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

___________________________

FORM 10-Q

___________________________

|           |  |                                                                                         
|---------- |  | ----------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                         
|[X]        |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 
|           |  |                                                                                         
|           |  | For the quarterly period ended September 30, 2002                                       
|           |  |                                                                                         
|[  ]       |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|           |  |                                                                                         
|           |  | For the transition period from      to                                                  

Commission file number: 000-29377

Landacorp, Inc.(Exact name of registrant as specified in its charter)

|                                                                       |  |                                               
|---------------------------------------------------------------------- |  | ----------------------------------------------
|Delaware(State or other jurisdiction of
incorporation or organization) |  | 94-3346710(IRS Employer Identification Number)

4151 Ashford Dunwoody Road, Suite 505
Atlanta, Georgia 30319(Address of principal executive offices including zip code)

(404) 531-9956(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 reports), and (2) has been subject to such
filing requirements for the past 90 days.  YES  [X]    NO  [ ].

Number of shares of Common stock, par value of $0.001, outstanding as of
October 30, 2002: 15,734,103.



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TABLE OF CONTENTS



|                                                 |                                                                                                |  |  |  |  |  |  | 
|------------------------------------------------ | ---------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION                  
|ITEM 1. FINANCIAL STATEMENTS                    
|                                                 | Condensed Consolidated Balance Sheets                                                         
|                                                 | Condensed Consolidated Statements of Operations                                               
|                                                 | Condensed Consolidated Statement of Cash Flows                                                
|                                                 | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                                          
|                                                 | Item 2.  Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                                 | Item 3.  Quantitative and Qualitative Disclosures about Market Risk                           
|                                                 | Item 4.  Company Disclosure Controls and Procedures                                           
|PART II  OTHER INFORMATION                     
|                                                 | Item 1.  Legal Proceedings                                                                    
|                                                 | Item 2.  Changes in Securities                                                                
|                                                 | Item 3.  Defaults in Senior Securities                                                        
|                                                 | Item 6.  Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                                      
|Section 906 Certification of the CEO and COO/CFO



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##### Table of Contents



Landacorp, Inc.

TABLE OF CONTENTS

|               |  |                                                                                                                
|-------------- |  | ---------------------------------------------------------------------------------------------------------------
|               |  |                                                                                                                
|PART I         |  | Financial Information                                                                                          
|Item 1.        |  | Financial Statements (unaudited):                                                                              
|               |  | Condensed Consolidated Balance Sheets as of
September 30, 2002 and December 31, 2001                           
|               |  | Condensed Consolidated Statements of
Operations for the three and nine months
ended September 30, 2002 and 2001
|               |  | Condensed Consolidated Statements of Cash
Flows for the nine months ended September 30,
2002 and 2001          
|               |  | Notes to Condensed Consolidated Financial
Statements                                                           
|Item 2.        |  | Managements Discussion and Analysis of
Financial Condition and Results of
Operations                          
|Item 3.        |  | Quantitative and Qualitative Disclosures
About Market Risk                                                     
|Item 4.        |  | Company Disclosure Controls and Procedures                                                                     
|PART II        |  | Other Information                                                                                              
|Item 1.        |  | Legal Proceedings                                                                                              
|Item 2.        |  | Changes in Securities and Use of Proceeds                                                                      
|Item 3.        |  | Defaults Upon Senior Securities                                                                                
|Item 4.        |  | Submission of Matters to a Vote of Security Holders                                                            
|Item 5.        |  | Other Information                                                                                              
|Item 6.        |  | Exhibits and Reports on Form 8-K                                                                               
|Signatures     |  |                                                                                                                
|Certifications |  |                                                                                                                

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PART I  FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS




LANDACORP, INC.
Condensed Consolidated Balance Sheets
(in thousands, except share data)

|                                                                                                                      |                                                                                                                                                                                    |                           |                            |                                      |        |               |         |              |        |        |  | 
|--------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------- | -------------------------- | ------------------------------------ | ------ | ------------- | ------- | ------------ | ------ | ------ |  | 
|                                                                                                                      |                                                                                                                                                                                    |                           |                            |                                      |        | September 30, |         | December 31,
|                                                                                                                      |                                                                                                                                                                                    |                           |                            |                                      |        | 2002          |         | 2001        
|                                                                                                                      |                                                                                                                                                                                    |                           |                            |                                      |        |               |         |             
|                                                                                                                      |                                                                                                                                                                                    |                           |                            |                                      |        | (Unaudited)  
|                                                                                                                      |                                                                                                                                                                                    |                           |                            | ASSETS                               |        |               |         |              |        |        |  | 
|Current Assets:                                                                                                       |                                                                                                                                                                                    |                           |                            |                                      |        |               |         |             
|                                                                                                                      | Cash and cash equivalents                                                                                                                                                          |                           | $                          | 8,464                                |        |               | $       | 12,274       |       
|                                                                                                                      | Accounts receivable and costs and estimated earnings in excess of billings
on uncompleted contracts, net of allowance for doubtful accounts
of $276,000 and $235,000, respectively |                           |                            | 5,373                                |        |               |         | 3,488        |       
|                                                                                                                      | Other current assets                                                                                                                                                               |                           |                            | 857                                  |        |               |         | 731          |       
|                                                                                                                      |                                                                                                                                                                                    |                           |                            |                                      |        |               |         |             
|                                                                                                                      |                                                                                                                                                                                    | Total current assets      |                            |                                      | 14,694 |               |         |              | 16,493 |       
|Property and equipment, net                                                                                           |                                                                                                                                                                                    |                           | 1,572                      |                                      |        |               | 2,309   |             
|Goodwill, net                                                                                                         |                                                                                                                                                                                    |                           | 7,749                      |                                      |        |               | 7,287   |             
|Intangible assets, net                                                                                                |                                                                                                                                                                                    |                           | 1,650                      |                                      |        |               | 5,413   |             
|Capitalized software, net                                                                                             |                                                                                                                                                                                    |                           | 32                         |                                      |        |               | 48      |             
|                                                                                                                      |                                                                                                                                                                                    |                           |                            |                                      |        |               |         |             
|Total Assets                                                                                                          |                                                                                                                                                                                    | $                         | 25,697                     |                                      |        | $             | 31,550  |             
|                                                                                                                      |                                                                                                                                                                                    |                           |                            |                                      |        |               |         |             
|                                                                                                                      |                                                                                                                                                                                    |                           |                            | LIABILITIES AND STOCKHOLDERS EQUITY |        |               |         |              |        |        |  | 
|Current liabilities:                                                                                                  |                                                                                                                                                                                    |                           |                            |                                      |        |               |         |             
|                                                                                                                      | Accounts payable                                                                                                                                                                   |                           | $                          | 956                                  |        |               | $       | 403          |       
|                                                                                                                      | Accrued expenses                                                                                                                                                                   |                           |                            | 3,514                                |        |               |         | 3,692        |       
|                                                                                                                      | Restructuring accrual                                                                                                                                                              |                           |                            | 192                                  |        |               |         | 368          |       
|                                                                                                                      | Deferred revenue and billings in excess of costs and estimated earnings on uncompleted
contracts                                                                                   |                           |                            | 8,663                                |        |               |         | 6,169        |       
|                                                                                                                      | Current portion of capital lease obligations                                                                                                                                       |                           |                            | 78                                   |        |               |         | 78           |       
|                                                                                                                      |                                                                                                                                                                                    |                           |                            |                                      |        |               |         |             
|                                                                                                                      |                                                                                                                                                                                    | Total current liabilities |                            |                                      | 13,403 |               |         |              | 10,710 |       
|Capital lease obligations, net of current portion                                                                     |                                                                                                                                                                                    |                           | 212                        |                                      |        |               | 152     |             
|                                                                                                                      |                                                                                                                                                                                    |                           |                            |                                      |        |               |         |             
|                                                                                                                      |                                                                                                                                                                                    | Total liabilities         |                            |                                      | 13,615 |               |         |              | 10,862 |       
|                                                                                                                      |                                                                                                                                                                                    |                           |                            |                                      |        |               |         |             
|Commitments                                                                                                           |                                                                                                                                                                                    |                           |                           |                                      |        |               |        |             
|Stockholders equity:                                                                                                 |                                                                                                                                                                                    |                           |                            |                                      |        |               |         |             
|Common Stock, $0.001 par value, 50,000,000 shares authorized; 15,734,000
and 15,675,000 shares issued and outstanding |                                                                                                                                                                                    |                           | 16                         |                                      |        |               | 16      |             
|Additional paid-in capital                                                                                            |                                                                                                                                                                                    |                           | 58,340                     |                                      |        |               | 58,321  |             
|Notes receivable from officers                                                                                        |                                                                                                                                                                                    |                           | (161                       | )                                    |        |               | (169    | )           
|Unearned stock-based compensation                                                                                     |                                                                                                                                                                                    |                           | (60                        | )                                    |        |               | (460    | )           
|Accumulated deficit                                                                                                   |                                                                                                                                                                                    |                           | (46,053                    | )                                    |        |               | (37,020 | )           
|                                                                                                                      |                                                                                                                                                                                    |                           |                            |                                      |        |               |         |             
|                                                                                                                      |                                                                                                                                                                                    |                           | Total stockholders equity |                                      |        | 12,082        |         |              |        | 20,688 | 
|                                                                                                                      |                                                                                                                                                                                    |                           |                            |                                      |        |               |         |             
|Total liabilities and stockholders equity                                                                             |                                                                                                                                                                                    | $                         | 25,697                     |                                      |        | $             | 31,550  |             
|                                                                                                                      |                                                                                                                                                                                    |                           |                            |                                      |        |               |         |             

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

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LANDACORP, INC.
Condensed Consolidated Statements of Operations
(unaudited, in thousands, except per share data)

|                                                                                    |                                      |                          |        |                     |       |                     |        |       |       |      |        |        |        |   |         |       |        | 
|----------------------------------------------------------------------------------- | ------------------------------------ | ------------------------ | ------ | ------------------- | ----- | ------------------- | ------ | ----- | ----- | ---- | ------ | ------ | ------ | - | ------- | ----- | ------ | 
|                                                                                    |                                      |                          |        | Three Month Period  |       | Nine Month Period  
|                                                                                    |                                      |                          |        | Ended September 30, |       | Ended September 30,
|                                                                                    |                                      |                          |        |                     |       |                    
|                                                                                    |                                      |                          |        | 2002                |       | 2001                |        | 2002  |       | 2001
|                                                                                    |                                      |                          |        |                     |       |                     |        |       |       |     
|REVENUE:                                                                            |                                      |                          |        |                     |       |                     |        |       |       |      |        |        |        |   |         |      
|                                                                                    | Program revenue and maintenance fees |                          |        | 4,269               |       |                     |        | 3,480 |       |      |        | 11,963 |        |   |         | 8,889 |       
|                                                                                    | System sales and consulting fees     |                          |        | 1,437               |       |                     |        | 384   |       |      |        | 3,721  |        |   |         | 2,916 |       
|                                                                                    |                                      |                          |        |                     |       |                     |        |       |       |      |        |        |        |   |         |      
|                                                                                    |                                      | Total revenues           |        |                     | 5,706 |                     |        |       | 3,864 |      |        |        | 15,684 |   |         |       | 11,805 | 
|                                                                                    |                                      |                          |        |                     |       |                     |        |       |       |      |        |        |        |   |         |      
|COST OF REVENUE:                                                                    |                                      |                          |        |                     |       |                     |        |       |       |      |        |        |        |   |         |      
|                                                                                    | Program revenue and maintenance fees |                          |        | 2,156               |       |                     |        | 1,691 |       |      |        | 6,493  |        |   |         | 5,222 |       
|                                                                                    | System sales and consulting fees     |                          |        | 641                 |       |                     |        | 568   |       |      |        | 1,867  |        |   |         | 2,460 |       
|                                                                                    |                                      |                          |        |                     |       |                     |        |       |       |      |        |        |        |   |         |      
|                                                                                    |                                      | Total cost of revenue    |        |                     | 2,797 |                     |        |       | 2,259 |      |        |        | 8,360  |   |         |       | 7,682  | 
|                                                                                    |                                      |                          |        |                     |       |                     |        |       |       |      |        |        |        |   |         |      
|GROSS PROFIT                                                                        |                                      |                          | 2,909  |                     |       |                     | 1,605  |       |       |      | 7,324  |        |        |   | 4,123   |      
|                                                                                    |                                      |                          |        |                     |       |                     |        |       |       |      |        |        |        |   |         |      
|OPERATING EXPENSES:                                                                 |                                      |                          |        |                     |       |                     |        |       |       |      |        |        |        |   |         |      
|                                                                                    | Sales and marketing                  |                          |        | 1,216               |       |                     |        | 1,115 |       |      |        | 3,771  |        |   |         | 4,621 |       
|                                                                                    | Research and development             |                          |        | 1,470               |       |                     |        | 1,316 |       |      |        | 4,184  |        |   |         | 5,194 |       
|                                                                                    | General and administrative           |                          |        | 1,175               |       |                     |        | 1,959 |       |      |        | 4,425  |        |   |         | 6,494 |       
|                                                                                    | Amortization of intangible assets    |                          |        | 134                 |       |                     |        | 507   |       |      |        | 769    |        |   |         | 1,553 |       
|                                                                                    | Restructuring charges                |                          |        |                    |       |                     |        | 231   |       |      |        |       |        |   |         | 960   |       
|                                                                                    | Asset impairment charge              |                          |        |                    |       |                     |        |      |       |      |        | 3,300  |        |   |         | 704   |       
|                                                                                    |                                      |                          |        |                     |       |                     |        |       |       |      |        |        |        |   |         |      
|                                                                                    |                                      | Total operating expenses |        |                     | 3,995 |                     |        |       | 5,128 |      |        |        | 16,449 |   |         |       | 19,526 | 
|                                                                                    |                                      |                          |        |                     |       |                     |        |       |       |      |        |        |        |   |         |      
|LOSS FROM OPERATIONS                                                                |                                      |                          | (1,086 | )                   |       |                     | (3,523 | )     |       |      | (9,125 | )      |        |   | (15,403 | )    
|INTEREST AND OTHER INCOME                                                           |                                      |                          | 28     |                     |       |                     | 125    |       |       |      | 118    |        |        |   | 603     |      
|INTEREST EXPENSE                                                                    |                                      |                          | (6     | )                   |       |                     | (5     | )     |       |      | (26    | )      |        |   | (18     | )    
|                                                                                    |                                      |                          |        |                     |       |                     |        |       |       |      |        |        |        |   |         |      
|NET LOSS BEFORE INCOME TAXES                                                        |                                      |                          | (1,064 | )                   |       |                     | (3,403 | )     |       |      | (9,033 | )      |        |   | (14,818 | )    
|PROVISION FOR INCOME TAXES                                                          |                                      |                          |       |                     |       |                     |       |       |       |      |       |        |        |   |        |      
|                                                                                    |                                      |                          |        |                     |       |                     |        |       |       |      |        |        |        |   |         |      
|NET LOSS                                                                            |                                      | $                        | (1,064 | )                   |       | $                   | (3,403 | )     |       | $    | (9,033 | )      |        | $ | (14,818 | )    
|                                                                                    |                                      |                          |        |                     |       |                     |        |       |       |      |        |        |        |   |         |      
|NET LOSS PER SHARE  BASIC AND DILUTED                                              |                                      | $                        | (0.07  | )                   |       | $                   | (0.23  | )     |       | $    | (0.59  | )      |        | $ | (1.00   | )    
|                                                                                    |                                      |                          |        |                     |       |                     |        |       |       |      |        |        |        |   |         |      
|Weighted average common and common equivalent
shares outstanding; basic and diluted |                                      |                          | 15,480 |                     |       |                     | 15,110 |       |       |      | 15,432 |        |        |   | 14,893  |      
|                                                                                    |                                      |                          |        |                     |       |                     |        |       |       |      |        |        |        |   |         |      

