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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 June 30, 2002                                            
|           |  |                                                                                         
|or         |  |                                                                                         
|           |  |                                                                                         
|[   ]      |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|           |  | For the transition period from     to                                                   

Commission file number: 000-29377

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

|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 94-3346710                          
|(State or other jurisdiction of
incorporation or organization) |  | (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
June 30, 2002: 15,694,000.



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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                           
|PART II  OTHER INFORMATION                      
|                                                  | Item 1. Legal Proceedings                                                                    
|                                                  | Item 2. Changes in Securities                                                                
|                                                  | Item 3. Defaults in 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                                       
|EXHIBIT INDEX                                    
|Section 906 Certifications of the CEO and COO/CFO



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##### Table of Contents



Landacorp, Inc.

TABLE OF CONTENTS

|           |  |                                                                                                           |  |          |    | 
|---------- |  | --------------------------------------------------------------------------------------------------------- |  | -------- | -- | 
|           |  |                                                                                                           |  | Page No.
|PART I     |  | Financial Information                                                                                     |  |          | 3  | 
|           |  |                                                                                                           |  |          |    | 
|Item 1.    |  | Financial Statements (unaudited):                                                                         |  |          | 3  | 
|           |  |                                                                                                           |  |          |    | 
|           |  | Condensed Consolidated Balance Sheets as of June 30, 2002 and December 31,
2001                           |  |          | 3  | 
|           |  |                                                                                                           |  |          |    | 
|           |  | Condensed Consolidated Statements of Operations for the three and six months ended
June 30, 2002 and 2001 |  |          | 4  | 
|           |  |                                                                                                           |  |          |    | 
|           |  | Condensed Consolidated Statements of Cash Flows for the six months ended
June 30, 2002 and 2001           |  |          | 5  | 
|           |  |                                                                                                           |  |          |    | 
|           |  | Notes to Condensed Consolidated Financial Statements                                                      |  |          | 6  | 
|           |  |                                                                                                           |  |          |    | 
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and Results
of Operations                     |  |          | 10 | 
|           |  |                                                                                                           |  |          |    | 
|Item 3.    |  | Quantitative and Qualitative Disclosures About Market Risk                                                |  |          | 23 | 
|           |  |                                                                                                           |  |          |    | 
|PART II    |  | Other Information                                                                                         |  |          | 23 | 
|           |  |                                                                                                           |  |          |    | 
|Item 1.    |  | Legal Proceedings                                                                                         |  |          | 23 | 
|           |  |                                                                                                           |  |          |    | 
|Item 2.    |  | Changes in Securities and Use of Proceeds                                                                 |  |          | 23 | 
|           |  |                                                                                                           |  |          |    | 
|Item 3.    |  | Defaults Upon Senior Securities                                                                           |  |          | 23 | 
|           |  |                                                                                                           |  |          |    | 
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                                       |  |          | 23 | 
|           |  |                                                                                                           |  |          |    | 
|Item 5.    |  | Other Information                                                                                         |  |          | 23 | 
|           |  |                                                                                                           |  |          |    | 
|Item 6.    |  | Exhibits and Reports on Form 8-K                                                                          |  |          | 24 | 
|           |  |                                                                                                           |  |          |    | 
|Signatures |  |                                                                                                           |  |          | 25 | 

2



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PART I  FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS




