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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Form 10-K

Commission file number: 000-29377

Landacorp, Inc.

4151 Ashford Dunwoody Road, Suite 505

(404) 531-9956

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

COMMON STOCK, $0.001 PAR VALUE (Title of Class)

      Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ          No o

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K, or any amendment to this Form 10-K.     o

      The aggregate market value of the voting stock held by persons other than those who may be deemed affiliates of the Company as of March 20, 2002, was approximately $5,200,000. Shares of Common Stock held by each executive officer and director and by each person who owns 5% or more of the outstanding Common Stock have been excluded in that such persons may under certain circumstances be deemed to be affiliates. This determination of executive officer or affiliate status is not necessarily a conclusive determination for other purposes.

      The number of shares of the Registrant’s Common Stock outstanding as of March 20, 2002 was 15,679,086.

Table of Contents

LANDACORP, INC.

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PART I

       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 or of our financial condition and plans to hire additional personnel; our market opportunity; 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-K and the Company’s other filings with the SEC. Such statements reflect the judgment of the Company as of the date of this annual report on Form 10-K 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.

      Landacorp, Maxsys II, maxMC, DSBuilder, DSManager and Managing for Tomorrow are trademarks or registered trademarks of Landacorp, Inc. All other trademarks are the property of their respective owners.

Item 1.     Description of Business

     Overview

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

      Landacorp’s disease management products and services — our predictive modeling and care management capabilities — help our healthcare payer customers identify and intervene with members who have chronic 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 assist our clients in managing the health of these members through the delivery of consistent and appropriate educational information and self-management materials or through referral to nurse case managers. Taken together, Landacorp’s disease management solutions allow customers to integrate targeting capabilities with a full 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 organizations 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 client-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

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      Landacorp was incorporated on April 27, 1982 as Landa Management Systems Corporation, a California corporation. We reincorporated as Landacorp, Inc., a Delaware corporation, on December 3, 1999. In October of 2000, we acquired ProMedex, Inc., which provides our Managing for Tomorrow® member-driven care management products. In November 2000, we acquired PatientCentrix, Inc., which provides our DSSeries care analytics product.

      Landacorp offers four products to healthcare payers. maxMC^TM and e-maxMC, its web-enabling application, are our medical management software products for this market. Our DSSeries product provides disease management predictive modeling and interventional targeting workflow software. Our Managing for Tomorrow product is a unique, high-tech/ light-touch disease management program designed to improve member self-management skills that are essential to reducing modifiable risks associated with chronic diseases and pregnancy. As of December 31, 2001, 28 payer organizations that claim to have a combined membership of approximately 48 million participants were using our products, all of which are operational and in use among our client base.

      Maxsys II™ is our medical management software product for healthcare delivery organizations. As of December 31, 2001, approximately 142 hospitals were using Maxsys II or its predecessor, Maxsys I, which we no longer market, but continue to support with a maintenance program.

      Our solutions benefit payers by:

	•	identifying and targeting, by the use of data analysis, health plan members with chronic conditions who are at risk for an acute-care episode;
	•	providing intervention software to support the health plan in engaging members to try to modify their behavior prior to a costly acute-care episode;
	•	providing disease management services to members with chronic diseases;
	•	providing members with health kits and educational information relevant to their disease type and disease states;
	•	aggregating member data for trend analysis and decision support;
	•	automating and streamlining administrative and business processes and clinical procedures and transactions to enhance operational efficiencies;
	•	increasing adherence to clinical guidelines to reduce delivery of inappropriate care;
	•	enhancing member satisfaction;
	•	supporting their marketing, branding and service efforts by providing consumer, member, or patient access to products, services and educational materials via the use of multiple media.

      Our solutions benefit hospitals and healthcare delivery organizations providers by:

	•	automating and streamlining administrative and business processes and clinical procedures and transactions to enhance operational efficiencies;
	•	reducing payment denials and claims appeals by payers;
	•	increasing quality and consistency of care;
	•	improving the efficiency of incident reporting and reducing the risk of legal liability;
	•	assisting with accreditation and administration of compliance programs; and
	•	aggregating data for trend analysis and decision support.

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      Members benefit from:

	•	increased access to health information content;
	•	empowerment and self-care, including participation in case management, disease management and wellness programs; and
	•	improved information flow such as referral tracking, claims status inquiries and personal information updating.

