506  |           
|                               |                                     |                          |           |                              |            |      |          |           
|                               |                                     | Total operating expenses |           |                              | 12,040,422 |      |          |            | 10,576,550 | 
|                               |                                     |                          |           |                              |            |      |          |           
|Operating income (loss)        |                                     |                          | 587,446   |                              |            |      | (191,298 | )         
|Interest and other income, net |                                     |                          | 631,159   |                              |            |      | 548,824  |           
|                               |                                     |                          |           |                              |            |      |          |           
|Income before income taxes     |                                     |                          | 1,218,605 |                              |            |      | 357,526  |           
|                               | Provision for income taxes          |                          |           | 487,440                      |            |      |          | 135,860    |           
|                               |                                     |                          |           |                              |            |      |          |           
|Net income                     |                                     | $                        | 731,165   |                              |            | $    | 221,666  |           
|                               |                                     |                          |           |                              |            |      |          |           
|Earnings per share             |                                     |                          |           |                              |            |      |          |           
|                               | Basic                               | $                        | 0.06      |                              |            | $    | 0.02     |           
|                               | Diluted                             |                          | $         | 0.06                         |            |      | $        | 0.02       |           

See accompanying notes to condensed consolidated financial statements.

4



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LANDMARK SYSTEMS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS

|                                           |                                                                                                    |                           |            |                |            |                   |            |            |            | 
|------------------------------------------ | -------------------------------------------------------------------------------------------------- | ------------------------- | ---------- | -------------- | ---------- | ----------------- | ---------- | ---------- | ---------- | 
|                                           |                                                                                                    |                           |            | March 31, 2001 |            | December 31, 2000
|                                           |                                                                                                    |                           |            |                |            |                  
|                                           |                                                                                                    |                           |            | (unaudited)   
|ASSETS                                    
|                                          
|                                          
|                                          
|                                          
|Current assets:                           
|                                          
|                                          
|                                          
|                                          
|                                           | Cash and cash equivalents                                                                          |                           | $          | 32,886,414     |            |                   | $          | 28,078,594 |           
|                                          
|                                          
|                                          
|                                          
|                                           | Accounts receivable, net of allowance for
   doubtful accounts of $504,000 and   
$509,000         |                           |            | 8,023,908      |            |                   |            | 15,399,070 |           
|                                          
|                                          
|                                          
|                                          
|                                           | Unbilled accounts receivable                                                                       |                           |            | 8,681,959      |            |                   |            | 9,677,138  |           
|                                          
|                                          
|                                          
|                                          
|                                           | Other current assets                                                                               |                           |            | 3,127,468      |            |                   |            | 3,186,357  |           
|                                           |                                                                                                    |                           |            |                |            |                   |            |           
|                                           |                                                                                                    | Total current assets      |            |                | 52,719,749 |                   |            |            | 56,341,159 | 
|                                          
|                                          
|                                          
|                                          
|Unbilled accounts receivable - noncurrent  |                                                                                                    |                           | 9,776,611  |                |            |                   | 8,154,395  |           
|                                          
|                                          
|                                          
|                                          
|Fixed assets, net                          |                                                                                                    |                           | 5,104,615  |                |            |                   | 5,315,662  |           
|                                          
|                                          
|                                          
|                                          
|Capitalized software costs, net            |                                                                                                    |                           | 504,167    |                |            |                   | 504,086    |           
|                                          
|                                          
|                                          
|                                          
|Intangible assets, net                     |                                                                                                    |                           | 4,159,200  |                |            |                   | 4,513,521  |           
|                                          
|                                          
|                                          
|                                          
|Other assets                               |                                                                                                    |                           | 2,065,416  |                |            |                   | 2,040,798  |           
|                                           |                                                                                                    |                           |            |                |            |                   |            |           
|Total assets                               |                                                                                                    | $                         | 74,329,758 |                |            | $                 | 76,869,621 |           
|                                           |                                                                                                    |                           |            |                |            |                   |            |           
|LIABILITIES AND STOCKHOLDERS EQUITY      
|                                          
|                                          
|                                          
|                                          
|Current liabilities:                      
|                                          
|                                          
|                                          
|                                          
|                                           | Accounts payable, accrued expenses and
   other current liabilities                                |                           | $          | 6,993,117      |            |                   | $          | 7,948,459  |           
|                                          
|                                          
|                                          
|                                          
|                                           | Deferred revenue                                                                                   |                           |            | 19,844,085     |            |                   |            | 23,552,449 |           
|                                           |                                                                                                    |                           |            |                |            |                   |            |           
|                                           |                                                                                                    | Total current liabilities |            |                | 26,837,202 |                   |            |            | 31,500,908 | 
|                                          
|                                          
|                                          
|                                          
|Deferred revenue - noncurrent              |                                                                                                    |                           | 12,183,412 |                |            |                   | 10,959,332 |           
|                                          
|                                          
|                                          
|                                          
|Other liabilities                          |                                                                                                    |                           | 137,682    |                |            |                   | 160,518    |           
|                                           |                                                                                                    |                           |            |                |            |                   |            |           
|Total liabilities                          |                                                                                                    |                           | 39,158,296 |                |            |                   | 42,620,758 |           
|                                           |                                                                                                    |                           |            |                |            |                   |            |           
|Stockholders equity:                     
|                                          
|                                          
|                                          
|                                          
|                                           | Common stock, $0.01 par value,   30,000,000
shares authorized,    13,189,047 and
13,147,411 issued |                           |            | 131,890        |            |                   |            | 131,474    |           
|                                          
|                                          
|                                          
|                                          
|                                           | Additional paid-in capital                                                                         |                           |            | 35,589,442     |            |                   |            | 35,499,092 |           
|                                          
|                                          
|                                          
|                                          
|                                           | Retained earnings                                                                                  |                           |            | 2,138,911      |            |                   |            | 1,407,746  |           
|                                          
|                                          
|                                          
|                                          
|                                           | Accumulated other comprehensive loss                                                               |                           |            | (245,027       | )          |                   |            | (345,695   | )         
|                                          
|                                          
|                                          
|                                          
|                                           | Treasury stock, at cost; 782,000 shares                                                            |                           |            | (2,443,754     | )          |                   |            | (2,443,754 | )         
|                                           |                                                                                                    |                           |            |                |            |                   |            |           
|Total stockholders equity                 |                                                                                                    |                           | 35,171,462 |                |            |                   | 34,248,863 |           
|                                           |                                                                                                    |                           |            |                |            |                   |            |           
|Total liabilities and stockholders equity |                                                                                                    | $                         | 74,329,758 |                |            | $                 | 76,869,621 |           
|                                           |                                                                                                    |                           |            |                |            |                   |            |           

