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**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION****WASHINGTON,D.C. 20549**

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**FORM10-Q**

| x | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR15(d)   OF THE SECURITIES EXCHANGE ACT OF 1934** |
|---|---------------------------------------------------------------------------------------------------|

**For thequarterly period ended September 30, 2002**

**or**

| o | **TRANSITION REPORT PURSUANT TO SECTION 13 OR15(d)   OF THE SECURITIES EXCHANGE ACT OF 1934** |
|---|----------------------------------------------------------------------------------------------------|

**For thetransition periodfrom                 to                 **

**Commission file number 1-6035**

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**THETITAN CORPORATION**(Exact name of registrant as specified in its charter)

| **DELAWARE**(State or other jurisdiction of incorporation or organization) |     | **95-2588754**(I.R.S. Employer Identification No.) |
|----------------------------------------------------------------------------|--------------------|----------------------------------------------------|

**3033Science Park RoadSan Diego, California 92121-1199**(Address ofprincipal executive offices, zip code)

(Registrant's telephone number, including areacode)**(858) 552-9500**

                                                                                                                                                   (Former name, former address and former fiscal year, if changedsince last report.)

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      Indicate bycheck mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or forsuch shorter period that the registrant was required to file suchreports), and (2) has been subject to such filing requirementsfor the past 90 days.  Yes x  No o.

      The number ofshares of registrant's common stock outstanding at November 1,2002, was 78,022,197.

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**Part I—FINANCIAL INFORMATION**

**Item 1. Financial Statements**

**THE TITAN CORPORATIONCONSOLIDATED STATEMENTS OF OPERATIONS****(Unaudited) (in thousands, except per share data)**

****

| ** **                                                                                                                                                                                                                           | **   ** | **Threemonths ended September 30,** | **   ** | **Ninemonths ended September 30,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------|------------------------------------------|------------------------|-----------------------------------------|------------|
|                                                                                                                                                                                                                                      |                        |                                          |                        |                                         |            |
|                                                                                                                                                                                                                                      |                        | **2002**                                 |                        | **2001**                                |            | **2002** |  | **2001** |  |
|                                                                                                                                                                                                                                      |                        |                                          |                        |                                         |            |  |  |  |  |
| Revenues                                                                                                                                                                                                                             |                        | $                                        | 352,819                |                                         | $          | 237,158 |  | $ | 1,012,798 |  | $ | 681,518 |  |
|                                                                                                                                                                                                                                      |                        |                                          |                        |                                         |            |  |  |  |  |
| Costs andexpenses:                                                                                                                                                                                                                   |                   |                                     |                        |                                         |       |  |  |   |  |  |   |  |  |
|       Cost of revenues                                                                                                                                                                                 |                   |                                          | 286,977                |                                         |       | 181,619 |  |   | 817,161 |  |   | 524,561 |  |
|       Selling, general and administrative expense                                                                                                                                                      |                   |                                          | 60,699                 |                                         |       | 38,712 |  |   | 137,429 |  |   | 113,295 |  |
|       Research and development expense                                                                                                                                                                 |                   |                                          | 3,954                  |                                         |       | 2,953 |  |   | 7,051 |  |   | 7,147 |  |
|       Exit and restructuring charges and other (Note3)                                                                                                                                                 |                   |                                          | 46,743                 |                                         |       | — |  |   | 50,062 |  |   | — |  |
|       Acquisition and integration related charges and other(Note 4)                                                                                                                                    |                   |                                          | —                |                                         |       | — |  |   | — |  |   | 27,847 |  |
|                                                                                                                                                                                                                                      |                        |                                          |                        |                                         |            |  |  |  |  |
|             Total costs and expenses                                                                                                                                     |                   |                                     | 398,373                |                                         |            | 223,284 |  |   | 1,011,703 |  |   | 672,850 |  |
|                                                                                                                                                                                                                                      |                        |                                          |                        |                                         |            | **1,095** |  |  |  |
| Operating profit(loss)                                                                                                                                                                                                               |                   |                                          | (45,554                | )                                       |            | 13,874 |  |   | 1,095 |  |   | 8,668 |  |
| Interestexpense                                                                                                                                                                                                                      |                   |                                          | (8,262                 | )                                       |            | (9,042 | ) |   | (24,270 | ) |  | (28,605 | ) |
| Interest income                                                                                                                                                                                                                      |                   |                                          | 565                    |                                         |            | 745 |  |   | 816 |  |   | 1,294 |  |
|                                                                                                                                                                                                                                      |                        |                                          |                        |                                         |            |  |  |  |  |
| Income (loss) fromcontinuing operations before income taxes, minorityinterests,       extraordinary loss andcumulative effect of change in accounting principle                                        |                        |                                          | (53,251                | )                                       |            | 5,577 |  |  | (22,359 | ) |  | (18,643 | ) |
| Income tax provision(benefit)                                                                                                                                                                                                        |                   |                                          | (19,735                | )                                       |            | 2,710 |  |   | (6,918 | ) |  | (4,565 | ) |
|                                                                                                                                                                                                                                      |                        |                                          |                        |                                         |            |  |  |  |  |
| Income (loss) fromcontinuing operations before minority interests,       extraordinary loss andcumulative effect of change in accounting principle                                                     |                   |                                          | (33,516                | )                                       |            | 2,867 |  |   | (15,441 | ) |   | (14,078 | ) |
| Minorityinterests                                                                                                                                                                                                                    |                   |                                          | —                |                                         |       | 70 |  |   | — |  |   | 4,729 |  |
|                                                                                                                                                                                                                                      |                        |                                          |                        |                                         |            |  |  |  |  |
| Income (loss) fromcontinuing operations before extraordinary loss and       cumulative effect of change inaccounting principle                                                                         |                   |                                          | (33,516                | )                                       |            | 2,937 |  |   | (15,441 | ) |   | (9,349 | ) |
| Loss from discontinuedoperations, net of tax benefit (Note 6)                                                                                                                                                                        |                   |                                          | (191,782               | )                                       |            | (41,728 | ) |   | (209,729 | ) |   | (97,117 | ) |
| Extraordinary loss fromearly extinguishment of debt, net of tax benefit                                                                                                                                                              |                   |                                          | —                |                                         |            | — |  |   | (5,408 | ) |   | — |  |
| Cumulative effect ofchange in accounting principle, net of tax benefit       (discontinued operations)(Note 5)                                                                                         |                   |                                          | —                |                                         |            | — |  |   | (40,111 | ) |   | — |  |
|                                                                                                                                                                                                                                      |                        |                                          |                        |                                         |            |  |  |  |  |
| Net loss                                                                                                                                                                                                                             |                   |                                          | (225,298               | )                                       |            | (38,791 | ) |  | (270,689 | ) |  | (106,466 | ) |
| Dividend requirements onpreferred stock                                                                                                                                                                                              |                   |                                          | (172                   | )                                       |            | (172 | ) |   | (517 | ) |   | (517 | ) |
|                                                                                                                                                                                                                                      |                        |                                          |                        |                                         |            |  |  |  |  |
| Net loss applicable tocommon stock                                                                                                                                                                                                   |                        | $                                        | (225,470               | )                                       | $          | (38,963 | ) | $ | (271,206 | ) | $ | (106,983 | ) |
|                                                                                                                                                                                                                                      |                        |                                          |                        |                                         |            |  |  |  |  |
| Basic earnings (loss) pershare:                                                                                                                                                                                                      |                   |                                     |                        |                                         |            |   |  |  |   |  |  |   |  |  |
|       Income (loss)from continuing operations before extraordinary loss             andcumulative effect of change in accounting principle |                        | $                                        | (0.43                  | )                                       | $          | 0.04 |  | $ | (0.21 | ) | $ | (0.24 | ) |
|       Loss fromdiscontinued operations, net of tax benefit                                                                                                                                             |                   |                                          | (2.46                  | )                                       |            | (0.67 | ) |   | (2.79 | ) |   | (1.75 | ) |
|       Extraordinaryloss from early extinguishment of debt, net of taxbenefit                                                                                                                           |                   |                                          | —                |                                         |            | — |  |   | (0.07 | ) |   | — |  |
|       Cumulativeeffect of change in accounting principle, net of tax benefit             (discontinuedoperations)                          |                   |                                          | —                |                                         |            | — |  |   | (0.53 | ) |   | — |  |
|                                                                                                                                                                                                                                      |                        |                                          |                        |                                         |            |  |  |  |  |
|       Netloss                                                                                                                                                                                          |                        | $                                        | (2.89                  | )                                       | $          | (0.63 | ) | $ | (3.60 | ) | $ | (1.99 | ) |
|                                                                                                                                                                                                                                      |                        |                                          |                        |                                         |            |  |  |  |  |
|       Weightedaverage shares                                                                                                                                                                           |                   |                                          | 77,820                 |                                         |            | 60,986 |  |   | 75,270 |  |   | 56,019 |  |
|                                                                                                                                                                                                                                      |                        |                                          |                        |                                         |            |  |  |  |  |
| Diluted earnings (loss)per share:                                                                                                                                                                                                    |                   |                                     |                        |                                         |            |   |  |  |   |  |  |   |  |  |
|       Income (loss)from continuing operations before extraordinary loss             andcumulative effect of change in accounting principle |                        | $                                        | (0.43                  | )                                       | $          | 0.04 |  | $ | (0.21 | ) | $ | (0.24 | ) |
|       Loss fromdiscontinued operations, net of tax benefit                                                                                                                                             |                   |                                          | (2.46                  | )                                       |            | (0.65 | ) |  | (2.79 | ) |  | (1.75 | ) |
|       Extraordinaryloss from early extinguishment of debt, net of taxbenefit                                                                                                                           |                   |                                          | —                |                                         |            | — |  |   | (0.07 | ) |   | — |  |
|       Cumulativeeffect of change in accounting principle, net of tax benefit             (discontinuedoperations)                          |                   |                                          | —                |                                         |            | — |  |   | (0.53 | ) |   | — |  |
|                                                                                                                                                                                                                                      |                        |                                          |                        |                                         |            |  |  |  |  |
|                                                                                                                                                                                                                                      |                        |                                          |                        |                                         |            |  |  |  |  |  |  |  |
|       Netloss                                                                                                                                                                                          |                        | $                                        | (2.89                  | )                                       | $          | (0.61 | ) | $ | (3.60 | ) | $ | (1.99 | ) |
|                                                                                                                                                                                                                                      |                        |                                          |                        |                                         |            |  |  |  |  |
|       Weightedaverage shares                                                                                                                                                                           |                   |                                          | 77,820                 |                                         |            | 62,847 |  |   | 75,270 |  |   | 56,019 |  |
|                                                                                                                                                                                                                                      |                        |                                          |                        |                                         |            |  |  |  |  |

Theaccompanying notes are an integral part of these consolidatedfinancial statements.