     Products

      Landacorp’s population health management solutions are identified under three product groups: Care Analytics, Care Management, and Medical Management Software.

     Care Analytics

      With more than 20% of a health plan’s members accounting for 80% of healthcare costs, payers have become increasingly focused on preventative measures to keep their members healthy. This requires the management of both health risks and medical costs. Landacorp’s Care Analytics solutions provide data compilation, warehousing and analysis solutions that help payer organizations identify and intervene with their potentially high-cost members. By targeting these members, health plans can engage them in disease management programs before they experience serious and expensive acute care events, thereby improving outcomes and reducing healthcare costs.

      Our care analytics solutions are built around an integrated suite of predictive modeling and interventional software applications — our DSSeries — which have been designed to help improve the efficiency and results of most health and disease management programs. These solutions help reduce healthcare costs through early identification and intervention with high-risk members. The DSSeries is a suite of integrated software that includes DS Builder®, DSMiner, and DSManager®. Together, they can identify the potentially high-cost sub-set of a health plan’s members and facilitate interventions with them before serious health problems occur. As a result, health plans can save a significant amount of medical management expense, while helping prevent members from experiencing acute, adverse health episodes that may require hospitalizations.

      Our predictive modeling and database building products provide a full-service solution for targeted and proactive ambulatory care management needs. DSBuilder and DSManager support large-scale implementation of patient-centric healthcare management. DSBuilder manages and analyzes a variety of sources of claims data (e.g., medical claims, prescription data, membership, UR data and lab data) to support rapid claims warehousing and patient-centric and provider profiling for over 20 disease states. Patient- and physician-level variables and segmentation create a data warehouse for DSMiner and DSManager.

      DSMiner is a risk stratification and prediction application that accesses information generated by DSBuilder to stratify patients according to their degree of risk. This allows an organization to appropriately deploy resources and programs. DSMiner works seamlessly with our intervention application DSManager, a patient-centric profiling and intervention tool that targets and prioritizes patients for intervention and provides integrated workflow management processes and management reporting. DSManager applies predictive patient models to identify high-risk patients who will have problems in the short- to mid-term.

      Our Care Management products are programs that empower a health plan’s members to be active participants in managing their health. This is achieved by connecting patients, providers and health plans to improve self-management skills that are essential to reducing modifiable risks associated with chronic diseases, smoking cessation and high-risk pregnancy. At the core of our activities is Managing for Tomorrow, a Landacorp-developed approach to health management that uses technologies including the Internet and advanced telephony, as well as conventional media, to contact, profile, stratify and intervene with a health plan’s members. Based on their responses to a health risk assessment survey, a customized, informative health

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      Landacorp provides Managing for Tomorrow programs for the following health conditions: allergy, asthma, cardiac disease, congestive heart failure, diabetes, pregnancy risk management, hypertension and smoking cessation. Through these programs, members can achieve an improved quality of life from better self-management skills and treatment compliance; improved healthcare access; early detection and preventive care options. The Managing for Tomorrow intervention programs and services do not require additional staffing, software or hardware, and are fully compatible with existing internal programs. Additionally, they include tools for risk prioritization, personal guides for member self-management, goal setting, incentives and re-evaluations.

      Health plans can realize the following benefits from these programs:

	•	Reduced direct cost of care for many chronic conditions
	•	Improved patient and clinical compliance and outcomes
	•	Improved multiple Health Plan Employer Data and Information Set (HEDIS®) scores while providing outcomes monitoring
	•	Enhanced formulary compliance through education and provider feedback
	•	Strengthened relationships with members

      Members of health plans can benefit from:

	•	Improved quality of life through better self-management skills
	•	Strengthened relationships with their healthcare provider

      Landacorp is currently one of only a few companies with the expertise to provide medical management software to both healthcare delivery and payer organizations. Our Maxsys II, maxMC and e-maxMC software products and applications help hospitals and health plans deliver high quality patient care while managing cost by documenting treatment, ensuring that care guidelines and government compliance requirements are met, and by automating the workflow and processes surrounding care coordination activities.

      Maxsys II was developed to help hospitals and integrated delivery systems automate the critical business functions required in today’s healthcare delivery environment, as well as help minimize many of the risks associated with providing patient care. Maxsys II achieves this through an integrated suite of quality and resource management modules, workflow and process improvement applications, and decision support capabilities that manage and coordinate the care process both with payers and within a healthcare delivery organization.