See accompanying notes to condensed consolidated financial statements.

5



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LANDMARK SYSTEMS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

|                                                  |                                                                                                                 |                                           |            |                              |           |      |            |          |           |  
|------------------------------------------------- | --------------------------------------------------------------------------------------------------------------- | ----------------------------------------- | ---------- | ---------------------------- | --------- | ---- | ---------- | -------- | --------- | -
|                                                  |                                                                                                                 |                                           |            | Three Months Ended March 31,
|                                                  |                                                                                                                 |                                           |            |                             
|                                                  |                                                                                                                 |                                           |            | 2001                         |           | 2000
|                                                  |                                                                                                                 |                                           |            |                              |           |     
|Cash flows from operating activities
  Net income |                                                                                                                 | $                                         | 731,165    |                              |           | $    | 221,666    |         
|                                                  | Adjustments to reconcile net income to net
        cash flows from operations
    Depreciation and amortization |                                           |            | 877,185                      |           |      |            | 640,914  |          
|                                                  | Tax benefit for exercise of stock options                                                                       |                                           |            |                             |           |      |            | 158,824  |          
|                                                  | Sale of unbilled accounts receivable                                                                            |                                           |            |                             |           |      |            | 992,414  |          
|                                                  | Changes in working capital                                                                                      |                                           |            | 3,244,970                    |           |      |            | (918,485 | )        
|                                                  |                                                                                                                 |                                           |            |                              |           |      |            |         
|                                                  |                                                                                                                 | Net cash provided by operating activities |            |                              | 4,853,320 |      |            |          | 1,095,333 |  
|                                                  |                                                                                                                 |                                           |            |                              |           |      |            |         
|Cash flows from investing
activities             
|
|                                                  | Acquisition of distribution rights                                                                              |                                           |            | (1,101                       | )         |      |            | (87,758  | )        
|                                                  | Capitalized software development costs                                                                          |                                           |            | (92,958                      | )         |      |            | (538,211 | )        
|                                                  | Capital expenditures                                                                                            |                                           |            | (217,839                     | )         |      |            | (191,345 | )        
|                                                  |                                                                                                                 |                                           |            |                              |           |      |            |         
|                                                  |                                                                                                                 | Net cash used in investing activities     |            |                              | (311,898  | )    |            |          | (817,314  | )
|                                                  |                                                                                                                 |                                           |            |                              |           |      |            |         
|Cash flows from financing
activities              |                                                                                                                 |                                           |            |                              |           |      |            |         
|                                                  | Proceeds from sale of common
stock                                                                              |                                           |            | 90,766                       |           |      |            | 510,677  |          
|                                                  |                                                                                                                 |                                           |            |                              |           |      |            |         
|                                                  |                                                                                                                 | Net cash provided by financing activities |            |                              | 90,766    |      |            |          | 510,677   |  
|                                                  |                                                                                                                 |                                           |            |                              |           |      |            |         
|Effect of exchange rate changes on cash           |                                                                                                                 |                                           | 175,632    |                              |           |      | 111,243    |         
|                                                  |                                                                                                                 |                                           |            |                              |           |      |            |         
|Net increase in cash and cash equivalents         |                                                                                                                 |                                           | 4,807,820  |                              |           |      | 899,939    |         
|Cash and cash equivalents, beginning of period    |                                                                                                                 |                                           | 28,078,594 |                              |           |      | 32,135,952 |         
|                                                  |                                                                                                                 |                                           |            |                              |           |      |            |         
|Cash and cash equivalents, end of period          |                                                                                                                 | $                                         | 32,886,414 |                              |           | $    | 33,035,891 |         
|                                                  |                                                                                                                 |                                           |            |                              |           |      |            |         