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

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LANDACORP, INC.
Condensed Consolidated Statement of Cash Flows
(unaudited in thousands)

|                                               |                                                                             |                                                                    |                                                                                                         |                                                     |       |                   |        |         |       |       |        |  
|---------------------------------------------- | --------------------------------------------------------------------------- | ------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------- | --------------------------------------------------- | ----- | ----------------- | ------ | ------- | ----- | ----- | ------ | -
|                                               |                                                                             |                                                                    |                                                                                                         |                                                     |       | Nine Months Ended
|                                               |                                                                             |                                                                    |                                                                                                         |                                                     |       | September 30,    
|                                               |                                                                             |                                                                    |                                                                                                         |                                                     |       |                  
|                                               |                                                                             |                                                                    |                                                                                                         |                                                     |       | 2002              |        | 2001   
|                                               |                                                                             |                                                                    |                                                                                                         |                                                     |       |                   |        |        
|Cash flows from operating activities:          |                                                                             |                                                                    |                                                                                                         |                                                     |       |                   |        |        
|                                               | Net loss                                                                    |                                                                    | $                                                                                                       | (9,033                                              | )     |                   | $      | (14,818 | )    
|                                               | Adjustments to reconcile net loss to net cash used in
operating activities: |                                                                    |                                                                                                         |                                                     |       |                   |        |         |      
|                                               |                                                                             | Depreciation and amortization                                      |                                                                                                         |                                                     | 1,593 |                   |        |         | 2,573 |      
|                                               |                                                                             | Provision for doubtful accounts                                    |                                                                                                         |                                                     |      |                   |        |         | 689   |      
|                                               |                                                                             | Stock-based compensation expense                                   |                                                                                                         |                                                     | 415   |                   |        |         | 1,260 |      
|                                               |                                                                             | Asset impairment charge                                            |                                                                                                         |                                                     | 3,300 |                   |        |         | 704   |      
|                                               |                                                                             | Loss on sale of equipment                                          |                                                                                                         |                                                     |      |                   |        |         | 59    |      
|                                               |                                                                             | Changes in assets and liabilities, net of effects of acquisitions: |                                                                                                         |                                                     |       |                   |        |         |       |      
|                                               |                                                                             |                                                                    | Accounts receivable and costs and estimated earnings
in excess of billing on uncompleted contracts, net |                                                     |       | (1,886            | )      |         |       | 1,503 |       
|                                               |                                                                             |                                                                    | Other assets                                                                                            |                                                     |       | (126              | )      |         |       | (151  | )     
|                                               |                                                                             |                                                                    | Accounts payable                                                                                        |                                                     |       | 553               |        |         |       | (408  | )     
|                                               |                                                                             |                                                                    | Accrued expenses                                                                                        |                                                     |       | (178              | )      |         |       | (333  | )     
|                                               |                                                                             |                                                                    | Restructuring accrual                                                                                   |                                                     |       | (176              | )      |         |       |      |       
|                                               |                                                                             |                                                                    | Deferred revenue and billings in excess of costs and
estimated earnings on uncompleted contracts        |                                                     |       | 2,495             |        |         |       | 644   |       
|                                               |                                                                             |                                                                    |                                                                                                         |                                                     |       |                   |        |        
|                                               |                                                                             |                                                                    |                                                                                                         | Net cash used in operating activities               |       |                   | (3,043 | )       |       |       | (8,278 | )
|                                               |                                                                             |                                                                    |                                                                                                         |                                                     |       |                   |        |        
|Cash flows from investing activities:          |                                                                             |                                                                    |                                                                                                         |                                                     |       |                   |        |        
|                                               | Purchases of property and equipment                                         |                                                                    |                                                                                                         | (678                                                | )     |                   |        | (576    | )    
|                                               | Proceeds from the sale of equipment                                         |                                                                    |                                                                                                         |                                                    |       |                   |        | 4       |      
|                                               | Capitalized software development costs                                      |                                                                    |                                                                                                         |                                                    |       |                   |        | (126    | )    
|                                               |                                                                             |                                                                    |                                                                                                         |                                                     |       |                   |        |        
|                                               |                                                                             |                                                                    |                                                                                                         | Net cash used in investing activities               |       |                   | (678   | )       |       |       | (698   | )
|                                               |                                                                             |                                                                    |                                                                                                         |                                                     |       |                   |        |        
|Cash flows from financing activities           |                                                                             |                                                                    | (103                                                                                                    | )                                                   |       |                   | (60    | )      
|                                               | Repayments of obligations under capital lease                               |                                                                    |                                                                                                         | 8                                                   |       |                   |        | 43      |      
|                                               | Collection on note receivable from officers                                 |                                                                    |                                                                                                         | 8                                                   |       |                   |        | 43      |      
|                                               | Proceeds from issuance of common stock                                      |                                                                    |                                                                                                         | 6                                                   |       |                   |        | 184     |      
|                                               |                                                                             |                                                                    |                                                                                                         |                                                     |       |                   |        |        
|                                               |                                                                             |                                                                    |                                                                                                         | Net cash provided by (used in) financing
Activities |       |                   | (89    | )       |       |       | 167    |  
|                                               |                                                                             |                                                                    |                                                                                                         |                                                     |       |                   |        |        
|(Decrease) in cash and cash equivalents        |                                                                             |                                                                    | (3,810                                                                                                  | )                                                   |       |                   | (8,809 | )      
|Cash and cash equivalents, beginning of period |                                                                             |                                                                    | 12,274                                                                                                  |                                                     |       |                   | 21,752 |        
|                                               |                                                                             |                                                                    |                                                                                                         |                                                     |       |                   |        |        
|Cash and cash equivalents, end of period       |                                                                             | $                                                                  | 8,464                                                                                                   |                                                     |       | $                 | 12,943 |        
|                                               |                                                                             |                                                                    |                                                                                                         |                                                     |       |                   |        |        
|Non-cash investing and financing activities:   |                                                                             |                                                                    |                                                                                                         |                                                     |       |                   |        |        
|                                               | Assets acquired under capital leases                                        |                                                                    | $                                                                                                       | 162                                                 |       |                   | $      |        |      
|                                               |                                                                             |                                                                    |                                                                                                         |                                                     |       |                   |        |        

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

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LANDACORP, INC.




NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. The Company and Basis of Presentation

Landacorp, Inc. was established in 1982 and, along with its subsidiaries
(collectively referred to herein as the Company), provides population health
management solutions to healthcare payer and provider organizations. These
technology-driven solutions include integrated predictive and interventional
disease management programs and services, and comprehensive Internet- and
Windows®-based medical management software that can improve health outcomes
while helping manage and prevent cost. The Companys corporate headquarters and
sales and marketing offices are located in Atlanta, GA, with operations located
in Chico, CA and Raleigh, NC.

The accompanying unaudited financial statements of the Company have been
prepared pursuant to the rules of the Securities and Exchange Commission (the
SEC). Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. These unaudited financial statements should be read in conjunction
with the audited financial statements and notes thereto included in the
Companys Annual Report on Form 10-K for the year ended December 31, 2001. The
balance sheet at December 31, 2001 is derived from the audited financial
statements included in the Form 10-K for the year ended December 31, 2001.
However, this Form 10-Q does not include all Form 10-K and other disclosures
required by generally accepted accounting principles in the United States for
the balance sheet as presented herein. In the opinion of management, the
accompanying unaudited financial statements reflect all adjustments, which are
of a normal recurring nature, necessary for a fair presentation of the results
for the periods presented.

The consolidated results of operations presented for the three and nine
month periods ended September 30, 2002 are not necessarily indicative of the
results to be expected for any other interim period or any future year. Certain
prior period balances have been reclassified in order to conform with current
period presentation.

2. Revenues

Program revenues and maintenance fees represent repeat and recurring
revenue streams, such as per member per month licensing and servicing revenues,
per participant per year fees and support charges for maintaining software.
System sales and consulting fees represent one-off or non-recurring and
non-repeat revenue, such as sales of perpetual licenses, implementation and
ad-hoc consulting or training services. The revenues and costs for 2001 have
been re-categorized into these groups for comparison purposes.

Revenue Recognition

The Company derives revenue primarily from (i) the licensing and
implementation of medical management software systems, (ii) the delivery of
post-contract customer support, training and consulting services, and (iii) the
delivery of care analytics solutions and care management services. In
accordance with Staff Accounting Bulletin (SAB) 101, the Company recognizes
revenue when all of the following criteria are met: (1) persuasive evidence of
an arrangement exists, (2) delivery has occurred or the services are rendered,
(3) the price is fixed and determinable and, (4) collectibility is reasonably
assured.

The Company accounts for their multiple element software systems contracts
in accordance with the provision of Statement of Position (SOP) 97-2, Software
Revenue Recognition,as amended by SOP 98-4, Deferral of the Effective Date of
Certain Provisions of SOP 97-2.As the Company provides significant production,
modification and/or customization of the software installed, system sales
revenues, including training and consulting services essential to the software
system, and the associated costs are recognized using the
percentage-of-completion method, using labor hours incurred relative to total
estimated contract hours as the measure of progress towards completion. Costs
and estimated earnings in excess of billings represent revenues that the
Company has earned in accordance with its accounting policies but that are not
yet billable under the terms of the contracts as of the date of the balance
sheet. These balances are generally billable within twelve months. When the
current estimates of total contract revenue and contract cost indicate a loss,
the Company records a provision for the estimated loss on the contract. Sales
of software products of other vendors are recognized upon installation.

Support services included in the initial licensing agreement and annual
support service renewal contracts are deferred and are recognized ratably over
the support period. Revenues from training and consulting not considered
essential to the functionality of the

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software system are recognized when the Company has delivered the services
in accordance with the terms of the service agreements or have no future
performance obligations. Amounts billed in advance of revenue recognition are
recorded as deferred revenue.

The Company delivers its care analytics solutions through a
subscription-based fee structure that provides for implementation services at a
fixed hourly rate and a subsequent monthly subscription fee based upon the
number of members maintained by the payer organization. The fair value of the
implementation service revenue is recognized as the services are performed and
the subscription fee is recognized on monthly basis at the subscription rate.
The Company delivers care management services through a per participant annual
enrollment fee. Payment is generally received at the beginning of the
enrollment period. Revenue is recognized on an effort-based measure over the
enrollment period as the services are provided and the obligations to the
participants are fulfilled.

From time to time, the Company may enter into care analytics and care
management contracts that guarantee certain cost savings or other performance
measures to the customer. Certain amounts are refundable to the customer if
such savings or performance criteria are not achieved. Under such contracts,
the Company defers revenue equal to either the maximum potential amount of fees
that are refundable, or such amount that is determined by management to be
reasonable based on historical performance under the contract. Such revenue
will not be recognized until the performance criteria have been met.