**THE TITAN CORPORATIONCONSOLIDATED BALANCE SHEETS****(Unaudited)****(in thousands, except share and per share data)**

| ** **                                                                                                                                                                                                                                                                                                                     | ** ** | **September 30, 2002** | ** ** | **December 31, 2001** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------|------------|----------------------------|------------|
|                                                                                                                                                                                                                                                                                                                                |            |                             |            |                            |            |
| ** **                                                                                                                                                                                                                                                                                                                     | ** ** |                             | ** ** | ** **                 | ** ** |
| **Assets**                                                                                                                                                                                                                                                                                                                     |       |                        |       |                       |       |   |   |
| Current Assets:                                                                                                                                                                                                                                                                                                                |       |                        |       |                       |       |   |   |
|       Cash and cashequivalents                                                                                                                                                                                                                                                                   |       | $                           | 39,098     |                       | $          | 18,621 |   |
|       Restrictedcash                                                                                                                                                                                                                                                                             |       |                             | 1,104      |                       |            | — |   |
|       Accounts receivable—net                                                                                                                                                                                                                                                              |       |                        | 304,534    |                       |       | 347,507 |   |
|       Inventories                                                                                                                                                                                                                                                                                |       |                        | 30,586     |                       |       | 23,922 |   |
|       Prepaid expenses and other                                                                                                                                                                                                                                                                 |       |                        | 18,276     |                       |       | 15,198 |   |
|       Deferred income taxes                                                                                                                                                                                                                                                                      |       |                        | 27,750     |                       |       | 53,941 |   |
|       Current assets of discontinued operations                                                                                                                                                                                                                                                  |       |                        | 51,627     |                       |       | 106,075 |   |
|                                                                                                                                                                                                                                                                                                                           |       |                             |       |                            |       |
|             Total current assets                                                                                                                                                                                                                                   |       |                        | 472,975    |                       |       | 565,264 |   |
|                                                                                                                                                                                                                                                                                                                                |            |                             |            |                            |            |  |  |  |  |
| Property and equipment— net                                                                                                                                                                                                                                                                                              |       |                        | 56,114     |                       |       | 61,440 |   |
| Goodwill                                                                                                                                                                                                                                                                                                                       |       |                        | 462,202    |                       |       | 401,411 |   |
| Other assets —net                                                                                                                                                                                                                                                                                                        |       |                        | 95,496     |                       |       | 77,666 |   |
| Deferred incometaxes                                                                                                                                                                                                                                                                                                           |            |                             | 110,498    |                            |            | — |  |
| Non-current assets ofdiscontinued operations                                                                                                                                                                                                                                                                                   |       |                        | 103,893    |                       |       | 346,138 |   |
|                                                                                                                                                                                                                                                                                                                           |       |                             |       |                            |       |
|              Total assets                                                                                                                                                                                                                                     |       | $                           | 1,301,178  |                       | $          | 1,451,919 |   |
|                                                                                                                                                                                                                                                                                                                           |       |                             |       |                            |       |
| **Liabilities and Stockholders'Equity**                                                                                                                                                                                                                                                                                        |       |                        |       |                       |       |   |   |
| CurrentLiabilities:                                                                                                                                                                                                                                                                                                            |       |                        |       |                       |       |   |   |
|       Current portion of amounts outstanding under creditfacility                                                                                                                                                                                                                                |       | $                           | 3,500      |                       | $          | 12,813 |   |
|       Accounts payable                                                                                                                                                                                                                                                                           |       |                        | 59,761     |                       |       | 68,648 |   |
|       Acquisition debt                                                                                                                                                                                                                                                                           |       |                        | —    |                       |       | 2,000 |   |
|       Current portion of long-term debt                                                                                                                                                                                                                                                          |       |                        | 776        |                       |       | 1,275 |   |
|       Accrued compensation and benefits                                                                                                                                                                                                                                                          |       |                        | 76,257     |                       |       | 66,473 |   |
|       Other accrued liabilities                                                                                                                                                                                                                                                                  |       |                        | 78,378     |                       |       | 65,309 |   |
|       Income taxespayable                                                                                                                                                                                                                                                                        |            |                             | 909        |                            |            | 1,174 |  |
|       Current liabilities of discontinued operations                                                                                                                                                                                                                                             |       |                        | 60,865     |                       |       | 68,960 |   |
|                                                                                                                                                                                                                                                                                                                           |       |                             |       |                            |       |
|             Total current liabilities                                                                                                                                                                                                                              |       |                        | 280,446    |                       |       | 286,652 |   |
|                                                                                                                                                                                                                                                                                                                           |       |                             |       |                            |       |
| Long-term portion ofamounts outstanding under credit facility                                                                                                                                                                                                                                                                  |       |                        | 346,500    |                       |       | 317,187 |   |
|                                                                                                                                                                                                                                                                                                                           |       |                             |       |                            |       |
| Other long-termdebt                                                                                                                                                                                                                                                                                                            |       |                        | 2,322      |                       |       | 5,612 |   |
|                                                                                                                                                                                                                                                                                                                           |       |                             |       |                            |       |
| Other non-currentliabilities                                                                                                                                                                                                                                                                                                   |       |                        | 67,387     |                       |       | 44,462 |   |
|                                                                                                                                                                                                                                                                                                                           |       |                             |       |                            |       |
| Non-current liabilities ofdiscontinued operations                                                                                                                                                                                                                                                                              |            |                             | 46,112     |                            |            | 51,025 |  |
|                                                                                                                                                                                                                                                                                                                           |       |                             |       |                            |       |
| Company obligatedmandatory redeemable convertible preferred securities of asubsidiary trust       whose sole assets are seniorsubordinated debentures of Titan                                                                                                                                   |       |                        | 250,000    |                       |       | 250,000 |   |
|                                                                                                                                                                                                                                                                                                                           |       |                             |       |                            |       |
| Minorityinterests                                                                                                                                                                                                                                                                                                              |       |                        | —    |                            |       | 23 |   |
|                                                                                                                                                                                                                                                                                                                           |       |                             |       |                            |       |
| Stockholders'Equity:                                                                                                                                                                                                                                                                                                           |       |                        |       |                       |       |   |   |
|       Preferred stock: $1 par value, authorized 5,000,000shares:                                                                                                                                                                                                                                 |       |                        |       |                       |       |   |   |
|             Cumulative convertible, $13,800 liquidationpreference, designated 1,068,102 shares:                    689,354and 689,678 shares issued and outstanding |       |                        | 689        |                            |       | 690 |   |
|             Series A junior participating: designated 1,000,000authorized shares:  None issued                                                                                                                                                           |       |                        | —    |                       |       | — |   |
|       Common stock:  $.01 par value, authorized200,000,000 shares, issued and outstanding:              78,244,249and 70,128,582 shares                                                                               |       |                        | 782        |                       |       | 701 |   |
|       Capital in excess of par value                                                                                                                                                                                                                                                             |       |                        | 647,580    |                            |       | 588,184 |   |
|       Deferred compensation                                                                                                                                                                                                                                                                      |       |                        | (11,631    | )                          |       | (34,519 | ) |
|       Retained earnings (accumulated deficit)                                                                                                                                                                                                                                                    |       |                        | (328,445   | )                          |       | (57,239 | ) |
|       Accumulated other comprehensive income                                                                                                                                                                                                                                                     |       |                        | 105        |                            |       | 128 |   |
|       Treasury stock (245,750 and 372,050 shares), atcost                                                                                                                                                                                                                                        |       |                        | (669       | )                          |       | (987 | ) |
|                                                                                                                                                                                                                                                                                                                           |       |                             |       |                            |       |
|             Total stockholders' equity                                                                                                                                                                                                                             |            |                        | 308,411    |                       |       | 496,958 |   |
|                                                                                                                                                                                                                                                                                                                           |       |                             |            |                            |       |
|             Total liabilities and stockholders'equity                                                                                                                                                                                                              |       | $                           | 1,301,178  |                       | $          | 1,451,919 |   |
|                                                                                                                                                                                                                                                                                                                           |       |                             |       |                            |       |

Theaccompanying notes are an integral part of these consolidatedfinancial statements.