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 September 2000, the FASB issued Statement of Financial Accounting
Standards (SFAS) No. 140, Accounting for the Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities. SFAS 140 is effective
for transfers occurring after March 31, 2001 and for disclosures relating to
securitizations transactions and collateral for fiscal years ending after
December 15, 2000. The Company is reviewing the provisions of SFAS 140, and
does not believe the adoption will have a material effect on the Companys
financial condition or results of operation.

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 months ended
March 31, 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.

|                                          |                                                               |  |             |         |               |  |           |            |  |  |   |      | 
|----------------------------------------- | ------------------------------------------------------------- |  | ----------- | ------- | ------------- |  | --------- | ---------- |  |  | - | ---- | 
|                                          |                                                               |  | Income      |         | Shares        |  | Per-Share
|                                          |                                                               |  | (Numerator) |         | (Denominator) |  | Amount   
|                                          |                                                               |  |             |         |               |  |          
|For the three months ended March 31, 2001
|                                         
|                                         
|                                         
|                                         
|                                          | Basic earnings per share                                      |  | $           | 731,165 |               |  |           | 12,375,820 |  |  | $ | 0.06 | 
|                                          |                                                               |  |             |         |               |  |           |            |  |  |   |     
|                                          | Effect of dilutive securities
     Stock options and warrants |  |             |        |               |  |           | 16,779     | 
|                                          |                                                               |  |             |         |               |  |           |           
|                                          | Diluted earnings per share                                    |  | $           | 731,165 |               |  |           | 12,392,599 |  |  | $ | 0.06 | 
|                                          |                                                               |  |             |         |               |  |           |            |  |  |   |     
|For the three months ended March 31, 2000
|                                         
|                                         
|                                         
|                                         
|                                          | Basic earnings per share                                      |  | $           | 221,666 |               |  |           | 12,901,578 |  |  | $ | 0.02 | 
|                                          |                                                               |  |             |         |               |  |           |            |  |  |   |     
|                                          | Effect of dilutive securities
    Stock options and warrants  |  |             |        |               |  |           | 350,684    | 
|                                          |                                                               |  |             |         |               |  |           |           
|                                          | Diluted earnings per share                                    |  | $           | 221,666 |               |  |           | 13,252,262 |  |  | $ | 0.02 | 
|                                          |                                                               |  |             |         |               |  |           |            |  |  |   |     

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 income for the three months ended March 31,
2001 and 2000 was $831,833 and $306,954, respectively.