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

|                                                                                                                      |                                                                                                                                                                                    |                      |                           |        |             |        |              |        |        |        | 
|--------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------- | ------------------------- | ------ | ----------- | ------ | ------------ | ------ | ------ | ------ | 
|                                                                                                                      |                                                                                                                                                                                    |                      |                           |        | June 30,    |        | December 31,
|                                                                                                                      |                                                                                                                                                                                    |                      |                           |        | 2002        |        | 2001        
|                                                                                                                      |                                                                                                                                                                                    |                      |                           |        |             |        |             
|                                                                                                                      |                                                                                                                                                                                    |                      |                           |        | (Unaudited) |        |              |        |       
|ASSETS                                                                                                               
|Current Assets:                                                                                                       |                                                                                                                                                                                    |                      |                           |        |             |        |              |       
|                                                                                                                      | Cash and cash equivalents                                                                                                                                                          |                      | $                         | 9,217  |             |        | $            | 12,274 |       
|                                                                                                                      | Accounts receivable and costs and estimated earnings in excess of billings on
uncompleted contracts, net of allowance for doubtful accounts of $321,000
and $235,000, respectively |                      |                           | 3,588  |             |        |              | 3,488  |       
|                                                                                                                      | Other current assets                                                                                                                                                               |                      |                           | 938    |             |        |              | 731    |       
|                                                                                                                      |                                                                                                                                                                                    |                      |                           |        |             |        |              |       
|                                                                                                                      |                                                                                                                                                                                    | Total current assets |                           |        | 13,743      |        |              |        | 16,493 |       
|Property and equipment, net                                                                                           |                                                                                                                                                                                    |                      | 1,703                     |        |             |        | 2,309        |       
|Goodwill, net                                                                                                         |                                                                                                                                                                                    |                      | 7,749                     |        |             |        | 7,287        |       
|Intangible assets, net                                                                                                |                                                                                                                                                                                    |                      | 1,783                     |        |             |        | 5,413        |       
|Capitalized software, net                                                                                             |                                                                                                                                                                                    |                      | 39                        |        |             |        | 48           |       
|                                                                                                                      |                                                                                                                                                                                    |                      |                           |        |             |        |              |       
|Total Assets                                                                                                          |                                                                                                                                                                                    | $                    | 25,017                    |        |             | $      | 31,550       |       
|                                                                                                                      |                                                                                                                                                                                    |                      |                           |        |             |        |              |       
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                 
|Current liabilities:                                                                                                  |                                                                                                                                                                                    |                      |                           |        |             |        |              |       
|                                                                                                                      | Accounts payable                                                                                                                                                                   |                      | $                         | 1,549  |             |        | $            | 403    |       
|                                                                                                                      | Accrued expenses                                                                                                                                                                   |                      |                           | 4,262  |             |        |              | 3,692  |       
|                                                                                                                      | Restructuring accrual                                                                                                                                                              |                      |                           | 241    |             |        |              | 368    |       
|                                                                                                                      | Deferred revenue and billings in excess of costs and estimated earnings on
uncompleted contracts                                                                                   |                      |                           | 5,558  |             |        |              | 6,169  |       
|                                                                                                                      | Current portion of capital lease obligations                                                                                                                                       |                      |                           | 78     |             |        |              | 78     |       
|                                                                                                                      |                                                                                                                                                                                    |                      |                           |        |             |        |              |       
|                                                                                                                      |                                                                                                                                                                                    |                      | Total current liabilities |        |             | 11,688 |              |        |        | 10,710 | 
|                                                                                                                      | Capital lease obligations, net of current portion                                                                                                                                  |                      |                           | 235    |             |        |              | 152    |       
|                                                                                                                      |                                                                                                                                                                                    |                      |                           |        |             |        |              |       
|                                                                                                                      |                                                                                                                                                                                    |                      | Total liabilities         |        |             | 11,923 |              |        |        | 10,862 | 
|                                                                                                                      |                                                                                                                                                                                    |                      |                           |        |             |        |              |       
|Commitments                                                                                                           |                                                                                                                                                                                    |                      |                          |        |             |        |             |       
|Stockholders equity:                                                                                                 |                                                                                                                                                                                    |                      |                           |        |             |        |              |       
|Common Stock, $0.001 par value, 50,000,000 shares authorized;
15,694,000 and 15,538,000 shares issued and outstanding |                                                                                                                                                                                    |                      | 16                        |        |             |        | 16           |       
|Additional paid-in capital                                                                                            |                                                                                                                                                                                    |                      | 58,478                    |        |             |        | 58,321       |       
