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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, 2003                                            
|or        
|o          |  | 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 o

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12-b-2 of the Exchange Act). YES o    NO x

Number of shares of Common stock, par value of $0.001, outstanding as of
June 30, 2003: 15,982,000.



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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                           
|Item 4. Controls and Procedures                                                              
|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                                                                                
|EX-3.2.1 CERTIFICATION OF INCORPORATION                                                      
|EX-3.3.1 BYLAWS OF THE REGISTRANT                                                            
|EX-10.3.1 1998 EQUITY INCENTIVE PLAN                                                         
|EX-10.4.1 1999 EMPLOYEE STOCK PURCHASE PLAN                                                  
|EX-31.1 SECTION 302 CERTIFICATION OF CEO                                                     
|EX-31.2 SECTION 302 CERTIFICATION OF CFO                                                     
|EX-32.1 SECTION 906 CERTIFICATION OF CEO                                                     
|EX-32.2 SECTION 906 CERTIFICATION OF CEO                                                     



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##### Table of Contents



Landacorp, Inc.

TABLE OF CONTENTS

|              |  |                                                                                                                     
|------------- |  | --------------------------------------------------------------------------------------------------------------------
|              |  |                                                                                                                     
|PART I        |  | Financial Information                                                                                               
|Item 1.       |  | Financial Statements:                                                                                               
|              |  | Condensed Consolidated Balance Sheets as of June 30, 2003(unaudited) and December 31,
2002                          
|              |  | Condensed Consolidated Statements of Operations for the three and six months ended
June 30, 2003 and 2002(unaudited)
|              |  | Condensed Consolidated Statements of Cash Flows for the six months ended
June 30, 2003 and 2002(unaudited)          
|              |  | Notes to Condensed Consolidated Financial Statements                                                                
|Item 2.       |  | Managements Discussion and Analysis of Financial Condition and Results
of Operations                               
|Item 3.       |  | Quantitative and Qualitative Disclosures About Market Risk                                                          
|Item 4.       |  | Controls and Procedures                                                                                             
|PART II       |  | Other Information                                                                                                   
|Item 1.       |  | Legal Proceedings                                                                                                   
|Item 2:       |  | Changes in Securities and Use of Proceeds                                                                           
|Item 3:       |  | Defaults Upon Senior Securities                                                                                     
|Item 4:       |  | Submission of Matters to a Vote of Security Holders                                                                 
|Item 5:       |  | Other Information                                                                                                   
|Item 6.       |  | Exhibits and Reports on Form 8-K                                                                                    
|Signatures    |  |                                                                                                                     
|Exhibit Index |  |                                                                                                                     

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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,
|                                          |                                                                                                                                     |   |                      |                                      |  | 2003        |         | 2002        
|                                          |                                                                                                                                     |   |                      |                                      |  |             |         |             
|                                          |                                                                                                                                     |   |                      |                                      |  | (Unaudited) |         |              |  |       
|                                          |                                                                                                                                     |   |                      | ASSETS                               |  |             |         |              |  |        |        | 
|Current Assets:                           |                                                                                                                                     |   |                      |                                      |  |             |         |             
|                                          | Cash and cash equivalents                                                                                                           |   | $                    | 9,677                                |  |             | $       | 10,008       | 
|                                          | Accounts receivable and costs and estimated earnings in excess of
billings on uncompleted contracts, net                            |   |                      | 5,405                                |  |             |         | 3,797        | 
|                                          | Other current assets                                                                                                                |   |                      | 720                                  |  |             |         | 761          | 
|                                          |                                                                                                                                     |   |                      |                                      |  |             |         |             
|                                          |                                                                                                                                     |   | Total current assets |                                      |  | 15,802      |         |              |  | 14,566 |       
|Property and equipment, net               |                                                                                                                                     |   | 1,517                |                                      |  |             | 1,365   |             
|Goodwill                                  |                                                                                                                                     |   | 7,749                |                                      |  |             | 7,749   |             
|Intangible assets, net                    |                                                                                                                                     |   | 1,249                |                                      |  |             | 1,516   |             
|Other long-term assets                    |                                                                                                                                     |   | 98                   |                                      |  |             | 123     |             
|                                          |                                                                                                                                     |   |                      |                                      |  |             |         |             
|Total Assets                              |                                                                                                                                     | $ | 26,415               |                                      |  | $           | 25,319  |             
|                                          |                                                                                                                                     |   |                      |                                      |  |             |         |             
|                                          |                                                                                                                                     |   |                      | LIABILITIES AND STOCKHOLDERS EQUITY |  |             |         |              |  |        |        | 
|Current liabilities:                      |                                                                                                                                     |   |                      |                                      |  |             |         |             
|                                          | Accounts payable                                                                                                                    |   | $                    | 971                                  |  |             | $       | 730          | 
|                                          | Accrued expenses                                                                                                                    |   |                      | 2,604                                |  |             |         | 3,525        | 
|                                          | Restructuring accrual                                                                                                               |   |                      | 161                                  |  |             |         | 208          | 
|                                          | Deferred revenue and billings in excess of costs and estimated earnings on
uncompleted contracts                                    |   |                      | 6,865                                |  |             |         | 7,122        | 
|                                          | Current portion of capital lease obligations                                                                                        |   |                      | 78                                   |  |             |         | 78           | 
|                                          | Current portion of notes payable                                                                                                    |   |                      | 92                                   |  |             |         |             | 
|                                          |                                                                                                                                     |   |                      |                                      |  |             |         |              | 
|                                          |                                                                                                                                     |   |                      | Total current liabilities            |  |             | 10,771  |              |  |        | 11,663 | 
|                                          | Capital lease obligations, net of current portion                                                                                   |   |                      | 126                                  |  |             |         | 181          | 
|                                          | Notes Payable, net of current portion                                                                                               |   |                      | 268                                  |  |             |         |             | 
|                                          |                                                                                                                                     |   |                      |                                      |  |             |         |              | 
|                                          |                                                                                                                                     |   |                      | Total liabilities                    |  |             | 11,165  |              |  |        | 11,844 | 
|                                          |                                                                                                                                     |   |                      |                                      |  |             |         |             
|Commitments                               |                                                                                                                                     |   |                     |                                      |  |             |        |             
|Stockholders equity:                     |                                                                                                                                     |   |                      |                                      |  |             |         |             
|                                          | Common Stock, $0.001 par value, 50,000,000 shares authorized;
15,982,000 and 15,694,000 shares issued and outstanding, respectively |   |                      | 16                                   |  |             |         | 16           | 
|                                          | Additional paid-in capital                                                                                                          |   |                      | 58,528                               |  |             |         | 58,412       | 
|Notes receivable from officers            |                                                                                                                                     |   | (167                 | )                                    |  |             | (163    | )           
|Unearned stock-based compensation         |                                                                                                                                     |   | (5                   | )                                    |  |             | (36     | )           
|Accumulated deficit                       |                                                                                                                                     |   | (43,122              | )                                    |  |             | (44,754 | )           
|                                          |                                                                                                                                     |   |                      |                                      |  |             |         |             
|Total stockholders equity                |                                                                                                                                     |   | 15,250               |                                      |  |             | 13,475  |             
|                                          |                                                                                                                                     |   |                      |                                      |  |             |         |             
|Total liabilities and stockholders equity |                                                                                                                                     | $ | 26,415               |                                      |  | $           | 25,319  |             
|                                          |                                                                                                                                     |   |                      |                                      |  |             |         |             