3. Net loss per share

Loss per share is computed by dividing the net loss available to common
stockholders for the period by the weighted average number of common shares
outstanding during the period. Diluted net loss per share is computed by
dividing the net loss for the period by the weighted average number of common
and potential common shares outstanding during the period if their effect is
dilutive. Potential common shares include common stock subject to repurchase
and incremental common shares issuable upon the exercise of stock options. The
potential common shares, which are excluded from the determination of diluted
net loss per share as the effect of such shares is anti-dilutive were 3,501,000
and 4,027,000 at September 30, 2002 and 2001, respectively.

4. Common Stock

In March 2001, the Company increased the number of its authorized shares
of Common Stock from 15,000,000 to 50,000,000.

5. Recent Accounting Pronouncements

In August 2001, the Financial Accounting Standards Board (FASB) issued
SFAS No. 143, Accounting for Asset Retirement Obligations. SFAS No. 143
addresses accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs. This statement requires that the fair value of a liability for an asset
retirement obligation be recognized in the period in which it is incurred if a
reasonable estimate of fair value can be made. The associated asset retirement
costs are capitalized as part of the carrying amount of the long-lived asset.
The liability is accreted to its present value each period while the cost is
depreciated over its useful life. SFAS No. 143 is effective for financial
statements issued for fiscal years beginning after June 15, 2002. We have not
yet determined the effects that SFAS No. 143 will have on our financial
position, results of operations or cash flows but we do not anticipate any
material adverse impact.

In June of 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities.FAS 146 requires that a liability
for a cost that is associated with an exit or disposal activity be recognized
when the liability is incurred. It nullifies the guidance of the Emerging
Issues Task Force (EITF) in EITF Issue No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring). Under EITF Issue No.
94-3, an entity recognized a liability for an exit cost on the date that the
entity committed itself to an exit plan. In FAS 146, the Board acknowledges
that an entitys commitment to a plan does not, by itself, create a present
obligation to other parties that meets the definition of a liability. FAS 146
also establishes that fair value is the objective for the initial measurement
of the liability. FAS 146 will be effective for exit or disposal activities
that are initiated after December 31, 2002.

6. Goodwill and Other Intangible Assets

Goodwill

We adopted SFAS 142, Goodwill and Other Intangible Assets on January 1,
2002. Accordingly, we reclassified $462,000 of intangible assets to goodwill
and discontinued periodic amortization of goodwill. Goodwill will be assessed
annually for impairment

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by applying a fair-value-based test. Additionally, the standard requires a
transitional impairment test during the period of adoption. We have performed
the transitional impairment test, which indicated that there is no impairment
to goodwill as of January 1, 2002.

During the three months ended September 30, 2001 and the nine months ended
September 30, 2001, we recorded $162,000 and $508,000 in amortization of
goodwill, respectively. The impact of amortization of goodwill on net loss for
the three and nine months ended September 30, 2001 is shown on the following
table (in thousands, except per share data):

|                                                                         |                       |  |                    |      |                    |  |         |      | 
|------------------------------------------------------------------------ | --------------------- |  | ------------------ | ---- | ------------------ |  | ------- | ---- | 
|                                                                         |                       |  | Three Months Ended |      | Nine Months Ended 
|                                                                         |                       |  | September 30, 2001 |      | September 30, 2001
|                                                                         |                       |  |                    |      |                   
|Reported net loss                                                        |                       |  | (3,403             | )    |                    |  | (14,818 | )   
|Add back:                                                                |                       |  |                    |      |                    |  |         |     
|                                                                         | Goodwill amortization |  |                    | 162  |                    |  |         | 508  | 
|                                                                         |                       |  |                    |      |                    |  |         |     
|Net loss excluding goodwill amortization                                 |                       |  | (3,241             | )    |                    |  | (14,310 | )   
|                                                                         |                       |  |                    |      |                    |  |         |     
|Net loss per share basic and diluted                                    |                       |  | (0.23              | )    |                    |  | (1.00   | )   
|Add back:                                                                |                       |  |                    |      |                    |  |         |     
|                                                                         | Goodwill amortization |  |                    | 0.01 |                    |  |         | 0.04 | 
|                                                                         |                       |  |                    |      |                    |  |         |     
|Net loss, excluding goodwill amortization                                |                       |  | (0.22              | )    |                    |  | (0.96   | )   
|                                                                         |                       |  |                    |      |                    |  |         |     
|Weighted average number of common
shares outstanding (basic and diluted) |                       |  | 15,110             |      |                    |  | 14,893  |     
|                                                                         |                       |  |                    |      |                    |  |         |     

Other Intangible assets

Intangible assets that have finite useful lives will continue to be
amortized over their useful lives. Our intangible assets consists primarily of
existing technology and customer base. Our acquired workforce intangible asset
was reclassified to goodwill upon the adoption of FAS 142 on January 1, 2002.
Amortization of intangible assets was $134,000 and $768,000 for the three and
nine months ending September 30, 2002, respectively. The table below summarizes
the activity by intangible asset (in thousands). See Note 7 regarding the
impairment charge.

|                                           |                       |  |            |        |          |  |           |      |       |  |      |      |   |  |        |        |  
|------------------------------------------ | --------------------- |  | ---------- | ------ | -------- |  | --------- | ---- | ----- |  | ---- | ---- | - |  | ------ | ------ | -
|                                           |                       |  | Existing   |        | Customer |  |           |      |       |  |      |      |  
|                                           |                       |  | Technology |        | Base     |  | Workforce |      | Total
|                                           |                       |  |            |        |          |  |           |      |      
|Acquired Cost                              |                       |  | 5,200      |        |          |  | 1,150     |      |       |  | 710  |      |   |  | 7,060  |       
|Accumulated Amortization                   |                       |  | (1,213     | )      |          |  | (269      | )    |       |  | (248 | )    |   |  | (1,730 | )     
|                                           |                       |  |            |        |          |  |           |      |       |  |      |      |   |  |        |       
|Intangible assets as of December 31, 2001  |                       |  | 3,987      |        |          |  | 881       |      |       |  | 462  |      |   |  | 5,330  |       
|                                           | Reclassify            |  |            |        |          |  |           |      |       |  |      |      |   |  |        |        |  
|                                           | Workforce to
Goodwill |  |            |       |          |  |           |     |       |  |      | (462 | ) |  |        | (462   | )
|                                           | Amortization          |  |            | (630   | )        |  |           | (138 | )     |  |      |     |   |  |        | (768   | )
|                                           | Impairment Charge     |  |            | (2,006 | )        |  |           | (444 | )     |  |      |     |   |  |        | (2,450 | )
|                                           |                       |  |            |        |          |  |           |      |       |  |      |      |   |  |        |       
|Intangible assets as of September 30, 2002 |                       |  | 1,351      |        |          |  | 299       |      |       |  |     |      |   |  | 1,650  |       
|                                           |                       |  |            |        |          |  |           |      |       |  |      |      |   |  |        |       

7. Asset Impairment Charge

On May 9, 2001 we announced an impairment charge in the first quarter 2001
on intangible assets acquired in connection with the acquisition of the
Portland, Oregon-based Interactive Media Group (IMG) in the amount of $704,000.
In May 2001, management determined that the operations of IMG should be
discontinued due to the slowdown in the web design and consulting industry. On
May 8, 2001, the Board of Directors approved a plan to immediately discontinue
IMGs operations.

During the second quarter of 2002, the Company experienced a decline in
demand for services in its Care Analytics/Care Management reporting unit.
Management determined this to be a triggering event pursuant to the provisions
of SFAS No. 144. Consequently, management evaluated the recoverability of its
long-lived assets in relation to the Care Analytics/Care Management reporting
unit. The analysis was first performed on an undiscounted cash flow basis which
indicated an impairment in its Care Analytics/Care Management reporting unit.
The impairment was then calculated using projections of discounted cash flows
over ten

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years utilizing a discount rate and terminal value commensurate with other
Disease Management companies, and companies of similar size to Landacorp. The
assumptions used in this analysis represent managements estimate of future
results.

The analysis resulted in an impairment charge during the three months
ended June 30, 2002 of $3,300,000, which consisted of a write-down of $850,000
and $2,450,000 to property, plant & equipment and its definite-lived intangible
assets, respectively. The Company will continue to monitor its performance
against the projections used in this analysis, which could result in future
impairments.

8. Restructuring and Acquisition Related Costs

During 2001, the Company announced its plan to cease operations of its
Portland, Oregon-based Interactive Media Group (IMG). Additionally, the company
had a reduction in work force of approximately 30%, or 76 employees.
Restructuring and acquisition related charges in 2001 were $1,301,000 relating
to severance costs, the closing of the IMG operations and additional lease
obligations related to unoccupied office space that the Company had committed
to, as well as a charge of $268,000 related to an agreement with certain
shareholders and option holders in connection with the acquisition of
PatientCentrix.

The restructuring accrual is based on certain estimates and judgments
related to contractual obligations and related costs. Potential restructuring
accruals related to lease contractual obligations could be materially affected
by factors such as our ability to secure subleases, the credit-worthiness of
subleases and our success at negotiating early termination agreements with
lessors. In the event that actual results differ from these estimates or the
Company adjusts these estimates in future periods, we may need to establish an
additional restructuring accrual or reverse accrual amounts accordingly.

The major components of the restructuring and acquisition related costs in
2001 and the remaining accrual at September 30, 2002 are as follows (in
thousands):

|                                  |  |            |       |               |  |                    |       |                     |  |  |     | 
|--------------------------------- |  | ---------- | ----- | ------------- |  | ------------------ | ----- | ------------------- |  |  | --- | 
|                                  |  |            |       |               |  | Amounts            |       | Accrued            
|                                  |  |            |       |               |  | Utilized in        |       | Restructuring Costs
|                                  |  | 2001 Costs |       | 2001 and 2002 |  | September 30, 2002
|                                  |  |            |       |               |  |                   
|Disposal of Fixed
Assets          |  |            | 173   |               |  |                    | 173   |                     |  |  |    | 
|Facility/rental
obligations       |  |            | 405   |               |  |                    | 221   |                     |  |  | 184 | 
|Severance and
workforce reduction |  |            | 455   |               |  |                    | 447   |                     |  |  | 8   | 
|Acquisition related               |  |            | 268   |               |  |                    | 268   |                     |  |  |    | 
|                                  |  |            |       |               |  |                    |       |                     |  |  |     | 
|                                  |  |            | 1,301 |               |  |                    | 1,109 |                     |  |  | 192 | 
|                                  |  |            |       |               |  |                    |       |                     |  |  |     | 

9. Agreement with Certain Shareholders and Option Holders

On March 13, 2002, the Company resolved a disagreement with former
shareholders and option holders of PatientCentrix regarding the amount of the
Earn Out payment due under the PatientCentrix merger agreement. During the
first quarter of 2002, as part of the resolution, we paid the former
shareholders and option holders of PatientCentrix an aggregate $400,000 in
respect of the Earn Out payment. This amount was recorded in the fourth quarter
of 2001 as an adjustment to goodwill. As further consideration for the release
of all disagreements related to the merger and Merger Agreement, we agreed to
reduce to $0.39 per share, the exercise price of stock options held by Michael
Miele, the major shareholder of PatientCentrix. This amount was recorded in the
fourth quarter of 2001 as an acquisition related charge in the amount of
$268,000. We also agreed to appoint Mr. Miele to our board of directors until
March 2003.

10. Subsequent Events

On October 9, 2002, the Company announced the early termination of its
agreement with Lifeguard, Inc. (Lifeguard) due to the takeover of the
Lifeguard HMO by the State of Californias Department of Managed Healthcare
(DMHC). At this time, the Company amended its agreement with Lifeguard to
provide for the early termination of the agreement and to eliminate the
Companys obligation to reimburse any fees paid to the Company by Lifeguard.
As a result, the Company expects to recognize revenue during the

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fourth quarter of 2002 of approximately $622,000 that was deferred due to the
performance guarantee under the original contract, which was amended on July
31, 2002. As of September 30, 2002, the Company had recognized revenue of
approximately $343,000 under this contract.




Item 2.  Managements Discussion and Analysis of Financial Condition and Results of Operations

Note Regarding Forward-Looking Statements: This quarterly report contains
forward looking statements for purpose of the safe harbor provisions under the
Private Securities Litigation Reform Act of 1995. Examples of such forward
looking statements include statements about our anticipated expenses,
impairment, restructuring and other charges and accruals, revenues and
financial results and business performance for fiscal 2002 and during the next
12 months, our strategy with respect to strategic partners, our plans to
support Maxsys I, the effects of SFAS No. 143 on our financial position,
anticipated growth in the market for population health management services and
increased penetration of our related product offerings and statements regarding
estimates of our future results relating to impairment charges. Actual results
may differ materially from those projected in such forward-looking statements
due to various known and unknown risks and uncertainties, including the risk
that we may fail to close on certain pending customer contracts during the next
12 months, our dependence on a limited number of products with limited market
acceptance, the risk that the market for population health management services
does not develop as anticipated, and the risk that we are unable to
successfully integrate the products and service offerings of our recent
acquisitions and successfully capitalize on anticipated synergies and growth
opportunities. For further information regarding these and the other risks
related to Landacorps business, see Factors that may Affect our Future
Results set forth below, as well as Landacorps prior filings with the
Securities and Exchange Commission, including its Form 10-K for the year ended
December 31, 2001.

Overview

Landacorp provides technology-driven population health management
solutions to healthcare payer and delivery organizations. Our innovative
predictive modeling and interventional disease management programs are
integrated with Internet- and Windows®-based medical management software to
deliver comprehensive solutions that can help our clients manage their at-risk
populations in ways that prevent and reduce cost, while improving outcomes.
Combined, our products and services comprise a unique set of capabilities that
support the continuum of patient care, from medical management to predictive
modeling to disease intervention.