      For payer organizations, our maxMC product automates and simplifies many of the administrative and care-planning activities associated with administering healthcare plans to large member populations. maxMC places the member at the hub of all activities to facilitate complex processes, including eligibility, authorizations, and tracking of plans. As a result, payers can more efficiently administer their plans and support the delivery of a high quality, cost-effective continuum of care to their members.

      With e-maxMC, Landacorp provides web-enabling companion software to maxMC that allows health plan medical management staff, providers, employers and members to interact over the web to achieve more

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      The flexible and open design of our medical management software solutions enables us to configure them to address our customers’ evolving needs and specific clinical, administrative and business requirements. Among their key features are:

	•	Rules Based Processing Capabilities. Our workflow engine utilizes a series of customized “if . . . then . . .” associations to trigger actions based upon changes in the state of any data within the database (e.g., automatically notifying a case manager if a high-risk authorization is requested).
	•	Clinical Guidelines Integrated into Workflow Applications. Our solutions incorporate industry standard clinical guidelines and specific medical management criteria provided by our customers into automated authorization, case management and disease management workflow processes.
	•	Interfacing Capabilities. We have built more than 300 interfaces, which enable efficient integration of our medical management solutions with other data systems. An interface is a method for transferring data from one system to another and a point at which a user can automatically launch a third-party program from within a given data system.
	•	Trend Analysis and Decision Support Tools. Our solutions enable healthcare personnel to view data in graphical formats to identify trends and spend more time resolving issues rather than identifying them.

      maxMC is Landacorp’s core medical management solution for payers. maxMC integrates a payer’s internal medical management guidelines and clinical, administrative and business processes with specific information about a payer’s members. Key functions of this product include:

	•	Care Coordination Center. This function verifies membership and benefits eligibility and incorporates industry standard clinical guidelines, including InterQual® and Milliman & Robertson Care Guidelines, and criteria provided by the payer into the treatment decision process to ensure consistent decisions about care across member populations. Medical management staff may intervene early to maximize the member’s benefits and alternatives for care, while ensuring coordination of services from home through acute and outpatient care. Completed decisions may then be promptly and directly exported to the claim adjudication system.
	•	Case and Disease Management. This function supports both case management and disease management programs using a combination of clinical disease assessment protocols selected by the client. The client can apply these protocols to determine appropriate levels of care, perform short- and long-term care planning and minimize costly unnecessary procedures. The client can deploy health assessments to identify members requiring case or disease management, care planning or healthcare education.
	•	Credentialing. This function assists with maintenance and review of healthcare provider credentials by automating the maintenance and review of physician and other care provider information, such as continuing medical education credits, medical board certifications and records of disciplinary and other adverse actions. Using the function, a payer can efficiently send requests for data to the National Practitioner Data Bank and other governmental bodies and receive and incorporate that data in its systems for use in regulatory compliance and other decision making activities.

      e-maxMC is our web-enabling medical management application for payers. e-maxMC, introduces providers and members into payers’ internal medical management systems by combining the immediate and broad-based connectivity of the Internet with the medical management functions of our maxMC solution. e-maxMC enables providers and members to access a payer’s secure medical management information and proprietary business processes, allowing them to engage in real-time via Internet-based transactions such as clinically-based authorizations, referrals and health risk assessments.

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      e-maxMC enables the following Web-based interactions between payers and providers:

	•	Referral Advice. Online notification to payers of referrals to specialists and others by primary care physicians.
	•	Treatment Requests and Communications. Affords primary care physicians and specialists a medium for conducting online eligibility checks, requests for care, clinical criteria analysis and benefits checks, in each case, in accordance with individual payers’ requirements.
	•	Assignment of Care. Online capability for primary care physicians to assign care management to appropriate specialists.
	•	Cross-coverage. Online notification by one primary care physician that another primary care physician will provide coverage for a specific period of time.
	•	Case and Disease Management Program Enrollment. Online requests that patients be considered for enrollment in a particular case or disease management program.
	•	Inpatient Admission. Online notification by an inpatient facility that a member has been admitted.
	•	Health Risk Assessment. Online completion of health risk assessments by primary care physicians and specialists.

      e-maxMC enables the following Web-based interactions between payers and their members:

	•	Information Exchange. Online reviewing and updating of member demographic information and checking of plan benefit and claim status information.
	•	Physician Selection. Online selection of primary care physician in accordance with payer-specific policies from up-to-date lists of in-network physicians.
	•	Health Risk Assessment. Online completion of health risk assessments by members.