****

**THE TITAN CORPORATIONCONSOLIDATED STATEMENTS OF CASH FLOWS****(Unaudited)  (in thousands of dollars)**

|                                                                                                                                                                                                    |                                            |          | **Ninemonths ended September 30,** |            |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------|----------|-----------------------------------------|------------|
| ** **                                                                                                                                                                                         | ** **                                 |          |                                         | ** ** |
| ** **                                                                                                                                                                                         |                                            | **2002** |                                         | **2001**   | ** ** |
|                                                                                                                                                                                                    |                                            |          |                                         |            |  |
| **Cash Flows fromOperating Activities:**                                                                                                                                                      |                                       |          |                                    |       |   |   |   |
| Loss from continuingoperations before extraordinary loss and cumulative effect of       change in accountingprinciple                                                |                                  | $        | (15,441                                 | )          | $ | (9,349 | ) |
| Adjustments to reconcileloss from continuing operations to net cash provided by (usedfor)       operating activities, net ofeffects of businesses acquired and sold: |         |          |                                         |       |  |  |
|       Depreciationand amortization                                                                                                                                   |                                       | 16,222   |                                         |       | 16,449 |  |
|       Write-offsdue to asset impairments                                                                                                                             |                                            | —  |                                         |            | 14,919 |  |
|       Deferredincome taxes and other                                                                                                                                 |                                       | 819      |                                         |       | (7,590 | ) |
|       Minorityinterests                                                                                                                                              |                                       | —  |                                         |       | (4,729 | ) |
|       Deferredcompensation                                                                                                                                           |                                       | 24,851   |                                         |       | 3,189 |  |
|       Changes inoperating assets and liabilities, net of the effects of businessesacquired and sold:                                                                 |                                       |          |                                         |       |  |  |
|             Accountsreceivable                                                                                                         |                                       | 73,309   |                                         |       | (199 | ) |
|             Inventories                                                                                                                |                                       | (5,903   | )                                       |       | (3,501 | ) |
|             Prepaidexpenses and other assets                                                                                           |                                       | (6,316   | )                                       |       | 1,025 |  |
|             Accountspayable                                                                                                            |                                       | (12,449  | )                                       |       | (13,255 | ) |
|             Accruedcompensation and benefits                                                                                           |                                       | 4,503    |                                         |       | 9,081 |  |
|             Incometaxes payable                                                                                                        |                                       | (278     | )                                       |       | (371 | ) |
|             Otherliabilities                                                                                                           |                                       | 42,909   |                                         |       | (6,195 | ) |
| ** **                                                                                                                                                                                         | ** **                                 |          |                                         |            |  |
| Net cash provided by (usedfor) continuing operations                                                                                                                                               |                                       | 122,226  |                                         |       | (526 | ) |
| ** **                                                                                                                                                                                         | ** **                                 |          |                                         |            |  |
| Loss from discontinuedoperations                                                                                                                                                                   |                                       | (209,729 | )                                       |       | (97,117 | ) |
| Minority interestattributable to discontinued operations                                                                                                                                           |                                       | (130     | )                                       |       | (10,968 | ) |
| Issuance of stock insubsidiaries                                                                                                                                                                   |                                       | 172      |                                         |       | 60,901 |  |
| Deferred compensationcharge attributable to discontinued operations                                                                                                                                |                                       | 7,780    |                                         |       | 49,155 |  |
| Changes in net assets andliabilities of discontinued operations                                                                                                                                    |                                       | 84,024   |                                         |       | (88,783 | ) |
| ** **                                                                                                                                                                                         | ** **                                 |          |                                         |            |  |
| Net cash used fordiscontinued operations                                                                                                                                                           |                                       | (117,883 | )                                       |       | (86,812 | ) |
| ** **                                                                                                                                                                                         | ** **                                 |          |                                         |            |  |
| Net cash provided by (usedfor) operating activities                                                                                                                                                |                                       | 4,343    |                                         |       | (87,338 | ) |
| ** **                                                                                                                                                                                         | ** **                                 |          |                                         |            |  |
| **Cash Flows fromInvesting Activities:**                                                                                                                                                           |                                       |     |                                    |       |  |  |
| Capitalexpenditures                                                                                                                                                                                |                                       | (13,657  | )                                       |       | (10,448 | ) |
| Acquisition of businessesand other equity interests, net of cash acquired                                                                                                                          |                                       | 27,856   |                                         |       | (14,969 | ) |
| Proceeds from sale ofinvestments and business                                                                                                                                                      |                                       | 6,917    |                                         |       | 3,217 |  |
| Advances to SureBeam online of credit                                                                                                                                                              |                                       | (20,000  | )                                       |       | — |  |
| Otherinvestments                                                                                                                                                                                   |                                       | (4,446   | )                                       |       | (6,522 | ) |
| Other                                                                                                                                                                                              |                                       | 6,219    |                                         |       | (356 | ) |
| ** **                                                                                                                                                                                         | ** **                                 |          |                                         |            |  |
| Net cash provided by (usedfor) investing activities                                                                                                                                                |                                       | 2,889    |                                         |       | (29,078 | ) |
| ** **                                                                                                                                                                                         | ** **                                 |          |                                         |            |  |
| **Cash Flows fromFinancing Activities:**                                                                                                                                                           |                                       |          |                                         |       |  |  |
| Additions todebt                                                                                                                                                                                   |                                       | 20,000   |                                         |       | 84,375 |  |
| Retirements ofdebt                                                                                                                                                                                 |                                       | (4,441   | )                                       |       | (718 | ) |
| Issuance of stock bysubsidiaries                                                                                                                                                                   |                                       | 19       |                                         |       | 21 |  |
| Deferred financingcosts                                                                                                                                                                            |                                       | (8,848   | )                                       |       | (1,614 | ) |
| Increase in restrictedcash                                                                                                                                                                         |                                       | (1,104   | )                                       |       | — |  |
| Dividends paid                                                                                                                                                                                     |                                       | (517     | )                                       |       | (517 | ) |
| Proceeds from stockissuances                                                                                                                                                                       |                                       | 8,269    |                                         |       | 142,508 |  |
| Other                                                                                                                                                                                              |                                       | (110     | )                                       |       | 125 |  |
| ** **                                                                                                                                                                                         | ** **                                 |          |                                         |            |  |
| Net cash provided byfinancing activities                                                                                                                                                           |                                       | 13,268   |                                         |       | 224,180 |  |
| ** **                                                                                                                                                                                         | ** **                                 |          |                                         |            |  |
| Effect of exchange ratechanges on cash                                                                                                                                                             |                                       | (23      | )                                       |       | 57 |  |
| ** **                                                                                                                                                                                         | ** **                                 |          |                                         |            |  |
| Net increase  in cashand cash equivalents                                                                                                                                                     |                                       | 20,477   |                                         |       | 107,821 |  |
| Cash and cash equivalentsat beginning of period                                                                                                                                                    |                                       | 18,621   |                                    |       | 5,846 |  |
| ** **                                                                                                                                                                                         |                                            |          |                                         |            |  |
| Cash and cash equivalentsat end of period                                                                                                                                                          |                                       | $        | 39,098                                  |            | $ | 113,667 |   |
|                                                                                                                                                                                                    |                                            |          |                                         |            |  |

Theaccompanying notes are an integral part of these consolidatedfinancial statements.

**THE TITAN CORPORATIONCONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY(Unaudited)(In thousands of dollars, except per share data)**

| ** **                                                                                                                                                                                                                            | ** ** | **Cumulative Convertible Preferred Stock****** | ** ** | **Common Stock****** | ** ** | **Capital In Excess of Par Value****** | ** ** | **Deferred Compen-sation****** | ** ** | **Retained Earnings (Accumulated Deficit)****** | ** ** | **Accumulated Other Comprehensive Income****** | ** ** | **Treasury Stock****** | ** ** | **Total****** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------|------------|----------------------|------------|----------------------------------------|------------|--------------------------------|------------|-------------------------------------------------|------------|------------------------------------------------|------------|------------------------|------------|---------------|------------|
| ** **                                                                                                                                                                                                                            | ** ** | ****                                           | ** ** | ****                 | ** ** | ****                                   | ** ** | ****                           | ** ** | ****                                            | ** ** | ****                                           | ** ** | ****                   | ** ** | ****          | ** ** |
| **Nine Months Ended September 30, 2002**                                                                                                                                                                                         |            |                                           |
| Balances at December 31, 2001                                                                                                                                                                                                    |       | $                                              | 690        |                 | $          | 701                                    |       | $                              | 588,184    |                                            | $          | (34,519                                        | )          | $                      | (57,239    | )             | $          | 128 |   | $ | (987 | ) | $ | 496,958 |   |
|    Spin-offof SureBeam                                                                                                                                                                                                 |       |                                           |       |                 |            |                                        |       |                                | (124,722   | )                                               |       | 19,318                                         |            |                   |       |          |       |   |   |   |  |   |   | (105,404 | ) |
|    Issuanceof stock for         acquisitions                                                                                                                                   |       |                                           |       |                 |            | 68                                     |       |                                | 139,277    |                                            |       |                                                |            |                   |       |          |       |   |   |   | 312 |   |   | 139,657 |   |
|    Exercise of stock options         andother                                                                                                                                  |       |                                           | (1         | )                    |            | 9                                      |       |                                | 8,261      |                                                 |       |                                                |            |                   |       |          |       |   |   |   |   |   |   | 8,269 |   |
|    Deferredcompensation         related to theissuance of         stockoptions                                                         |       |                                           |       |                 |            |                                        |       |                                | 29,690     |                                            |       | (29,690                                        | )          |                   |       |          |       |   |   |   |  |   |   | — |   |
|    Write-off of deferred         compensationrelated to         discontinuedoperations                                                 |       |                                           |       |                 |            |                                        |       |                                | (629       | )                                               |       | 629                                            |            |                   |       |          |       |   |   |   |   |   |   | — |   |
|    Amortization of deferred        compensation                                                                                                                                |       |                                           |       |                 |            |                                   |       |                                |       |                                            |       | 32,631                                         |       |                   |       |          |       |  |   |   |   |   |   | 32,631 |   |
|    Foreign currency translation        adjustment                                                                                                                              |       |                                           |       |                 |            |                                   |       |                                |       |                                            |       |                                           |       |                   |       |          |       | (23 | ) |  |  |  |  | (23 | ) |
|    Shares contributed to         employee benefitplans                                                                                                                         |       |                                           |       |                 |       | 4                                      |            |                                | 7,519      |                                            |       |                                           |       |                   |       |          |       |   |   |   | 6 |   |   | 7,529 |   |
|    Dividends on preferred         stock -Cumulative        convertible, $.75 per         share |       |                                           |       |                 |       |                                        |       |                                |       |                                            |       |                                           |       |                   | (517       | )             |       |   |   |   |   |   |   | (517 | ) |
|    Net loss                                                                                                                                                                                                            |       |                                           |       |                 |       |                                   |       |                                |            |                                            |       |                                           |       |                   | (270,689   | )             |       |   |   |   |   |   |   | (270,689 | ) |
| ** **                                                                                                                                                                                                                            | ** ** | ****                                           | ** ** | ****                 | ** ** | ****                                   | ** ** | ****                           | ** ** | ****                                            | ** ** | ****                                           | ** ** | ****                   | ** ** | ****          | ** ** |
| Balances at September 30, 2002                                                                                                                                                                                                   |       | $                                              | 689        |                 | $          | 782                                    |       | $                              | 647,580    |                                            | $          | (11,631                                        | )          | $                      | (328,445   | )             | $          | 105 |  | $ | (669 | ) | $ | 308,411 |   |
| ** **                                                                                                                                                                                                                            | ** ** | ****                                           | ** ** | ****                 | ** ** | ****                                   | ** ** | ****                           | ** ** | ****                                            | ** ** | ****                                           | ** ** | ****                   | ** ** | ****          | ** ** |
| **Nine Months Ended September 30, 2001**                                                                                                                                                                                         |            |                                           |
| Balances at December 31, 2000                                                                                                                                                                                                    |       | $                                              | 690        |                 | $          | 541                                    |       | $                              | 191,358    |                                            | $          | (13,882                                        | )          | $                      | (9,960     | )             | $          | 108 |  | $ | (1,439 | ) | $ | 167,416 |   |
|    Proceedsfrom issuance of         stock                                                                                                                                      |       |                                           |       |                      |            | 80                                     |       |                           | 136,102    |                                            |       |                                           |       |                   |       |          |       |   |   |   |  |  |  | 136,182 |   |
|    Issuanceof stock for         acquisition                                                                                                                                    |       |                                           |       |                      |            | 23                                     |       |                           | 44,909     |                                            |       |                                           |       |                   |       |          |       |   |   |   |  |  |  | 44,932 |   |
|    Exercise of stock options          andother                                                                                                                                 |       |                                           |       |                      |            | 10                                     |       |                           | 6,416      |                                            |       |                                           |       |                   |       |          |       |   |   |   | (100 | ) |  | 6,326 |   |
|    Deferred compensation        related to the issuance of        stock options                                                        |       |                                           |       |                 |            |                                   |       |                                | 78,604     |                                            |       | (78,604                                        | )          |                   |       |          |       |   |   |   |   |   |   | — |   |
|    Amortization of deferred        compensation                                                                                                                                |       |                                           |       |                 |            |                                   |       |                                |       |                                            |       | 52,344                                         |       |                   |       |          |       |   |   |   |   |   |   | 52,344 |   |
|    Foreign currency translation        adjustment                                                                                                                              |       |                                           |       |                 |            |                                   |       |                                |       |                                            |       |                                           |       |                   |       |          |       | 57 |   |   |   |   |   | 57 |   |
|    Gain related to issuance of        stock in subsidiary                                                                                                                      |       |                                           |       |                 |       |                                   |       |                                |       |                                            |       |                                           |       |                   | 52,025     |          |       |   |   |   |   |   |   | 52,025 |   |
|    Sharescontributed to          employee benefitplans                                                                                                                         |       |                                           |       |                 |       |                                   |       |                                | 595        |                                            |       |                                           |       |                   |            |               |       |   |   |   | 840 |   |   | 1,435 |  |
|    Dividends on preferred         stock -Cumulative        convertible, $.75 per         share |       |                                           |       |                 |       |                                   |       |                                |       |                                            |       |                                           |       |                   | (517       | )             |       |   |   |   |   |   |   | (517 | ) |
|         Net loss                                                                                                                                                                              |       |                                           |       |                 |       |                                   |       |                                |            |                                            |       |                                           |       |                   | (106,466   | )             |       |   |   |   |   |   |   | (106,466 | ) |
| ** **                                                                                                                                                                                                                            | ** ** | ****                                           | ** ** | ****                 | ** ** | ****                                   | ** ** | ****                           | ** ** | ****                                            | ** ** | ****                                           | ** ** | ****                   | ** ** | ****          | ** ** |
| Balances at September 30, 2001                                                                                                                                                                                                   |       | $                                              | 690        |                 | $          | 654                                    |       | $                              | 457,984    |                                            | $          | (40,142                                        | )          | $                      | (64,918    | )             | $          | 165 |  | $ | (699 | ) | $ | 353,734 |   |
| ** **                                                                                                                                                                                                                            | ** ** | ****                                           | ** ** | ****                 | ** ** | ****                                   | ** ** | ****                           | ** ** | ****                                            | ** ** | ****                                           | ** ** | ****                   | ** ** | ****          | ** ** |

Theaccompanying notes are an integral part of these consolidatedfinancial statements.