|Notes receivable from officers                                                                                        |                                                                                                                                                                                    |                      | (159                      | )      |             |        | (169         | )     
|Unearned stock-based compensation                                                                                     |                                                                                                                                                                                    |                      | (252                      | )      |             |        | (460         | )     
|Accumulated deficit                                                                                                   |                                                                                                                                                                                    |                      | (44,989                   | )      |             |        | (37,020      | )     
|                                                                                                                      |                                                                                                                                                                                    |                      |                           |        |             |        |              |       
|                                                                                                                      | Total stockholders equity                                                                                                                                                         |                      |                           | 13,094 |             |        |              | 20,688 |       
|                                                                                                                      |                                                                                                                                                                                    |                      |                           |        |             |        |              |       
|Total liabilities and stockholders equity                                                                             |                                                                                                                                                                                    | $                    | 25,017                    |        |             | $      | 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 |       | Six Month Period
|                                                                                    |                                      |                          |        | Ended June 30,     |       | Ended June 30,  
|                                                                                    |                                      |                          |        |                    |       |                 
|                                                                                    |                                      |                          |        | 2002               |       | 2001             |        | 2002  |       | 2001
|                                                                                    |                                      |                          |        |                    |       |                  |        |       |       |     
|REVENUE:                                                                            |                                      |                          |        |                    |       |                  |        |       |       |      |        |       |        |   |         |      
|                                                                                    | Program revenue and maintenance fees |                          |        | 4,005              |       |                  |        | 2,960 |       |      |        | 7,694 |        |   |         | 5,409 |       
|                                                                                    | System sales and consulting fees     |                          |        | 1,633              |       |                  |        | 770   |       |      |        | 2,284 |        |   |         | 2,533 |       
|                                                                                    |                                      |                          |        |                    |       |                  |        |       |       |      |        |       |        |   |         |      
|                                                                                    |                                      | Total revenues           |        |                    | 5,638 |                  |        |       | 3,730 |      |        |       | 9,978  |   |         |       | 7,942  | 
|                                                                                    |                                      |                          |        |                    |       |                  |        |       |       |      |        |       |        |   |         |      
|COST OF REVENUE:                                                                    |                                      |                          |        |                    |       |                  |        |       |       |      |        |       |        |   |         |      
|                                                                                    | Program revenue and maintenance fees |                          |        | 2,340              |       |                  |        | 1,796 |       |      |        | 4,337 |        |   |         | 3,352 |       
|                                                                                    | System sales and consulting fees     |                          |        | 700                |       |                  |        | 917   |       |      |        | 1,226 |        |   |         | 2,071 |       
|                                                                                    |                                      |                          |        |                    |       |                  |        |       |       |      |        |       |        |   |         |      
|                                                                                    |                                      | Total cost of revenue    |        |                    | 3,040 |                  |        |       | 2,713 |      |        |       | 5,563  |   |         |       | 5,423  | 
|                                                                                    |                                      |                          |        |                    |       |                  |        |       |       |      |        |       |        |   |         |      
|GROSS PROFIT                                                                        |                                      |                          | 2,598  |                    |       |                  | 1,017  |       |       |      | 4,415  |       |        |   | 2,519   |      
|                                                                                    |                                      |                          |        |                    |       |                  |        |       |       |      |        |       |        |   |         |      
|OPERATING EXPENSES:                                                                 |                                      |                          |        |                    |       |                  |        |       |       |      |        |       |        |   |         |      
|                                                                                    | Sales and marketing                  |                          |        | 1,346              |       |                  |        | 1,950 |       |      |        | 2,555 |        |   |         | 3,506 |       
|                                                                                    | Research and development             |                          |        | 1,528              |       |                  |        | 1,977 |       |      |        | 2,713 |        |   |         | 3,920 |       
|                                                                                    | General and administrative           |                          |        | 1,601              |       |                  |        | 1,778 |       |      |        | 3,251 |        |   |         | 4,474 |       
|                                                                                    | Amortization of intangible assets    |                          |        | 317                |       |                  |        | 480   |       |      |        | 635   |        |   |         | 1,066 |       
|                                                                                    | Restructuring charge                 |                          |        |                   |       |                  |        | 729   |       |      |        |      |        |   |         | 729   |       
|                                                                                    | Asset impairment charge              |                          |        | 3,300              |       |                  |        |      |       |      |        | 3,300 |        |   |         | 704   |       
|                                                                                    |                                      |                          |        |                    |       |                  |        |       |       |      |        |       |        |   |         |      
|                                                                                    |                                      | Total operating expenses |        |                    | 8,092 |                  |        |       | 6,914 |      |        |       | 12,454 |   |         |       | 14,399 | 
|                                                                                    |                                      |                          |        |                    |       |                  |        |       |       |      |        |       |        |   |         |      
|LOSS FROM OPERATIONS                                                                |                                      |                          | (5,494 | )                  |       |                  | (5,897 | )     |       |      | (8,039 | )     |        |   | (11,880 | )    
|INTEREST AND OTHER INCOME                                                           |                                      |                          | 39     |                    |       |                  | 181    |       |       |      | 90     |       |        |   | 477     |      
|INTEREST EXPENSE                                                                    |                                      |                          | (13    | )                  |       |                  | (8     | )     |       |      | (20    | )     |        |   | (13     | )    
|                                                                                    |                                      |                          |        |                    |       |                  |        |       |       |      |        |       |        |   |         |      
|NET LOSS BEFORE INCOME TAXES                                                        |                                      |                          | (5,468 | )                  |       |                  | (5,724 | )     |       |      | (7,969 | )     |        |   | (11,416 | )    
|PROVISION FOR INCOME TAXES                                                          |                                      |                          |       |                    |       |                  |       |       |       |      |       |       |        |   |        |      
|                                                                                    |                                      |                          |        |                    |       |                  |        |       |       |      |        |       |        |   |         |      
|NET LOSS                                                                            |                                      | $                        | (5,468 | )                  |       | $                | (5,724 | )     |       | $    | (7,969 | )     |        | $ | (11,416 | )    
|                                                                                    |                                      |                          |        |                    |       |                  |        |       |       |      |        |       |        |   |         |      
|NET LOSS PER SHARE  BASIC AND DILUTED                                              |                                      | $                        | (0.35  | )                  |       | $                | (0.38  | )     |       | $    | (0.52  | )     |        | $ | (0.77   | )    
|                                                                                    |                                      |                          |        |                    |       |                  |        |       |       |      |        |       |        |   |         |      
|Weighted average common and common equivalent
shares outstanding; basic and diluted |                                      |                          | 15,440 |                    |       |                  | 14,985 |       |       |      | 15,408 |       |        |   | 14,880  |      
|                                                                                    |                                      |                          |        |                    |       |                  |        |       |       |      |        |       |        |   |         |      