      Maxsys II is Landacorp’s medical management solution for hospitals and healthcare delivery organizations. It enables them to improve communications and apply more efficient workflow tools to the healthcare delivery process. Maxsys II is the successor to our Maxsys I product, which we no longer market but continue to support with a maintenance program. Key functions of our Maxsys II solution include:

	•	Case/ Utilization Management. This function helps ensure that patients receive appropriate levels of care and minimizes expenses associated with inappropriate and unduly lengthy hospital stays. It enables providers to reduce inefficient use of human resources and reduce denials of reimbursement by payers resulting from failure to follow payer guidelines. Our provider customers achieve these outcomes through the automation of the initial evaluation and on-going review of patient care in order to monitor compliance with clinical guidelines, including guidelines provided by the provider customer and industry standard clinical guidelines, such as InterQual and Milliman & Robertson Care Guidelines.
	•	Quality Management. This function helps identify deficiencies in patient care or provider performance and alerts process improvement personnel in order to promote early intervention. It allows a provider organization’s staff to monitor and evaluate care processes, treatments, operative procedures and outcomes. It also permits quality managers to better monitor high-cost, high-risk procedures and to enforce quality initiatives by providing variance reporting, process monitoring and centralized data.
	•	Risk Management. This function helps to reduce financial losses by automating and supporting timely and thorough investigations, interventions, communication and education regarding potential and actual claims. This function enables a provider organization’s risk management staff to be notified instantly as incidents are reported by personnel anywhere within the organization. The function also supports efficient management, tracking and analysis of potential and asserted claims by patient/episode, staff members, physicians, allied health professionals and visitors.

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	•	Infection Control. This function facilitates effective management of epidemiology and analysis of treatment protocols based on the National Nosocomial Infections Study model, which reports the national standards for epidemiological studies. The function eliminates redundant manual data entry by extracting pertinent data from other sources in a provider organization’s information technology system and from data collected by case and quality management staff.
	•	Credentialing. This function supports the tracking of provider (i.e.; physician) credentials by automating the maintenance and review of care provider information such as continuing medical education credits, medical board certifications and records of disciplinary and other adverse actions. It also facilitates the exchange of data with the National Practitioner Data bank and other governmental bodies.

      We offer our payer and provider customers comprehensive implementation and consulting services such as:

	•	project management;
	•	identification of customer-specific system requirements;
	•	consideration of interactions between our solutions and our customer’s information systems and designing appropriate administrative, clinical and business processes;
	•	actuarial and other consulting services;
	•	building proprietary interfaces to other systems and configuring hardware and software to support the customer’s administrative, clinical and business processes;
	•	training customer personnel;
	•	delivery of our software solutions via an application service provider (ASP) model;
	•	designing and implementing branding strategies and sticky applications based on our disease management solutions;
	•	determining hardware and software requirements; and
	•	providing general health content, disease management tools and e-commerce capabilities.

      Landacorp targets payer organizations with membership ranging from several million to 50,000 covered lives. We currently serve 28 payer organizations that claim to have a combined membership of approximately 48 million participants. Our top healthcare payer customers are Aetna, Highmark (Blue Cross Blue Shield of Western Pennsylvania), WellPoint, Blue Cross Blue Shield of North Carolina, Blue Cross and Blue Shield of South Carolina, Healthnet of California, One Health Plan (part of Great West Life Assurance Company), Lifeguard, Inc, and Renal Management Systems (a subsidiary of Baxter International Inc.). Highmark, Blue Cross Blue Shield of North Carolina, and Renal Management Systems are currently using our maxMC solution. Renal Management utilizes maxMC’s disease management functionality, which was implemented using a central database and twenty-two remote satellite operations throughout the United States. Blue Cross Blue Shield of North Carolina is also using our e-maxMC Web-enabling solution. Lifeguard, Inc. utilizes our DSSeries solution and Managing for Tomorrow, and One Health Plan utilizes our Managing for Tomorrow program. Additionally, Lifeguard became one of the industry’s first fully integrated, reinsured disease management program to include both predictive modeling and interventional services. During 2001, Healthnet of California and One Health Plan contributed more than ten percent of our total revenue for the year.