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,  
|                                                                          |  |                                      |                          |   |                    |       |                 
|                                                                          |  |                                      |                          |   | 2003               |       | 2002             |   | 2003  |       | 2002  
|                                                                          |  |                                      |                          |   |                    |       |                  |   |       |       |       
|REVENUE:                                                                  |  |                                      |                          |   |                    |       |                  |   |       |       |        |   |       |        |        |  
|                                                                          |  | Program revenue and maintenance fees |                          | $ | 5,164              |       |                  | $ | 4,005 |       |        | $ | 9,352 |        |        | $ | 7,694 |       
|                                                                          |  | System sales and consulting fees     |                          |   | 1,890              |       |                  |   | 1,713 |       |        |   | 3,659 |        |        |   | 2,397 |       
|                                                                          |  |                                      |                          |   |                    |       |                  |   |       |       |        |   |       |        |        |  
|                                                                          |  |                                      | Total revenues           |   |                    | 7,054 |                  |   |       | 5,718 |        |   |       | 13,011 |        |   |       | 10,091 | 
|                                                                          |  |                                      |                          |   |                    |       |                  |   |       |       |        |   |       |        |        |  
|COST OF REVENUE:                                                          |  |                                      |                          |   |                    |       |                  |   |       |       |        |   |       |        |        |  
|                                                                          |  | Program revenue and maintenance fees |                          |   | 1,702              |       |                  |   | 2,340 |       |        |   | 3,059 |        |        |   | 4,337 |       
|                                                                          |  | System sales and consulting fees     |                          |   | 542                |       |                  |   | 780   |       |        |   | 1,187 |        |        |   | 1,339 |       
|                                                                          |  |                                      |                          |   |                    |       |                  |   |       |       |        |   |       |        |        |  
|                                                                          |  |                                      | Total cost of revenue    |   |                    | 2,244 |                  |   |       | 3,120 |        |   |       | 4,246  |        |   |       | 5,676  | 
|                                                                          |  |                                      |                          |   |                    |       |                  |   |       |       |        |   |       |        |        |  
|GROSS PROFIT                                                              |  |                                      | 4,810                    |   |                    |       | 2,598            |   |       |       | 8,765  |   |       |        | 4,415  |  
|                                                                          |  |                                      |                          |   |                    |       |                  |   |       |       |        |   |       |        |        |  
|OPERATING EXPENSES:                                                       |  |                                      |                          |   |                    |       |                  |   |       |       |        |   |       |        |        |  
|                                                                          |  | Sales and marketing                  |                          |   | 1,025              |       |                  |   | 1,346 |       |        |   | 1,893 |        |        |   | 2,555 |       
|                                                                          |  | Research and development             |                          |   | 1,197              |       |                  |   | 1,528 |       |        |   | 2,300 |        |        |   | 2,713 |       
|                                                                          |  | General and administrative           |                          |   | 1,357              |       |                  |   | 1,601 |       |        |   | 2,691 |        |        |   | 3,251 |       
|                                                                          |  | Amortization of intangible assets    |                          |   | 134                |       |                  |   | 317   |       |        |   | 268   |        |        |   | 635   |       
|                                                                          |  | Asset impairment charge              |                          |   |                   |       |                  |   | 3,300 |       |        |   |      |        |        |   | 3,300 |       
|                                                                          |  |                                      |                          |   |                    |       |                  |   |       |       |        |   |       |        |        |  
|                                                                          |  |                                      | Total operating expenses |   |                    | 3,713 |                  |   |       | 8,092 |        |   |       | 7,152  |        |   |       | 12,454 | 
|                                                                          |  |                                      |                          |   |                    |       |                  |   |       |       |        |   |       |        |        |  
|INCOME (LOSS) FROM OPERATIONS                                             |  |                                      | 1,097                    |   |                    |       | (5,494           | ) |       |       | 1,613  |   |       |        | (8,039 | )
|INTEREST AND OTHER INCOME                                                 |  |                                      | 24                       |   |                    |       | 39               |   |       |       | 50     |   |       |        | 90     |  
|INTEREST EXPENSE                                                          |  |                                      | (8                       | ) |                    |       | (13              | ) |       |       | (13    | ) |       |        | (20    | )
|                                                                          |  |                                      |                          |   |                    |       |                  |   |       |       |        |   |       |        |        |  
|NET INCOME (LOSS) BEFORE INCOME TAXES                                     |  |                                      | 1,113                    |   |                    |       | (5,468           | ) |       |       | 1,650  |   |       |        | (7,969 | )
|PROVISION FOR INCOME TAXES                                                |  |                                      | 20                       |   |                    |       |                 |   |       |       | 20     |   |       |        |       |  
|                                                                          |  |                                      |                          |   |                    |       |                  |   |       |       |        |   |       |        |        |  
|NET INCOME (LOSS)                                                         |  | $                                    | 1,093                    |   |                    | $     | (5,468           | ) |       | $     | 1,630  |   |       | $      | (7,969 | )
|                                                                          |  |                                      |                          |   |                    |       |                  |   |       |       |        |   |       |        |        |  
|NET INCOME (LOSS) PER SHARE  BASIC                                       |  | $                                    | 0.07                     |   |                    | $     | (0.35            | ) |       | $     | 0.10   |   |       | $      | (0.52  | )
|                                                                          |  |                                      |                          |   |                    |       |                  |   |       |       |        |   |       |        |        |  
|NET INCOME (LOSS) PER SHARE  DILUTED                                     |  | $                                    | 0.06                     |   |                    | $     | (0.35            | ) |       | $     | 0.10   |   |       | $      | (0.52  | )
|                                                                          |  |                                      |                          |   |                    |       |                  |   |       |       |        |   |       |        |        |  
|Weighted average common and common equivalent
shares outstanding; basic   |  |                                      | 15,698                   |   |                    |       | 15,440           |   |       |       | 15,609 |   |       |        | 15,408 |  
|                                                                          |  |                                      |                          |   |                    |       |                  |   |       |       |        |   |       |        |        |  
|Weighted average common and common equivalent
shares outstanding; diluted |  |                                      | 17,077                   |   |                    |       | 15,440           |   |       |       | 16,662 |   |       |        | 15,408 |  
|                                                                          |  |                                      |                          |   |                    |       |                  |   |       |       |        |   |       |        |        |  

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,        
|                                                 |                                                                                      |                                  |                                                                                                         |                                                     |     |                 
|                                                 |                                                                                      |                                  |                                                                                                         |                                                     |     | 2003             |        | 2002  
|                                                 |                                                                                      |                                  |                                                                                                         |                                                     |     |                  |        |       
|Cash flows from operating activities:            |                                                                                      |                                  |                                                                                                         |                                                     |     |                  |        |       
|                                                 | Net Income (loss)                                                                    |                                  | $                                                                                                       | 1,630                                               |     |                  | $      | (7,969 | )    
|                                                 | Adjustments to reconcile net income (loss) to net cash used in
operating activities: |                                  |                                                                                                         |                                                     |     |                  |        |        |      
|                                                 |                                                                                      | Depreciation and amortization    |                                                                                                         |                                                     | 637 |                  |        |        | 1,249 |      
|                                                 |                                                                                      | Stock-based compensation expense |                                                                                                         |                                                     | 152 |                  |        |        | 358   |      
|                                                 |                                                                                      | Non-cash interest income         |                                                                                                         |                                                     | (2  | )                |        |        | (4    | )    
|                                                 |                                                                                      | Asset Impairment Charge          |                                                                                                         |                                                     |    |                  |        |        | 3,300 |      
|                                                 |                                                                                      |                                  | Changes in assets and liabilities:                                                                      |                                                     |     |                  |        |        |       |       |       
|                                                 |                                                                                      |                                  | Accounts receivable and costs and estimated earnings in excess of
billing on uncompleted contracts, net |                                                     |     | (1,588           | )      |        |       | (100  | )     
|                                                 |                                                                                      |                                  | Other assets                                                                                            |                                                     |     |                 |        |        |       | (206  | )     
|                                                 |                                                                                      |                                  | Accounts payable                                                                                        |                                                     |     | 241              |        |        |       | 1,146 |       
|                                                 |                                                                                      |                                  | Accrued expenses                                                                                        |                                                     |     | (922             | )      |        |       | 571   |       
|                                                 |                                                                                      |                                  | Restructuring accrual                                                                                   |                                                     |     | (47              | )      |        |       | (126  | )     
|                                                 |                                                                                      |                                  | Deferred revenue and billings in excess of costs and estimated
earnings on uncompleted contracts        |                                                     |     | (257             | )      |        |       | (611  | )     
|                                                 |                                                                                      |                                  |                                                                                                         |                                                     |     |                  |        |        |      
|                                                 |                                                                                      |                                  |                                                                                                         | Net cash used in operating activities               |     |                  | (156   | )      |       |       | (2,392 | )
|                                                 |                                                                                      |                                  |                                                                                                         |                                                     |     |                  |        |        |      
|Cash flows from investing activities:            |                                                                                      |                                  |                                                                                                         |                                                     |     |                  |        |       
|                                                 | Purchases of property and equipment                                                  |                                  |                                                                                                         | (486                                                | )   |                  |        | (606   | )    
|                                                 |                                                                                      |                                  |                                                                                                         |                                                     |     |                  |        |        |      
|                                                 |                                                                                      |                                  |                                                                                                         | Net cash used in investing activities               |     |                  | (486   | )      |       |       | (606   | )
|                                                 |                                                                                      |                                  |                                                                                                         |                                                     |     |                  |        |        |      
|Cash flows from financing activities             |                                                                                      |                                  |                                                                                                         |                                                     |     |                  |        |       
|                                                 | Repayments of obligations under capital lease                                        |                                  |                                                                                                         | (55                                                 | )   |                  |        | (79    | )    
|                                                 | Collection on note receivable from officers                                          |                                  |                                                                                                         |                                                    |     |                  |        | 14     |      
|                                                 | Repayment of long-term debt                                                          |                                  |                                                                                                         | (8                                                  | )   |                  |        |       |      
|                                                 | Proceeds from long-term debt                                                         |                                  |                                                                                                         | 368                                                 |     |                  |        |       |      
|                                                 | Proceeds from Common Stock issuances                                                 |                                  |                                                                                                         | 6                                                   |     |                  |        | 6      |      
|                                                 |                                                                                      |                                  |                                                                                                         |                                                     |     |                  |        |        |      
|                                                 |                                                                                      |                                  |                                                                                                         | Net cash provided by (used in) financing activities |     |                  | 311    |        |       |       | (59    | )
|                                                 |                                                                                      |                                  |                                                                                                         |                                                     |     |                  |        |        |      
|Increase (decrease) in cash and cash equivalents |                                                                                      |                                  | (331                                                                                                    | )                                                   |     |                  | (3,057 | )     
|Cash and cash equivalents, beginning of period   |                                                                                      |                                  | 10,008                                                                                                  |                                                     |     |                  | 12,274 |       
|                                                 |                                                                                      |                                  |                                                                                                         |                                                     |     |                  |        |        |      
|Cash and cash equivalents, end of period         |                                                                                      | $                                | 9,677                                                                                                   |                                                     |     | $                | 9,217  |       
|                                                 |                                                                                      |                                  |                                                                                                         |                                                     |     |                  |        |        |      
|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 delivery organizations that
include predictive modeling and chronic condition management programs, and
Internet-and Windows®-based medical management software. These solutions are
designed to help our customers control and avoid cost, while improving outcomes
across the continuum of care. The Company maintains offices in Atlanta,
Georgia, Chico, California, and Raleigh, North Carolina and derives
substantially all of its revenues from customers in the United States.

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, 2002. The
balance sheet at December 31, 2002 is derived from the audited financial
statements included in the Form 10-K for the year ended December 31, 2002.
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, 2003 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.

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 management services. In accordance with Staff Accounting
Bulletin (SAB) 101, the Company recognizes revenue when all of the following
criteria are met: (1) persuasive evidence of an arrangement exists, (2)
delivery has occurred or the services are rendered, (3) the price is fixed and
determinable and, (4) collectibility is reasonably assured.