Landacorps disease management products and servicesour predictive
modeling and interventional capabilitieshelp our customers identify and
intervene with their members at risk for a chronic or potentially high
predicted expenditure outcomes associated with chronic health conditions like
asthma, diabetes and heart disease. These member-focused solutions assist our
clients in managing the health of these members through educational and
self-management materials or through referral to nurse case managers.
Landacorps medical management software solutions help health plans and
hospitals manage the cost and care of their patients by documenting treatment,
ensuring that care guidelines and government compliance requirements are met,
and by automating the workflow and processes surrounding care coordination
activities. These applications streamline administrative and business processes
and enable real-time interaction among various healthcare participants. As of
September 30, 2002, 28 payers who claim to have a combined membership of
approximately 59 million participants were using our payer solutions, and
approximately 139 hospital providers were using our provider solutions. We have
historically derived revenues from the installation and licensing of our maxMC
and Maxsys solutions, sublicensing third-party software applications as part of
system implementations and delivery of post-contract customer support, training
and consulting services. We are currently focusing our primary development,
sales and marketing efforts on our DSSeries, Managing for Tomorrow, maxMC,
e-maxMC, and Maxsys IIproducts. Although we do not anticipate future system
sales or enhancements of Maxsys I, we continue to provide maintenance services
to, and receive maintenance fees from, customers who purchased this product in
the past. We plan to continue to support Maxsys I for the foreseeable future as
a service to such customers and pursuant to ongoing contractual obligations.

We recognize system sales revenues and associated costs using the
percentage-of-completion method for fixed-fee contracts, with labor hours
incurred relative to total estimated contract hours as the measure of progress
towards completion. Revenues on time and materials based contracts are
recognized as services are delivered. We recognize revenues from sublicensing
of third-party software upon installation of such software. We recognize
revenues from support services ratably over the support period. We recognize
revenues from training and consulting as such services are delivered.

The Company delivers care analytics services through a subscription-based
fee structure that provides for implementation services at a fixed hourly rate
and a subsequent monthly subscription fee based upon the number of members
maintained by the payer organization. The fair value of the implementation
service revenue is recognized as the services are performed and the
subscription fee

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is recognized on a monthly basis at the subscription rate. The Company
delivers care management services through a per participant annual enrollment
fee. Payment is generally received at the beginning of the enrollment period.
Revenue is recognized on an effort-based measure over the enrollment period as
the services are provided and the obligations to the participants are
fulfilled.

From time to time, the Company may enter into care analytics and care
management contracts that guarantee certain cost savings or other performance
measures to the customer. Certain amounts are refundable to the customer if
such savings or performance criteria are not achieved. Under such contracts,
the Company defers revenue equal to either the maximum potential amount of fees
that are refundable, or such amount that is determined by management to be
reasonable based on historical performance under the contract. Such revenue
will not be recognized until the performance criteria have been met.

To accelerate the implementation of elements of our strategy, we intend to
target and pursue strategic acquisitions and relationships, such as marketing
alliances with vendors of complementary products and services and partnerships
with Internet providers of healthcare content, disease management and
health-related e-commerce services. Investigating or entering into any such
strategic relationships could lead to additional expenditures.

Critical Accounting Policies

Managements Discussion and Analysis of Financial Condition and Results
of Operations are based upon the Companys consolidated financial statements
and the notes thereto, which have been prepared in accordance with generally
accepted accounting principles in the United States (US GAAP). The
preparation of these financial statements requires management to make estimates
and judgments that affect the reported amounts of assets and liabilities and
the reported amounts of revenues and expenses during the reported periods. On
an ongoing basis, management evaluates its estimates and judgments, including
those related to revenue recognition, bad debts, restructuring costs, and
goodwill and other intangible assets.

Management bases its estimates and judgments on historical experience and
on various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent
from other sources. There can be no assurance that actual results will not
differ from those estimates.

The Company has identified the policies below as critical to our business
operations and the understanding of our results of operations.

Revenue recognition.The Company recognizes revenues when persuasive
evidence of an arrangement exists, services have been rendered, the price to
the buyer is fixed or determinable, and collectibility is reasonably assured.
Revenues consist of software license and implementation fees, related
maintenance and software service fees, and care analytics and disease
management services. Deferred revenue consists of maintenance billings and
annual enrollment fees due in advance of service periods. From time to time,
the Company may enter into care analytics and care management contracts that
guarantee certain cost savings or other performance measures to the customer.
Certain amounts are refundable to the customer if such savings or performance
criteria are not achieved. Under such contracts, the Company defers revenue
equal to either the maximum potential amount of fees that are refundable, or
such amount that is determined by management to be reasonable based on
historical performance under the contract. Such revenue will not be recognized
until the performance criteria have been met. The Companys revenue
recognition policies are consistent with the guidance in Staff Accounting
Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements and
AICPA Statement of Position No. 97-2 Software Revenue Recognition. The
Company follows specific and detailed guidelines in measuring revenue; however
certain estimates and judgments made by management affect the application of
the revenue policy. These estimates include the estimated contract hours and
time to complete for percentage of completion accounting, and the effort-based
measures used in services accounting. Changes in conditions or new contract
terms could cause management to determine these estimates and judgments must be
revised. Such changes or revisions could adversely affect the revenue
recognition for any reporting period.

Bad debt.Management analyzes accounts receivable balances, historical bad
debts, customer concentrations, customer credit worthiness, current economic
trends, and changes in our customer payment terms and trends when evaluating
the adequacy of the allowance for bad debt. Significant management judgment and
estimates must be made and used in connection with establishing the allowance
for bad debt in any accounting period. The accounts receivable balance was $5.4
million, net of allowance for bad debt of $276,000 as of September 30, 2002. If
the financial condition of the Companys customers were to deteriorate,
resulting in an impairment of their ability to make payments, additional
allowances may be required.

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Goodwill.We adopted SFAS 142, Goodwill and Other Intangible Assets on
January 1, 2002. Accordingly, we discontinued periodic amortization of goodwill
of approximately $650,000 annually. Goodwill will be assessed annually for
impairment by applying a fair-value-based test. Additionally, the standard
requires a transitional impairment test during the period of adoption. We have
performed the transitional impairment test, which indicated that there is no
impairment to goodwill as of January 1, 2002. The projections used to test for
impairment of goodwill were based on managements estimate of future results.
The Company will test its goodwill for impairment on an annual basis. Such
tests will be based on revised estimates, and may result in future impairments
to goodwill.

Long Lived Assets.We adopted SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets on January 1, 2002. SFAS No. 144 requires
long-lived assets to be measured at the lower of carrying amount or fair value
less the cost to sell.

During the second quarter of 2002, the Company experienced a decline in
demand for services in its Care Analytics/Care Management reporting unit.
Management determined this to be a triggering event pursuant to the provisions
of SFAS No. 144. Consequently, management evaluated the recoverability of its
long-lived assets in relation to the Care Analytics/Care Management reporting
unit. The analysis was first performed on an undiscounted cash flow basis which
indicated an impairment in its Care Analytics/Care Management reporting unit.
The impairment was then calculated using projections of discounted cash flows
over ten years utilizing a discount rate and terminal value commensurate with
other Disease Management companies, and companies of similar size to Landacorp.
The assumptions used in this analysis represent managements estimate of future
results.

The analysis resulted in an impairment charge during the three months
ended June 30, 2002 of $3,300,000, which consisted of a write-down of $850,000
and $2,450,000 to property, plant & equipment and its definite-lived intangible
assets, respectively. The Company will continue to monitor its performance
against the projections used in this analysis, which could result in future
impairments.

Restructuring costs.The restructuring accrual is based on certain
estimates and judgments related to contractual obligations and related costs.
Potential restructuring accruals related to lease contractual obligations could
be materially affected by factors such as our ability to secure subleases, the
credit-worthiness of subleases and our success at negotiating early termination
agreements with lessors. In the event that actual results differ from these
estimates or the Company adjusts these estimates in future periods, we may need
to establish an additional restructuring accrual or reverse accrual amounts
accordingly.

Recent Developments

On January 31, 2000, we purchased from High Technology Solutions, Inc.
assets related to its business of providing Web site services to healthcare
payers (this business is also referred to as Interactive Media Group or IMG).
The purchase price for the assets was $1,268,000 (including an estimated
$18,000 in assumed liabilities) of which we paid $250,000 at the closing.

On November 2, 2000 we completed the acquisition of PatientCentrix, Inc.
(PatientCentrix), a leading provider of population management targeting and
intervention programs and services. The Company acquired 100% of the shares and
assumed all outstanding options of PatientCentrix in return for cash of
$5,850,000 paid to the stockholders and option holders, and issuing 1,157,000
shares to the stockholders of PatientCentrix. The price of the shares issued
was $1.777 based on the average of the previous 20 trading days prior to the
date of the definitive agreement, which was October 31, 2000. We also assumed
all the incentive stock options issued by PatientCentrix prior to the
acquisition. These now represent options to purchase up to 1,582,532 of Common
Stock of Landacorp with an average exercise price of $1.525. The total purchase
price of $11,188,000 consisted of $5,850,000 cash, $2,056,000 of our Common
Stock (1,157,000 shares), assumed stock options with a fair value of
$2,970,000, and other acquisition related expenses of approximately $312,000,
consisting primarily of payment for legal and financial advisory services. Of
the total purchase price, approximately $191,000 was allocated to the net
tangible assets, approximately $961,000 was allocated to unearned compensation
related to our right to repurchase 30% of the shares of the Companys Common
Stock and options to purchase our Common Stock issued to employees of
PatientCentrix pursuant to the purchase agreement in the event of such
employees termination under certain circumstances, and the remainder was
allocated to intangible assets, including existing technology ($3,600,000),
customer base ($640,000), assembled work force ($280,000), and goodwill
($5,516,000).

Subsequent to the acquisition of PatientCentrix, its majority shareholder,
Michael Miele, became an employee and Director of the Company. During 2001, the
Company and the majority shareholder entered into a Settlement Agreement and
Mutual Release (Agreement) whereby the Company and majority shareholder
mutually agreed to terminate the employment relationship and to release each
other from any claims arising from or related to the employment relationship.
The majority shareholder released the Company from any and all claims that the
termination of employment in and of itself violates the Merger Agreement or
interferes with

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or negatively impacts the payment of any Earn Out under the Merger
Agreement or achievement of any related milestone event. The agreement requires
the Company to make payments to the majority shareholder of approximately
$800,000 and to allow the vesting of the majority shareholders options, allow
the options to be immediately exercisable and release the Companys repurchase
rights with respect to certain shares of common stock. The amount related to
this accelerated vesting is approximately $277,000. The Settlement and Mutual
Release amount of $1,077,000 has been recorded as goodwill.

On March 13, 2002, we resolved a disagreement with former shareholders and
option holders of PatientCentrix regarding the amount of the Earn Out payment
due under the PatientCentrix merger agreement. We agreed to pay the former
shareholders and option holders of PatientCentrix an aggregate $400,000 in
respect of the Earn Out payment. This amount was recorded in the fourth quarter
of 2001 as an adjustment to goodwill. As further consideration for the release
of all disagreements related to the merger and Merger Agreement, we agreed to
reduce to $0.39 per share, the exercise price of stock options held by Michael
Miele, the major shareholder of PatientCentrix. This amount was recorded in the
fourth quarter of 2001 as an acquisition related charge in the amount of
$268,000. We also agreed to appoint Mr. Miele to our board of directors until
March 2003.

In May of 2001, the Company announced a reduction in our work force
representing approximately 16%, or 40 employees of the Companys total work
force. In August 2001, the Company announced an additional reduction in work
force of approximately 18%, or 36 employees.

During the second quarter of 2002, the Company experienced a decline in
demand for services in its Care Analytics/Care Management reporting unit.
Management determined this to be a triggering event pursuant to the provisions
of SFAS No. 144. Consequently, management evaluated the recoverability of its
long-lived assets in relation to the Care Analytics/Care Management reporting
unit. The analysis was first performed on an undiscounted cash flow basis which
indicated an impairment in its Care Analytics/Care Management reporting unit.
The impairment was then calculated using projections of discounted cash flows
over ten years utilizing a discount rate and terminal value commensurate with
other Disease Management companies, and companies of similar size to Landacorp.
The assumptions used in this analysis represent managements estimate of future
results.

The analysis resulted in an impairment charge during the three months
ended June 30, 2002 of $3,300,000, which consisted of a write-down of $850,000
and $2,450,000 to property, plant & equipment and its definite-lived intangible
assets, respectively. The Company will continue to monitor its performance
against the projections used in this analysis, which could result in future
impairments.

As of September 30, 2002 the Companys office in Montclair, NJ was closed.

On October 9, 2002, the Company announced the early termination of its
agreement with Lifeguard, Inc. (Lifeguard) due to the takeover of the
Lifeguard HMO by the State of Californias Department of Managed Healthcare
(DMHC). At this time, the Company amended its agreement with Lifeguard to
provide for the early termination of the agreement and to eliminate the
Companys obligation to reimburse any fees paid to the Company by Lifeguard.
As a result, the Company expects to recognize revenue during the fourth quarter
of 2002 of approximately $621,000 that was deferred due to the performance
guarantee under the original contract, which was amended on July 31, 2002. As
of September 30, 2002, the Company had recognized revenue of approximately
$343,000 under this contract.