      We target hospitals and healthcare delivery organizations with licensed beds ranging from several thousand to as few as 250. We currently serve approximately 142 such organizations. Among our leading provider customers are Rush Presbyterian-St. Lukes’s Medical Center, University of Texas M. D. Anderson

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      We believe that our proprietary technology platforms provide us with a competitive advantage. Our products utilize n-tiered and Web architecture systems derived from our proprietary object oriented software foundation. Through the application of middleware platforms or service-oriented applications that include business rules and service functions, our technology supports our population health management solutions by ensuring high availability and scalability. Additionally, the solutions are designed with complementary tool kits that enable powerful customizations and extensions that are specific to each implementation. We currently employ both Oracle® and Microsoft® SQLServer database management systems to support the data storage requirements of our solutions.

      We have developed an open architecture standard, allowing separate functional components to run on several different hardware platforms. Maxsys II and maxMC are based on the leading fourth generation language of PowerBuilder™ and run on standard Intel®-compatible personal computers accessing Oracle databases. Similarly, DSSeries is developed using Visual Basic and runs on the same desktop platforms accessing Microsoft SQLServer databases. Our Managing for Tomorrow program utilizes Oracle databases, Interactive Voice Response and Web-based front-ends with PLSQL to script out the health risk assessment rules. Our common object request broker architecture, or CORBA, based rules engine runs on Microsoft Windows™-NT. e-maxMC, which utilizes Java®, Java Servelets, Enterprise Java Beans™ (EJB), and XML for its functionality and either Microsoft’s Internet Explorer™ or Netscape’s Netscape Communicator™ browsers for the provider interface, makes use of any Internet capable system with the application itself being served by leading UNIX® or Microsoft NT platforms. Our data interface engine operates on the leading UNIX or Microsoft NT platforms. Additional servers may be placed in the system, such as report servers, fax servers or additional web/application servers, in order to ensure scalability and fault tolerance without performance loss. The interaction of all these services, applications, and middleware makes the system truly n-tiered, rather than two-tiered (client/server) or three-tiered (client/application/server).

      Total Research and Development expenditures for 1999, 2000 and 2001 were $1,733,000, $4,214,000, and $6,361,000, respectively.

      The market for our population health management solutions is highly competitive and is characterized by rapidly changing technology, evolving user needs and the frequent introduction of new products. 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), MedDecision, and others. In the medical management software healthcare delivery market, we compete against MIDS (a division of Affiliated Computer Systems, Inc.), SoftMed Systems and others.

      We believe that the absence of vendors capable of providing flexible, stand-alone medical and disease management products and service, as well as a comprehensive integrated population health management solution to help manage the continuum of patient care represents a significant market opportunity for Landacorp. We expect that competition will continue to increase as a result of consolidation in the Internet, information technology and healthcare industries. We believe that the principal factors affecting competition in our markets include product functionality, performance, flexibility and features, use of open standards technology, quality of service and support, company reputation, price, scalability and overall cost of ownership.

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      We depend upon our proprietary information and technology. We rely primarily on a combination of copyright, trademark and trade secret laws and license agreements to establish and protect our rights in our software products and other proprietary technology. Landacorp requires employees and third-party consultants and contractors to enter into nondisclosure agreements to limit use of, access to, and distribution of, our proprietary information. Nevertheless, our means of protecting our proprietary rights may not be adequate to prevent misappropriation. The laws of some foreign countries may not protect our proprietary rights as fully or in the same manner as do the laws of the United States. Also, despite the steps taken by us to protect our proprietary rights, unauthorized third parties may be able to copy aspects of our products, reverse engineer our products or otherwise obtain and use information that we regard as proprietary. Furthermore, others may independently develop technologies similar or superior to our technology, or design around the proprietary rights that we own.

      Participants in the healthcare industry, such as our payer and provider customers, are subject to extensive and frequently changing laws and regulations, including laws and regulations relating to the confidential treatment and secure transmission of healthcare information such as patient medical records. Legislators at both the state and federal levels have proposed additional legislation relating to the use and disclosure of medical information, and the federal government is likely to enact new federal laws or regulations in the near future. Pursuant to the Health Insurance Portability and Accountability Act of 1996, HIPAA, the Department of Health and Human Services, DHHS, has proposed regulations setting forth security and privacy standards for all health plans, clearinghouses and providers to follow with respect to an individual’s healthcare information that is electronically transmitted, processed, or stored. In addition, Congress is currently considering various legislative proposals regarding security related to health information.