The Company accounts for their multiple element software systems contracts in
accordance with the provision of Statement of Position (SOP) 97-2, Software
Revenue Recognition,as amended by SOP 98-4, Deferral of the Effective Date of
Certain Provisions of SOP 97-2.As the Company provides significant production,
modification and/or customization of the software installed, system sales
revenues, including training and consulting services essential to the software
system, and the associated costs are recognized using the
percentage-of-completion method, using labor hours incurred relative to total
estimated contract hours as the measure of progress towards completion. Costs
and estimated earnings in excess of billings represent revenues that the
Company has earned in accordance with its accounting policies but that are not
yet billable under the terms of the contracts as of the date of the balance
7Table of ContentsLANDACORP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)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 care management program services through a per
participant annual enrollment fee and 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. Payments for participants annual
enrollment fees are 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. Such obligations include the delivery of health risk assessment
surveys, tailored health guides and certain lab test kits.Other miscellaneous revenue is recognized as services are provided and
obligations to the customer are fulfilled.From time to time, the Company may enter into care management contracts
that guarantee certain cost savings or other performance measures to the
customer. Certain amounts are refundable to the customer if such savings or
performance criteria are not achieved. Under such contracts, the Company defers
revenue equal to either the maximum potential amount of fees that are
refundable, or such amount that is determined by management to be reasonable
based on historical performance under the contract. Such revenue will not be
recognized until the performance criteria have been met. As of June 30, 2003
the Company had outstanding performance guarantees on three contracts, for a
maximum total of approximately $1,019,000, which is included in deferred
revenue.Included in the second quarter of 2003, is revenue of approximately $308,000
related to achieving certain performance criteria from an ongoing care
management contract.Also included in the second quarter of 2003, is additional revenue of
approximately $374,000 due to the revision of the estimated time required to
complete an ongoing fixed-price medical management software contract.3.     Net income (loss) per shareBasic net income (loss) per share is computed using the weighted average
number of common shares outstanding. Diluted net income (loss) per share is
computed using the weighted average number of common and potential common
shares outstanding. Potential common shares consist of outstanding common
shares subject to repurchase by the Company, and common shares issuable upon
the exercise of stock options and warrants (using the treasury stock method).
Potential common shares are excluded from the computation if their effect is
anti-dilutive. The approximate potential common shares, which are excluded from
the determination of diluted net income per share as the effect of such shares
is anti-dilutive were 737,000 and 1,462,000 for the three and six months ended
June 30, 2003, respectively. The approximate potential common shares, which
are excluded from the determination of basic and diluted net loss per share as
the effect of such shares is anti-dilutive were 3,636,000 at June 30, 2002.4.     Recent Accounting PronouncementsIn August 2001, the Financial Accounting Standards Board (FASB) issued
SFAS No. 143, Accounting for Asset Retirement Obligations. SFAS No. 143
addresses accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs. This statement requires that the8Table of Contents

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

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. The Company adopted this statement effective
January 1, 2003 and it did not have a material effect on our financial
position, results of operations or cash flows.

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. The Company adopted this statement effective January
1, 2003 and did not have a material effect on our financial position, results
of operations or cash flows.

In November 2002, the FASB reached a consensus on EITF Issue 00-21,
Accounting for Revenue Arrangements with Multiple Deliverables (the Issue).
The guidance in this Issue is effective for revenue arrangements entered into
fiscal years beginning after June 15, 2003. The Issue addresses certain aspects
of the accounting by a vendor for arrangements under which it will perform
multiple revenue-generating activities. Specifically, the Issue addresses how
to determine whether an arrangement involving multiple deliverables contains
more than one earnings process and, if it does, how to divide the arrangement
into separate units of accounting consistent with the identified earnings
processes for revenue recognition purposes. The Issue also addresses how
arrangement consideration should be measured and allocated to the separate
units of accounting in the arrangement. The Company currently follows the
appropriate pronouncement as discussed in Revenue Recognition and anticipates
the Issue will not have a significant impact on the results of operations,
financial position, or cash flows.

In November 2002, the FASB issued FASB Interpretation 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, including Indirect
Guarantees of Indebtedness of Others. This interpretation clarifies the
requirements of SFAS 5, Accounting for Contingencies, relating to guarantors
accounting for, and disclosure of, the issuance of certain types of guarantees.
This interpretation is intended to improve the comparability of financial
reporting by requiring identical accounting for guarantees issued with a
separately identified premium and guarantees issued without a separately
identified premium. The interpretations provisions for initial recognition and
measurement are required on a prospective basis to guarantees issued or
modified after December 31, 2002. We have adopted the disclosure provisions of
this interpretation and it did not have a material effect on our financial
position, results of operations or cash flows. From time to time, the Company
indemnifies certain customers from any claims arising from patent or copyright
infringements related to the implementation of its Medical Management software.
To date, there have been no such infringements or claims thereof. The Company
is also a party to employment agreements with certain executive officers that
contain change of control provisions. These agreements are disclosed in our
definitive proxy statement for our 2003 Annual Meeting of Stockholders.

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

5.     Goodwill and Other Intangible Assets

We adopted SFAS 142, Goodwill and Other Intangible Assets on January 1,
2002. Accordingly, we reclassified $462,000 of intangible assets to goodwill
and discontinued periodic amortization of goodwill. Goodwill will be assessed
annually on January 1 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. We
have completed the test as of January 1, 2003, which also indicated no
impairment.

Intangible assets that have finite useful lives will continue to be
amortized over their useful lives. Our intangible assets consist principally of
existing technology and customer base, and all are considered to have finite
lives. Our acquired workforce intangible asset was reclassified to goodwill
upon the adoption of FAS 142 on January 1, 2002.

(in thousands)

|                                          |                                  |   |            |        |          |   |           |      |       |   |      |      |   |   |        |        |  
|----------------------------------------- | -------------------------------- | - | ---------- | ------ | -------- | - | --------- | ---- | ----- | - | ---- | ---- | - | - | ------ | ------ | -
|                                          |                                  |   | 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                     |   |            | (740   | )        |   |           | (162 | )     |   |      |     |   |   |        | (902   | )
|                                          | Impairment Charge (note 7)       |   |            | (2,006 | )        |   |           | (444 | )     |   |      |     |   |   |        | (2,450 | )
|                                          |                                  |   |            |        |          |   |           |      |       |   |      |      |   |   |        |       
|Intangible assets as of December 31, 2002 |                                  |   | 1,241      |        |          | $ | 275       |      |       | $ |     |      |   | $ | 1,516  |       
|Amortization                              |                                  |   | (110       | )      |          |   | (24       | )    |       |   |     |      |   |   | (134   | )     
|                                          |                                  |   |            |        |          |   |           |      |       |   |      |      |   |   |        |       
|Intangible assets as of March 31, 2003    |                                  |   | 1,131      |        |          |   | 251       |      |       |   |     |      |   |   | 1,382  |       
|Amortization                              |                                  |   | (110       | )      |          |   | (23       | )    |       |   |     |      |   |   | (133   | )     
|                                          |                                  |   |            |        |          |   |           |      |       |   |      |      |   |   |        |       
|Intangible assets as of June 30, 2003     |                                  | $ | 1,021      |        |          | $ | 228       |      |       | $ |     |      |   | $ | 1,249  |       
|                                          |                                  |   |            |        |          |   |           |      |       |   |      |      |   |   |        |       

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

6.     Restructuring and Acquisition Related Costs

In May 2001, the Company announced a reduction in work force representing
approximately 16% of the Companys total work force which consisted of 40
employees from various areas of the Company. Also in May 2001, the Company
announced its plan to cease operations of its Portland, Oregon-based
Interactive Media Group (IMG). On August 8, 2001, the Company announced an
additional reduction in work force of approximately 18%, or 36 employees. For
the year ended December 31, 2001, restructuring and acquisition related charges
consisted of $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
re-pricing of stock options granted in connection with the acquisition of
PatientCentrix. In December 2002, the Company recorded a restructuring charge
of $106,000 related to additional estimated real estate lease obligations on
office space that was vacated as a result of the reductions in force announced
by the Company in May 2001.

The following is a rollforward of the restructuring accrual:

|                           |                          |   |         |          |  
|-------------------------- | ------------------------ | - | ------- | -------- | -
|Balance, January 1, 2002   |                          |   | 368,000 |         
|Additions:                 |                          |   |         |         
|                           | Facility/rental payments |   |         | 106,000  |  
|Reductions:                |                          |   |         |         
|                           | Facility/rental payments |   |         | (226,000 | )
|                           | Severance payments       |   |         | (40,000  | )
|                           |                          |   |         |         
|Balance, December 31, 2002 |                          |   | 208,000 |         
|                           |                          |   |         |         
|Reductions:                |                          |   |         |         
|                           | Facility/rental payments |   |         | (28,000  | )
|                           |                          |   |         |         
|Balance, March 31, 2003    |                          |   | 180,000 |         
|Reductions:                |                          |   |         |         
|                           | Facility/rental payments |   |         | (19,000  | )
|                           |                          |   |         |         
|Balance, June 30, 2003     |                          | $ | 161,000 |         
|                           |                          |   |         |         

7.     Asset Impairment Charge

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

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

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

The analysis resulted in an impairment charge during the year ended
December 31, 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.     Agreement with Certain Shareholders and Option Holders

On March 13, 2002, the Company settled 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 has been recorded 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 has been recorded 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. Our board of directors
has determined that Mr. Miele should remain on our board of directors, and Mr.
Miele was re-elected at our 2003 annual meeting of stockholders.

9.     Stock-Based Compensation

The Company accounts for stock-based compensation based on the provisions
of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees (APB No. 25), which states that no compensation expense is
recorded for stock options or other stock-based awards to employees that are
granted with an exercise price equal to or above the estimated fair value per
share of the Companys common stock on the grant date. In the event that stock
options are granted at a price lower than the fair market value at that date,
the difference between the fair market value of the Companys common stock and
the exercise price of the stock option is recorded as unearned compensation.
Unearned compensation is amortized to compensation expense over the vesting
period of the stock option. The Company has adopted the disclosure requirements
of Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation (SFAS 123), as it relates to stock options granted
to employees, which requires pro forma net losses be disclosed based on the
fair value of the options granted at the date of the grant. The Company
accounts for equity instruments issued to non-employees in accordance with the
provisions of SFAS No. 123 and Emerging Issues Task Force (EITF) 96-18,
Accounting for Equity Instruments That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services.