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)

|                                                 |                                                                             |                                                                    |                                                                                                         |                                                     |       |                  |        |         |       |       |        |  
|------------------------------------------------ | --------------------------------------------------------------------------- | ------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------- | --------------------------------------------------- | ----- | ---------------- | ------ | ------- | ----- | ----- | ------ | -
|                                                 |                                                                             |                                                                    |                                                                                                         |                                                     |       | Six Months Ended
|                                                 |                                                                             |                                                                    |                                                                                                         |                                                     |       | June 30,        
|                                                 |                                                                             |                                                                    |                                                                                                         |                                                     |       |                 
|                                                 |                                                                             |                                                                    |                                                                                                         |                                                     |       | 2002             |        | 2001   
|                                                 |                                                                             |                                                                    |                                                                                                         |                                                     |       |                  |        |        
|Cash flows from operating activities:            |                                                                             |                                                                    |                                                                                                         |                                                     |       |                  |        |        
|                                                 | Net loss                                                                    |                                                                    | $                                                                                                       | (7,969                                              | )     |                  | $      | (11,416 | )    
|                                                 | Adjustments to reconcile net loss to net cash used in
operating activities: |                                                                    |                                                                                                         |                                                     |       |                  |        |         |      
|                                                 |                                                                             | Depreciation and amortization                                      |                                                                                                         |                                                     | 1,249 |                  |        |         | 1,673 |      
|                                                 |                                                                             | Provision for doubtful accounts                                    |                                                                                                         |                                                     |      |                  |        |         | 707   |      
|                                                 |                                                                             | Stock-based compensation expense                                   |                                                                                                         |                                                     | 358   |                  |        |         | 820   |      
|                                                 |                                                                             | Asset Impairment Charge                                            |                                                                                                         |                                                     | 3,300 |                  |        |         | 704   |      
|                                                 |                                                                             | 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 |                                                     |       | (100             | )      |         |       | 2,122 |       
|                                                 |                                                                             |                                                                    | Other assets                                                                                            |                                                     |       | (206             | )      |         |       | (432  | )     
|                                                 |                                                                             |                                                                    | Accounts payable                                                                                        |                                                     |       | 1,146            |        |         |       | 226   |       
|                                                 |                                                                             |                                                                    | Accrued expenses                                                                                        |                                                     |       | 571              |        |         |       | 107   |       
|                                                 |                                                                             |                                                                    | Restructuring Accrual                                                                                   |                                                     |       | (126             | )      |         |       |      |       
|                                                 |                                                                             |                                                                    | Deferred revenue and billings in excess of costs and estimated
earnings on uncompleted contracts        |                                                     |       | (611             | )      |         |       | (70   | )     
|                                                 |                                                                             |                                                                    |                                                                                                         |                                                     |       |                  |        |        
|                                                 |                                                                             |                                                                    |                                                                                                         | Net cash provided by (used in) operating activities |       |                  | (2,388 | )       |       |       | (5,559 | )
|                                                 |                                                                             |                                                                    |                                                                                                         |                                                     |       |                  |        |        
|Cash flows from investing activities:            |                                                                             |                                                                    |                                                                                                         |                                                     |       |                  |        |        
|                                                 | Purchases of property and equipment                                         |                                                                    |                                                                                                         | (606                                                | )     |                  |        | (456    | )    
|                                                 | Capitalized software development costs                                      |                                                                    |                                                                                                         |                                                    |       |                  |        | (83     | )    
|                                                 |                                                                             |                                                                    |                                                                                                         |                                                     |       |                  |        |        
|                                                 |                                                                             |                                                                    |                                                                                                         | Net cash used in investing activities               |       |                  | (606   | )       |       |       | (539   | )
|                                                 |                                                                             |                                                                    |                                                                                                         |                                                     |       |                  |        |        
|Cash flows from financing activities             |                                                                             |                                                                    |                                                                                                         |                                                     |       |                  |        |        
|                                                 | Repayments of obligations under capital lease                               |                                                                    |                                                                                                         | (79                                                 | )     |                  |        | (33     | )    
|                                                 | Collection on note receivable from officers                                 |                                                                    |                                                                                                         | 10                                                  |       |                  |        | 27      |      
|                                                 | Proceeds from Common Stock issuances                                        |                                                                    |                                                                                                         | 6                                                   |       |                  |        | 168     |      
|                                                 |                                                                             |                                                                    |                                                                                                         |                                                     |       |                  |        |        
|                                                 |                                                                             |                                                                    |                                                                                                         | Net cash used in financing activities               |       |                  | (63    | )       |       |       | 162    |  
|                                                 |                                                                             |                                                                    |                                                                                                         |                                                     |       |                  |        |        
|Increase (decrease) in cash and cash equivalents |                                                                             |                                                                    | (3,057                                                                                                  | )                                                   |       |                  | (5,936 | )      
|Cash and cash equivalents, beginning of period   |                                                                             |                                                                    | 12,274                                                                                                  |                                                     |       |                  | 21,752 |        
|                                                 |                                                                             |                                                                    |                                                                                                         |                                                     |       |                  |        |        
|Cash and cash equivalents, end of period         |                                                                             | $                                                                  | 9,217                                                                                                   |                                                     |       | $                | 15,816 |        
|                                                 |                                                                             |                                                                    |                                                                                                         |                                                     |       |                  |        |        
|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, Raleigh, NC and Montclair, NJ.

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 six
month periods ended June 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

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LANDACORP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

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 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 enters into care analytics and care
management contracts which guarantee certain cost savings to the customer. The
guaranteed savings amount is refundable to the customer if the savings are not
achieved. Under such contracts, the Company defers revenue equal to the
maximum potential amount of savings that are guaranteed and refundable. Such
revenue will not be recognized until the savings are generated and approved by
all parties and the fees are no longer refundable.

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 3,636,000
and 4,049,000 at June 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.

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LANDACORP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

5. Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board (FASB or the
Board) issued Statement of Financial Accounting Standards No. 141 (SFAS 141),
Business Combinations,and No. 142 (SFAS 142), Goodwill and Other Intangible
Assets,collectively referred to as the Standards".SFAS 141 supersedes
Accounting Principles Board Opinion (APB) No. 16, Business Combination.The
provisions of SFAS 141 (1) require that the purchase method of accounting be
used for all business combinations initiated after June 30, 2001, (2) provide
specific criteria for the initial recognition and measurement of intangible
assets apart from goodwill, and (3) require that unamortized negative goodwill
be written off immediately as an extraordinary gain instead of being deferred
and amortized. SFAS 141 also requires that upon adoption of SFAS 142 the
Company reclassify the carrying amounts of certain intangible assets into or
out of goodwill, based on certain criteria. SFAS 142 supersedes APB 17,
Intangible Assets,and is effective for fiscal years beginning after December
15, 2001. SFAS 142 primarily addresses the accounting for goodwill and
intangible assets subsequent to their initial recognition. The provisions of
SFAS 142 (1) prohibit the amortization of goodwill and indefinite-lived
intangible assets, (2) require that goodwill and indefinite-lived intangible
assets be tested annually for impairment (and in interim periods if certain
events occur indicating that the carrying value of goodwill and/or
indefinite-lived intangible assets may be impaired), (3) require that reporting
units be identified for the purpose of assessing potential future impairments
of goodwill, and (4) remove the forty-year limitation on the amortization
period of intangible assets that have finite lives.