**THE TITAN CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2002(in thousands, except share and per share data, or as otherwisenoted)**

**Note (1) Basis ofFinancial Statement Preparation**

      Theaccompanying consolidated financial information of The TitanCorporation and its subsidiaries ("Titan" or the "Company") shouldbe read in conjunction with the Notes to Consolidated FinancialStatements contained in the Company's Annual Report on Form 10-K/AAmendments No. 1 and No. 2**to the Securities andExchange Commission for the year ended December 31,2001.  The accompanying financial information includessubstantially all subsidiaries on a consolidated basis and allnormal recurring adjustments which are considered necessary by theCompany's management for a fair presentation of the financialposition, results of operations and cash flows for the periodspresented.  However, these results are not necessarilyindicative of results for a full fiscal year.  Additionally,certain prior period amounts have been reclassified to conform tothe current period presentation.

      Thepreparation of financial statements in conformity with accountingprinciples generally accepted in the United States of Americarequires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities and disclosure ofcontingent assets and liabilities at the date of the financialstatements and the reported amounts of revenues and expenses duringthe reporting period.  Actual results could differ from thoseestimates.

**RecentDevelopments**

      InAugust 2002, Titan made the decision to sell or otherwisedivest its LinCom Wireless business and to sell a remainingcommercial information technology business, both of which werepreviously reported in the Company’s Titan Technologiessegment.  Accordingly, Titan has reflected both operations asdiscontinued in accordance with SFAS No. 144 (see Note6).

      OnJuly 11, 2002, Titan announced that it would exit all of itsinternational telecommunications business through a combination ofselling and winding down its operations within its Titan Wirelesssegment.  Titan began implementing these actions immediatelyand expects to complete the majority of these actions by the end of2002.  The Company has reported this exit of the TitanWireless segment as a discontinued operation in accordance withSFAS No. 144 (see Note 6).

      During thefirst quarter of 2002, the Company made the decision to sellcertain of its commercial information technology operations withinits Cayenta segment and the AverCom business within the TitanTechnologies segment.  In accordance with SFAS No. 144,all commercial operations that are held for sale have beenreflected as discontinued operations for all periods presented inTitan’s consolidated financial statements (see Note6).

      As a resultof Titan’s decision in the third quarter of 2002 to exitsubstantially all of its remaining commercial businesses andbecause most of Titan’s remaining operations are itsgovernment businesses, Titan is no longer reporting the results ofoperations by segments in accordance with SFAS No. 131,“Disclosures about Segments of an Enterprise and RelatedInformation.”  Also, as a result of these decisions, theCompany merged its Titan Systems Corporation subsidiary, whichencompassed its primary government businesses, into The TitanCorporation on September 25, 2002 (see Note 9).

**Recent AccountingPronouncements**

      InAugust 2001, the Financial Accounting Standards Board(“FASB”) issued Statement of Financial AccountingStandards (“SFAS”) No. 143, "Accounting for AssetRetirement Obligations".  This statement addresses financialaccounting and reporting for obligations associated with theretirement of tangible long-lived assets and the associated assetretirement costs.  It applies to (a) all entities and(b) legal obligations associated with the retirement oflong-lived assets that result from the acquisition, construction,development and/or normal operation of long-lived assets, exceptfor certain obligations of lessees.  This statement amendsSFAS No. 19, "Financial Accounting and Reporting by Oil andGas Producing Companies," and is effective for financial statementsissued for fiscal years beginning after June 15, 2002. Management does not believe that the adoption of this statementwill have a material impact on its consolidated financial positionor results of operations.

      Also inAugust 2001, the FASB issued SFAS No. 144, "Accountingfor the Impairment or Disposal of Long-Lived Assets." SFASNo. 144 addresses financial accounting and reporting for theimpairment or disposal of long-lived assets and supersedes SFASNo. 121, "Accounting for the Impairment of Long-Lived Assetsand for Long-Lived Assets to Be Disposed Of," and the accountingand reporting provisions of Accounting Principles Board(“APB”) Opinion No. 30, "Reporting the Results ofOperations—Reporting the Effects of Disposal of a Segment ofa Business, and Extraordinary, Unusual and Infrequently OccurringEvents and Transactions," for the disposal of a segment of abusiness (as previously defined in that Opinion).  Theprovisions of SFAS No. 144 are effective for financialstatements issued for fiscal years beginning afterDecember 15, 2001.  The Company adopted SFAS No. 144in the first quarter of 2002.  As a result of the timing ofthe effective date of SFAS No. 144, the Company has reportedthe discontinuance of its SureBeam segment under the provisions ofAPB No. 30 and the discontinuance of certain componentsdiscussed in Note 6 in accordance with SFAS No. 144 as ofJanuary 1, 2002.

      The FASBissued SFAS No. 145, Rescission of FASB Statements No. 4,44, and 64, Amendment of FASB Statement No. 13, and TechnicalCorrections as of April 2002, which is effective for fiscalyears beginning after May 15, 2002. SFAS No. 145 rescindsSFAS No. 4 and SFAS No. 64, which required that all gainsand losses from extinguishment of debt be aggregated, and ifmaterial, classified as an extraordinary item. As a result ofchanges in the criteria, gains and losses from debt extinguishmentare to be classified as extraordinary only if they meet thecriteria set forth in APB Opinion No. 30, “Reporting theResults of Operations—Reporting the Effects of Disposal of aSegment of a Business, and Extraordinary, Unusual and InfrequentlyOccurring Events and Transactions.”  SFAS No. 145also requires that sale-leaseback accounting be used for capitallease modifications with economic effects similar to sale-leasebacktransactions.  The Company does not expect implementation tohave a significant effect on its results of operations. However, the loss from the current extinguishment of theCompany’s credit facility, which was appropriately recordedas an extraordinary item in accordance with APB No. 30, willbe reclassified to income from continuing operations in 2003 whenthe Company adopts SFAS No. 145.

      In June 2002, theFASB issued SFAS No. 146, “Accounting for CostsAssociated with Exit or Disposal Activities.”  SFASNo. 146 applies to costs associated with an exit activity(including restructuring) or with a disposal of long-lived assets.Those activities can include eliminating or reducing product lines,terminating employees and contracts, and relocating plantfacilities or personnel. Under SFAS No. 146, a company willrecord a liability for a cost associated with an exit or disposalactivity when that liability is incurred and can be measured atfair value.  Under current rules, companies can record aliability for restructuring costs when a commitment to a plan ofaction is made.  SFAS No. 146 will require a company todisclose information about its exit and disposal activities, therelated costs, and changes in those costs in the notes to theinterim and annual financial statements that include the period inwhich an exit activity is initiated and in any subsequent perioduntil the activity is completed. SFAS No. 146 is effectiveprospectively for exit or disposal activities initiated afterDecember 31, 2002, with earlier adoption encouraged. UnderSFAS No. 146, a company may not restate its previouslyissued financial statements, and the new statement grandfathers theaccounting for liabilities that a company had previously recordedunder Emerging Issues Task Force Issue 94-3.  Titan does notintend to adopt SFAS No. 146 until after December 31,2002.

**Note (2)Acquisitions and Investment**

      OnSeptember 12, 2002, the Company completed the acquisition of100% of the outstanding shares of Wave Science, Inc., a privatelyheld designer of radio components and communication systems, for apurchase price of approximately $8.5 million in cash, subjectto post-closing adjustments and indemnification obligations. Also, additional consideration of up to $3.0 millionmay be paid based on achieving certain revenue and profitmargin targets for the two-year period beginning January 1,2002 through December 31, 2003, and additional considerationof up to $1.0 million may be paid based on the receipt ofcertain contract awards through December 31, 2004.  Theacquisition was to further Titan’s goal of acquiringgovernment information technology companies which fit strategicallywith its government business, particularly the addition of WaveScience’s experienced engineering team.  The transactionwas accounted for as a purchase.  The excess of the purchaseprice over the estimated fair market value of the net assetsacquired was approximately $7.4 million, and has been recordedas goodwill.  Operating results of Wave Science are reportedin operating results from September 13, 2002.

      OnMarch 21, 2002, Titan completed the acquisition of Jaycor,Inc. ("Jaycor"), a San Diego, California, based provider ofinformation technology services and specialized communications andsensor products to further Titan’s goal of acquiringgovernment information technology companies which fit strategicallywith its government business.  At the closing, Titan issuedapproximately 4,919,500 shares of Titan common stock for all theoutstanding shares of common stock of Jaycor, based on an exchangeratio of 0.50160 shares of Titan common stock for each shareof Jaycor common stock at an aggregate value of $99.6 million,based on $20.24 per Titan share, the average trading price endingMarch 20, 2002, the date on which the formula for the purchaseconsideration became fixed.  Jaycor's operations are reportedin our operating results from March 22, 2002.  The excessof the $99.6 million purchase price over the estimated fairmarket value of the net assets acquired ($57.6 million) wasapproximately $42.0 million.  The transaction wasaccounted for as a purchase.  In April 2002, the Companyhad an independent valuation completed by Bearing Point (formerlyKPMG Consulting, Inc.), to assist management in its purchase priceallocation for the Jaycor acquisition.  The independentvaluation was the basis for the Company’s allocation of$38.1 million to goodwill and $3.9 million to intangibleassets.  The intangible assets consist of backlog, customerrelationships and trade name of $0.7 million,$1.3 million, and $1.9 million, respectively, which willbe amortized over the estimated useful lives of 1 year, 1 to 3years and 5 years, respectively.  The transaction valuewas increased by approximately $3.9 million to an aggregatetotal of $103.5 million to reflect an additional 173,099shares issued in July to cover certain costs of theshareholders of Jaycor, and an additional 20,948 shares issued inJuly and August 2002 related to certain working capitaladjustments.  The additional purchase price of$3.9 million was accounted for as an increase to goodwillresulting in a final allocation to goodwill of$42.0 million.