On October 21, 2002, as part of its continuing efforts to reduce costs,
the Company eliminated a total of ten positions, or approximately 6% of its
workforce.

Effective at the opening of trading on November 7, 2002, the Companys
common stock will be traded on the Nasdaq SmallCap Market. The Companys stock
will continue trading under the symbol LCOR.

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RESULTS OF OPERATIONS

The following table presents the statement of operations data as a
percentage of total revenues:

|                          |                                      |                          |       |                     |       |                     |       |      |       |      |       |      |       |  |        |      |       | 
|------------------------- | ------------------------------------ | ------------------------ | ----- | ------------------- | ----- | ------------------- | ----- | ---- | ----- | ---- | ----- | ---- | ----- |  | ------ | ---- | ----- | 
|                          |                                      |                          |       | Three month period  |       | Nine month period  
|                          |                                      |                          |       | ended September 30, |       | ended September 30,
|                          |                                      |                          |       |                     |       |                    
|                          |                                      |                          |       | 2002                |       | 2001                |       | 2002 |       | 2001
|                          |                                      |                          |       |                     |       |                     |       |      |       |     
|REVENUE:                  |                                      |                          |       |                     |       |                     |       |      |       |      |       |      |       |  |        |     
|                          | Program revenue and maintenance fees |                          |       | 74.8                |       |                     |       | 90.1 |       |      |       | 76.3 |       |  |        | 75.3 |      
|                          | System sales and consulting fees     |                          |       | 25.2                |       |                     |       | 9.9  |       |      |       | 23.7 |       |  |        | 24.7 |      
|                          |                                      |                          |       |                     |       |                     |       |      |       |      |       |      |       |  |        |     
|                          |                                      | Total revenues           |       |                     | 100.0 |                     |       |      | 100.0 |      |       |      | 100.0 |  |        |      | 100.0 | 
|                          |                                      |                          |       |                     |       |                     |       |      |       |      |       |      |       |  |        |     
|COST OF REVENUE:          |                                      |                          |       |                     |       |                     |       |      |       |      |       |      |       |  |        |     
|                          | Program revenue and maintenance fees |                          |       | 37.8                |       |                     |       | 43.8 |       |      |       | 41.4 |       |  |        | 44.2 |      
|                          | System sales and consulting fees     |                          |       | 11.2                |       |                     |       | 14.7 |       |      |       | 11.9 |       |  |        | 20.9 |      
|                          |                                      |                          |       |                     |       |                     |       |      |       |      |       |      |       |  |        |     
|                          |                                      | Total cost of revenue    |       |                     | 49.0  |                     |       |      | 58.5  |      |       |      | 53.3  |  |        |      | 65.1  | 
|                          |                                      |                          |       |                     |       |                     |       |      |       |      |       |      |       |  |        |     
|GROSS PROFIT              |                                      |                          | 51.0  |                     |       |                     | 41.5  |      |       |      | 46.7  |      |       |  | 34.9   |     
|                          |                                      |                          |       |                     |       |                     |       |      |       |      |       |      |       |  |        |     
|OPERATING EXPENSES:       |                                      |                          |       |                     |       |                     |       |      |       |      |       |      |       |  |        |     
|                          | Sales and marketing                  |                          |       | 21.3                |       |                     |       | 28.9 |       |      |       | 24.1 |       |  |        | 39.1 |      
|                          | Research and development             |                          |       | 25.8                |       |                     |       | 34.1 |       |      |       | 26.7 |       |  |        | 44.0 |      
|                          | General and administrative           |                          |       | 20.6                |       |                     |       | 50.7 |       |      |       | 28.2 |       |  |        | 55.0 |      
|                          | Amortization of intangible assets    |                          |       | 2.3                 |       |                     |       | 13.1 |       |      |       | 4.9  |       |  |        | 13.2 |      
|                          | Restructuring charges                |                          |       |                    |       |                     |       | 5.9  |       |      |       |     |       |  |        | 8.1  |      
|                          | Asset Impairment Charge              |                          |       |                    |       |                     |       |     |       |      |       | 21.0 |       |  |        | 6.0  |      
|                          |                                      |                          |       |                     |       |                     |       |      |       |      |       |      |       |  |        |     
|                          |                                      | Total operating expenses |       |                     | 70.0  |                     |       |      | 132.7 |      |       |      | 104.9 |  |        |      | 165.4 | 
|                          |                                      |                          |       |                     |       |                     |       |      |       |      |       |      |       |  |        |     
|LOSS FROM OPERATIONS      |                                      |                          | (19.0 | )                   |       |                     | (91.2 | )    |       |      | (58.2 | )    |       |  | (130.5 | )   
|INTEREST AND OTHER INCOME |                                      |                          | 0.5   |                     |       |                     | 3.2   |      |       |      | 0.8   |      |       |  | 5.1    |     
|INTEREST EXPENSE          |                                      |                          | (0.1  | )                   |       |                     | (0.1  | )    |       |      | (0.2  | )    |       |  | (0.1   | )   
|                          |                                      |                          |       |                     |       |                     |       |      |       |      |       |      |       |  |        |     
|NET LOSS                  |                                      |                          | (18.6 | )                   |       |                     | (88.1 | )    |       |      | (57.6 | )    |       |  | (125.5 | )   
|                          |                                      |                          |       |                     |       |                     |       |      |       |      |       |      |       |  |        |     

Comparison of the three and nine-month periods ended September 30, 2001 and
2002.

Revenues.Program revenues and maintenance fees represent repeat and
recurring revenue streams, such as per member per month licensing and servicing
revenues, per participant per year fees and support charges for maintaining
software. System sales and consulting fees represent one-off or non-recurring
and non-repeat revenue, such as sales of perpetual licenses, implementation and
ad-hoc consulting or training services. During the three months ended September
30, 2002, two customers accounted for 32% and 11% of revenue. Two customers
accounted for 27% and 16% of revenue for the three-month period ended September
30, 2001. During the nine months ended September 30, 2002, two customers
accounted for 15% and 20% of revenue. Two customers accounted for 28% and 10%
of revenue for the nine-month period ended September 30, 2001.

Program revenues and maintenance fees have increased by $789,000 or 22.7%
from $3,480,000 in the three-month period ended September 30, 2001 to
$4,269,000 in the three-month period ended September 30, 2002. Program revenues
and maintenance fees have increased by $3,074,000 or 34.6% from $8,889,000 in
the nine-month period ended September 30, 2001 to $11,963,000 in the nine-month
period ended September 30, 2002. The increase in revenues relates mainly to the
increased revenue from our Managing for Tomorrow program.

System sales and consulting fees increased by $1,053,000 or 274.2% from
$384,000 in the three-month period ended September 30, 2001 to $1,437,000 in
the three-month period ended September 30, 2002. System sales and consulting
fees increased by $805,000 or 27.6% from $2,916,000 in the nine-month period
ended September 30, 2001 to $3,721,000 in the nine-month period ended September
30, 2002. These increases in system sales and consulting fees are primarily due
to additional revenue in 2002 related to implementations of our medical
management software.

Cost of Program Revenue and Maintenance Fees.Cost of program revenue and
maintenance fees consists principally of personnel related costs, product
costs, amortization of unearned stock-based compensation, related department
overhead, costs of third party software products, and depreciation of
equipment. Cost of program revenues and maintenance fees increased by $465,000
or 27.5% from $1,691,000 in the three-month period ended September 30, 2001 to
$2,156,000 in the three-month period ended September 30,

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2002, representing
48.6% of program revenues and maintenance fees revenues for the third quarter
of 2001 and 50.5% for the third quarter of 2002. Cost of program revenues and
maintenance fees increased by $1,271,000 or 24.3% from $5,222,000 in the
nine-month period ended September 30, 2001 to $6,493,000 in the nine-month
period ended September 30, 2002, representing 58.7% of program revenues and
maintenance fees revenues for the nine months ended September 30, 2001 and
54.3% for the same period in 2002. This increase in costs is primarily due to
additional direct costs associated with increased revenue from our Managing for
Tomorrow program.

Cost of System Sales and Consulting Fees.Cost of system sales and
consulting fees consist principally of costs incurred in the implementation of
our software products, and other consulting and training personnel costs. The
cost of system sales and consulting fees includes personnel costs, amortization
of unearned stock-based compensation, non-reimbursed travel expenditures,
related department overhead, amortization of capitalized software development
costs, costs of third party software products, and depreciation on equipment.
During the quarter ended September 30, 2002 these costs were $641,000 or 44.6%
of system sales and consulting fees, compared to costs of $568,000 representing
147.9% of system sales and consulting fees during the quarter ended September
30, 2001. Cost of system sales and consulting fees increased by $73,000 or
12.9% from the quarter ended September 30, 2001 to the same period for 2002.
This cost increase was mostly due to an increase in costs associated with the
additional system sales and consulting fees revenue in 2002 related to
implementations of our medical management software. During the nine-month
period ended September 30, 2002 these costs were $1,867,000 or 50.2% of system
sales and consulting fees, compared to costs of $2,460,000 representing 84.4%
of system sales and consulting fees during the nine-month period ended
September 30, 2001. Cost of system sales and consulting fees decreased by
$593,000 or 24.1% from the nine-month period ended September 30, 2001 to the
same period for 2002. This cost decrease was mostly due to the reduction in
workforce during 2001 and the elimination of our web consulting business during
July of 2001, each as discussed above in the Recent Developments section.

Sales and Marketing. Sales and marketing expenses consist principally of
compensation for our sales and marketing personnel, amortization of unearned
stock-based compensation, advertising, trade show and other promotional costs,
and departmental overhead. Sales and marketing expenses during the quarter
ended September 30, 2002 amounted to $1,216,000 representing 21.3% of total
revenues, in comparison with $1,115,000 representing 28.9% of total revenues
during the corresponding quarter of 2001. Sales and marketing expenses
increased by $101,000 or 9.1% from the third quarter of 2001. This increase is
mostly related to the growth in our Managing for Tomorrow program. Sales and
marketing expenses during the nine-month period ended September 30, 2002
amounted to $3,771,000 representing 24.0% of total revenues, in comparison with
$4,621,000 representing 39.1% of total revenues during the corresponding period
of 2001. Sales and marketing expenses decreased by $850,000 or 18.4% from the
nine-months ended September 30, 2001. This is primarily due to the 2001
reductions in workforce, as discussed in the Recent Developments section above.

Research and Development.Research and development expenses consist of
personnel costs, amortization of unearned stock-based compensation, related
department overhead and depreciation on equipment. Research and development
expenses totaled $1,470,000 or 25.8% of total revenues during the quarter ended
September 30, 2002, an increase of $154,000 or 11.7% compared to expenses
totaling $1,316,000 representing 34.1% of total revenues during the quarter
ended September 30, 2001. This increase is mostly due to costs associated with
the increase in revenue from our Managing for Tomorrow program. Research and
development expenses totaled $4,184,000 or 26.7% of total revenues in the
nine-months ended September 30, 2002, a decrease of $1,010,000 or 19.4%
compared to expenses totaling $5,194,000 representing 44.0% of total revenues
in the nine-months ended September 30, 2001. This is primarily due to the 2001
reductions in workforce discussed in the Recent Developments section above.

General and Administrative.General and administrative expenses consist of
compensation for personnel, fees for outside professional services,
amortization of unearned stock-based compensation, allocated occupancy and
overhead costs and bad debt. General and administrative expenses decreased by
$784,000 or 40.0% from $1,959,000, representing 50.7% of total revenues, in the
third quarter of 2001 to $1,175,000, representing 20.6% of total revenues, in
the third quarter of 2002. General and administrative expenses decreased by
$2,069,000 or 31.9% from $6,494,000, representing 55.0% of total revenues, in
the nine-months ended September 30, 2001 to $4,425,000, representing 28.2% of
total revenues, in the nine-months ended September 30, 2002. Approximately
$700,000 of this decrease is related to a specific net increase in first
quarter 2001 to our bad debt reserve for the outstanding balance of a customer
that was having difficulty in meeting their payment obligations. The remaining
decrease was due to general cost cutting measures since 2001.

Amortization of Intangible Assets.Amortization expense decreased by
$373,000 or 73.6% from $507,000 or 13.1% of revenues in the third quarter of
2001 to $134,000 or 2.3% of revenues in the third quarter 2002. Amortization
expense decreased by $784,000 or 50.5% from $1,553,000 or 13.2% of revenues in
the nine-months ended September 30, 2001 to $769,000 or 4.9% of revenues in the
nine-months ended September 30, 2002. Included in the third quarter of 2001 is
$162,000 of goodwill amortization. Effective January

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1, 2002, the Company no
longer amortizes goodwill and will test goodwill for impairment in accordance
with the provisions of SFAS No. 142.

Asset Impairment Charge.On May 9, 2001 we announced an impairment charge
in the first quarter 2001 on intangible assets acquired in connection with the
acquisition of the Portland, Oregon-based Interactive Media Group (IMG). The
charge was $704,000. In May 2001, management determined that the operations of
IMG should be discontinued due to the slowdown in the web design and
consulting industry. On May 8, 2001, the Board of Directors approved a
plan to immediately discontinue IMGs operations. The employees of IMG are
included in the reduction in workforce described above in the Recent
Developments section.