7



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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 and client/server. The
Companys revenues by product group consist of the following:

|              |                |   |                              |            |      |   |            |            | 
|------------- | -------------- | - | ---------------------------- | ---------- | ---- | - | ---------- | ---------- | 
|              |                |   | Three Months Ended March 31,
|              |                |   |                             
|              |                |   | 2001                         |            | 2000
|              |                |   |                              |            |     
|OS/390        |                | $ | 14,469,937                   |            |      | $ | 11,996,920 |           
|             
|             
|             
|             
|Client/server |                |   | 633,443                      |            |      |   | 467,724    |           
|              |                |   |                              |            |      |   |            |           
|              | Total revenues |   | $                            | 15,103,380 |      |   | $          | 12,464,644 | 
|              |                |   |                              |            |      |   |            |           

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 March 31,
|               |                |   |                             
|               |                |   | 2001                         |            | 2000
|               |                |   |                              |            |     
|United States  |                | $ | 10,187,742                   |            |      | $ | 8,388,417 |           
|              
|              
|              
|              
|Germany        |                |   | 947,116                      |            |      |   | 982,838   |           
|              
|              
|              
|              
|United Kingdom |                |   | 919,868                      |            |      |   | 851,721   |           
|              
|              
|              
|              
|Benelux        |                |   | 417,598                      |            |      |   | 342,675   |           
|              
|              
|              
|              
|Nordic         |                |   | 322,217                      |            |      |   | 289,218   |           
|              
|              
|              
|              
|Australia      |                |   | 313,358                      |            |      |   | 248,702   |           
|              
|              
|              
|              
|Other          |                |   | 1,995,481                    |            |      |   | 1,361,073 |           
|               |                |   |                              |            |      |   |           |           
|               | Total revenues |   | $                            | 15,103,380 |      |   | $         | 12,464,644 | 
|               |                |   |                              |            |      |   |           |           

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

|              |                         |   |           |           |              |   |            |            | 
|------------- | ----------------------- | - | --------- | --------- | ------------ | - | ---------- | ---------- | 
|              |                         |   | March 31, |           | December 31,
|              |                         |   |           |           |             
|              |                         |   | 2001      |           | 2000        
|              |                         |   |           |           |             
|United States |                         | $ | 9,508,412 |           |              | $ | 10,031,879 |           
|             
|             
|             
|             
|Europe        |                         |   | 237,047   |           |              |   | 275,061    |           
|             
|             
|             
|             
|Other         |                         |   | 22,523    |           |              |   | 26,329     |           
|              |                         |   |           |           |              |   |            |           
|              | Total long-lived assets |   | $         | 9,767,982 |              |   | $          | 10,333,269 | 
|              |                         |   |           |           |              |   |            |           

8



---



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 March 31,
|                               |                                     |                          |     |                             
|                               |                                     |                          |     | 2001                         |       | 2000
|                               |                                     |                          |     |                              |       |     
|Revenues                      
|                               | License revenues                    |                          |     | 42.0                         | %     |      |      | 35.6 | %    
|                              
|                              
|                              
|                              
|                               | Maintenance revenues                |                          |     | 58.0                         |       |      |      | 64.4 |      
|                               |                                     |                          |     |                              |       |      |      |     
|                               |                                     | Total revenues           |     |                              | 100.0 |      |      |      | 100.0 | 
|                              
|                              
|                              
|                              
|Cost of
revenues              
|                               | Cost of license revenues            |                          |     | 3.0                          |       |      |      | 2.1  |      
|                              
|                              
|                              
|                              
|                               | Cost of maintenance revenues        |                          |     | 9.6                          |       |      |      | 10.2 |      
|                              
|                              
|                              
|                              
|                               | Cost to acquire distribution rights |                          |     | 3.8                          |       |      |      | 4.4  |      
|                               |                                     |                          |     |                              |       |      |      |     
|                               |                                     | Total cost of revenues   |     |                              | 16.4  |      |      |      | 16.7  | 
|                               |                                     |                          |     |                              |       |      |      |     
|                               | Gross profit                        |                          |     | 83.6                         |       |      |      | 83.3 |      
|                               |                                     |                          |     |                              |       |      |      |     
|Operating expenses            
|                               | Sales and marketing                 |                          |     | 44.5                         |       |      |      | 43.6 |      
|                              
|                              
|                              
|                              
|                               | Product research and development    |                          |     | 24.3                         |       |      |      | 29.0 |      
|                              
|                              
|                              
|                              
|                               | General and administrative          |                          |     | 10.9                         |       |      |      | 12.3 |      
|                               |                                     |                          |     |                              |       |      |      |     
|                               |                                     | Total operating expenses |     |                              | 79.7  |      |      |      | 84.9  | 
|                               |                                     |                          |     |                              |       |      |      |     
|Operating income (loss)        |                                     |                          | 3.9 |                              |       |      | (1.6 | )   
|                              
|                              
|                              
|                              
|Interest and other income, net |                                     |                          | 4.1 |                              |       |      | 4.5  |     
|                               |                                     |                          |     |                              |       |      |      |     
|Income before income taxes     |                                     |                          | 8.0 |                              |       |      | 2.9  |     
|                              
|                              
|                              
|                              
|                               | Provision for income taxes          |                          |     | 3.2                          |       |      |      | 1.1  |      
|                               |                                     |                          |     |                              |       |      |      |     
|Net income                     |                                     |                          | 4.8 | %                            |       |      | 1.8  | %   
|                               |                                     |                          |     |                              |       |      |      |     

