Back to GetFilings.com

Table of Contents

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

___________________________

FORM 10-Q

___________________________

Commission file number: 000-29377

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

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

(404) 531-9956
(Registrant’s telephone number, including area code)

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

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

Table of Contents

Landacorp, Inc.

TABLE OF CONTENTS

2

Table of Contents

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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

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

3

Table of Contents

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

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

4

Table of Contents

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

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

5

Table of Contents

LANDACORP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. The Company and Basis of Presentation

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

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

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

2. Revenues

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

Revenue Recognition

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

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

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

6

Table of Contents

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

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

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

3. Net loss per share

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

4. Common Stock

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

5. Recent Accounting Pronouncements

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

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

6. Goodwill and Other Intangible Assets

     Goodwill

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

7

Table of Contents

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

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