The Company adopted the provisions of SFAS 142 as of January 1, 2002. In
connection with the adoption of SFAS 142, the Company reclassified $462,000 of
its intangible assets to goodwill.

The balance of goodwill was $7.7 million as of June 30, 2002. The Company
will no longer record approximately $650,000 of amortization per year relating
to its existing goodwill, as adjusted for the reclassifications just mentioned.

SFAS 142 requires that goodwill be tested annually for impairment using a
two-step process. The first step is to identify a potential impairment and, in
transition, this step must be measured as of the beginning of the fiscal year.
The Company has completed the first step of the goodwill impairment test, which
indicated that there was no impairment to goodwill as of January 1, 2002.

In August 2001, the 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.

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LANDACORP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

In October 2001, the
Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No.
144, Accounting for the Impairment or Disposal of Long-Lived
Assets, which replaces SFAS No. 121, Accounting for
the Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed Of. SFAS No. 144 provides updated guidance concerning
the recognition and measurement of an impairment loss for certain
types of long-lived assets, expands the scope of a discontinued
operation to include a component of an entity and eliminates the
current exemption to consolidation when control over a subsidiary is
likely to be temporary. The Company adopted this Statement on
January 1, 2002 (See Note 7).

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 discontinued periodic amortization of goodwill. 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.

During the three months ended June 30, 2001 and the six months ended June
30, 2001, we recorded $162,000 and $346,000 in amortization of goodwill,
respectively. The impact of amortization of goodwill on net loss for the three
months ended June 30, 2001 is shown on the following table (in thousands,
except per share data):

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|                                                                         |  |                    |        |                  |  |  |         |  
|------------------------------------------------------------------------ |  | ------------------ | ------ | ---------------- |  |  | ------- | -
|                                                                         |  | Three Months Ended |        | Six Months Ended
|                                                                         |  | June 30, 2001      |        | June 30, 2001   
|                                                                         |  |                    |        |                 
|Reported net loss                                                        |  |                    | (5,724 | )                |  |  | (11,416 | )
|Add back:                                                                |  |                    |        |                  |  |  |         |  
|Goodwill amortization                                                    |  |                    | 162    |                  |  |  | 346     |  
|                                                                         |  |                    |        |                  |  |  |         |  
|Net loss excluding goodwill amortization                                 |  |                    | (5,562 | )                |  |  | (11,070 | )
|                                                                         |  |                    |        |                  |  |  |         |  
|Net loss per share basic and diluted                                    |  |                    |        |                  |  |  |         |  
|Reported net loss                                                        |  |                    | (0.38  | )                |  |  | (0.77   | )
|Add back:                                                                |  |                    |        |                  |  |  |         |  
|Goodwill amortization                                                    |  |                    | 0.01   |                  |  |  | 0.02    |  
|                                                                         |  |                    |        |                  |  |  |         |  
|Net loss, excluding goodwill amortization                                |  |                    | (0.37  | )                |  |  | (0.74   | )
|                                                                         |  |                    |        |                  |  |  |         |  
|Weighted average number of common shares
outstanding (basic and diluted) |  |                    | 14,985 |                  |  |  | 14,880  |  
|                                                                         |  |                    |        |                  |  |  |         |  

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 $318,000 and $635,000 for the three and
six months ending June 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                     |  |            | (520   | )        |  |           | (115 | )     |  |      |     |   |  |        | (635   | )
|                                          | Impairment Charge                |  |            | (2,006 | )        |  |           | (444 | )     |  |      |     |   |  |        | (2,450 | )
|                                          |                                  |  |            |        |          |  |           |      |       |  |      |      |   |  |        |       
|Intangible assets as of June 30, 2002     |                                  |  | 1,461      |        |          |  | 322       |      |       |  |     |      |   |  | 1,783  |       
|                                          |                                  |  |            |        |          |  |           |      |       |  |      |      |   |  |        |       

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LANDACORP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

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

|                                  |  |            |       |               |  |               |       |                     |  |  |     | 
|--------------------------------- |  | ---------- | ----- | ------------- |  | ------------- | ----- | ------------------- |  |  | --- | 
|                                  |  |            |       |               |  | Amounts       |       | Accrued            
|                                  |  |            |       |               |  | Utilized in   |       | Restructuring Costs
|                                  |  | 2001 Costs |       | 2001 and 2002 |  | June 30, 2002
|                                  |  |            |       |               |  |              
|Disposal of Fixed Assets          |  |            | 173   |               |  |               | 173   |                     |  |  |    | 
|Facility/rental obligations       |  |            | 405   |               |  |               | 172   |                     |  |  | 233 | 
|Severance and workforce reduction |  |            | 455   |               |  |               | 447   |                     |  |  | 8   | 
|Acquisition related               |  |            | 268   |               |  |               | 268   |                     |  |  |    | 
|                                  |  |            |       |               |  |               |       |                     |  |  |     | 
|                                  |  |            | 1,301 |               |  |               | 1,060 |                     |  |  | 241 | 
|                                  |  |            |       |               |  |               |       |                     |  |  |     | 

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. Mr. Miele has been appointed to the board and will
stand for re-election with our other board members at our 2002 annual meeting
of stockholders.