During the second quarter of 2002, primarily due to a decline in demand
for services in the Companys Care Analytics/Care Management reporting unit,
management determined that it was necessary to test for an impairment of
long-lived assets. This test was performed in accordance with the provisions of
FAS 144, which was adopted by the Company on January 1, 2002. As a result of
this test and the subsequent analysis of the fair value of its Care
Analytics/Care Management reporting unit, Landacorp recorded an impairment to
its long-lived assets in the amount of $3,300,000 during the second quarter of
2002. As discussed in the Factors that May Affect our Future Results section
below, the analysis performed to determine the amount of impairment was based
on managements estimate of future results. However, such estimates may need to
be revised in future periods, which could result in additional impairment
charges.

Restructuring charges. Restructuring charges of $231,000 and $960,000 were
recorded in the three and nine-month periods ended September 30, 2001,
respectively. The costs included in the restructuring charges relate to
severance costs and the closing of the IMG operations. In May 2001, the Company
announced a reduction in work force representing approximately 16%, or 40
employees of the Companys total work force.

Stock-Based Compensation.Amortization of unearned stock compensation
during the quarters ended September 30, 2002 and 2001 were $54,000 and
$267,000, respectively. Amortization of unearned stock compensation during the
nine-month periods ended September 30, 2002 and 2001 were $326,000 and
$1,087,000, respectively. These amounts have been allocated to cost of sales
and operating expenses.

Interest and Other Income and Interest Expense.Interest and other income
consist primarily of earnings on our cash and cash equivalents. Interest and
other income amounted to $125,000 for the third quarter of 2001 and $28,000 for
the third quarter of 2002, and $603,000 for the nine-months ended September 30,
2001 and $118,000 for the nine-months ended September 30, 2002. The decrease in
interest and other income in the third quarter 2002 of $97,000 or 77.6% and the
decrease of $485,000 or 80.4% in the nine-months ended September 30, 2002 are
due to the decrease in cash from September 30, 2001 to September 30, 2002.
Interest expense of $6,000 during the third quarter of 2002 and $5,000 for the
third quarter of 2001, and $26,000 during the nine-months ended September 30,
2002 and $18,000 for the nine-months ended September 30, 2001 arises from
financing certain fixed assets through capital leases.

Provision for Income Tax.We recorded no current provision or benefit for
federal or state income taxes for the first three quarters of 2001 or 2002, as
the Company has incurred net operating losses and has no carry-back potential.

Liquidity and Capital Resources

Since inception, we have financed our operations through net cash
generated from operating activities, and sales of our common stock and
preferred stock, as well as debt financing. During February 2000, we completed
our initial public offering through which we raised net proceeds of
approximately $35 million. As of September 30, 2002, we had $8.5 million in
cash and cash equivalents and $1.3 million in working capital with outstanding
capital lease obligations totaling $212,000.

Net cash used in operating activities was $3,043,000 and $8,278,000 during
the nine months ended September 30, 2002 and 2001, respectively. Net cash used
to fund operating activities in the first nine months of 2002 reflects net
losses before non-cash charges for depreciation and amortization, stock-based
compensation, asset impairment charge and increases in accounts payable, and
deferred revenue, offset by an increase in net accounts receivable and other
assets and a decrease in accrued expenses and the restructuring accrual. Net
cash used to fund operating activities in the first nine months of 2001
reflects net losses before non-cash charges for depreciation and amortization
of intangible assets, provision for doubtful accounts, stock-based
compensation, loss on sale of equipment and asset impairment charge, a decrease
in net accounts receivable and an increase in deferred revenue, offset by an
increase in other current assets and decreases in accounts payable and accrued
expenses.

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During the nine months ended September 30, 2002 and 2001, net cash used in
investing activities was $678,000 and $698,000, respectively. Investing
activities during the nine months ended 2002 and 2001 consisted primarily of
purchases of computer equipment, software, office furniture and leasehold
improvements, as well as capitalized software development costs during the nine
months ended September 30, 2001.

Net cash used in financing activities was $89,000 for the nine months
ended September 30, 2002. Net cash provided by financing activities was
$167,000 in the nine months ended September 30, 2001. Net cash used in
financing activities for the nine months ended September 30, 2002 resulted from
payments under capital lease obligations, collections on notes receivable from
officers and proceeds from issuances of common stock. Net cash provided by
financing activities for the nine months ended September 30, 2001 resulted from
the proceeds from the exercise of common stock options and collections on notes
receivable from officers, less certain finance lease payments.

We anticipate that operating expenses and planned capital expenditures
will constitute a material use of our cash resources for the foreseeable
future. In addition, we may utilize cash resources to fund acquisitions or
investments in other businesses, technologies or product lines. We believe that
available cash and cash equivalents and the net proceeds from the sale of the
common stock in our initial public offering will be sufficient to meet our
working capital and operating expense requirements for the next twelve months.
Thereafter, we may require additional funds to support our working capital and
operating expense requirements or for other purposes and may seek to raise such
additional funds through public or private debt or equity financings, although
there can be no assurance that such funding will be available on terms
acceptable to us. However, if we are not able to sign one or more of the
customer contracts presently in negotiations, we will need to seek a strategic
partner or raise additional funds within the next twelve months.

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FACTORS THAT MAY AFFECT OUR FUTURE RESULTS

We Have a Long History of Losses and May Never Become Profitable.

We have been in business since 1982 and we have incurred significant
losses since that time. We expect to continue to incur losses on an annual
basis for the foreseeable future. As of September 30, 2002, our accumulated
deficit was $46 million. We expect to incur increased levels of product
development, sales and marketing and administrative expenses and, as a result,
we will need to increase our revenue significantly to achieve future
profitability. Although our revenue has grown in recent quarters, we may not be
able to sustain this growth and we may not realize sufficient revenue to
achieve profitability. Further, even if we achieve profitability, due to
competition and the evolving nature of the disease management, medical
management, healthcare information technology and Internet markets, we could
fail to sustain or increase profitability on a quarterly or annual basis.

We Have a History of Quarterly and Annual Fluctuations in Our Revenue and
Operating Results, and Expect These Fluctuations to Continue, Which May Result
in Volatility in Our Stock Price.

Our quarterly and annual revenue and operating results have varied
significantly in the past and will likely vary significantly in the future due
to a number of factors, many of which we cannot control. The factors that may
cause our quarterly revenue and operating results to fluctuate include:



| |  |  | fluctuations in demand for our population health management products
and related services;                                                                                                                
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the ability of customers to provide us with the names of qualified
members to enroll in our Managing for Tomorrowmember-driven disease
management program;                                                
|
| |  |  | the timing of customer orders and product implementations,
particularly orders from large customers involving substantial software
implementation;                                                        
|
| |  |  | the length of our sales cycle, which varies and is unpredictable;                                                                                                                                         
|
| |  |  | the length of our software implementation process varies and often
depends on matters outside of our control such as the customers ability
to commit its resources to the implementation process;        
|
| |  |  | our ability to develop, introduce, implement and support new products
and product enhancements;                                                                                                           
|
| |  |  | the rate of adoption of our population health management solutions,
which often require our customers to change some aspects of the way in
which they have traditionally conducted business;              
|
| |  |  | announcements and new product introductions by our competitors and
deferrals of customer orders in anticipation of new products, services
or product enhancements introduced by us or our competitors; and
|
| |  |  | changes in the prices at which we can sell our population health
management solutions.                                                                                                                    

Accordingly, you should not rely on the results of any past periods as an
indication of our future performance. In some future periods, our operating
results may not meet expectations of public market analysts or investors. If
this occurs, our stock price may decline.

Our Business will Suffer if our Population Health Management Solutions Do Not
Achieve Widespread Market Acceptance Among Healthcare Payer Organizations.

Achieving our growth objectives depends on our population health
management solutions achieving widespread market acceptance among healthcare
payer organizations. This is difficult to determine at this time. We
commercially released our maxMC medical management software in 1997 and
acquired the DSSeriesand Managing for Tomorrowpredictive modeling and
interventional disease management products and services in the fourth quarter
of 2000. Our solutions currently have limited market acceptance with only 28
payer customers currently using them. Our maxMC medical management software
product has achieved some degree of market acceptance as we have implemented or
are in the process of implementing it at 12 client sites. Realizing market
acceptance for our

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disease management solutions will require ongoing enhancement of their
features and functionalities, and improved sales and marketing efforts. If we
do not gain significant market share for all of our population health
management solutions before our competitors introduce alternative products with
features similar to ours, our operating results will suffer. Operating results
will also suffer if our pricing strategies are not economically viable or
acceptable to our customers.

The Healthcare Industry May Not Accept Our Population Health Management
Solutions.

To be successful, we must attract as customers a significant number of
healthcare payer organizations, and continue to attract hospitals and
healthcare delivery organizations. We cannot determine the extent to which the
payer market will accept either our disease management or medical management
solutions as substitutes for traditional methods of intervening with members
with chronic health conditions or processing healthcare information and
managing patient care. To date, many healthcare industry participants have been
slow to adopt new disease management methodologies and medical management
technology solutions. We believe that the complex nature of healthcare
processes and communications among healthcare industry participants, as well as
concerns about confidentiality of patient information, may hinder the
development and acceptance of our population health management solutions.

In addition, customers that are already engaged in disease management
programs or have implemented information systems in which they have made
significant commitments may refuse to adopt our solutions if they perceive that
our solutions will not complement their existing investments. As a result, the
conversion from traditional methods of disease management and communication to
electronic information exchange may not occur as rapidly as we expect it will.
Even if these conversions do occur as rapidly as expected, payers and providers
may use solutions, products and services offered by others.

Because We Offer a Limited Number of Products and Operate Exclusively in the
Population Health Management Solutions Market, We Are Particularly Susceptible
to Competition, Product Obsolescence and Market Downturns.

We depend on a limited number of products and we operate exclusively in
the disease management and medical management solutions markets. Prior to our
acquisitions of predictive modeling and interventional disease management
products, we derived substantially all of our revenue from the sale and
associated support of Maxsys II(and its predecessor Maxsys I), a medical
management software solution marketed to hospitals and healthcare delivery
organizations. We anticipate that we will continue to generate revenue from the
continued sales and support of that solution, in addition to our maxMC and
e-maxMC solutions, However, we believe that for the foreseeable future
increasingly more of our revenue will be attributable to the sales and support
of our DSSeriesand Managing for Tomorrowdisease management solutions marketed
to health plans, employer groups and other payers. Dependence on this limited
product line makes us particularly susceptible to the successful introduction
of, or changes in market preferences for, competing products. In addition,
operating exclusively in the market for population management solutions make us
particularly susceptible to downturns in that market that may be unrelated to
the quality or competitiveness of our solutions.

We Currently Depend on a Limited Number of Key Customers and the Loss of Any of
Them, or Any Future Customer on Whom We May Depend For a Significant Portion of
Our Sales, Could Significantly Reduce Our Revenues and Negatively Impact Our
Results of Operations, Our Stock Price and Our Future Viability.

We currently serve a limited number of customers, two of whom accounted
for 32% and 11%, respectively, of our revenues for the three-month period ended
September 30, 2002. Moreover, because we focus our sales efforts on a small
group of potential customers in the health management solutions market we
anticipate our operating results will continue to depend on sales to a small
number of key customers for the foreseeable future. The loss of, or a
reduction in sales to, any of our current customers or our failure to sell our
products and services to additional customers would significantly reduce our
future revenues and negatively impact our results of operations, our stock
price and our future viability.

If We Do Not Hire and Retain Additional Sales, Marketing and Implementation
Personnel We May Not Succeed in Implementing Our Growth Strategy and Achieving
Our Target Revenue Growth.

Our future growth depends to a significant extent on our ability to hire
additional sales, marketing and implementation personnel in response to any
increase in our customer base. Competition for these people is intense. We have
experienced difficulty in hiring qualified sales and marketing professionals,
as well as database administrators, and we may not be successful in attracting
and retaining such individuals in part due to our recent reductions in force.
If we do not hire additional qualified sales and marketing personnel, we may
not succeed in implementing our growth strategy and our targeted revenue growth
may not be achieved. In

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addition, even if our sales increase, our market penetration and revenue
growth will be limited if we are unable to hire additional personnel to
implement the medical management solutions we sell.

We also believe that our success depends to a significant extent on the
ability of our key personnel to operate effectively, both individually and as a
group. Many of our employees have only recently joined us, and we may
experience high turnover rates in some categories of personnel. If we do not
assimilate new employees in a timely and cost-effective manner, the
productivity of those employees will be low, and as a result our operating
results may decrease.

In addition, companies in our industry whose employees accept positions
with competitors frequently claim that their competitors have engaged in unfair
hiring practices. Competitors or other companies may make such claims against
us in the future as we seek to hire qualified personnel. Any claim of this
nature could result in material litigation. We could incur substantial costs in
defending ourselves against these claims, regardless of their merits.

Our Future Success Depends in Significant Part Upon the Continued Service of
Our Management Team.

We have recently experienced significant changes in our senior management,
which may be disruptive to our business and may result in the departure of
employees and/or customers. Our management team has a great deal of experience
in the software, medical management software and healthcare information
technology industries in general and in the market for population health
management solutions, in particular. While management is relatively
inexperienced in the disease management industry, which is a relatively new
market, they are uniquely qualified to manage our business and would be
difficult to replace. These employees may voluntarily terminate their
employment with us at any time. The search for a replacement for any of our key
personnel could be time consuming, and could distract our management team from
the day-to-day operations of our business. This could delay the implementation
of our growth strategy and negatively impact our ability to achieve targeted
revenue growth. In addition, we do not maintain key person life insurance on
our key personnel.

We do not believe that the departure of Eugene Cattarina, our President
and Chief Executive Officer, will have a material adverse effect on our
business and results of operations. Our current President and Chief Executive
Officer, Eugene Miller, assumed these positions in January 2002.