Fair Value Disclosures

The Company calculated the fair value of each option on the date of grant
using the Black-Scholes option pricing model as prescribed by SFAS No. 123
using the following weighted average assumptions:

|                          |  |               |      |               |  |  |      |  
|------------------------- |  | ------------- | ---- | ------------- |  |  | ---- | -
|                          |  | June 30, 2003 |      | June 30, 2002
|                          |  |               |      |              
|Risk-free interest rate   |  |               | 3.90 | %             |  |  | 5.02 | %
|Expected lives (in years) |  |               | 10.0 |               |  |  | 10.0 |  
|Dividend yield            |  |               | 0.0  | %             |  |  | 0.0  | %
|Expected volatility       |  |               | 100  | %             |  |  | 100  | %

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

Had compensation cost for the Companys stock-based compensation plans
been determined as prescribed by SFAS No. 123, the Companys net pro forma
income (loss) would have been as follows:

|                                     |                      |  |               |           |               |  |   |             |  
|------------------------------------ | -------------------- |  | ------------- | --------- | ------------- |  | - | ----------- | -
|                                     |                      |  | June 30, 2003 |           | June 30, 2002
|                                     |                      |  |               |           |              
|Net income (loss):                   |                      |  |               |           |               |  |   |            
|                                     | As reported          |  | $             | 1,630,000 |               |  |   | ($7,969,000 | )
|                                     | Compensation Expense |  |               | (402,000  | )             |  |   | (395,000    | )
|                                     |                      |  |               |           |               |  |   |            
|                                     | Pro forma            |  |               | 1,228,000 |               |  |   | (8,364,000  | )
|                                     |                      |  |               |           |               |  |   |            
|Basic net income (loss) per share:   |                      |  |               |           |               |  |   |            
|                                     | As reported          |  | $             | 0.10      |               |  | $ | (0.52       | )
|                                     | Compensation Expense |  |               | (0.02     | )             |  |   | (0.02       | )
|                                     |                      |  |               |           |               |  |   |            
|                                     | Pro forma            |  | $             | 0.08      |               |  | $ | (0.54       | )
|                                     |                      |  |               |           |               |  |   |            
|Diluted net income (loss) per share: |                      |  |               |           |               |  |   |            
|                                     | As reported          |  | $             | 0.10      |               |  | $ | (0.52       | )
|                                     | Compensation Expense |  |               | (0.02     | )             |  |   | (0.02       | )
|                                     |                      |  |               |           |               |  |   |            
|                                     | Pro forma            |  | $             | 0.08      |               |  | $ | (0.54       | )
|                                     |                      |  |               |           |               |  |   |            

The pro forma expense was calculated based upon conditions present for a
public company.

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

Note Regarding Forward-Looking Statements: This report contains certain
forward-looking statements (as such term is defined in Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934)
and information relating to the Company that are based on the beliefs of the
management of the Company as well as assumptions made by and information
currently available to the management of the Company. Examples of such
forward-looking statements include projections of our future results of
operations, including consecutive quarter over quarter revenues
during the remainder of 2003, or of our financial condition and plans to hire additional
personnel; our market opportunities; deployment, capabilities and uses of our
products and services; advantages and advancements that may be enabled by our
products; product development and product innovations; developments in the
healthcare and population health management industries; expansion of our
intellectual property portfolio; growth in our research and development, sales,
marketing and general administrative expenses; and anticipated trends in our
business. Actual results may differ materially from those indicated by these
forward-looking statements as a result of various important factors including,
but not limited to, Landacorps dependence on a limited number of products with
limited market acceptance and other risk factors that are discussed in this
Form 10-Q and the Companys other filings with the SEC, including its Form 10-K
for the year ended December 31, 2002. Such statements reflect the judgment of
the Company as of the date of this report on Form 10-Q with respect to future
events, the outcome of which is subject to certain risks, including the risk
factors set forth below, which may have a significant impact on the Companys
business, operating results or financial condition. Investors are cautioned
that these forward-looking statements are inherently uncertain. Should one or
more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results or outcomes may vary materially
from those described herein. Landacorp undertakes no obligation to update
forward looking statements.

Overview

Landacorp provides population health management solutions to healthcare
payer and delivery organizations. Our innovative predictive modeling and
chronic condition management programs work together with our Internet- and
Windows®-based medical management software to deliver comprehensive solutions
that can help our clients better manage their at-risk patient populations. This
can result in prevented and reduced cost, while improving health outcomes.
Combined, our products and services comprise a unique set of capabilities that
support our customers across the continuum of patient care.

Landacorps care management solutions  our predictive modeling and
chronic condition management capabilities  help health plans and other payers
identify and intervene with members who have health conditions like asthma,
diabetes and heart disease and are at risk for potentially high predicted
expenditure outcomes associated with their condition. These member-focused
solutions help our clients manage the health of these members through the
delivery of consistent and appropriate educational information and
self-management materials, or through referral to the customers nurse case
managers. Taken together, Landacorps care management solutions allow customers
to integrate targeting capabilities with a wide range of multi-disease
intervention solutions to reach identified at-risk members. These programs also
support our clients branding and marketing efforts by helping them build
stronger, more binding relationships with their members through the
communication tools and methodologies used to deliver information.

Landacorps medical management software solutions help healthcare payers,
and hospitals and healthcare delivery systems manage the cost and care of their
patients by documenting treatment, ensuring that clinical guidelines and
government compliance requirements are met, and by automating the workflow and
processes surrounding care coordination activities. These applications use
customer-defined business process rules to streamline administrative and
business processes; facilitate interaction among various healthcare
participants; and minimize inefficient paper-, fax- and phone-based
communications. Our software solutions utilize an n-tiered system architecture
that enables them to complement existing information systems, as well as other
Internet-based products, with a rich set of functions. They are flexible and
secure, and can be deployed across a broad range of computing environments.
They are also scalable, allowing our customers to configure and adapt them to
fit their unique administrative and business requirements and processes.

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During the quarter ended June 30, 2003, 59% and 41% of revenue was generated
from care management services and medical management software, respectively.

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 management programs and services through a per
participant annual enrollment fee and 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. Payments for participants annual
enrollment fees are 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. Such obligations include the delivery of health risk assessment
surveys, tailored health guides and certain lab test kits.

Other miscellaneous revenue is recognized as services are provided and
obligations to the customer are fulfilled.

From time to time, the Company may enter into care analytics and care
management contracts that guarantee certain cost savings or other performance
measures to the customer. Certain amounts are refundable to the customer if
such savings or performance criteria are not achieved. Under such contracts,
the Company defers revenue equal to either the maximum potential amount of fees
that are refundable, or such amount that is determined by management to be
reasonable based on historical performance under the contract. Such revenue
will not be recognized until the performance criteria have been met. As of
June 30, 2003 the Company had outstanding performance guarantees on three
contracts, for a maximum total of approximately $1,019,000, which is included
in deferred revenue.

To accelerate the implementation of elements of our strategy, we intend to
target and pursue strategic 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. Evaluating 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. 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, allowances and reserves, restructuring costs,
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 certain revenue derived from our
care management programs. Deferred revenue consists of maintenance billings and
annual enrollment fees due in advance of service periods. From time to time,
the Company may enter into care

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management contracts that guarantee certain cost savings or other
performance measures to the customer. Certain amounts are refundable to the
customer if such savings or performance criteria are not achieved. Under such
contracts, the Company defers revenue equal to either the maximum potential
amount of fees that are refundable, or such amount that is determined by
management to be reasonable based on historical performance under the contract.
Such revenue will not be recognized until the performance criteria have been
met. The Companys revenue recognition policies are consistent with the
guidance in Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in
Financial Statements and AICPA Statement of position No. 97  2 Software
Revenue Recognition. The Company follows specific and detailed guidelines in
measuring revenue; however certain estimates and judgments affect the
application of the revenue policy. These estimates include the estimated
contract hours and time to complete for percentage of completion accounting,
and the effort-based measures used in services accounting. Changes in
conditions or new contract terms could cause management to determine these
estimates and judgments must be revised. Such changes or revisions could
adversely affect the revenue recognition for any reporting period.

Bad debt.Management analyzes accounts receivable balances, historical
bad debts, customer concentrations, customer credit-worthiness, current
economic trends, and changes in our customer payment terms and trends when
evaluating the adequacy of the allowance for bad debt. Significant management
judgment and estimates must be made and used in connection with establishing
the allowance for bad debt in any accounting period. The accounts receivable
balance was $3.8 million, net of allowance for bad debt of $0.3 million as of
June 30, 2003. If the financial condition of the Companys customers were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances for bad debt may be required.

Goodwill.The Company adopted SFAS 142, Goodwill and Other Intangible
Assets on January 1, 2002. Accordingly, the Company discontinued periodic
amortization of goodwill of approximately $650,000 annually. Goodwill will be
assessed annually on January 1 for impairment by applying a fair-value-based
test. Additionally, the standard requires a transitional impairment test during
the period of adoption. The Company has performed the transitional impairment
test, which indicated that there is no impairment to goodwill as of January 1,
2002. The Company has completed the test as of January 1, 2003, which also
indicated no impairment. The projections used to test for impairment of
goodwill were based on managements estimate of future results. However, such
estimates may need to be revised in future periods, which could result in
impairment charges.

Other Intangible Assets.Other intangible assets are amortized on a
straight-line basis over the useful life of the asset, which is the period the
asset is expected to contribute directly or indirectly to future cash flows.
Other intangibles include customer relationships and acquired technology. The
lives established for our intangible assets are based on many factors, and are
subject to change because of the nature of our operations. We periodically
evaluate the recoverability of intangible assets and take into account events
or circumstances that warrant revised estimates of useful lives or indicate
that an impairment exists. These evaluations are based on the Companys
estimates of future results and may be revised in future periods. During the
second quarter of 2002, we recorded an impairment charge of $2,450,000 on our
intangible assets. Our acquired workforce intangible asset was reclassified to
goodwill upon the adoption of FAS 142 on January 1, 2002.

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 additional restructuring accruals or reverse accrual amounts
accordingly.

Recent Developments

On November 2, 2000 we completed the acquisition of PatientCentrix, Inc.
(PatientCentrix), a leading provider of predictive modeling and targeting.
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, representing

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options to purchase up to 1,582,532 of Common Stock of Landacorp with an
average exercise price of $1.525. The total purchase price of $11,188,000
consisted of $5,850,000 cash, $2,056,000 of our Common Stock (1,157,000
shares), assumed stock options with a fair value of $2,970,000, and other
acquisition related expenses of approximately $312,000, consisting primarily of
payment for legal and financial advisory services. Of the total purchase price,
approximately $191,000 was allocated to the net tangible assets, approximately
$961,000 was allocated to unearned compensation related to our right to
repurchase 30% of the shares of the Companys Common Stock and options to
purchase our Common Stock issued to employees of PatientCentrix pursuant to the
purchase agreement in the event of such employees termination under certain
circumstances, and the remainder was allocated to intangible assets, including
existing technology ($3,600,000), customer base ($640,000), assembled work
force ($280,000), and goodwill ($5,516,000). Additionally, up to $6 million in
additional cash could be paid to the shareholders and option holders of
PatientCentrix, under the earn out provision of the purchase agreement. As
discussed in the following paragraphs, the Company reached various settlements
with shareholders of PatientCentrix during 2001 affecting this provision.
Accordingly, approximately $1,477,000 has been recorded to goodwill as
additional purchase price, resulting in a cumulative aggregate purchase price
of $12,665,000.