      Since both our provider customers and payer customers must comply with HIPAA, its associated regulations and all other applicable healthcare laws and regulations, Landacorp is taking the appropriate steps to ensure that our products and business practices are HIPAA-ready. Accordingly, in order for our medical management solutions to be marketable, they must contain features and functionality that allow our customers to comply with these laws and regulations, and we have established an ongoing program to ready our products and our employees to comply with HIPAA’s final security rules. We believe our products currently allow our customers to comply with existing laws and regulations. However, because new regulations are yet to come and because the proposed regulations may be modified prior to becoming final, our products may require modification in the future. Such modifications will become part of our standard maintenance releases and upgrades. 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.

      In addition, laws governing healthcare payers and providers are often not uniform among states. This could require us to undertake the expense and difficulty of tailoring our products in order for our customers to be in compliance with applicable state and local laws and regulations.

      The Internet and its associated technologies are also subject to government regulation. Many existing laws and regulations, when enacted, did not anticipate the methods of Internet-based medical management solutions we offer. We believe, however, that these laws and regulations may nonetheless be applied to us. Current laws and regulations which may affect our Internet-based business relate to the following:

	•	patient medical record information;
	•	the electronic transmission of information between healthcare providers, payers, clearinghouses and other healthcare industry participants;
	•	the use of software applications in the diagnosis, cure, treatment, mitigation or prevention of disease;

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	•	health maintenance organizations, insurers, healthcare service providers and/or employee health benefit plans; and
	•	the relationships between or among healthcare providers.

      We expect to conduct our Internet-based business in substantial compliance with all material federal, state and local laws and regulations governing our operations. However, the impact of regulatory developments in the healthcare industry is complex and difficult to predict, and our business could be adversely affected by existing or new healthcare regulatory requirements or interpretations. These requirements or interpretations could also limit the use of the Internet for our medical management solutions or even prohibit the sale of a particular product or service.

      Because of the Internet’s popularity and increasing use, new laws and regulations with respect to the Internet are becoming more prevalent. Such laws and regulations have covered, or may cover in the future, issues such as:

	•	security, privacy and encryption;
	•	pricing;
	•	taxation;
	•	content;
	•	copyrights and other intellectual property;
	•	contracting and selling over the Internet;
	•	distribution; and
	•	characteristics and quality of services.

      Moreover, the applicability to the Internet of existing laws in various jurisdictions governing issues such as property ownership, sales and other taxes, libel and personal privacy is uncertain and may take years to resolve. Demand for our Internet-based applications and services may be affected by additional regulation of the Internet. Any new legislation or regulation regarding the Internet, or the application of existing law and regulations to the Internet, could adversely affect our business. Additionally, while we do not currently operate outside of the United States, the international regulatory environment relating to the Internet market could have an adverse effect on our business, especially if we expand internationally.

      The growth of the Internet, coupled with publicity regarding Internet fraud, may also lead to the enactment of more stringent consumer protection laws. These laws may impose additional burdens on our business. The enactment of any additional laws or regulations in this area may impede the growth of the Internet, which could decrease our potential revenues or otherwise cause our business to suffer.

      As of December 31, 2001, we employed 164 employees.

      Our success depends on our continued ability to attract and retain highly skilled and qualified personnel. Competition for such personnel is intense in the information technology industry, particularly for talented software developers, service consultants, and sales and marketing personnel. We may not be able to attract and retain qualified personnel in the future.

      Our employees are not members of any labor union. We consider our relations with our employees to be good.

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      Our executive officers and certain information about them are as follows:

      Eugene J. Miller, President, Chief Executive Officer and Director. Mr. Miller joined Landacorp after serving as Executive Vice President for CorSolutions from 1994 to 2001. While there, he was responsible for all sales and marketing, contracting and pricing, sales training and development and reimbursement and enrollment activities associated with disease management programs. Miller brings over 20 years of healthcare experience to Landacorp, having held several executive positions for Medical Care America/Critical Care America.