The Length and Complexity of Our Sales Cycle and Product Implementation Period
May Cause Us to Expend Substantial Time, Effort and Funds Without Receiving
Related Revenue.

We do not control many of the factors that influence our customers buying
decisions and the implementation of our population health management solutions.
The sales and implementation process for our solutions is lengthy, particularly
for our medical management software products, and involves a significant
technical evaluation and requires our customers to commit considerable time and
money. The sale and implementation of our solutions are subject to delays due
to healthcare payers and providers internal budgets and procedures for
approving large capital expenditures and deploying new technologies and
methodologies within their organizations. The sales cycle for our solutions is
unpredictable and has generally ranged from six to twenty-four months from
initial contact to contract signing. The time it takes to implement our medical
management software solutions is also difficult to predict and has typically
ranged from six to fifteen months from contract execution to the commencement
of live operation. During the sales cycle and the implementation period, we may
expend substantial time, effort and money preparing contract proposals,
negotiating the contract and implementing the solution without receiving any
related revenue.

Our Disease Management Solutions Depend on Accurate Member Data Provided by the
Client, Which Must Be Received on a Timely Basis in Order for Us to Fulfill Our
Obligations.

Landacorps disease management solutions rely on claims data such as
medical claims, prescription data, member contact information, UR data and lab
data for the client to identify and target for intervention members at risk.
The inability of a customer to provide this information on a timely basis, or
the delivery of inaccurate or incorrect data could have an impact on our
ability to fulfill customer obligations and deliver guaranteed savings and,
therefore, achieve revenue expectations from particular contracts.

Our Managing for Tomorrow Disease Management Programs Rely on Complex,
Proprietary Technology, the Malfunctioning of Which Could Delay or Impede the
Realization of Revenue.

Our Managing for Tomorrow programs rely on the engagement in the program
of members targeted by a health plan or other payer organization. In order to
fulfill our customer obligations, we rely on an automated system that uses
sophisticated technologies and data

20



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management processes to contact, profile, stratify and intervene with
these members with customized self-management materials. Additionally, this
system automates workflow, and monitors and reports on results of the program.
Our telecommunications hardware and a significant portion of our data and
systems reside at an offsite data center owned by a co-location and managed
hosting service. The co-location and managed hosting industry is experiencing a
severe economic downturn, which could effect our co-location and managed
hosting service provider. If our service provider were to curtail or close its
business our access to our telecommunications hardware, systems and data could
be interrupted until we can make co-location arrangements with a new service
provider. Any such interruption or other malfunctions, system downtime or
software errors could impede our ability to realize anticipated revenue, lead
to an increase in our costs, adversely effect our relationship with our
customers, and potentially expose us to liability.

We enter into Disease Management contracts that provide guaranteed levels of
performance to our customers, and we may be required to refund to customers a
significant portion of the subscription fees paid to us if we fail to achieve
the guaranteed performance criteria.

From time to time, the Company may enter into Disease Management contracts
pursuant to which we guarantee certain minimum levels of cost savings or other
performance measures to the customer. Under such contracts, we often agree to
reimburse all or a portion of the subscription fees paid to us by the customer
if we fail to achieve such minimum cost savings. Due to the large number of
variables, many of which are not within our control, that could impact the
realization of such minimum cost savings, there can be no assurance that we
will achieve such savings. If we do not achieve the necessary cost savings we
may be obligated to reimburse significant portions of the subscription fees
paid to us by customers, we will not recognize the revenue associated with such
fees and our business and reputation may be harmed. As of September 30, 2002,
we had four contracts that contain some level of performance guarantee.

Our Medical Management Solutions are Complex and May Contain Undetected
Software Errors, Which Could Lead to an Increase in Our Costs or a Reduction in
Our Revenues.

Complex software products such as our medical management solutions
frequently contain undetected errors when first introduced or as new versions
are released. We have, from time to time, found errors in our software
products, and in the future we may find further errors. In addition, we combine
our solutions with software and hardware products from other vendors. As a
result, we may experience difficulty in identifying the source of an error. The
occurrence of hardware and software errors, whether caused by our solutions or
another vendors products, could:



| |  |  | impair market acceptance of our products;                                                 
| | - |  | ------------------------------------------------------------------------------------------
|
| |  |  | cause sales of our solutions to decrease and our revenues to decline;                     
|
| |  |  | cause us to incur significant warranty and repair costs;                                  
|
| |  |  | divert the attention of our technical personnel away from product development efforts; and
|
| |  |  | cause significant customer relations problems.                                            

Because Our Population Health Management Solutions Rely on Technology That We
Own, Our Business Will Suffer if We Fail to Protect Our Intellectual Property
Rights to That Technology Against Infringement by Competitors.

To protect our intellectual property rights, we rely on a combination of
copyright, trademark and trade secret laws and restrictions on disclosure. We
also enter into confidentiality or license agreements with our employees,
consultants and corporate partners, and control access to and distribution of
our software, documentation and other proprietary information. Despite our
efforts to protect our proprietary rights, unauthorized parties may copy or
otherwise obtain and use our products or technology. Monitoring unauthorized
use of our solutions is difficult and the steps we have taken may not prevent
unauthorized use of our technology, particularly in foreign countries where the
laws may not protect our proprietary rights as fully as in the United States.
If we fail to protect our intellectual property from infringement, other
companies may use our intellectual property to offer competitive products at
lower prices. If we fail to compete effectively against these companies we
could lose customers and sales of our solutions and our revenue could decline.

Efforts to Protect Our Intellectual Property or Our Alleged Misuse of the
Intellectual Property of Others May Cause Us to Become Involved in Costly and
Lengthy Litigation.

21



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Although we are not currently involved in any intellectual property
litigation, we may be a party to litigation in the future either to protect our
intellectual property or as a result of an alleged infringement by us of the
intellectual property of others. These claims and any resulting litigation
could subject us to significant liability or invalidate our ownership rights in
the technology used in our solutions. Litigation, regardless of the merits of
the claim or outcome, could consume a great deal of our time and money and
would divert management time and attention away from our core business. Any
potential intellectual property litigation could also force us to do one or
more of the following:



| |  |  | stop using the challenged intellectual property or selling our
products or services that incorporate it;                                                                                                                              
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | obtain a license to use the challenged intellectual property or to
sell products or services that incorporate it, which could be costly or
unavailable; and                                                                           
|
| |  |  | redesign those products or services that are based on or incorporate
the challenged intellectual property, which could be costly and time
consuming or could adversely affect the functionality and market
acceptance of our products.

If we must take any of the foregoing actions, we may be unable to
manufacture and sell our solutions, which would substantially reduce our
revenue.

We Face Significant Competition From, Among Others, Disease Management Vendors,
Medical Management Software Vendors, Internet Companies and Consulting Groups
Focused on the Healthcare Industry.

We face intense market competition for our population health management
solutions. Many of our competitors have greater financial, technical, product
development, marketing and other resources than we have. Because these
organizations may be better known and have more customers than us, we may not
compete successfully against them. The principal companies we compete against
in the disease management market include American Healthways, CorSolutions,
Lifemasters and Matria Healthcare. Our principal competitors in the medical
management software payer market include HPR (a subsidiary of McKesson HBOC),
MEDecision, and others. In the healthcare delivery segment of the medical
management software market, we compete against MIDS (a division of Affiliated
Computer Systems, Inc.), SoftMed Systems and others. We expect that competition
will continue to increase as a result of consolidation in the Internet,
information technology and healthcare industries.

Rapidly Changing Technology May Impair Our Ability to Develop and Market Our
Population Health Management Solutions.

Because our business relies on technology, it is susceptible to:



| |  |  | rapid technological change;            
| | - |  | ---------------------------------------
|
| |  |  | changing customer needs;               
|
| |  |  | frequent new product introductions; and
|
| |  |  | evolving industry standards.           

In particular, the Internet is evolving rapidly and the technology used in
Internet related products changes rapidly. As the Internet, computer and
software industries continue to experience rapid technological change, we must
quickly modify our solutions to adapt to such changes. The demands of operating
in such an environment may delay or prevent our development and introduction of
new solutions and additional functions for our existing solutions that must
continue to meet changing market demands and keep pace with evolving industry
standards. Moreover, competitors may develop products superior to our
solutions, which could make our products obsolete.

Our Customers May Encounter System Delays, Failures or Loss of Data When Using
Our Internet-Based Medical Management Solution and Internet Capabilities of Our
Disease Management Products and Services as a Result of Disruptions or Other
Problems With Internet Services and Internet Access Provided by Third Parties.

System delays, failures or loss of data experienced by our customers could
harm our business. The success of our Internet-based medical management
solutions and disease management capabilities depend on the efficient operation
of Internet connections among

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our payer customers and their members and associated providers, and with
Landacorp. These connections, in turn, depend on the efficient operation of
Internet service providers, Internet connections and Web browsers. In the past,
Internet users have occasionally experienced difficulties with Internet
connections and services due to system failures. Any disruption in Internet
access provided by third parties could delay or disrupt the performance of our
Internet-based solutions, and consequently, make them less acceptable to
payers. Furthermore, we will depend on our customers hardware suppliers for
prompt delivery, installation and service of the equipment that runs our
applications.

Security Breaches and Security Concerns About Internet Transmissions May Cause
Customers to Refuse to Purchase or Discontinue the Use of Our Population Health
Management Solutions.

Our customers will retain confidential customer and patient information
using our solutions. An experienced computer user who is able to access our
customers computer systems could gain access to confidential patient and
company information. Therefore, our products must remain secure and the market
must perceive them as secure. The occurrence of security breaches could cause
customers to refuse to purchase or discontinue use of our solutions. Protecting
against such security breaches or alleviating problems caused by security
breaches may require us to expend significant capital and other resources. In
addition, upgrading our systems to incorporate more advanced encryption and
authentication technology as it becomes available may cause us to spend
significant resources and encounter costly delays. Concerns over the security
of the Internet and other online transactions and the privacy of users may also
inhibit the growth of the market for our Internet-based population health
management solutions.

We Operate in an Industry Subject to Changing Regulatory Influences, Which
Could Limit the Usefulness of Our Solutions or Require Us to Make Expensive and
Time-Consuming Modifications to Our Products.

During the past several years, federal, state and local governments have
increased their regulation of the U.S. healthcare industry and have proposed
numerous healthcare industry reforms. These reforms may increase governmental
involvement in healthcare, continue to reduce reimbursement rates and otherwise
change the operating environment for our customers.

Our customers may react to these proposals and the uncertainty surrounding
the proposals by curtailing or deferring investments, including those for our
medical management solutions.

Existing state and federal laws regulate the confidentiality of healthcare
information and the circumstances under which such records may be released.
Congress is considering further legislation and the Department of Health and
Human Services has proposed regulations that would further regulate the
confidentiality of healthcare information. In addition, the Department of
Health and Human Services has proposed regulations setting forth security
standards for all health plans, clearinghouses and providers to follow with
respect to healthcare information that is electronically transmitted, processed
or stored. While these laws and regulations may not apply to us directly, our
products must comply with existing and future laws and regulations in order to
achieve market acceptance. Such compliance may be difficult and expensive or
even impossible to achieve. These laws or regulations could restrict the
ability of our customers to obtain, use or disseminate patient information,
which in turn could limit the usefulness of our medical management solutions
causing a decrease in our sales.

Because of the Internets popularity and increasing use, new laws and
regulations with respect to the Internet are becoming prevalent. Such new laws
and regulations could limit the effectiveness and market acceptance of our
Internet-based solutions or could cause us to have to modify our solutions,
which could be expensive and time consuming.

Our Population Health Management Solutions Will Have to Contain HIPAA-Compliant
Features and Functionality to Remain Marketable.

These new regulations are proposed and may be modified prior to becoming
final. Our products may require modification in the future. Any such
modification could be expensive, could divert resources away from other product
development efforts or could delay future releases or product enhancements. If
we fail to offer solutions that permit our customers to comply with applicable
laws and regulations our business will suffer.

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Consolidation in the Healthcare Industry Could Lead to Large Integrated
Healthcare Delivery Systems Who May Use Their Enhanced Market Power to Force
Price Reductions for Our Population Health Management Solutions and Related
Services.

Many healthcare industry participants are consolidating to create
integrated healthcare delivery systems with greater market power. As the
healthcare industry consolidates, competition to provide products and services
to industry participants will become more intense and the importance of
establishing relationships with large industry participants will become
greater. These industry participants may try to use their market power to
negotiate price reductions for our products and services. Our operating results
may suffer if we reduce our prices without achieving corresponding reductions
in our expenses.

We May Encounter Acquisition-Related Risks Such as Becoming Responsible for
Unexpected Liabilities of Acquired Businesses and Difficulties Integrating
Employees and Operations of Acquired Businesses.

We expect to review opportunities to acquire other businesses or
technologies. In connection with acquisitions, we could:



| |  |  | issue stock that would dilute our stockholders percentage ownership;
| | - |  | ---------------------------------------------------------------------
|
| |  |  | incur debt; or                                                       
|
| |  |  | assume liabilities.                                                  

Acquisitions could involve numerous risks, including:



| |  |  | problems integrating the purchased operations, technologies or products;                   
| | - |  | -------------------------------------------------------------------------------------------
|
| |  |  | unanticipated costs or unexpected liabilities;                                             
|
| |  |  | diversion of our managements attention from our core business;                            
|
| |  |  | interference with existing business relationships with suppliers and customers;            
|
| |  |  | risks associated with entering markets in which we have no or limited prior experience; and
|
| |  |  | potential loss of key employees of purchased organizations.                                