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 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 and allow the options
to be immediately exercisable. 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 settled 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 has been recorded as an adjustment
to goodwill. As further consideration for the release of all disagreements
related to the merger and the 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 re-pricing has been recorded 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 was nominated
and elected as a director at our 2003 annual meeting of stockholders.

During the second quarter of 2002, the Company experienced a decline in
demand for services in its Care Management reporting unit, previously referred
to as Care Analytics/Care Management. 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 Management reporting unit. The analysis was first performed on an
undiscounted cash flow basis, which indicated an impairment in its Care
Management reporting unit. The impairment was then calculated using projections
of discounted cash flows over ten years utilizing a discount rate and terminal
value commensurate with other Disease Management companies, and companies of
similar size to Landacorp. The assumptions used in this analysis represent
managements estimate of future results.

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

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

On October 9, 2002, the Company announced the early termination of its
agreement with Lifeguard, Inc. due to the takeover of the Lifeguard HMO by the
State of Californias Department of Managed Healthcare. At that time,

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the Company amended its agreement with Lifeguard to provide for the early
termination of the agreement and to eliminate the Companys obligation to
reimburse any fees paid to the Company by Lifeguard.

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

Effective at the opening of trading on November 7, 2002, the Companys
common stock began trading on the NASDAQ SmallCap Market. The Companys common
stock continues to trade under the symbol LCOR.

On February 17, 2003, Thomas Stephenson, resigned as Chairman of our board
of directors and Eugene Santa Cattarina was appointed Chairman. Mr. Stephenson
continues to be a director of the company.

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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,  
|                                      |                                      |                          |      |                    |       |                 
|                                      |                                      |                          |      | 2003               |       | 2002             |       | 2003 |       | 2002
|                                      |                                      |                          |      |                    |       |                  |       |      |       |     
|REVENUE:                              |                                      |                          |      |                    |       |                  |       |      |       |      |      |      |       |  |       |     
|                                      | Program revenue and maintenance fees |                          |      | 73.2               |       |                  |       | 70.0 |       |      |      | 71.9 |       |  |       | 76.2 |      
|                                      | System sales and consulting fees     |                          |      | 26.8               |       |                  |       | 30.0 |       |      |      | 28.1 |       |  |       | 23.8 |      
|                                      |                                      |                          |      |                    |       |                  |       |      |       |      |      |      |       |  |       |     
|                                      |                                      | Total revenues           |      |                    | 100.0 |                  |       |      | 100.0 |      |      |      | 100.0 |  |       |      | 100.0 | 
|                                      |                                      |                          |      |                    |       |                  |       |      |       |      |      |      |       |  |       |     
|COST OF REVENUE:                      |                                      |                          |      |                    |       |                  |       |      |       |      |      |      |       |  |       |     
|                                      | Program revenue and maintenance fees |                          |      | 24.1               |       |                  |       | 40.9 |       |      |      | 23.5 |       |  |       | 43.0 |      
|                                      | System sales and consulting fees     |                          |      | 7.7                |       |                  |       | 13.7 |       |      |      | 9.1  |       |  |       | 13.3 |      
|                                      |                                      |                          |      |                    |       |                  |       |      |       |      |      |      |       |  |       |     
|                                      |                                      | Total cost of revenue    |      |                    | 31.8  |                  |       |      | 54.6  |      |      |      | 32.6  |  |       |      | 56.3  | 
|                                      |                                      |                          |      |                    |       |                  |       |      |       |      |      |      |       |  |       |     
|GROSS PROFIT                          |                                      |                          | 68.2 |                    |       |                  | 45.4  |      |       |      | 67.4 |      |       |  | 43.7  |     
|                                      |                                      |                          |      |                    |       |                  |       |      |       |      |      |      |       |  |       |     
|OPERATING EXPENSES:                   |                                      |                          |      |                    |       |                  |       |      |       |      |      |      |       |  |       |     
|                                      | Sales and marketing                  |                          |      | 14.5               |       |                  |       | 23.5 |       |      |      | 14.6 |       |  |       | 25.3 |      
|                                      | Research and development             |                          |      | 17.0               |       |                  |       | 26.7 |       |      |      | 17.7 |       |  |       | 26.9 |      
|                                      | General and administrative           |                          |      | 19.2               |       |                  |       | 28.0 |       |      |      | 20.7 |       |  |       | 32.2 |      
|                                      | Amortization of intangible assets    |                          |      | 1.9                |       |                  |       | 5.6  |       |      |      | 2.0  |       |  |       | 6.3  |      
|                                      | Asset Impairment Charge              |                          |      |                   |       |                  |       | 57.7 |       |      |      |     |       |  |       | 32.7 |      
|                                      |                                      |                          |      |                    |       |                  |       |      |       |      |      |      |       |  |       |     
|                                      |                                      | Total operating expenses |      |                    | 52.6  |                  |       |      | 141.5 |      |      |      | 55.0  |  |       |      | 123.4 | 
|                                      |                                      |                          |      |                    |       |                  |       |      |       |      |      |      |       |  |       |     
|INCOME (LOSS) FROM OPERATIONS         |                                      |                          | 15.6 |                    |       |                  | (96.1 | )    |       |      | 12.4 |      |       |  | (79.7 | )   
|INTEREST AND OTHER INCOME             |                                      |                          | 0.3  |                    |       |                  | 0.7   |      |       |      | 0.4  |      |       |  | 0.9   |     
|INTEREST EXPENSE                      |                                      |                          | (0.1 | )                  |       |                  | (0.2  | )    |       |      | (0.1 | )    |       |  | (0.2  | )   
|                                      |                                      |                          |      |                    |       |                  |       |      |       |      |      |      |       |  |       |     
|NET INCOME (LOSS) BEFORE INCOME TAXES |                                      |                          | 15.8 |                    |       |                  | (95.6 | )    |       |      | 12.7 |      |       |  | (79.0 | )   
|                                      |                                      |                          |      |                    |       |                  |       |      |       |      |      |      |       |  |       |     
|PROVISION FOR INCOME TAXES            |                                      |                          | 0.3  |                    |       |                  |      |      |       |      | 0.2  |      |       |  |      |     
|                                      |                                      |                          |      |                    |       |                  |       |      |       |      |      |      |       |  |       |     
|NET INCOME (LOSS)                     |                                      |                          | 15.5 |                    |       |                  | (95.6 | )    |       |      | 12.5 |      |       |  | (79.0 | )   
|                                      |                                      |                          |      |                    |       |                  |       |      |       |      |      |      |       |  |       |     

Comparison of the three and six-month periods ended June 30, 2003 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,
2003, four customers accounted for 24%, 21%, 17%, and 14% of revenue. One
customer accounted for 25% of revenue for the three-month period ended June 30,
2002. During the six months ended June 30, 2003, four customers accounted for
21%, 18%, 17% and 15% of revenue. One customer accounted for 26% of revenue
for the six-month period ended June 30, 2002.

Program revenues and maintenance fees have increased by $1,159,000 or 29%
from $4,005,000 for the three-month period ended June 30, 2002 to $5,164,000 in
the three-month period ended June 30, 2003. The increase in revenues relates
largely to the increased enrollments in our care management programs, as well
as approximately $308,000 related to meeting the requirements of a performance
guarantee under an ongoing care management contract. Program revenues and
maintenance fees have increased by $1,658,000 or 22% from $7,694,000 in the
six-month period ended June 30, 2002 to $9,352,000 in the six-month period
ended June 30, 2003. The increase in revenues largely relates to increased
enrollments in our care management programs including a major program launched
toward the end of the first quarter with favorable pricing, as well as
approximately $770,000 related to meeting the requirements of a performance
guarantee under an ongoing care management contract.

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System sales and consulting fees increased by $177,000 or 10% from
$1,713,000 in the three-month period ended June 30, 2002 to $1,890,000 in the
three-month period ended June 30, 2003. This increase is primarily due to
additional revenue in 2003 related to implementations of our medical management
software. Included in the three-month period ended June 30, 2003 is additional
revenue of approximately $374,000 related to the revision of the estimated time
to complete a fixed-price medical management software contract. System sales
and consulting fees increased by $1,262,000 or 53% from $2,397,000 in the
six-month period ended June 30, 2002 to $3,659,000 in the six-month period
ended June 30, 2003. The increase in system sales and consulting fees are
primarily due to additional revenue in 2003 related to several new
implementations of our medical management software at major health payer
organizations.

Based on existing and anticipated customer contracts, management does not
believe that consecutive quarter over quarter increases in revenue will
continue for the remainder of 2003.

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 decreased by $638,000
or 27% from $2,340,000 in the three-month period ended June 30, 2002 to
$1,702,000 in the three-month period ended June 30, 2003, representing 58.4% of
program revenues and maintenance fees revenues for the second quarter of 2002
and 33.0% for the second quarter of 2003. Cost of program revenues and
maintenance fees decreased by $1,278,000 or 29% from $4,337,000 in the
six-month period ended June 30, 2002 to $3,059,000 in the six-month period
ended June 30, 2003, representing 56.4% of program revenues and maintenance
fees revenues for the six months ended June 30, 2002 and 32.7% for the same
period in 2003. This decrease in costs for the three and six month periods
ended June 30, 2003, is primarily due to cost reductions associated with the
closing of our Montclair, New Jersey office in September of 2002 and cost
reductions related to the termination of our contract with Lifeguard in October
of 2002.

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, 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, 2003 these costs were $542,000 or 28.7% of system sales
and consulting fees, compared to costs of $780,000 representing 45.5% of system
sales and consulting fees during the quarter ended June 30, 2002. Cost of
system sales and consulting fees decreased by $238,000 or 31% from the quarter
ended June 30, 2002 to the same period for 2003. During the six-month period
ended June 30, 2003 these costs were $1,187,000 or 32.4% of system sales and
consulting fees, compared to costs of $1,339,000 representing 55.9% of system
sales and consulting fees during the six-month period ended June 30, 2002. Cost
of system sales and consulting fees decreased by $152,000 or 11% from the
six-month period ended June 30, 2002 to the same period for 2003. This cost
decrease for the three months ended June 30, 2003 was due to reduced personnel
costs and a decrease in royalty payments in 2003. The decrease during the six
months ended June 30, 2003 was due to reduced personnel costs and royalties
during the second quarter, offset by additional purchases of third-party
software for resale to the Companys customers during the first quarter of
2003.