      Following isunaudited condensed balance sheet information for Jaycor at thedate of acquisition (amounts in millions):

| ** **                   |  | **Jaycor** |      |
|------------------------------|--|------------|------|
| ** **                   |  | ****       |      |
| Cash                         |  | $          | 36.0 |  |
| Accountsreceivable           |  |            | 28.4 |  |
| Other currentassets          |  |            | 2.2  |  |
| Property, plant andequipment |  |            | 4.0  |  |
| Non-currentassets            |  |            | 1.1  |  |
| ** **                   |  | ****       |      |
| Total assets                 |  |            | 71.7 |  |
| ** **                   |  | ****       |      |
| Accounts payable             |  |            | 3.2  |  |
| Other currentliabilities     |  |            | 10.6 |  |
| Non-currentliabilities       |  |            | 0.3  |  |
| ** **                   |  | ****       |      |
| Totalliabilities             |  |            | 14.1 |  |
| ** **                   |  | ****       |      |
| Net assets(liabilities)      |  | $          | 57.6 |  |
| ** **                   |  | ****       |      |

      OnFebruary 23, 2002, and as amended on July 3, 2002, Titanentered into a definitive agreement to acquire Science andEngineering Associates, Inc. ("SEA"), a New Mexico basedprivately-held provider of engineering and information technologyservices and specialized laser, sensor, and imaging products forapproximately $78.1 million in Titan common stock less a$3.9 million holdback, which is subject to the satisfaction ofcertain indemnification obligations for approximately a one yearperiod following the closing date.  In addition, a potential$3.9 million earn-out may be paid to the SEA shareholdersupon the attainment of certain operating performance targets duringthe period from July 1, 2002 through June 30, 2003. The exchange ratio and the number of shares of Titan stock will bedetermined based upon the average closing sale prices of Titancommon stock over the 20 consecutive trading days ending on the dayprior to the closing date.  A special meeting of the SEAshareholders will take place approximately twenty (20) businessdays following the proxy mailing to vote on the mergertransaction.  The special meeting has not yet been scheduled,but is expected to be held in the near future, and the transactionis expected to close shortly thereafter.

      OnFebruary 22, 2002, Titan completed the acquisition ofInternational Systems, LLC, which designs and builds low-costcombat systems for the Department of Defense (DoD) and agencies ofthe DoD, to further Titan’s goal of acquiring governmentinformation technology companies which fit strategically with itsgovernment business.  The purchase price, which aggregatedapproximately $1.8 million, was comprised of approximately100,000 shares of Titan common stock, subject to post-closingadjustments and indemnification obligations.  Also, additionalconsideration may be paid based on the receipt of certaincontract awards and the achievement of defined earnings levels onall contracts generated by International Systems, whichconsideration may be satisfied with cash or Titan commonstock.  In July 2002, 100,000 shares of Titan stockvalued at $1.2 million were issued based on the receipt ofcertain of these contract awards.  The value of the shares wasrecorded as an increase to goodwill.  Up to an aggregatemaximum of 350,000 additional shares of common stock may beissued as additional consideration based on the receipt of futurecontract awards.  In October 2002, under the provisionsof the original purchase agreement, Titan advanced$0.8 million to a former principal shareholder ofInternational Systems.  Such advance is evidenced by apromissory note which is secured by the shareholder’spurchase consideration of Titan shares and shares issuable uponachievement of certain milestones as provided under the originalpurchase agreement.  The note bears interest at 6 percent perannum, commencing in October 2003.  The operations ofInternational Systems are reported in our operating results fromFebruary 23, 2002.  The transaction was accounted for asa purchase, and goodwill of $4.3 million has beenrecorded.

      OnNovember 27, 2001, Titan completed the acquisition of BTG,Inc. ("BTG"), a provider of information technology solutions andservices primarily to the U.S. military and other governmentagencies.  In connection with the determination of the fairvalue of assets acquired and pursuant to the provisions of SFASNo. 141, “Business Combinations,” the Company hasvalued contracts in process at contract price, minus the estimatedcosts to complete and an allowance for the normal industry profiton its effort to complete such contracts which amounted to$5.5 million.  This adjustment has been reflected in theconsolidated balance sheet as additional purchase price allocatedto the fair value of the assets and liabilities acquired by theCompany.  The Company recognized approximately$0.5 million and $1.1 million of this allowance in thethree and nine months ended September 30, 2002, respectively,as a reduction of costs, with the remaining $3.8 million to berecorded as a reduction of costs in future periods as work oncertain contracts is performed, which is estimated to continuethrough fiscal 2005.

      OnSeptember 28, 2001, Titan completed the acquisition of DatronSystems Incorporated ("Datron"), a provider of radio andsatellite-based communication systems and broadband communicationproducts for government and commercial markets.  In connectionwith the determination of fair value of assets acquired andpursuant to the provisions of SFAS No. 141, the Company hasvalued contracts in process at contract price, minus the estimatedcosts to complete and an allowance for the normal industry profiton its effort to complete such contracts, which amounted to$1.4 million.  This adjustment has been reflected in theaccompanying consolidated balance sheet as additional purchaseprice allocated to the fair value of the assets and liabilitiesacquired by the Company.  The Company recognized approximately$0.1 million and $0.5 million of this allowance in thethree and nine months ended September 30, 2002, respectively,as a reduction of costs, with the remaining $0.1 million to berecorded as a reduction of costs in future periods as work oncertain contracts is performed, which is estimated to continuethrough fiscal 2002.

      InJune 2000, e-tenna Corporation was formed to facilitate thetransfer of an antenna technology originally designed forgovernment and military customers to the commercial wirelessmarket.  Titan's initial investment of approximately$0.6 million in e-tenna in 2000 consisted of its contributionof certain intellectual property and patents.  As ofDecember 31, 2001, Archery Capital and other investorsinvested a total of $9.9 million for common and votingpreferred stock, and Titan invested $5.8 million in non-votingpreferred stock and $0.4 million in common stock.  Duringthe first quarter of 2002, Titan paid $1.9 million insatisfaction of its commitment to acquire additional non-votingpreferred stock.  As of September 30, 2002, Titan'sinvestment of approximately $7.6 million is included in theaccompanying consolidated balance sheet in Other Assets, and isreflected under the cost method.  During the first quarter andmost of the second quarter of 2002, Titan's investment in e-tennaapproximated 58.7% of the total equity of e-tenna and approximately29.1% of the voting power of e-tenna.  For an interim period,the Company’s voting power of e-tenna rose above 20%. For that period, the relevant amounts of gains or losses wereincluded in the determination of net income and reflected againstthe carrying value of Titan’s investment in e-tenna.  Asof September 30, 2002, the Company’s voting interest ofe-tenna is 12% and the Company’s total equity interest ine-tenna is 58.7%.

      During thenine months ended September 30, 2002, approximately$2.0 million was paid in satisfaction of purchase priceholdbacks for the SenCom Corporation acquisition made in 2000 andapproximately $2.7 million was paid in satisfaction ofpurchase price holdbacks for the System Resources Corporationacquisition made in 1999.  Each of these amounts had beenrecorded as liabilities in periods prior to January 1,2002.

**Note (3) Exit andRestructuring Charges and Other**

      Included inthe quarter and nine months ended September 30, 2002 are$46.7 million and $50.1 million, respectively, ofrestructuring costs related to the merger of Titan Systems intoTitan on September 25, 2002 and exit charges related to theshutdown of Cayenta’s headquarters office. Approximately $8.0 million and $11.4 million, for thequarter and nine months ended September 30, 2002,respectively, of these exit charges are related to the shutdown ofthe Cayenta headquarters office and network operations center,which includes employee termination costs and other liabilities ofapproximately $0.8 million, lease commitment costs ofapproximately $4.8 million, and asset impairment charges ofapproximately $2.4 million relating primarily to theunamortized leasehold improvements and other fixed assets at theCayenta headquarters.  The remaining lease commitment costsare expected to be paid through future periods ending inJanuary 2007.  The amounts recorded in the first andsecond quarter of 2002 of $3.4 million primarily relate toemployee termination costs and lease costs.

      Approximately$38.7 million of restructuring charges for the quarter andnine months ended September 30, 2002 were related to themerger of Titan Systems into Titan and other associatedreorganization and consolidation costs.  The costs includedapproximately $32.2 million for the consolidation of variousTitan Systems facilities into centralized locations in Virginia andCalifornia.  This charge reflects the estimated losses, net ofestimated sublease income, on future lease commitments offacilities with terms extending through year 2009.  TheCompany intends to actively market the facilities for subleaseopportunities.

      Approximately$6.5 million of the Titan Systems restructuring costs areprimarily related to employee termination costs, employee retentioncosts, duplicate transition costs related to certain reorganizationand consolidation activities within Titan Systems, and professionalfees.

      A summary ofexit and restructuring charges is as follows(in millions):

|                                                                              |   | **Threemonths ended September 30, 2002** |   | **Ninemonths ended September 30, 2002** |   |
|-----------------------------------------------------------------------------------|--------|-----------------------------------------------|--------|----------------------------------------------|--------|
|                                                                                   |        |                                               |        |                                              |        |
| Titan Systemsrestructuring:                                                       |   |                                               |        |                                         |        |  |   |
|       Estimatedfacilities consolidation costs       |   | $                                             | 32.2   |                                              | $      | 32.2 |  |
|       Employeetermination/retention costs and other |   |                                               | 6.5    |                                              |        | 6.5 |  |
|                                                                                   |        |                                               |        |                                              |        |
|                                                                                   |        |                                               | 38.7   |                                              |        | 38.7 |  |
|                                                                                   |        |                                               |        |                                              |        |
| Cayenta headquarters exitcosts:                                                   |   |                                               |        |                                              |        |  |   |
|       Leasecommitment costs                         |   |                                          | 4.8    |                                              |        | 4.8 |  |
|       Assetimpairment costs                         |   |                                               | 2.4    |                                              |        | 2.4 |   |
|       Employeetermination costs and other           |   |                                          | 0.8    |                                              |        | 4.2 |  |
|                                                                                   |        |                                               |        |                                              |        |
|                                                                                   |        |                                               | 8.0    |                                              |        | 11.4 |  |
|                                                                                   |        |                                               |        |                                              |        |
|                                                                                   |   | $                                             | 46.7   |                                              | $      | 50.1 |  |
|                                                                                   |        |                                               |        |                                              |        |

**Note (4)Acquisition and Integration Related Charges andOther**

      There havebeen no acquisition and integration related charges and other in2002.