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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 regarding Landacorps anticipated
expenses, impairment and other charges, revenues and financial results and
business performance for fiscal 2002 and during the next 12 months, 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
June 30, 2002, 28 payers who claim to have a combined membership of
approximately 57 million participants were using our payer solutions, and
approximately 142 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

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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 enters into care analytics and care
management contracts which guarantee certain cost savings to the customer. The
guaranteed savings amount is refundable to the customer if the savings are not
achieved. Under such contracts, the Company will defer revenue equal to the
maximum potential amount of savings that are guaranteed and refundable. Such
revenue will not be recognized until the savings are generated and approved by
all parties and the fees are no longer refundable.

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 enters into
certain contracts which guarantee cost savings to the customer. The guaranteed
savings amount is refundable to the customer if the savings are not achieved.
Under such contracts, the Company defers revenue equal to the maximum potential
amount of savings that are guaranteed and refundable. Such revenue will not be
recognized until the savings are generated and approved by all parties and the
fees are no longer refundable. 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 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

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receivable balance was $3.6 million, net of allowance for bad debt of
$321,000 as of June 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.

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 best 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 best 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 accruals 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

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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 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. Mr. Miele has been appointed to the board and will stand for
re-election with our other board members at our 2002 annual meeting of
stockholders.

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 best 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.

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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 |       | Six
month period
|                          |                                      |                          |       | ended
June 30,     |       | ended
June 30,  
|                          |                                      |                          |       |                    |       |                 
|                          |                                      |                          |       | 2002               |       | 2001             |        | 2002 |       | 2001
|                          |                                      |                          |       |                    |       |                  |        |      |       |     
|REVENUE:                  |                                      |                          |       |                    |       |                  |        |      |       |      |       |      |       |  |        |     
|                          | Program revenue and maintenance fees |                          |       | 71.0               |       |                  |        | 79.4 |       |      |       | 77.1 |       |  |        | 68.1 |      
|                          | System sales and consulting fees     |                          |       | 29.0               |       |                  |        | 20.6 |       |      |       | 22.9 |       |  |        | 31.9 |      
|                          |                                      |                          |       |                    |       |                  |        |      |       |      |       |      |       |  |        |     
|                          |                                      | Total revenues           |       |                    | 100.0 |                  |        |      | 100.0 |      |       |      | 100.0 |  |        |      | 100.0 | 
|                          |                                      |                          |       |                    |       |                  |        |      |       |      |       |      |       |  |        |     
|COST OF REVENUE:          |                                      |                          |       |                    |       |                  |        |      |       |      |       |      |       |  |        |     
|                          | Program revenue and maintenance fees |                          |       | 41.5               |       |                  |        | 48.1 |       |      |       | 43.5 |       |  |        | 42.2 |      
|                          | System sales and consulting fees     |                          |       | 12.4               |       |                  |        | 24.6 |       |      |       | 12.3 |       |  |        | 26.1 |      
|                          |                                      |                          |       |                    |       |                  |        |      |       |      |       |      |       |  |        |     
|                          |                                      | Total cost of revenue    |       |                    | 53.9  |                  |        |      | 72.7  |      |       |      | 55.8  |  |        |      | 68.3  | 
|                          |                                      |                          |       |                    |       |                  |        |      |       |      |       |      |       |  |        |     
|GROSS PROFIT              |                                      |                          | 46.1  |                    |       |                  | 27.3   |      |       |      | 44.2  |      |       |  | 31.7   |     
|                          |                                      |                          |       |                    |       |                  |        |      |       |      |       |      |       |  |        |     
|OPERATING EXPENSES:       |                                      |                          |       |                    |       |                  |        |      |       |      |       |      |       |  |        |     
|                          | Sales and marketing                  |                          |       | 23.9               |       |                  |        | 52.3 |       |      |       | 25.6 |       |  |        | 44.2 |      
|                          | Research and development             |                          |       | 27.1               |       |                  |        | 53.0 |       |      |       | 27.2 |       |  |        | 49.4 |      
|                          | General and administrative           |                          |       | 28.4               |       |                  |        | 47.7 |       |      |       | 32.6 |       |  |        | 56.3 |      
|                          | Amortization of intangible assets    |                          |       | 5.6                |       |                  |        | 12.9 |       |      |       | 6.4  |       |  |        | 13.4 |      
|                          | Restructuring charge                 |                          |       |                   |       |                  |        | 19.5 |       |      |       |     |       |  |        | 9.2  |      
|                          | Asset Impairment Charge              |                          |       | 58.5               |       |                  |        |     |       |      |       | 33.1 |       |  |        | 8.9  |      
|                          |                                      |                          |       |                    |       |                  |        |      |       |      |       |      |       |  |        |     
|                          |                                      | Total operating expenses |       |                    | 143.5 |                  |        |      | 185.4 |      |       |      | 124.9 |  |        |      | 181.4 | 
|                          |                                      |                          |       |                    |       |                  |        |      |       |      |       |      |       |  |        |     
|LOSS FROM OPERATIONS      |                                      |                          | (97.4 | )                  |       |                  | (158.1 | )    |       |      | (80.7 | )    |       |  | (149.7 | )   
|INTEREST AND OTHER INCOME |                                      |                          | 0.7   |                    |       |                  | 4.8    |      |       |      | 0.9   |      |       |  | 6.0    |     
|INTEREST EXPENSE          |                                      |                          | (0.2  | )                  |       |                  | (0.2   | )    |       |      | (0.2  | )    |       |  | (0.2   | )   
|                          |                                      |                          |       |                    |       |                  |        |      |       |      |       |      |       |  |        |     
|NET LOSS                  |                                      |                          | (96.9 | )                  |       |                  | (153.5 | )    |       |      | (80.0 | )    |       |  | (143.9 | )   
|                          |                                      |                          |       |                    |       |                  |        |      |       |      |       |      |       |  |        |     

Comparison of the three and six-month periods ended June 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 June 30,
2002, one customer accounted for 27% of revenue. Two customers accounted for
28% and 12% of revenue for the three-month period ended June 30, 2001.