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, 2003 amounted to $1,025,000 representing 14.5% of total
revenues, in comparison with $1,346,000 representing 23.5% of total revenues
during the corresponding quarter of 2002. Sales and marketing expenses
decreased by $321,000 or 24% from the second quarter of 2002. Sales and
marketing expenses during the six-month period ended June 30, 2003 amounted to
$1,893,000 representing 14.6% of total revenues, in comparison with $2,555,000
representing 25.3% of total revenues during the corresponding period of 2002.
Sales and marketing expenses decreased by $662,000 or 26% from the six-months
ended June 30, 2002. This is primarily due to decreased personnel associated
costs during both the three and six- month periods ended June 30, 2003.

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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 $1,197,000 or 17.0% of total revenues during the quarter ended
June 30, 2003, a decrease of $331,000 or 22% compared to expenses totaling
$1,528,000 representing 26.7% of total revenues during the quarter ended June
30, 2002. Research and development expenses totaled $2,300,000 or 17.7% of
total revenues in the six-months ended June 30, 2003, a decrease of $413,000 or
15% compared to expenses totaling $2,713,000 representing 26.9% of total
revenues in the six-months ended June 30, 2002. During both the three and
six-month periods ended June 30, 2003, this is primarily due to cost reductions
associated with the closing of our Montclair, New Jersey office in September of
2002.

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
$244,000 or 15% from $1,601,000, representing 28.0% of total revenues, in the
second quarter of 2002 to $1,357,000, representing 19.2% of total revenues, in
the second quarter of 2003. General and administrative expenses decreased by
$560,000 or 17% from $3,251,000, representing 32.2% of total revenues, in the
six-months ended June 30, 2002 to $2,691,000, representing 20.7% of total
revenues, in the six-months ended June 30, 2003. The decrease during both the
three and six-month periods ended June 30, 2003 is largely related to the
closing of Montclair, New Jersey office and general cost cutting measures
throughout 2002.

Amortization of Intangible Assets.Amortization expense decreased by
$183,000 or 58% from $317,000 or 5.5% of revenues in the second quarter of 2002
to $134,000 or 1.9% of revenues in the second quarter 2003. Amortization
expense decreased by $367,000 or 58% from $635,000 or 6.3% of revenues in the
six-months ended June 30, 2002 to $268,000 or 2.1% of revenues in the
six-months ended June 30, 2003. The decrease in amortization of intangible
assets during both the three and six-month periods ended June 30, 2003 is due
to the intangible asset impairment charge of $2,450,000 recorded in the second
quarter of 2002.

Stock-Based Compensation.Amortization of unearned stock compensation
during the quarters ended June 30, 2003 and 2002 was $31,000 and $104,000,
respectively. Amortization of unearned stock compensation during the six-month
periods ended June 30, 2003 and 2002 was $152,000 and $271,000, respectively.
These amounts have been allocated to cost of sales and operating expenses.
Included in these amounts is stock compensation expense of approximately
$15,000 in the quarter ended June 30, 2003 for the modification of a fixed
stock option grant.

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 $39,000 for the second quarter of 2002 and $24,000 for
the second quarter of 2003, and $90,000 for the six-months ended June 30, 2002
and $50,000 for the six-months ended June 30, 2003. The decrease in interest
and other income in the second quarter 2003 of $15,000 or 38% and the decrease
of 40,000 or 44% in the six-months ended June 30, 2003 is due to the decrease
in cash from June 30, 2002 to June 30, 2003 as well as an overall decrease in
interest rates. Interest expense of $8,000 during the second quarter of 2003
and $13,000 for the second quarter of 2002, and $13,000 during the six-months
ended June 30, 2003 and $20,000 for the six-months ended June 30, 2002 arises
from financing certain fixed assets through capital leases and debt.

Provision for Income Tax.Based on various Federal tax regulations that do
not allow the full application of net operating loss carry-forwards against net
income, we have recorded an income tax provision of $20,000 during the three
and six months ended June 30, 2003.

Liquidity and Capital Resources

Since inception, we have financed our operations through net cash
generated from operating activities, and sales of common and preferred stock.
As of June 30, 2003, we had $9.7 million in cash and cash equivalents, which
includes approximately $564,000 used to secure certain letters of credit and
notes payable. We also had $5.0 million in working capital with outstanding
capital lease obligations and notes payable totaling approximately $564,000.

Net cash used in operating activities was $156,000 and $2,392,000 during
the six months ended June 30, 2003 and 2002, respectively. Net cash used to
fund operating activities in the first half of 2003 reflects net income

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before non-cash charges for depreciation and amortization, stock-based
compensation, an increase in net accounts receivable, a decrease in other
assets, an increase in accounts payable, and decreases in accrued expenses,
restructuring accrual, and deferred revenue.The decrease in accrued expenses
during the first half of 2003 was primarily due to the payment in March 2003 of
2002 accrued employee bonus amounts. The decrease in deferred revenue was
primarily due to the recognition of approximately $770,000 in revenue related
to achieving the performance criteria from an ongoing contract, as well as the
recognition of revenue that was deferred in the fourth quarter of 2002 due to
the timing of prepayments by certain customers. Net cash used to fund
operating activities in the first half of 2002 reflects net losses before
non-cash charges for depreciation and amortization of intangible assets,
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.

During the six months ended June 30, 2003 and 2002, net cash used in
investing activities was $486,000 and $606,000, respectively. Investing
activities consist primarily of purchases of computer equipment, software,
office furniture and leasehold improvements.

Net cash provided by financing activities was $311,000 for the six months
ended June 30, 2003. Net cash used in financing activities was $59,000 for the
six months ended June 30, 2002. Net cash provided by financing activities for
the six months ended June 30, 2003 resulted from proceeds from long-term debt
offset somewhat by payments on capital lease obligations. Net cash used in
financing activities for the six months ended June 30, 2002 resulted from the
payments on certain capital lease obligations.

We may utilize existing cash to fund strategic transactions or investments
in other businesses, technologies or product lines. We believe that cash
generated by revenues, available cash and cash equivalents will be sufficient
to meet our working capital, operating expense and capital expenditure
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.

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FACTORS THAT MAY AFFECT OUR FUTURE RESULTS

We Have a Long History of Losses and May Not Sustain or Increase Profitability

We have been in business since 1982 and we have incurred significant
losses since that time. We may continue to incur losses on an annual or
quarterly basis in the future. As of June 30, 2003, our accumulated deficit was
$43.1 million. Even though we have achieved profitability during the past three
quarters, due to competition and the evolving nature of the disease management,
medical management, healthcare information technology and Internet markets, we
could fail to sustain or increase profitability on a quarterly or annual basis.

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

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



| |  |  | fluctuations in demand for our population health management products
and related services;                                                                                                                
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the ability of customers to provide us with the names of qualified
members to enroll in our Managing for Tomorrowmember-driven chronic
condition 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 predictive modeling applications and services, and chronic
condition management programs in the fourth quarter of 2000. Our solutions
currently have limited market acceptance with only 17 payer customers currently
using them. Our maxMC medical management software product has achieved a modest
degree of market acceptance as we have implemented or are in the process of
implementing it at 9 client sites. Realizing market acceptance for our care
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

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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 care 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 chronic condition management products,
we derived substantially all of our revenue from the sale and associated
support of Maxsys II(and its predecessor Maxsys I), maxMC, a medical
management software solution marketed to hospitals, healthcare delivery
organizations and health insurance companies. We anticipate that we will
continue to generate revenue from the continued sales and support of medical
management software solutions. With the acquisitions of Care Management
solutions, we have increased our product offering, but it is still limited.
Dependence on this limited product line makes us particularly susceptible to
the successful introduction of, or changes in market preferences for, competing
products. In addition, operating exclusively in the market for population
management solutions make us particularly susceptible to downturns in that
market that may be unrelated to the quality or competitiveness of our
solutions.

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

We currently serve a limited number of customers, four of whom accounted
for 24%, 21%, 17%, and 14%, respectively, of our revenues for the three-month
period ended June 30, 2003. Moreover, because we focus our sales efforts on a
small group of potential customers in the healthcare industry we anticipate our
operating results will continue to depend on sales to a small number of key
customers for the foreseeable future. The loss of, or a reduction in sales to,
any of our current customers or our failure to sell our products and services
to additional customers would significantly reduce our future revenues and
negatively impact our results of operations, our stock price and our future
viability.

We Are Exposed to the Credit Risk of Some of Our Customers.

Due to the current slowdown in the economy, the credit risks relating to
our customers have increased. Although we have programs in place to monitor and
mitigate the associated risk, there can be no assurance that such programs will
be effective in reducing our credit risks. We have experienced losses due to
customers failing to meet their obligations. Although these losses have not
been significant, future losses, if incurred, could harm our business and have
a material adverse effect on our operating results and financial conditions.

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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.

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.

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 our 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.

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 Care 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.

Our care 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

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of a customer to provide this information on a timely basis or the
delivery of inaccurate or incorrect data could have an impact on our ability to
fulfill customer obligations and deliver guaranteed savings and, therefore,
achieve revenue expectations from particular contracts.

Our Managing for Tomorrow Chronic Condition 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 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 Chronic Condition Management Contracts that Provide Guaranteed
Levels of Performance to Our Customers, and We May be Required to Refund to
Customers a Significant Portion of the Subscription Fees Paid to Us if We Fail
to Achieve the Guaranteed Performance Criteria.

From time to time, the Company may enter into chronic condition management
contracts pursuant to which we guarantee certain minimum levels of cost savings
or other performance measures to the customer. Under such contracts, we often
agree to reimburse all or a portion of the enrollment 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 enrollment
fees paid to us by customers, we will not be able to recognize the revenue
associated with such fees and our business and reputation may be harmed. As of
June 30, 2003, we had three contracts that contain some level of performance
guarantee. As of June 30, 2003 we had deferred revenue of approximately
$1,019,000 related to performance guarantees.

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.                                            

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

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

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

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; or                                                                            
|
| |  |  | 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;
| | - |  | ---------------------------

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

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

Our Customers May Encounter System Delays, Failures or Loss of Data When Using
Our Internet-Based Medical Management Solution and Internet Capabilities of Our
Chronic Condition 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 chronic condition management capabilities depend on the efficient
operation of Internet connections among our payer customers and their members
and associated providers, and with us. 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 Relating to Disclosure of Confidential
Patient and Customer Information May Result in Liability to the Company and
Cause Customers to Refuse to Purchase or Discontinue the Use of Our Population
Health Management Solutions.