      The$27.8 million acquisition and integration related charges inthe first nine months of 2001 include costs of $12.4 millionprimarily related to the integration of ACS and AverStar, and arealignment of the business to better align the major categories ofcustomers of the Company’s government business.  Theseactions together resulted in a reduction in employee workforce ofapproximately 50 employees and the closing of severalfacilities.  Included in these costs is approximately$3.3 million of employee termination and retention costs,$3.5 million of costs to eliminate duplicate and excessfacilities and assets, $1.1 million of duplicate personnelcosts to transition processes and functions, and $1.5 millionof asset impairment costs of certain asset balances.  Therecoverability of such balances was impaired due to our exit from asatellite services business within the Company’s governmentbusiness.  Approximately $3.0 million of the charge wasrelated to another subsidiary acquired in a prior year forcontingencies arising from matters pre-existing to Titan'sacquisition of the business.  That acquisition was accountedfor as a purchase, and those matters were resolved in2001.

      Also includedin the acquisition and integration related charges for the ninemonths of 2001 is a charge of $15.5 million related to therestructuring of Cayenta’s headquarters office.  As aresult of reduced corporate spending on commercial informationtechnology services and e-business software applications, theCompany developed and approved a plan to restructure the Cayentaheadquarters and network operations center, which included areduction in workforce of approximately 40 personnel,resulting in a charge of approximately $1.7 million, and theelimination of duplicate and excess facilities, resulting in acharge of approximately $0.8 million.  As a result ofmanagement's evaluation of the recoverability of all the assets ofCayenta, in accordance with Statement of Financial AccountingStandards No. 121, "Accounting for the Impairment ofLong-Lived Assets and for Long-Lived Assets to be Disposed Of",management concluded from this evaluation that a significantimpairment of intangible as well as long-lived assets hadoccurred.  The resulting impairment charge of$13.0 million was comprised of the following:$5.5 million for fixed assets associated with Cayenta'snetwork operations center, $2.0 million for prepaidadvertising costs, $5.3 million for Cayenta's investment inSoliance, LLC, a joint venture that markets and deliversinformation technology systems and solutions to the utilityindustry, and $0.2 million for certain otherassets.

**Note (5) Adoptionof SFAS No. 142, “Goodwill and Other IntangibleAssets”**

      EffectiveJanuary 1, 2002, the Company adopted SFAS No. 142,"Goodwill and Other Intangible Assets," which establishes financialaccounting and reporting for acquired goodwill and other intangibleassets andsupersedesAPB Opinion No. 17, "Intangible Assets".  Under SFASNo. 142, goodwill and indefinite-lived intangible assets areno longer amortized but are reviewed at least annually forimpairment.  Separable intangible assets that have finiteuseful lives will continue to be amortized over their usefullives.

      SFASNo. 142 requires that goodwill be tested for impairment at thereporting unit level at adoption and at least annually thereafter,utilizing a two step methodology.  The initial step requiresthe Company to assess whether indications of impairmentexist.  If indications of impairment are determined to exist,the second step of measuring impairment is performed, wherein thefair value of the relevant reporting unit is compared to thecarrying value, including goodwill, of such unit.  If the fairvalue exceeds the carrying value, no impairment loss isrecognized.  However,if the carrying value of thereporting unitexceeds its fair value, the goodwill of the reporting unitisimpaired. 

*InitialAdoption*

      In connectionwith adopting this standard as ofJanuary 1, 2002, during the first quarter the Company’sindependent valuation consultant, Bearing Point (formerly KPMGConsulting, Inc.), completed step one of the test for impairment,which indicated that the carrying values of certain reporting unitsexceeded their estimated fair values, as determined utilizingvarious evaluation techniques including discounted cash flow andcomparative market analysis.  Thereafter, given the indicationof a potential impairment, Bearing Point completed step two of thetest.  Based on that analysis, a transitional impairment lossof $40.1 million, which was net of a $10.0 million taxbenefit, was recognized in the first quarter of 2002 as thecumulative effect of an accounting change.  The impairmentcharge resulted from a change in the criteria for themeasurement of the impairment lossfrom anundiscounted cash flow method, as required bySFAS No. 121, "Accounting for theImpairment ofLong-Lived Assets and for Long-Lived Assets to be Disposed Of,"toa discounted cash flow method and comparativemarket analysis as required by SFAS No. 142.  The gross $50.1 millionimpairment charge recorded in the first quarter of 2002 wascomprised of approximately $27.5 million in certain componentsof our Cayenta business, approximately $14.9 million in ourAverCom business, which was previously reported in our TitanTechnologies segment (previously our Emerging Technologies andBusinesses segment), both attributable to lower valuations andweakened outlook in commercial IT services, and approximately$7.7 million in our Titan Wireless business.  The entire$50.1 million charge was related to discontinued businesses;approximately $42.4 million of this charge pertained tobusinesses that were discontinued by the Company on March 1,2002 with the remaining charge of $7.7 million related to theCompany’s long distance telecommunications business that wasdiscontinued in the third quarter of 2002.

*Impairment in theQuarter Ended September 30, 2002*

      As a resultof Titan’s decision in July 2002 to exit its longdistance telecommunications business, and the deterioration inpricing and valuations in the telecommunications industry, Titanrecorded an additional impairment charge of $59.5 million ofgoodwill in its international telecommunications business, TitanWireless, based upon recent indications of fair value as determinedby recent sales offers from potential buyers.

      In connectionwith the Company’s decision in the third quarter of 2002 todivest its LinCom Wireless business, Titan recorded a$2.7 million impairment of goodwill based upon recentindications of fair value as determined by offers from potentialbuyers.  In October 2002, Titan shut down the operationsof LinCom Wireless.

      In addition,approximately $8.7 million of additional goodwill wasdetermined to be impaired related to previously discontinuedcomponents of Cayenta and the AverCom business.  Thisimpairment was identified in the third quarter of 2002 inconnection with the sale of these entities.

      Allimpairment charges recognized during the quarter endedSeptember 30, 2002 have been reported in the loss fromdiscontinued operations, as all impairments were incurred inbusinesses held for sale or disposed of during the third quarter of2002.  Refer to Note 6.

      Theadjustment of previously reported net income (loss) and earnings(loss) per share below represents the recorded amortization ofgoodwill and other purchased intangibles.  The impact on netincome (loss), and basic and diluted net earnings (loss) per sharefor the three and nine months ended September 30, 2002 and2001 is set forth below:

Reconciliation of NetIncome (Loss) and Earnings (Loss) Per Share:

|                                                                                                                                                                  |   | **Threemonths ended September 30,** |     | **Ninemonths ended September 30,** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------|----------|-----------------------------------------|--------|
|                                                                                                                                                                       |        |                                          |          |                                         |        |
|                                                                                                                                                                  |   | **2002**                                 |     | **2001**                                |   | **2002** |   | **2001** |   |
|                                                                                                                                                                       |        |                                          |          |                                         |        |  |  |  |  |
| Income (loss) fromcontinuing operations before extraordinary loss andcumulative       effect of change in accountingprinciple           |        | $                                        | (33,516  | )                                       | $      | 2,937 |  | $ | (15,441 | ) | $ | (9,349 | ) |
| Add back amortization ofgoodwill, net of tax                                                                                                                          |        |                                          | —  |                                         |        | 1,278 |  |  | — |  |  | 5,614 |  |
|                                                                                                                                                                       |        |                                          |          |                                         |        |  |  |  |  |
| Adjusted income (loss)from continuing operations before extraordinary lossand       cumulative effect of change inaccounting principle  |        |                                          | (33,516  | )                                       |        | 4,215 |  |  | (15,441 | ) |  | (3,735 | ) |
|                                                                                                                                                                       |        |                                          |          |                                         |        |  |  |  |  |
|                                                                                                                                                                       |        |                                          |          |                                         |        |  |  |  |  |  |  |  |  |
| Loss from discontinuedoperations, net of tax benefit                                                                                                                  |        |                                          | (191,782 | )                                       |        | (41,728 | ) |  | (209,729 | ) |  | (97,117 | ) |
|       Add backamortization of goodwill in discontinued operations, net oftax                                                            |        |                                          | —  |                                         |        | 3,412 |  |  | — |  |  | 13,845 |  |
|                                                                                                                                                                       |        |                                          |          |                                         |        |  |  |  |  |
| Adjusted loss fromdiscontinued operations                                                                                                                             |        |                                          | (191,782 | )                                       |        | (38,316 | ) |  | (209,729 | ) |  | (83,272 | ) |
|                                                                                                                                                                       |        |                                          |          |                                         |        |  |  |  |  |
|                                                                                                                                                                       |        |                                          |          |                                         |        |  |  |  |  |  |  |  |  |
| Extraordinary loss fromearly extinguishment of debt, net of tax benefit                                                                                               |        |                                          | —  |                                         |        | — |  |  | (5,408 | ) |  | — |  |
| Cumulative effect ofchange in accounting principle, net of taxbenefit                                                                                                 |        |                                          | —  |                                         |        | — |  |  | (40,111 | ) |  | — |  |
|                                                                                                                                                                       |        |                                          |          |                                         |        |  |  |  |  |
|                                                                                                                                                                       |        |                                          |          |                                         |        |  |  |  |  |  |  |  |  |
| Net loss                                                                                                                                                              |        |                                          | (225,298 | )                                       |        | (34,101 | ) |  | (270,689 | ) |  | (87,007 | ) |
| Dividend requirements onpreferred stock                                                                                                                               |        |                                          | (172     | )                                       |        | (172 | ) |  | (517 | ) |  | (517 | ) |
|                                                                                                                                                                       |        |                                          |          |                                         |        |  |  |  |  |
| Net loss applicable tocommon stock                                                                                                                                    |        | $                                        | (225,470 | )                                       | $      | (34,273 | ) | $ | (271,206 | ) | $ | (87,524 | ) |
|                                                                                                                                                                       |        |                                          |          |                                         |        |  |  |  |  |
|                                                                                                                                                                       |        |                                          |          |                                         |        |  |  |  |  |  |  |  |  |
| Basic earnings (loss) pershare:                                                                                                                                       |        |                                          |          |                                         |        |  |  |  |  |  |  |  |  |
| Income (loss) fromcontinuing operations beforeextraordinary lossandcumulative       effect of change in accountingprinciple             |        | $                                        | (0.43    | )                                       | $      | 0.04 |  | $ | (0.21 | ) | $ | (0.24 | ) |
|       Add backamortization of goodwill, net of tax                                                                                      |        |                                          | —  |                                         |        | 0.02 |  |  | — |  |  | 0.10 |  |
|                                                                                                                                                                       |        |                                          |          |                                         |        |  |  |  |  |
| Adjusted income (loss)from continuing operations before extraordinary lossand       cumulative effect of change inaccounting principle  |        | $                                        | (0.43    | )                                       | $      | 0.06 |  | $ | (0.21 | ) | $ | (0.14 | ) |
|                                                                                                                                                                       |        |                                          |          |                                         |        |  |  |  |  |
|                                                                                                                                                                       |        |                                          |          |                                         |        |  |  |  |  |  |  |  |  |
| Loss from discontinuedoperations, net of tax benefit                                                                                                                  |        | $                                        | (2.46    | )                                       | $      | (0.67 | ) | $ | (2.79 | ) | $ | (1.75 | ) |
|       Add backamortization of goodwill in discontinued operations, net oftax                                                            |        |                                          | —  |                                         |        | 0.06 |  |  | — |  |  | 0.25 |  |
|                                                                                                                                                                       |        |                                          |          |                                         |        |  |  |  |  |
| Adjusted loss fromdiscontinued operations                                                                                                                             |        | $                                        | (2.46    | )                                       | $      | (0.61 | ) | $ | (2.79 | ) | $ | (1.50 | ) |
|                                                                                                                                                                       |        |                                          |          |                                         |        |  |  |  |  |
|                                                                                                                                                                       |        |                                          |          |                                         |        |  |  |  |  |  |  |  |  |
| Extraordinary loss fromearly extinguishment of debt, net of tax benefit                                                                                               |        | $                                        | —  |                                         | $      | — |  | $ | (0.07 | ) | $ | — |  |
| Cumulative effect ofchange in accounting principle, net of tax benefit                                                                                                |        | $                                        | —  |                                         | $      | — |  | $ | (0.53 | ) | $ | — |  |
|                                                                                                                                                                       |        |                                          |          |                                         |        |  |  |  |  |
|       Net loss                                                                                                                          |        | $                                        | (2.89    | )                                       | $      | (0.55 | ) | $ | (3.60 | ) | $ | (1.64 | ) |
|                                                                                                                                                                       |        |                                          |          |                                         |        |  |  |  |  |
|                                                                                                                                                                       |        |                                          |          |                                         |        |  |  |  |  |  |  |  |  |
|       Weighted average shares                                                                                                           |        |                                          | 77,820   |                                         |        | 60,986 |  |  | 75,270 |  |  | 56,019 |  |
|                                                                                                                                                                       |        |                                          |          |                                         |        |  |  |  |  |
| Diluted earnings (loss)per share:                                                                                                                                     |        |                                          |          |                                         |        |  |  |  |  |  |  |  |  |
| Income (loss) fromcontinuing operations before extraordinary loss andcumulative       effect of change in accountingprinciple           |        | $                                        | (0.43    | )                                       | $      | 0.04 |  | $ | (0.21 | ) | $ | (0.24 | ) |
|       Add back amortization of goodwill, net of tax                                                                                     |        |                                          | —  |                                         |        | 0.02 |  |  | — |  |  | 0.10 |  |
|                                                                                                                                                                       |        |                                          |          |                                         |        |  |  |  |  |
| Adjusted income (loss)from continuing operations before extraordinary loss and       cumulative effect of change inaccounting principle |        | $                                        | (0.43    | )                                       | $      | 0.06 |  | $ | (0.21 | ) | $ | (0.14 | ) |
|                                                                                                                                                                       |        |                                          |          |                                         |        |  |  |  |  |
|                                                                                                                                                                       |        |                                          |          |                                         |        |  |  |  |  |  |  |  |  |
| Loss from discontinuedoperations, net of tax benefit                                                                                                                  |        | $                                        | (2.46    | )                                       | $      | (0.65 | ) | $ | (2.79 | ) | $ | (1.75 | ) |
|       Add back amortization of goodwillindiscontinued operations, net oftax                                                             |        |                                          | —  |                                         |        | 0.05 |  |  | — |  |  | 0.25 |  |
|                                                                                                                                                                       |        |                                          |          |                                         |        |  |  |  |  |
|       Adjusted loss from discontinued operations                                                                                        |        | $                                        | (2.46    | )                                       | $      | (0.60 | ) | $ | (2.79 | ) | $ | (1.50 | ) |
|                                                                                                                                                                       |        |                                          |          |                                         |        |  |  |  |  |
|                                                                                                                                                                       |        |                                          |          |                                         |        |  |  |  |  |  |  |  |  |
| Extraordinary loss fromearly extinguishment of debt, net of tax benefit                                                                                               |        | $                                        | —  |                                         | $      | — |  | $ | (0.07 | ) | $ | — |  |
| Cumulative effect ofchange in accounting principle, net of tax benefit                                                                                                |        | $                                        | —  |                                         | $      | — |  | $ | (0.53 | ) | $ | — |  |
|                                                                                                                                                                       |        |                                          |          |                                         |        |  |  |  |  |
|       Net loss                                                                                                                          |        | $                                        | (2.89    | )                                       | $      | (0.54 | ) | $ | (3.60 | ) | $ | (1.64 | ) |
|                                                                                                                                                                       |        |                                          |          |                                         |        |  |  |  |  |
|       Weighted average shares                                                                                                           |        |                                          | 77,820   |                                         |        | 62,847 |  |  | 75,270 |  |  | 56,019 |  |
|                                                                                                                                                                       |        |                                          |          |                                         |        |  |  |  |  |