      Mark Rapoport, Chief Operating Officer and Chief Financial Officer. Mr. Rapoport joined Landacorp in April 2001 from Atlanta-based iXL Enterprises, where he served as Senior Vice President, Controller from 2000 to 2001. Prior to joining iXL, Mr. Rapoport served in a number of key financial positions for BellSouth Corporation from 1996 to 2000. As Executive Director — Mergers & Acquisitions Accounting, he worked with the corporate development group for merger and acquisition activities and was responsible for setting BellSouth’s overall accounting policy. Mr. Rapoport also served as Vice President — Finance and Chief Financial Officer for BellSouth Entertainment, the company’s video division. Mr. Rapoport is a certified public accountant and earned his Master of Business Administration in Finance and Accounting from Emory University in 1982.

      Marlene McCurdy, Senior Vice President and General Manager — Disease Management, joined Landacorp in 1998 as Senior Vice President — Client Services after serving as Director, Implementation Strategy/Research & Development for the Eclipsys Corporation from 1996 to 1997. Prior to that position, McCurdy held a number of implementation and technical support positions for TDS/ALLTEL, including Director, Implementation Services, during a 17-year career relationship with that organization. Her broad-based experience includes every facet of the implementation process and includes detailed knowledge of customer service and technical support.

      Brandon Raines, Senior Vice President, Research & Development and General Manager, Medical Management joined Landacorp in 1988 as a software developer. Prior to assuming his current role, Mr. Raines held various positions including Systems Engineer, Systems Analyst, Manager, R&D and Vice President, R&D.

      Officers serve at the discretion of the Board and are appointed annually. The employment of each of our officers is at will and may be terminated at any time, with or without cause. There are no family relationships between any of the directors or executive officers of Landacorp.

Item 2.     Description of Property

      The Company maintains offices in Atlanta, Georgia, Chico, California, Raleigh, North Carolina, and Montclair, New Jersey. We have under leases approximately 63,500 square feet of office space. We anticipate that our current facilities are adequate for our current needs.

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Item 3.     Legal Proceedings

      Landacorp is not currently involved in any litigation.

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

      None.

PART II

Item 5.     Market for the Registrant’s Common Equity and Related Stockholder Matters

      During the year ended December 31, 2001, we sold and issued the following unregistered securities: approximately 124,000 shares of common stock pursuant to exercise of options that we assumed in connection with the acquisition of PatientCentrix.

      As of December 31, 2001, there were approximately 187 registered holders of our common stock. Our common stock is listed for quotation on the NASDAQ Stock Market’s National Market System under the symbol “LCOR”. The following table sets forth for the period indicated, the high and low prices of our common stock as quoted in the NASDAQ Stock Market’s National Market System:

      We have not paid any dividends since our inception and do not intend to pay any dividends on our capital stock in the foreseeable future.

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Item 6.     Selected Consolidated Financial Data

SELECTED FINANCIAL DATA

      You should read the following selected financial data in conjunction with our financial statements and their related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this report. We derived the following statement of operations data for the years ended December 31, 1999, 2000 and 2001, and the balance sheet data as of December 31, 2000 and 2001, from the audited financial statements included at the end of this report. We derived the following statement of operations data for the year ended December 31, 1997 and 1998 and the balance sheet data as of December 31, 1997, 1998 and 1999 from audited financial statements not included elsewhere in this report.

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

      Landacorp’s disease management products and services — our predictive modeling and interventional capabilities — help our customers identify and intervene with their members at risk for a chronic or potentially high predicted expenditure outcomes associated with chronic health conditions like asthma, diabetes and heart disease. These member-focused solutions assist our clients in managing the health of these members through educational and self-management materials or through referral to nurse case managers. Landacorp’s medical management software solutions help health plans and hospitals manage the cost and care of their patients by documenting treatment, ensuring that care guidelines and government compliance requirements are met, and

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      Traditionally, we have recognized system sales revenues and associated costs using the percentage-of-completion method, with labor hours incurred relative to total estimated contract hours as the measure of progress towards completion. 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 its care analytics solutions through a subscription-based fee structure that provides for implementation services at a fixed hourly rate and a subsequent monthly subscription fee based upon the number of members maintained by the payer organization. The fair value of the implementation service revenue is recognized as the services are performed and the subscription fee is recognized on mo