In the course of providing our solutions, we and our customers maintain
confidential information about patients and members, including their names and
addresses, social security numbers and certain details about their health. An
experienced computer user who is able to access our or our customers computer
systems could gain access to confidential patient and member information.
Therefore, our solutions 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.

Recently, a laptop computer containing the names, social security numbers
and certain health information of approximately 30,000 members of two of our
health plan customers was stolen during a burglary at our headquarters.
Although the information is password protected, it is possible that an
experienced computer user could access the information and use it, or give it
to others who might use it, for identity theft or other unlawful activities. If
the information were misused in this manner we could be liable for damages
incurred by the effected members, and our existing and future customers could
determine that our solutions are not secure and cease to use them. In either
event, our results of operation could be materially and adversely impacted.

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.

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

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

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

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

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

The requirements of HIPAA are continuously being modified. Therefore, 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 That 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 may 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:
29Table of Contents



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

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

Our Principal Stockholders Have Significant Voting Power, Which May Limit Our
Stockholders 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 existing cash reserves 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, operating expense and capital expenditure 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. 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 cessation of operations
of our web consulting business.

During the second quarter of 2002, primarily due to a decline in demand
for services in the Companys Care 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 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. In accordance with the provisions of SFAS 144 and 142, we will continue
to evaluate the fair value of our reporting units and the recoverability of the
assets contained therein.

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

Our Stock Price Has Been Highly Volatile, and Your Investment Could Suffer a
Decline in Value.
30Table of Contents

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



| |  |  | actual or anticipated variations in quarterly operating results;                                
| | - |  | ------------------------------------------------------------------------------------------------
|
| |  |  | failure to achieve, or changes in, financial estimates by securities analysts;                  
|
| |  |  | announcements of new products or services or technological innovations by us or our competitors;
|
| |  |  | conditions or trends in the healthcare industry;                                                
|
| |  |  | announcements by us of significant strategic transactions or capital commitments;               
|
| |  |  | additions or departures of key personnel;                                                       
|
| |  |  | sales of our common stock; and                                                                  
|
| |  |  | developments regarding our intellectual property or that of our competitors.                    

In addition, the stock market in general, and the NASDAQ SmallCap 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.

As of the opening of trading on November 7, 2002, our common stock has
traded on the NASDAQ Stock Markets SmallCap Market. There is no guarantee that
an active trading market for our Common Stock will be maintained on the NASDAQ
SmallCap Market. You may not be able to sell your shares quickly or at the
market price if trading in our stock is not active.

If we were to be unable to comply with NASDAQs continued listing
criteria and other requirements within the time frame prescribed, we could be
delisted from trading on such market, and thereafter trading in our common
stock, if any, would likely be conducted through the over-the-counter market or
on the Electronic Bulletin Board of the National Association of Securities
Dealers, Inc.




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.




Item 4.     Controls and Procedures

Evaluation of disclosure controls and procedures. Our management
evaluated, with the participation of our Chief Executive Officer and our Chief
Financial Officer, the effectiveness of our disclosure controls and procedures
as of the end of the period covered by this Quarterly Report on Form 10-Q.
Based on this evaluation, our Chief

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Executive Officer and our Chief Financial Officer have concluded that our
disclosure controls and procedures are effective to ensure that information we
are required to disclose in reports that we file or submit under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in Securities and Exchange Commission rules and forms.

Changes in internal control over financial reporting. There was no change in
our internal control over financial reporting that occurred during the period
covered by this Quarterly Report on Form 10-Q that has materially affected, or
is reasonably likely to materially affect, our internal control over financial
reporting.

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PART II  OTHER INFORMATION




Item 1.     Legal Proceedings

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




Item 2.     Changes in Securities

None.




Item 3.     Defaults in Senior Securities

None.




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

Our Annual Meeting of Stockholders was held on June 9, 2003 in Atlanta,
Georgia. Of the 15,964,593 shares outstanding as of the record date, 14,807,610
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          |  |           | 14,772,845 |                |  |  | 34,765  | 
|Eugene Santa Cattarina |  |           | 14,681,030 |                |  |  | 126,580 | 
|Jerome Grossman, M.D.  |  |           | 14,635,284 |                |  |  | 172,326 | 
|Bryan Lang             |  |           | 14,654,090 |                |  |  | 153,520 | 
|Thomas Stephenson      |  |           | 14,570,921 |                |  |  | 236,689 | 
|Howard Cox             |  |           | 14,746,595 |                |  |  | 61,015  | 
|Michael Miele          |  |           | 14,593,353 |                |  |  | 214,257 | 

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

|                  |  |  |            | 
|----------------- |  |  | ---------- | 
|Votes for:        |  |  | 14,757,830 | 
|Votes against:    |  |  | 34,994     | 
|Votes abstaining: |  |  | 14,786     | 

3.     To approve the amendment to the Second Amended and Restated
Certificate of Incorporation of the Company to remove certain supermajority
voting requirements.

|                                              |  |  |            | 
|--------------------------------------------- |  |  | ---------- | 
|Votes for:                                    |  |  | 11,226,837 | 
|Votes against:                                |  |  | 43,805     | 
|Votes abstaining, including broker non-votes: |  |  | 3,536,968  | 




Item 5.     Other Information

None.




Item 6.     Exhibits and Reports on Form 8-K

(a) Exhibits.

33



---



##### Table of Contents



|               |  |                                                                                                                                                                                                                                                                                                                                                                 
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description of Document                                                                                                                                                                                                                                                                                                                                         
|               |  |                                                                                                                                                                                                                                                                                                                                                                 
|3.1(1)         |  | Second Amended and Restated Certificate of Incorporation of the Registrant dated February 14, 2000.                                                                                                                                                                                                                                                             
|3.2(5)         |  | Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation of the
Registrant dated March 26, 2001.                                                                                                                                                                                                                                
|3.2.1          |  | Certificate of Amendment of the Second Amended and Restated Certificate of Incorporation of the
Registrant dated June 12, 2003.                                                                                                                                                                                                                                 
|3.3(1)         |  | Bylaws of the Registrant.                                                                                                                                                                                                                                                                                                                                       
|3.3.1          |  | Certificate of Amendment to the Bylaws of the Registrant, dated June 19, 2003.                                                                                                                                                                                                                                                                                  
|4.1(1)         |  | Specimen Common Stock Certificate.                                                                                                                                                                                                                                                                                                                              
|4.2(1)         |  | Registration Rights Agreement dated October 29, 1997, as amended.                                                                                                                                                                                                                                                                                               
|4.3(4)         |  | Registration Rights Agreement by and among Landacorp, Inc., and certain holders of shares of
Landacorp, Inc., dated October 31, 2000.                                                                                                                                                                                                                           
|10.1(1)        |  | Form of Indemnification Agreement between the Registrant and each of its directors and officers.                                                                                                                                                                                                                                                                
|10.2(1)        |  | 1995 Stock Plan and form of agreements thereunder.                                                                                                                                                                                                                                                                                                              
|10.3(2)        |  | 1998 Equity Incentive Plan, as amended.                                                                                                                                                                                                                                                                                                                         
|10.3.1         |  | 1998 Equity Incentive Plan, as amended on June 9, 2003 and form of agreements thereunder.                                                                                                                                                                                                                                                                       
|10.4(1)        |  | 1999 Employee Stock Purchase Plan.                                                                                                                                                                                                                                                                                                                              
|10.4.1         |  | 1999 Employee Stock Purchase Plan, as amended on April 1, 2003.                                                                                                                                                                                                                                                                                                 
|10.5(1)        |  | Sublease Agreement for Offices located at 4151 Ashford Dunwoody Rd., Atlanta, Georgia.
between Landacorp and Unisys Corporation, dated September 1, 1991.                                                                                                                                                                                                       
|10.6(1)        |  | Lease Agreement for offices located on Fortress Avenue, Chico, CA, between Landacorp and
Fortress Development Group, dated March 8, 1999.                                                                                                                                                                                                                       
|10.7(1)        |  | Licensing Agreement by and between Interqual® Incorporated and Landa Management Systems
Corporation, dated September 8, 1992.                                                                                                                                                                                                                                   
|10.8(1)        |  | Sublicensor Agreement by and between Interqual® Incorporated and Landa Management Systems, effective
April 15, 1994.                                                                                                                                                                                                                                            
|10.9(1)        |  | Distribution Agreement for Interqual® Medical Appropriateness Review Systems, signed on January 1, 1996.                                                                                                                                                                                                                                                        
|10.10(1)       |  | License Agreement  Software Developers, between Milliman & Robertson, Inc. and
Landacorp, dated August 17, 1998.                                                                                                                                                                                                                                               
|10.11(3)       |  | Asset Purchase Agreement by and among Landacorp, Inc., PMX Holdings, Inc., and Landacorp
Acquisition Subsidiary Inc. dated October 27, 2000.                                                                                                                                                                                                                    
|10.12(4)       |  | Merger Agreement by and among Landacorp, Inc., CDMS Acquisition Corporation,
PatientCentrix, Inc., Michael S. Miele, Christopher C. Synn, and James W. Tiepel, dated October 31, 2000.                                                                                                                                                                          
|10.13(6)       |  | Settlement Agreement and Mutual Release by and between Landacorp, Inc. and Bryan Lang dated June 20,
2001.                                                                                                                                                                                                                                                      
|10.14(6)       |  | Separation Agreement between Eugene Santa Cattarina and Landacorp, Inc. dated January 15, 2002.                                                                                                                                                                                                                                                                 
|10.15(6)       |  | Memorandum of Agreement between Landacorp, Inc. and Marlene McCurdy dated August 6, 2001.                                                                                                                                                                                                                                                                       
|10.16(6)       |  | Settlement Agreement and Mutual Release by and among Landacorp, Inc. and Michael S. Miele dated
May 3, 2001.                                                                                                                                                                                                                                                    
|10.17(6)       |  | Settlement Agreement and Mutual Release by and among Landacorp, Inc., Eugene Santa
Cattarina and Michael S. Miele, Christopher C. Synn, James W. Tiepel, Richard Sweeney,
Stephen Brooks, Mary Dean, Ian Duncan, Percival Herrero, John Burke, Arthur Robb,
Anne Forbes, Virginia OShea, Lucia Egoavil, Thomas Sweeney, and Bradley Green dated March 13, 2002.
|10.18(6)       |  | Stock Purchase Agreement by and between Landa Management
Systems Corporation and Eugene Santa Cattarina dated March 17, 1999.                                                                                                                                                                                                                                   
|10.19(6)       |  | Stock Purchase Agreement by and between Landa Management Systems Corporation and
Stephen P. Kay dated March 17, 1999.                                                                                                                                                                                                                                           
|10.20(7)       |  | First Amended and Restated Services and Systems Agreement Number 01071003 between Lifeguard, Inc. and
Lifeguard Life Insurance Company, and Landacorp, Inc. dated July 31, 2002.*                                                                                                                                                                               
|10.21(8)       |  | Second Amended and Restated Services and Systems Agreement Number 01071003 between Lifeguard, Inc. and
Lifeguard Life Insurance Company, and Landacorp, Inc. dated October 8, 2002.*                                                                                                                                                                            
|31.1           |  | Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) under the Securities
Exchange Act of 1934, as amended.                                                                                                                                                                                                                            
|31.2           |  | Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) under the Securities
Exchange Act of 1934, as amended.                                                                                                                                                                                                                            
|32.1           |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                              
|32.2           |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                              