Total revenues. Total revenues increased 21.2% from $12.5 million for the
three months ended March 31, 2000, to $15.1 million for the three months ended
March 31, 2001. Revenues for the first three months of 2001 from OS/390
products and services were $14.5 million, an increase of 20.6% from the same
period in the prior year. Revenues for the first three months of 2001 from
client/server products and services were $0.6 million, an increase of 35.4%
from the same period in the prior year.

License revenues. License revenues increased 42.9% from $4.4 million for
the three months ended March 31, 2000, to $6.3 million for the three months
ended March 31, 2001. License revenues increased in part due to the continued
acceptance of three new products introduced in the fourth quarter of 2000 and
first quarter of 2001; the products are TMON for TCP/IP (a networking product),
TMON for USS (an e-business infrastructure product) and TMON for IMS (a
transaction processing product). Additionally, the Company closed several
large deals during the first quarter of 2001.

Maintenance revenues. Maintenance revenues increased 10.0% from $8.0
million for the three months ended March 31, 2000 to $8.8 million for the three
months ended March 31, 2001. This increase is primarily due to contractual
rate increases that occur in the first part of the year since a large part of
the Companys renewal maintenance base enters into a new contract year
effective January 1.

Cost of license revenues. Cost of license revenues includes amortization
of capitalized software costs, product royalties, materials and packaging
expenses. Costs of license revenues were $0.5 million and $0.3 for the three
months ended March 31, 2001 and 2000, respectively, representing 7.1% and 5.7%
of license revenues in such periods. The increase is the result of an increase
in third-party royalties resulting from increased sales of products covered by
the various royalty agreements.

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 $1.4 million and $1.3 million for the
three months ended March 31, 2001 and 2000, respectively, representing 16.5%
and 15.9% of service revenues in such periods. The slight increase is primarily
attributed to the formation of a professional services consulting organization
established to provide post sales training and consulting services for some of
the Companys client/server products. Since the discontinuation of these
products, the professional services organization has been reduced in size and
refocused to provide training services for the Companys OS/390 products.

9



---



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 March 31, 2001 and 2000 were
$0.6 million.

Sales and marketing. Sales and marketing expenses include personnel and
related costs for the Companys direct sales organization, marketing staff and
promotional expenses. Sales and marketing expenses were $6.7 million and $5.4
million for the three months ended March 31, 2001 and 2000, respectively,
representing 44.5% and 43.6% of total revenues in such periods. The increase in
sales and marketing expenses is primarily due to increased commission expenses
caused by the increased license revenues. Additionally, the Companys
worldwide sales force is now virtually fully staffed which has increased
personnel costs.

Product research and development. Product research and development
expenses include personnel and related costs for the Companys development
staff. Product research and development expenses were $3.7 million and $3.6
million for the three months ended March 31, 2001 and 2000, respectively,
representing 24.3% and 29.0% of total revenues in such periods. The decrease
in product research and development expenses as a percentage of revenue is
primarily due to the increase in revenues.

General and administrative. General and administrative expenses include
salaries and related costs of administration, finance and management personnel,
as well as legal and accounting fees. General and administrative expenses were
$1.6 million and $1.5 million for the three months ended March 31, 2001 and
2000, respectively, representing 10.9% and 12.3% of total revenues in such
periods. The slight increase in general and administrative expenses from is
primarily due to increased investments in IS infrastructure as the Company
deploys new systems to support its business.