Program revenues and maintenance fees have increased by $1,045,000 or
35.3% from $2,960,000 in the three-month period ended June 30, 2001 to
$4,005,000 in the three-month period ended June 30, 2002. Program revenues and
maintenance fees have increased by $2,285,000 or 42.2% from $5,409,000 in the
six-month period ended June 30, 2001 to $7,694,000 in the six-month period
ended June 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 $863,000 or 112.1% from
$770,000 in the three-month period ended June 30, 2001 to $1,633,000 in the
three-month period ended June 30, 2002. This increase is primarily due to
additional revenue in 2002 related to implementations of our medical management
software. System sales and consulting fees decreased by $249,000 or 9.8% from
$2,533,000 in the six-month period ended June 30, 2001 to

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$2,284,000 in the six-month period ended June 30, 2002. The decrease during
the six-month period in system sales and consulting fees primarily resulted from the elimination of our web consulting business in July 2001.

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 $544,000
or 30.3% from $1,796,000 in the three-month period ended June 30, 2001 to
$2,340,000 in the three-month period ended June 30, 2002, representing 60.7% of
program revenues and maintenance fees revenues for the second quarter of 2001
and 58.4% for the second quarter of 2002. Cost of program revenues and
maintenance fees increased by $985,000 or 29.4% from $3,352,000 in the
six-month period ended June 30, 2001 to $4,337,000 in the six-month period
ended June 30, 2002, representing 62.0% of program revenues and maintenance
fees revenues for the six months ended June 30, 2001 and 56.4% 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 June 30, 2002 these costs were $700,000 or 42.9% of
system sales and consulting fees, compared to costs of $917,000 representing
119.1% of system sales and consulting fees during the quarter ended June 30,
2001. Cost of system sales and consulting fees decreased by $217,000 or 23.7%
from the quarter ended June 30, 2001 to the same period for 2002. During the
six-month period ended June 30, 2002 these costs were $1,226,000 or 53.7% of
system sales and consulting fees, compared to costs of $2,071,000 representing
81.8% of system sales and consulting fees during the six-month period ended
June 30, 2001. Cost of system sales and consulting fees decreased by $845,000
or 40.8% from the six-month period ended June 30, 2001 to the same period for
2002. This cost decrease was mostly due to the reduction in workforce during
2001, as discussed in the Recent Developments section above, and the
elimination of our web consulting business during July of 2001.

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 June 30, 2002 amounted to $1,346,000 representing 23.9% of total
revenues, in comparison with $1,950,000 representing 52.3% of total revenues
during the corresponding quarter of 2001. Sales and marketing expenses
decreased by $604,000 or 31.0% from the second quarter of 2001. Sales and
marketing expenses during the six-month period ended June 30, 2002 amounted to
$2,555,000 representing 25.6% of total revenues, in comparison with $3,506,000
representing 44.2% of total revenues during the corresponding period of 2001.
Sales and marketing expenses decreased by $951,000 or 27.1% from the six-months
ended June 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 $1,528,000 or 27.1% of total revenues during the quarter ended
June 30, 2002, a decrease of $449,000 or 22.7% compared to expenses totaling
$1,977,000 representing 53.0% of total revenues during the quarter ended June
30, 2001. Research and development expenses totaled $2,713,000 or 27.2% of
total revenues in the six-months ended June 30, 2002, a decrease of $1,207,000
or 30.8% compared to expenses totaling $3,920,000 representing 49.4% of total
revenues in the six-months ended June 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
$177,000 or 10.0% from $1,778,000, representing 47.7% of total revenues, in the
second quarter of 2001 to $1,601,000, representing 28.4% of total revenues, in
the second quarter of 2002. General and administrative expenses decreased by
$1,223,000 or

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27.3% from $4,474,000, representing 56.3% of total revenues, in the six-months
ended June 30, 2001 to $3,251,000, representing 32.6% of total revenues, in the
six-months ended June 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 throughout 2001.

Amortization of Intangible Assets.Amortization expense decreased by
$163,000 or 34.0% from $480,000 or 12.9% of revenues in the second quarter of
2001 to $317,000 or 5.6% of revenues in the second quarter 2002. Amortization
expense decreased by $431,000 or 40.4% from $1,066,000 or 13.4% of revenues in
the six-months ended June 30, 2001 to $635,000 or 6.4% of revenues in the
six-months ended June 30, 2002. Included in the second quarter of 2001 is
$162,000 of goodwill amortization. Effective January 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 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 best estimate of future results. However, such estimates may
need to be revised in future periods, which could result in additional
impairment charges.

Restructuring Charge. A restructuring charge of $729,000 was recorded in
the three and six-month periods ended June 30, 2001. The costs included in the
restructuring charge 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 June 30, 2002 and 2001 were $104,000 and $338,000,
respectively. Amortization of unearned stock compensation during the six-month
periods ended June 30, 2002 and 2001 were $271,000 and $820,000, respectively.
These amounts have been allocated to cost of sales and operating expenses.