---

34



---



##### Table of Contents





|(1) |  | Incorporated by reference from the Registrants Registration Statement on
Form S-1 (file no. 333-84703), as amended.
|--- |  | --------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Incorporated by reference from the Registrants Registration Statement on
Form S-8 filed on March 22, 2001.         
|   
|(3) |  | Incorporated by reference from the Registrants Current Report on Form
8-K filed on November 13, 2000.              
|   
|(4) |  | Incorporated by reference from the Registrants Current Report on Form
8-K filed on November 17, 2000.              
|   
|(5) |  | Incorporated by reference to the Registrants Annual Report on Form 10-K
filed on March 30, 2001.                   
|   
|(6) |  | Incorporated by reference to the Registrants Annual Report on Form 10-K
filed on March 29, 2002.                   
|   
|(7) |  | Incorporated by reference from the Registrants Current Report on Form 8-K
filed on August 7, 2002.                 
|   
|(8) |  | Incorporated by reference from the Registrants Current Report on Form 8-K
filed on October 15, 2002.               



|* |  | Portions of this exhibit have been omitted pursuant to a request for
confidential treatment filed with the Commission.
|- |  | ----------------------------------------------------------------------------------------------------------------------

(b)     Reports on Form 8-K.

A Current Report on Form 8-K was furnished to the SEC on May 9, 2003,
presenting the Companys press release announcing financial results for its
second fiscal quarter ended March 31, 2003.

35



---



##### Table of Contents






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, 2003 |                              | 
|                      
|                       | By:                          |  | /s/ Eugene MillerEugene MillerPresident, Chief Executive Officer                 
|                      
|                       |                              | 
|                      
|                       | By:                          |  | /s/ Mark RapoportMark RapoportChief Operating Officer and
Chief Financial Officer

36



---



##### Table of Contents






EXHIBIT INDEX

|               |  |                                                                                                                                                                                                                                                                                                                                                                 
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description of Document                                                                                                                                                                                                                                                                                                                                         
|               |  |                                                                                                                                                                                                                                                                                                                                                                 
|3.1(1)         |  | Second Amended and Restated Certificate of Incorporation of the Registrant dated February 14, 2000.                                                                                                                                                                                                                                                             
|3.2(5)         |  | Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation of the
Registrant dated March 26, 2001.                                                                                                                                                                                                                                
|3.2.1          |  | Certificate of Amendment of the Second Amended and Restated Certificate of Incorporation of the
Registrant dated June 12, 2003.                                                                                                                                                                                                                                 
|3.3(1)         |  | Bylaws of the Registrant.                                                                                                                                                                                                                                                                                                                                       
|3.3.1          |  | Certificate of Amendment to the Bylaws of the Registrant, dated June 19, 2003.                                                                                                                                                                                                                                                                                  
|4.1(1)         |  | Specimen Common Stock Certificate.                                                                                                                                                                                                                                                                                                                              
|4.2(1)         |  | Registration Rights Agreement dated October 29, 1997, as amended.                                                                                                                                                                                                                                                                                               
|4.3(4)         |  | Registration Rights Agreement by and among Landacorp, Inc., and certain holders of shares of
Landacorp, Inc., dated October 31, 2000.                                                                                                                                                                                                                           
|10.1(1)        |  | Form of Indemnification Agreement between the Registrant and each of its directors and officers.                                                                                                                                                                                                                                                                
|10.2(1)        |  | 1995 Stock Plan and form of agreements thereunder.                                                                                                                                                                                                                                                                                                              
|10.3(2)        |  | 1998 Equity Incentive Plan, as amended.                                                                                                                                                                                                                                                                                                                         
|10.3.1         |  | 1998 Equity Incentive Plan, as amended on June 9, 2003 and form of agreements thereunder.                                                                                                                                                                                                                                                                       
|10.4(1)        |  | 1999 Employee Stock Purchase Plan.                                                                                                                                                                                                                                                                                                                              
|10.4.1         |  | 1999 Employee Stock Purchase Plan, as amended on April 1, 2003.                                                                                                                                                                                                                                                                                                 
|10.5(1)        |  | Sublease Agreement for Offices located at 4151 Ashford Dunwoody Rd., Atlanta, Georgia.
between Landacorp and Unisys Corporation, dated September 1, 1991.                                                                                                                                                                                                       
|10.6(1)        |  | Lease Agreement for offices located on Fortress Avenue, Chico, CA, between Landacorp and
Fortress Development Group, dated March 8, 1999.                                                                                                                                                                                                                       
|10.7(1)        |  | Licensing Agreement by and between Interqual® Incorporated and Landa Management Systems
Corporation, dated September 8, 1992.                                                                                                                                                                                                                                   
|10.8(1)        |  | Sublicensor Agreement by and between Interqual® Incorporated and Landa Management Systems, effective
April 15, 1994.                                                                                                                                                                                                                                            
|10.9(1)        |  | Distribution Agreement for Interqual® Medical Appropriateness Review Systems, signed on January 1, 1996.                                                                                                                                                                                                                                                        
|10.10(1)       |  | License Agreement  Software Developers, between Milliman & Robertson, Inc. and
Landacorp, dated August 17, 1998.                                                                                                                                                                                                                                               
|10.11(3)       |  | Asset Purchase Agreement by and among Landacorp, Inc., PMX Holdings, Inc., and Landacorp
Acquisition Subsidiary Inc. dated October 27, 2000.                                                                                                                                                                                                                    
|10.12(4)       |  | Merger Agreement by and among Landacorp, Inc., CDMS Acquisition Corporation,
PatientCentrix, Inc., Michael S. Miele, Christopher C. Synn, and James W. Tiepel, dated October 31, 2000.                                                                                                                                                                          
|10.13(6)       |  | Settlement Agreement and Mutual Release by and between Landacorp, Inc. and Bryan Lang dated June 20,
2001.                                                                                                                                                                                                                                                      
|10.14(6)       |  | Separation Agreement between Eugene Santa Cattarina and Landacorp, Inc. dated January 15, 2002.                                                                                                                                                                                                                                                                 
|10.15(6)       |  | Memorandum of Agreement between Landacorp, Inc. and Marlene McCurdy dated August 6, 2001.                                                                                                                                                                                                                                                                       
|10.16(6)       |  | Settlement Agreement and Mutual Release by and among Landacorp, Inc. and Michael S. Miele dated
May 3, 2001.                                                                                                                                                                                                                                                    
|10.17(6)       |  | Settlement Agreement and Mutual Release by and among Landacorp, Inc., Eugene Santa
Cattarina and Michael S. Miele, Christopher C. Synn, James W. Tiepel, Richard Sweeney,
Stephen Brooks, Mary Dean, Ian Duncan, Percival Herrero, John Burke, Arthur Robb,
Anne Forbes, Virginia OShea, Lucia Egoavil, Thomas Sweeney, and Bradley Green dated March 13, 2002.
|10.18(6)       |  | Stock Purchase Agreement by and between Landa Management
Systems Corporation and Eugene Santa Cattarina dated March 17, 1999.                                                                                                                                                                                                                                   
|10.19(6)       |  | Stock Purchase Agreement by and between Landa Management Systems Corporation and
Stephen P. Kay dated March 17, 1999.                                                                                                                                                                                                                                           
|10.20(7)       |  | First Amended and Restated Services and Systems Agreement Number 01071003 between Lifeguard, Inc. and
Lifeguard Life Insurance Company, and Landacorp, Inc. dated July 31, 2002.*                                                                                                                                                                               
|10.21(8)       |  | Second Amended and Restated Services and Systems Agreement Number 01071003 between Lifeguard, Inc. and
Lifeguard Life Insurance Company, and Landacorp, Inc. dated October 8, 2002.*                                                                                                                                                                            
|31.1           |  | Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) under the Securities
Exchange Act of 1934, as amended.                                                                                                                                                                                                                            
|31.2           |  | Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) under the Securities
Exchange Act of 1934, as amended.                                                                                                                                                                                                                            
|32.1           |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                              





---



##### Table of Contents



|               |  |                                                                                                                                                   
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description of Document                                                                                                                           
|               |  |                                                                                                                                                   
|32.2           |  | Certification of 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 from the Registrants Registration Statement on
Form S-8 filed on March 22, 2001.         
|   
|(3) |  | Incorporated by reference from the Registrants Current Report on Form
8-K filed on November 13, 2000.              
|   
|(4) |  | Incorporated by reference from the Registrants Current Report on Form
8-K filed on November 17, 2000.              
|   
|(5) |  | Incorporated by reference to the Registrants Annual Report on Form 10-K
filed on March 30, 2001.                   
|   
|(6) |  | Incorporated by reference to the Registrants Annual Report on Form 10-K
filed on March 29, 2002.                   
|   
|(7) |  | Incorporated by reference from the Registrants Current Report on Form 8-K
filed on August 7, 2002.                 
|   
|(8) |  | Incorporated by reference from the Registrants Current Report on Form 8-K
filed on October 15, 2002.               



|* |  | Portions of this exhibit have been omitted pursuant to a request for
confidential treatment filed with the Commission.
|- |  | ----------------------------------------------------------------------------------------------------------------------