****

**Note (6)Discontinued Operations**

      InAugust 2002, Titan made the decision to sell or otherwisedivest its LinCom Wireless business and to sell a remainingcommercial information technology business, both of which werepreviously reported in the Company’s Titan Technologiessegment.  Accordingly, Titan has reflected both operations asdiscontinued in accordance with SFAS No. 144.

      OnJuly 11, 2002, Titan announced that it would exit itsinternational telecommunications business through a combination ofselling and winding down its operations within its Titan Wirelesssegment.  Titan began implementing these actions immediatelyand expects to complete the majority of these actions by the end of2002.  The Company has reported this exit of the TitanWireless segment as a discontinued operation in accordance withSFAS No. 144.

      During thefirst quarter of 2002, the Company made the decision to sellcertain of its commercial information technology operations withinits Cayenta segment and the AverCom business within the TitanTechnologies segment.  In accordance with SFAS No. 144,all commercial operations that are held for sale have beenreflected as discontinued operations for all periods presented inTitan’s consolidated financial statements.

      Revenues andnet loss generated by the operations discontinued in 2002 and 2001were as follows:

|                                                   |   | **Threemonths ended September 30,** |     | **Ninemonths ended September 30,** |   |
|--------------------------------------------------------|--------|------------------------------------------|----------|-----------------------------------------|--------|
|                                                        |        |                                          |          |                                         |        |
|                                                   |   | **2002**                                 |     | **2001**                                |   | **2002** |   | **2001** |   |
|                                                        |        |                                          |          |                                         |        |  |  |  |  |
| Revenues                                               |   |                                          |          |                                         |        |  |  |  |  |  |  |  |  |
|       TitanWireless      |   | $                                        | 28,797   |                                         | $      | 21,534 |  | $ | 98,348 |  | $ | 65,550 |  |
|       Cayenta            |   |                                          | 446      |                                         |        | 4,651 |  |  | 6,428 |  |  | 17,372 |  |
|       SureBeam           |        |                                          | 225      |                                         |        | 11,662 |  |  | 4,946 |  |  | 25,754 |  |
|       Titan Technologies |   |                                          | 8,449    |                                         |        | 10,815 |  |  | 26,703 |  |  | 35,706 |  |
|                                                        |        |                                          |          |                                         |        |  |  |  |  |
|                                                        |        | $                                        | 37,917   |                                         | $      | 48,662 |  | $ | 136,425 |  | $ | 144,382 |  |
|                                                        |        |                                          |          |                                         |        |  |  |  |  |
|                                                        |   |                                          |          |                                         |        |  |  |  |  |  |  |  |  |
| Net income (loss) –net of tax                    |        |                                          |          |                                         |        |  |  |  |  |  |  |  |  |
|       TitanWireless      |   | $                                        | (161,904 | )                                       | $      | 776 |  | $ | (165,355 | ) | $ | 1,477 |  |
|       Cayenta            |   |                                          | (3,309   | )                                       |        | (31 | ) |  | (4,153 | ) |  | (13,690 | ) |
|       SureBeam           |        |                                          | —  |                                         |        | (42,279 | ) |  | (9,913 | ) |  | (84,416 | ) |
|       Titan Technologies |   |                                          | (26,569  | )                                       |        | (194 | ) |  | (30,308 | ) |  | (488 | ) |
|                                                        |        |                                          |          |                                         |        |  |  |  |  |
|                                                        |        | $                                        | (191,782 | )                                       | $      | (41,728 | ) | $ | (209,729 | ) | $ | (97,117 | ) |
|                                                        |        |                                          |          |                                         |        |  |  |  |  |

      Allintercompany revenues and profits have been appropriatelyeliminated in the tables above.

***2002 DiscontinuedOperations***

**Fiscal2002**

*TitanWireless*

Overview

      OnJuly 11, 2002, Titan announced it would exit all of itsinternational telecommunications business, directly as a result ofan increasingly deteriorating market, particularly in the wholesalelong distance business.  Notably, the bankruptcies of GlobalCrossing, WorldCom and Globaltron, and the dire financial conditionof other providers, such as Ibasis, have imposed a rapid and suddendeterioration in wholesale prices.  As a direct result ofdecreasing wholesale margins, and the difficulty of providers toobtain financing to invest in new projects globally, Titan’stelecommunications business operating results declinedsubstantially beginning in the second quarter of 2002.  Thelosses in the second quarter of 2002 and the bleak outlook of thetelecommunications market globally led to the July 2002 TitanBoard of Directors decision to exit these markets.

Acquisitions andInvestments

      OnMarch 21, 2002, Titan completed the acquisition of GlobalNet,Inc. ("GlobalNet"), a provider of international voice, data, andInternet services.  Titan issued approximately 1,452,800shares of common stock for all the common stock of GlobalNet at anaggregate value of $28.6 million, based on $19.67 perTitan share, the average trading price ending March 15, 2002,the date on which the formula for consideration became fixed, andassumed stock options and warrants representing approximately77,900 shares of Titan common stock at an aggregate value of$0.8 million, based on an exchange ratio of 0.3853 sharesof Titan common stock for each share of GlobalNet commonstock.  GlobalNet's operations from March 22, 2002 arereported in our Titan Wireless business, which was discontinued inthe third quarter of 2002.  The transaction was accounted foras a purchase.  The excess of the purchase price of$29.4 million over the estimated fair market value of the netliabilities acquired of approximately $21.4 million wasapproximately $50.8 million.  In April 2002, theCompany had an independent valuation completed by independentvaluation specialists Bearing Point (formerly KPMG Consulting,Inc.) to assist management in its purchase price allocation of theGlobalNet acquisition.  The independent valuation was thebasis for the Company’s allocation of $50.8 million togoodwill and $0 to intangible assets as of March 31,2002.

      As a resultof Titan’s decision on July 11, 2002, to exit itstelecommunications business, and to sell certain of thesebusinesses, Titan determined that there was an impairment of thecarrying value of GlobalNet’s goodwill of approximately$40.5 million in accordance with SFAS No. 142.  Themeasurement of this impairment was evident based upon recentindications of fair value, as determined by recent offers frompotential buyers, compared to the carrying value of theasset.