Interest and Other Income and Interest Expense.Interest and other income
consists primarily of earnings on our cash and cash equivalents. Interest and
other income amounted to $181,000 for the second quarter of 2001 and $39,000
for the second quarter of 2002, and $477,000 for the six-months ended June 30,
2001 and $90,000 for the six-months ended June 30, 2002. The decrease in
interest and other income in the second quarter 2002 of $142,000 or 78.5% and
the decrease of $387,000 or 81.1% in the six-months ended June 30, 2002 is due
to the decrease in cash from June 30, 2001 to June 30, 2002. Interest expense
of $13,000 during the second quarter of 2002 and $8,000 for the second quarter
of 2001, and $20,000 during the six-months ended June 30, 2002 and $13,000 for
the six-months ended June 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 two quarters of 2001 or 2002, as
the Company has incurred net operating losses and has no carry-back potential.

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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 June 30, 2002, we had $9.2 million in cash and
cash equivalents and $2.0 million in working capital with outstanding capital
lease obligations totaling $235,000.

Net cash used in operating activities was $2,388,000 and $5,559,000 during
the six months ended June 30, 2002 and 2001, respectively. Net cash used to
fund operating activities in the first half of 2002 reflects net losses before
non-cash charges for depreciation and amortization, stock-based compensation,
asset impairment charge, an increase in accounts payable and accrued expenses,
offset by an increase in net accounts receivable and other assets and a
decrease in the restructuring accrual and deferred revenue. Net cash used to
fund operating activities in the first half of 2001 reflects net losses before
non-cash charges for depreciation and amortization of intangible assets,
provision for doubtful accounts, stock-based compensation and asset impairment
charge, a decrease in net accounts receivable and an increase in accounts
payable and accrued expenses offset by an increase in other
current assets and a decrease in deferred revenue.

During the six months ended June 30, 2002 and 2001, net cash used in
investing activities was $606,000 and $539,000, respectively. Investing
activities during the six months ended 2002 and 2001 consisted primarily of
purchases of computer equipment, office furniture and leasehold improvements,
as well as capitalized software development costs during the six months ended
June 30, 2001.

Net cash used in financing activities was $63,000 for the six months ended
June 30, 2002. Net cash provided by financing activities was $162,000 in the
six months ended June 30, 2001. Net cash used in financing activities for the
six months ended June 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
six months ended June 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 expect to experience growth in our operating expenses for the
foreseeable future in order to execute our business plan, and to the extent
that we are successful in generating additional sales, we will need to hire
additional employees. As a result, we anticipate that operating expenses and
planned capital expenditures will constitute a material use of our cash
resources. 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 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 June 30, 2002, our accumulated deficit
was $45 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 Tomorrow
member-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

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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 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.

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. 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. 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 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.

21



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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 on January 2, 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.

22



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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 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
savings 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 savings.

From time to time, the Company enters into Disease Management contracts
pursuant to which we guarantee certain minimum levels of cost savings 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 June 30, 2002, we had four contracts that
contain some level of guaranteed savings.

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.

23



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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.

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;   

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| |  |  | 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 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

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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.

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.                                

26



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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 raise additional funds within the next twelve
months.. If 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 best 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;                                                

27



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| |  |  | 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;                             
|
| |  |  | 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.

There May Not be an Active, Liquid Trading Market For Our Common Stock.

There is no guarantee that an active trading market for our Common Stock
will be maintained on the NASDAQ National 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 Stock Markets National
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 NASDAQ
Stock Markets SmallCap Market, 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, at the same time, maximizing the yields without significantly
increasing 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.

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PART II  OTHER INFORMATION




Item 1.Legal Proceedings

None.




Item 2.Changes in Securities

None.




Item 3.Defaults in Senior Securities

None.




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

Our Annual Meeting of Stockholders was held on June 10, 2002 in Atlanta,
Georgia. Of the 15,679,000 shares outstanding as of the record date,
11,603,823 were present or represented by proxy at the meeting. The results of
the voting on the matters submitted to the stockholders are as follows:

1.     To elect seven (7) directors to serve until the 2003 Annual Meeting of
Stockholders and until their successors are duly elected and qualified.

|                       |  |           |            |                |  |  |         | 
|---------------------- |  | --------- | ---------- | -------------- |  |  | ------- | 
|Name                   |  | Votes For |            | Votes Withheld
|                       |  |           |            |               
|Eugene Miller          |  |           | 11,531,975 |                |  |  | 71,848  | 
|Thomas Stephenson      |  |           | 11,532,975 |                |  |  | 70,848  | 
|Jerome Grossman, M.D.  |  |           | 11,530,430 |                |  |  | 73,393  | 
|Bryan Lang             |  |           | 11,530,162 |                |  |  | 73,661  | 
|Eugene Santa Cattarina |  |           | 11,521,925 |                |  |  | 81,898  | 
|Howard Cox             |  |           | 11,531,975 |                |  |  | 71,848  | 
|Michael Miele          |  |           | 11,487,075 |                |  |  | 116,748 | 

2.     To ratify the appointment of PricewaterhouseCoopers LLP as independent
auditors of the Company for the fiscal year ending December 31, 2002.

|                  |  |  |            | 
|----------------- |  |  | ---------- | 
|Votes for:        |  |  | 11,554,945 | 
|Votes against:    |  |  | 34,858     | 
|Votes abstaining: |  |  | 14,020     | 




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 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

None.

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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: August 12, 2002 |  | By:             |  | /s/ Eugene Miller                 
|                       |  |                 |  |                                   
|                       |  |                 |  | Eugene Miller                     
|                       |  |                 |  | President, Chief Executive Officer
|                       |  |                 |  |                                   
|Dated: August 12, 2002 |  | By:             |  | /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 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.
|--- |  | ------------------------------------------------------------------------------------------------------