Interest and other income, net. Interest and other income, net 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
totaled $0.63 million and $0.55 million for the three months ended March 31,
2001 and 2000, respectively. Of these amounts, $0.3 million and $0.4 million
represent interest earned on the Companys bank balances for the three months
ended March 31, 2001 and 2000, respectively.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 2001, the Company had cash and cash equivalents of $32.9
million and working capital of $25.9 million. During the three months ended
March 31, 2001, net cash provided by operating and financing activities were
$4.9 million and $0.1 million, respectively, while net cash used in investing
activities was $0.3 million. 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 March 31, 2001,
other than normal trade payables and accrued liabilities. Stockholders equity
at March 31, 2001 was $35.2 million.

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

The Company continues to finance its growth through funds generated from
operations. For the three months ended March 31, 2001, cash flow from
operations was $4.9 million. During 2000, the Company augmented operating cash
flows with the sale of unbilled accounts receivable. The sale of the unbilled
receivables resulted in immaterial gains and losses for the Company. The
general rise of interest rates during 2000 made it more difficult to identify
financial institutions willing to buy the unbilled receivables at terms
favorable to the Company; there can be no assurance of the Companys continued
ability to sell additional unbilled receivables in the future. However, the
Company will continue to seek financing of this type depending on the Companys
cash flow requirements and whether the terms are financially favorable for the
Company.

The Companys investing activities primarily include expenditures for
fixed assets in support of the Companys product development activities.
During the three months ended March 31, 2001, the Company invested $0.2 million
in fixed assets, consisting primarily of computer equipment to expand and
upgrade the Companys infrastructure.

The Company believes that cash and cash equivalents at March 31, 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

10



---



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 September 2000, the FASB issued Statement of Financial Accounting
Standards (SFAS) No. 140, Accounting for the Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities. SFAS 140 is effective
for transfers occurring after March 31, 2001 and for disclosures relating to
securitizations transactions and collateral for fiscal years ending after
December 15, 2000. The Company is reviewing the provisions of SFAS 140, and
does not believe the adoption will have a material effect on the Companys
financial condition or results of operation.

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, 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 March 31, 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.

The Companys exposure to market risk for changes in interest rates
relates primarily to unbilled accounts receivable. At March 31, 2001, the
Company has $18.5 million of unbilled accounts receivable; the estimated fair
market value of these receivables is $18.5 million. If market interest rates
increase 10% from the levels at March 31, 2001, the fair market value of the
unbilled accounts receivable would decline by approximately $0.1 million.

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.

11



---





|                                       
|---------------------------------------
|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
Securities and Exchange Commission under the Securities Act of
1933, as amended.)  
|   
|   
|   
|   
|    |  | 10.4     |  | 1992 Executive Stock Incentive Plan (incorporated by reference
to Exhibit 10.4 forming a part of the Companys registration
statement on Form S-1 (File No. 333-35629) filed with the
Securities and Exchange Commission under the Securities Act of
1933, as amended.)
|   
|   
|   
|   
|    |  | 10.5     |  | 1994 Stock
Incentive Plan (incorporated by reference to Exhibit 10.5 forming a
part of the Companys registration statement on Form S-1 (File No.
333-35629) filed with the Securities and Exchange Commission under
the Securities Act of 1933, as amended.)          

12



---



|    |  |                     |  |                                                                                                                                                                                                                                                                                                                              
|--- |  | ------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|    |  | 10.6                |  | 1996 Advisory Board and Directors Stock Incentive Plan
(incorporated by reference to Exhibit 10.6 forming a part of
the Companys registration statement on Form S-1 (File No.
333-35629) filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended.)                                   
|   
|   
|   
|   
|    |  | 10.7                |  | 1998 Employee Stock
Purchase Plan (incorporated by reference to Exhibit 99 forming a
part of the Companys registration statement on Form S-8 (File No.
333-61161) filed with the Securities and Exchange Commission under
the Securities Act of 1933, as amended.)                                                          
|   
|   
|   
|   
|    |  | 10.8                |  | Deed of Lease between Boston Properties Limited Partnership
and Landmark Systems Corporation dated January 30, 1998
(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.                                                                                                                                                                                                                                                                                                                        

13



---



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

14