We may not be able to successfully integrate any businesses, products,
technologies or personnel that we might purchase in the future.

Our Principal Stockholders Have Significant Voting Power, Which May Limit Our
Stockholders Ability to Influence the Outcome of Director Elections and Other
Stockholder Matters.

Our executive officers and directors and their affiliates beneficially
own, in the aggregate, approximately 48% of our outstanding common stock. As a
result, these stockholders will be able to exercise significant control over
all matters requiring stockholder approval, including the election of directors
and approval of significant corporate transactions, which could delay or
prevent an outside party from acquiring or merging with us.

Due to Our Limited Funds, We May Be Unable to Develop or Enhance Our Population
Health Management Solutions, Take Advantage of Future Opportunities or Respond
to Competitive Pressures or Unanticipated Events.

Our funds are limited. They consist of the net proceeds of our initial
public offering, together with other cash and cash equivalents and limited
anticipated cash flow from operations. We believe that these funds will be
sufficient to meet our capital and operating expense requirements for the next
twelve months. Thereafter, we may require additional funds to support our
working capital and operating expense requirements or for other purposes and
may seek to raise such additional funds through public or private debt or
equity financings if such funding is available on terms acceptable to us.
However, if we are not able to sign one or more of the contracts presently in
negotiations, we will need to seek a strategic partner or raise additional
funds within the next twelve months. If

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we cannot raise capital on acceptable
terms and when needed, we may not have the resources to develop new products or
enhance existing products, take advantage of future opportunities or respond to
competitive pressures or unanticipated events.

We have experienced over $4 million in impairments of our fixed and intangible
assets since the first quarter of 2001, and our assets may continue to become
additionally impaired in the future.

During the first quarter of 2001, we recorded an impairment of intangible
assets in the amount of $704,000 in connection with the shutting down of our
web consulting business.

During the second quarter of 2002, primarily due to a decline in demand
for services in the Companys Disease Management reporting unit, management
determined that it was necessary to test for an impairment of long-lived
assets. As a result of this test and the subsequent analysis of the fair value
of its Disease Management reporting unit, Landacorp recorded an impairment to
its long-lived assets in the amount of $3,300,000 during the second quarter of
2002. In accordance with the provisions of SFAS 144 and 142, we will continue
to evaluate the fair value of our reporting units and the recoverability of the
assets contained therein.

The impairments recorded during the quarter ended March 31, 2001 and the
quarter ended June 30, 2002 were based on assumptions that reflected
managements estimate of future results. However, such estimates may need to be
revised in future periods, which could result in additional impairment charges.

Our Stock Price Has Been Highly Volatile, and Your Investment Could Suffer a
Decline in Value.

The trading price of our common stock has been highly volatile and could
continue to be subject to wide fluctuations in price in response to various
factors, many of which are beyond our control, including:



| |  |  | actual or anticipated variations in quarterly operating results;                                               
| | - |  | ---------------------------------------------------------------------------------------------------------------
|
| |  |  | failure to achieve, or changes in, financial estimates by securities analysts;                                 
|
| |  |  | announcements of new products or services or technological innovations by us or our competitors;               
|
| |  |  | conditions or trends in the healthcare industry;                                                               
|
| |  |  | announcements by us of significant acquisitions, strategic partnerships, joint ventures or capital commitments;
|
| |  |  | additions or departures of key personnel and/or members of our board of directors;                             
|
| |  |  | increases and decreases in our customer base;                                                                  
|
| |  |  | litigation or threats of litigation;                                                                           
|
| |  |  | regulatory developments or changes in regulatory guidance;                                                     
|
| |  |  | sales of our common stock; and                                                                                 
|
| |  |  | developments regarding our patents or other intellectual property or that of our competitors.                  

In addition, the stock market in general, and the NASDAQ National Market
and the market for technology companies in particular, have experienced
significant price and volume fluctuations that have often been unrelated or
disproportionate to the operating performance of those companies. Further,
there has been particular volatility in the market prices of securities of
healthcare services and software companies. These broad market and industry
factors may seriously harm the market price of our common stock, regardless of
our operating performance. In the past, following periods of volatility in the
market price of a companys securities, securities class action litigation has
often been instituted. A securities class action suit against us could result
in substantial costs, potential liabilities and the diversion of managements
attention and resources.

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There May Not be an Active, Liquid Trading Market For Our Common Stock. As of
the Opening of Trading on November 7, 2002, Our Common Stock Has Traded on the
NASDAQ Stock Markets SmallCap Market.

There is no guarantee that an active trading market for our Common Stock
will be maintained on the NASDAQ SmallCap Market. You may not be able to sell
your shares quickly or at the market price if trading in our stock is not
active.

We are currently trading below $1 per share, the minimum bid price per
share required for continued listing on the NASDAQ SmallCap Market. In
addition, the NASDAQ recently proposed certain rule changes which, if adopted
in their current form, may require us to make significant changes to the
membership of our board of directors and audit committee. If our stock
continues to trade below the minimum bid price per share, or if we were to be
unable to comply with any new rules within the time frame prescribed by the
NASDAQ, we could be delisted from trading on such market, and thereafter
trading in our common stock, if any, would be conducted through the
over-the-counter market or on the Electronic Bulletin Board of the National
Association of Securities Dealers, Inc.

Sales of Large Numbers of Shares of Our Common Stock Could Cause Our Stock
Price to Decline.

The market price of our common stock could decline as a result of sales of
substantial amounts of our common stock in the public market, or the perception
that these sales could occur. In addition, these factors could make it more
difficult for us to raise funds through future offerings of common stock. All
of the shares sold in our initial public offering are now freely transferable
without restriction or further registration under the Securities Act, except
for any shares purchased by our affiliates, as defined in Rule 144 of the
Securities Act. The remaining shares of common stock outstanding are restricted
securities as defined in Rule 144. These shares may be sold in the future
without registration under the Securities Act, to the extent permitted by Rule
144 or other exemptions under the Securities Act. In November 2000, we issued
an aggregate 2,740,000 additional restricted shares of common stock to former
shareholders of PatientCentrix. In addition, we assumed options to purchase
492,502 shares of our common stock to former shareholders and option holders of
PatientCentrix




Item 3.  Quantitative and Qualitative Disclosures about Market Risk

The primary objective of our investment activities is to preserve
principal, while maximizing yields and avoiding a significant increase in risk.
To achieve this objective, we invest in highly liquid and high-quality money
market accounts that invest in debt securities. Our investment in debt
securities is subject to interest rate risk. To minimize the exposure due to
adverse shifts in interest rates, we invest in money market accounts that
invest only in short-term securities that maintain an average maturity of less
than one year and debt securities that also have an average maturity of less
than one year. As a result, we do not believe we are subject to significant
market risk.




Item 4.  Company Disclosure Controls and Procedures

As of September 30, 2002, an evaluation was performed under the
supervision and with the participation of the Companys management, including
the Chief Executive Officer and the Chief Operating Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the Companys
disclosure controls and procedures. Based on that evaluation, the Companys
Management, including the Chief Executive Officer and the Chief Operating
Officer and Chief Financial Officer, concluded that the Companys disclosure
controls and procedures were effective as of September 30, 2002. There have
been no significant changes in the Companys internal controls or in other
factors that could significantly affect internal controls subsequent to
September 30, 2002.

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PART II  OTHER INFORMATION




Item 1.  Legal Proceedings

The Company is not a
party to any material legal proceedings.




Item 2.  Changes in Securities

None.




Item 3.  Defaults in 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 on Form 8-K

(a)  Exhibits.

|        |  |                                                                                                                                                                                                  
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1 (1) |  | Second Amended and Restated Certificate of Incorporation of the Registrant                                                                                                                       
|3.2 (2) |  | Certificate of Amendment to the Second Amended and Restated Certificate
of Incorporation of the Registrant                                                                                       
|3.3 (1) |  | Bylaws of the Registrant                                                                                                                                                                         
|4.1 (1) |  | Specimen Common Stock Certificate                                                                                                                                                                
|4.2 (1) |  | Registration Rights Agreement dated October 29, 1997, as amended                                                                                                                                 
|4.3 (3) |  | Registration Rights Agreement by and among Landacorp, Inc., and certain
holders of shares of Landacorp, Inc., dated October 31, 2000                                                             
|       
|99.1    |  | Certification of Chief Executive Officer and Chief Operating and Chief
Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002



---

|(1) |  | Incorporated by reference from the Registrants Registration Statement on
Form S-1 (file no. 333-84703), as amended.
|--- |  | --------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Incorporated by reference to the Registrants Annual Report on Form 10-K
filed on March 30, 2001.                   
|   
|(3) |  | Incorporated by reference from the Registrants Current Report on Form
8-K filed on November 17, 2000.              

(b)  Reports on Form 8-K



| |                                                                                                                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We filed a Current Report on Form 8-K with the SEC dated July 31, 2002,
reporting that we entered into the First Amended and Restated Services and
Systems Agreement (the Amended Agreement) with Lifeguard, Inc., a private
not-for-profit heath plan, and its affiliate Lifeguard Insurance Co.
(Collectively, Lifeguard).



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We filed a Current Report on Form 8-K with the SEC dated October 15, 2002
reporting that we entered into the Second Amended and Restated Services and
Systems Agreement with Lifeguard (the Second Amended Agreement). The Second
Amended Agreement amends and restates the original November 2001 Services and
System Agreement, which was first amended on July 31, 2002. The Second
Amended Agreement provides, among other things, that the Amended Agreement
will terminate on November 30, 2002 and no fees paid to Landacorp will be
reimbursable to Lifeguard. Among certain other changes, the Company and
Lifeguard have agreed to delete from the Amended Agreement certain provisions
relating to The Companys obligations to reimburse Lifeguard for certain fees
and to indemnify Lifeguard and its affiliates for certain liabilities.

27



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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.

|                          |  |                              |  |                                                                 
|------------------------- |  | ---------------------------- |  | ----------------------------------------------------------------
|                          |  | LANDACORP, INC.
(Registrant)
|                          |  |                              |  |                                                                 
|Dated:  November 11, 2002 |  | By:                          |  | /s/  Eugene
Miller                                              
|                          |  |                              |  |                                                                 
|                          |  |                              |  | Eugene MillerPresident, Chief Executive Officer                 
|                          |  |                              |  |                                                                 
|Dated:  November 11, 2002 |  | By                           |  | /s/  Mark Rapoport                                              
|                          |  |                              |  |                                                                 
|                          |  |                              |  | Mark RapoportChief Operating Officer and
Chief Financial Officer

28



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##### Table of Contents



SARBANES-OXLEY SECTION 302(A) CERTIFICATION

I, Eugene Miller, President and Chief Executive Officer of Landacorp, Inc.
certify that:

1.  I have reviewed this quarterly report on Form 10-Q of Landacorp, Inc;

2.  Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3.  Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.  The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        

5.  The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):



| | a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have identified
for the registrants auditors any material weaknesses in internal
controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                        

6.  The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|                  |  |  |  |                                      
|----------------- |  |  |  | -------------------------------------
|November 11, 2002 |  |  |  | /s/ Eugene Miller                    
|                  |  |  |  |                                      
|                  |  |  |  | Eugene Miller
Chief Executive Officer

29



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##### Table of Contents



SARBANES-OXLEY SECTION 302(A) CERTIFICATION

I, Mark Rapoport, Chief Operating Officer and Chief Financial Officer of
Landacorp, Inc. certify that:

1.  I have reviewed this quarterly report on Form 10-Q of Landacorp, Inc;

2.  Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3.  Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.  The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        

5.  The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):



| | a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have identified
for the registrants auditors any material weaknesses in internal
controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                        

6.  The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|                  |  |  |  |                                                                  
|----------------- |  |  |  | -----------------------------------------------------------------
|November 11, 2002 |  |  |  | /s/ Mark Rapoport                                                
|                  |  |  |  |                                                                  
|                  |  |  |  | Mark Rapoport
Chief Operating Officer and Chief Financial Officer

30



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##### Table of Contents



EXHIBIT INDEX

|            |  |                                                                                                                                                                                                  
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Exhibit Title                                                                                                                                                                                    
|            |  |                                                                                                                                                                                                  
|3.1(1)      |  | Second Amended and Restated Certificate of Incorporation of the Registrant                                                                                                                       
|3.2(2)      |  | Certificate of Amendment to the Second Amended and Restated Certificate of
Incorporation of the Registrant                                                                                       
|3.3(1)      |  | Bylaws of the Registrant                                                                                                                                                                         
|4.1(1)      |  | Specimen Common Stock Certificate                                                                                                                                                                
|4.2(1)      |  | Registration Rights Agreement dated October 29, 1997, as amended                                                                                                                                 
|4.3(3)      |  | Registration Rights Agreement by and among Landacorp, Inc., and certain
holders of shares of Landacorp, Inc., dated October 31, 2000                                                             
|99.1        |  | Certification of Chief Executive Officer and Chief Operating and Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002



---

|(1) |  | Incorporated by reference from the Registrants Registration Statement on
Form S-1 (file no. 333-84703), as amended.
|--- |  | --------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Incorporated by reference to the Registrants Annual Report on Form 10-K
filed on March 30, 2001                    
|   
|(3) |  | Incorporated by reference from the Registrants Current Report on Form
8-K filed on November 17, 2000.              

31