      OnJune 28, 2000, Titan Wireless Africa, a wholly ownedsubsidiary of Titan Wireless, made an investment in Ivoire TelecomS.A. Holding (Ivoire Telecom), acquiring an 80% equity interest inIvoire Telecom and through such interest acquired a majority equityinterest in each of the principal subsidiaries owned by IvoireTelecom.  The initial investment consisted of$5.0 million in cash subject to certain indemnificationobligations, and an initial $5.5 million working capital note,which was funded shortly after the initial investment, which wererecorded as Other Assets in the Company's consolidated balancesheet.  In addition, Titan committed to provide up to amaximum of $35.0 million for capital expenditures and otherexpenditures necessary to build out the Ivoire Telecomnetwork.  Titan has also provided equipment with anapproximate aggregate value of $4.5 million.  Thiscommitment had been substantially funded for such expenditures asof the end of 2001. 

      Our aggregateinvestment in Ivoire Telecom of approximately $50 million isreflected in Non-current Assets of DiscontinuedOperations******in the Company's consolidated balance sheetat December 31, 2001 and, as previously reported, is reportedon the cost method.  Titan has not consolidated the operationsof Ivoire Telecom because of the Company’s inability toobtain accurate and reliable financial information, theCompany’s inability to exercise any influence on theoperations of the company due to strong opposition from the CEOlocated in Africa, and the Company’s inability to obtainrepresentation on the board of directors of each of IvoireTelecom’s 14 principal subsidiaries.  Titan engaged aglobal independent public accounting firm to audit the financialstatements of Ivoire Telecom for the year ended December 31,2001.  The independent public accounting firm did not completeits audit procedures due to difficulties encountered in resolvingopen audit issues.  Specifically, the independent publicaccounting firm has reported that there are weaknesses in internalcontrols, inconsistent accounting policies and procedures, andlimited use of management information systems, all resulting in theinability of Ivoire Telecom to prepare and report accuratefinancial statements.  Titan has made direct efforts and maderepeated requests of Ivoire Telecom management to establishcontrols, implement record keeping, and establish financialreporting controls to conform to U.S. reporting standards. Titan sent financial managers to Ivoire Telecom headquarters inattempts to help establish controls and implement financialreporting.  All of Titan’s requests and other directactions have resulted in no success in obtaining timely andreliable financial statements.

      However,consistent with Titan’s original expectations, management ofIvoire Telecom appears to have executed the plan of usingTitan’s investment to build out the network and beginoffering services to subscribers.  Management of Titan has hadfrequent interaction with the management of Ivoire Telecom and hasreceived operational status reports.  Although Titan has beenprovided with operational status reports, Titan has been treated asa passive investor and its attempts to exercise control or exertinfluence have been blocked.   Based upon the informationavailable to management, the Company believes Ivoire Telecomcontinues to incur losses and negative cash flows consistent withits original expectations at the time of investment in thisstart-up telecommunications service provider.  To the extentIvoire Telecom requires additional cash in the future to fundoperations, Titan has no obligation nor commitment to fund suchcash flow needs. 

      Subsequent toTitan’s decision to exit and sell this business, Titanreceived indications of interest that are substantially below thecarrying value of its investment.  Titan believes the value ofIvoire Telecom has been impaired not only by the recentdeterioration and poor outlook of the global telecommunicationsmarket, but also as a result of the recent civil unrest in theIvory Coast, which is where the earth station hub is located forall of Ivoire Telecom’s West African network. Specifically, a rebel uprising in the Ivory Coast commenced onSeptember 21, 2002 and has continued to spread to other partsof the West African country, whereby fighting has occurred inAbidjan between rogue soldiers and troops loyal to the governmentGbagbo.  In addition, the Central African Republic has beenwracked by civil unrest, which commenced on October 30, 2002,at which time shortly thereafter a specialized U.S. militaryassessment team was sent to the Central African Republic to assesssecurity for Americans in the country.

      Titan hasrecently been informed by investment banking firms representing twopotential buyers that their clients are hesitant to acquire equityinterest in Ivoire Telecom due to the recent political turmoil andcivil unrest in both the Ivory Coast and the Central AfricanRepublic. Titan also believes that the value of the Ivoire Telecominvestment has been impacted by its investment intent to no longerhold and retain but rather to exit and divest as soon aspractical.*** ***   Accordingly, Titan hasconcluded that there has been a non-temporary impairment of theentire carrying value of its investment in Ivoire Telecom as ofSeptember 30, 2002. Titan has taken a charge for this impairmentbased upon recent indications of fair value as determined by recentoffers from potential buyers. * *This impairment charge has been included inTitan’s consolidated income statement for the period endingSeptember 30, 2002.

OperatingResults

      Included inTitan Wireless’ net loss for the quarter and nine monthsended September 30, 2002 are impairment charges of$190.7 million, or $143.0 million, net of tax, that wererecorded as a result of Titan’s decision to exit itsinternational telecommunications business.  The charges werecomprised of the following:  (1) impairment of goodwillin accordance with SFAS No. 142 of approximately$59.5 million, primarily comprised of Titan’sacquisition of GlobalNet discussed above and Sakon, recorded inaccordance with SFAS No. 142; (2) impairment of investments ofapproximately $62.6 million, primarily comprised ofTitan’s investment in Ivoire Telecom discussed above; (3) andimpairment of fixed and other assets of approximately$68.6 million.

      In addition,exit charges of approximately $22.5 million were recorded inthe third quarter of 2002, primarily related to outstandingcommitments of warranty obligations of $3.9 million,commitments for space satellite segments of $3.9 million, andoutstanding lease obligations of $1.6 million.  Theremaining $13.1 million of the charge is primarily related toemployee termination costs of $2.6 million, other estimateddirect costs to exit these businesses of $5.5 million and theestimated settlements of other obligations of approximately$5.0 million.  Such commitments are expected to be paidthrough the first half of 2004.

      In summary,included in Titan Wireless’ net loss for the quarter and ninemonths ended September 30, 2002 is an impairment charge of$190.7 million, exit charges of $22.5 million and pre-taxlosses excluding impairment and exit charges of $2.8 millionand $8.3 million for the three and nine months endedSeptember 30, 2002.  Included in the operating losses ofTitan Wireless for the three and nine months endedSeptember 30, 2002 is interest expense allocated todiscontinued operations of $0.6 million.  All amountspresented are net of tax benefits.  Following is a summary intabular format of Titan Wireless’ net loss for the quarterand nine months ended September 30, 2002 (amountsin millions):

|                                                |   | **Threemonths ended September 30, 2002** |   | **Ninemonths ended September 30, 2002** |   |
|-----------------------------------------------------|--------|-----------------------------------------------|--------|----------------------------------------------|--------|
|                                                     |        |                                               |        |                                              |        |
| Impairment ofgoodwill                               |   | $                                             | (59.5  | )                                            | $      | (59.5 | ) |
| Impairment ofinvestments                            |   |                                               | (62.6  | )                                            |        | (62.6 | ) |
| Impairment of fixed andother assets                 |   |                                               | (68.6  | )                                            |        | (68.6 | ) |
| Exit charges                                        |   |                                               | (22.5  | )                                            |        | (22.5 | ) |
|                                                     |        |                                               |        |                                              |        |
|                                                     |   |                                               | (213.2 | )                                            |        | (213.2 | ) |
| Pre-tax losses excludingimpairment and exit charges |   |                                               | (2.8   | )                                            |        | (8.3 | ) |
|                                                     |        |                                               |        |                                              |        |
|                                                     |   |                                          | (216.0 | )                                            |   | (221.5 | ) |
| Tax benefit                                         |   |                                               | (54.1  | )                                            |        | (56.1 | ) |
|                                                     |        |                                               |        |                                              |        |
| Net loss                                            |        | $                                             | (161.9 | )                                            | $      | (165.4 | ) |
|                                                     |        |                                               |        |                                              |        |

*TitanTechnologies*

      Included inTitan Technologies’ net loss for the quarter and nine monthsended September 30, 2002 is an impairment charge of$12.0 million, net of tax, related to LinCom Wireless. The measurement of this impairment is based upon recent indicationsof fair value, resulting in a write-off of the carrying value ofits assets which included an impairment of goodwill of$2.7 million, in accordance with SFAS No. 142.  InOctober 2002, Titan shut down the operations of LinComWireless.  Accordingly, a charge will be recorded in thefourth quarter of 2002 for all employee termination costs, leasetermination costs and other outstanding commitments.

      InSeptember 2002, certain assets of the AverCom business weresold for $0.5 million cash and an earn-out of$0.6 million of additional consideration based on certaingross margin targets.  In addition, the Company retainedapproximately $3.0 million of net accounts receivablebalances, which are expected to be collected by December 31,2002.  A charge of approximately $10.7 million, or$6.7 million net of tax, was recorded in the third quarter of2002 to reflect the excess of the carrying value over the saleproceeds, which included an additional impairment of goodwill ofapproximately $3.5 million in accordance with SFASNo. 142.  Included in the $10.7 million charge isthe remaining facility lease commitment of $1.6 million, whichwas recorded to reflect the remaining lease obligations related tothe AverCom business.  For the nine months endedSeptember 30, 2002, the charge for goodwill impairment inaccordance with SFAS No. 142 of AverCom was approximately$18.4 million.  However, $14.9 million of the SFASNo. 142 impairment was reported as a cumulative effect of achange in accounting principle in the first quarter of 2002 (seeNote 5).

      In additionto the impairment charges discussed above, pre-tax losses excludingimpairment and exit charges for the Titan Technologies businessesfor the three and nine months ended September 30, 2002 were$7.0 million and $13.5 million, respectively. Included in the operating losses for the three and nine monthsended September 30, 2002 is interest expense allocated todiscontinued operations of $0.2 million.  Following is asummary in tabular format of the net loss of Titan Technologies forthe quarter and nine months ended September 30, 2002 (amountsin millions):

|                                                |   | **Threemonths ended September 30, 2002** |   | **Ninemonths ended September 30, 2002** |   |
|-----------------------------------------------------|--------|-----------------------------------------------|--------|----------------------------------------------|--------|
|                                                     |        |                                               |        |                                              |        |
| Impairment ofgoodwill                               |   | $                                             | (10.2  | )                                            | $      | (10.2 | ) |
| Impairment of fixed assetsand other                 |   |                                               | (22.9  | )                                            |        | (22.9 | ) |
| Exit charges                                        |   |                                               | (1.6   | )                                            |        | (1.6 | ) |
|                                                     |        |                                               |        |                                              |        |
|                                                     |   |                                               | (34.7  | )                                            |        | (34.7 | ) |
| Pre-tax losses excludingimpairment and exit charges |   |                                               | (7.0   | )                                            |        | (13.5 | ) |
|                                                     |        |                                               |        |                                              |        |
|                                                     |   |                                          | (41.7  | )                                            |   | (48.2 | ) |
| Tax benefit                                         |   |                                               | (15.1  | )                                            |        | (17.9 | ) |
|                                                     |        |                                               |        |                                              |        |
| Net loss                                            |        | $                                             | (26.6  | )                                            | $      | (30.3 | ) |
|                                                     |        |                                               |        |                                              |        |

*Cayenta*

      InJuly 2002, the two information technology businesses ofCayenta were sold for approximately $3.5 millionconsideration, in the form of a promissory note, with$1.0 million due a year from the date of sale and theremaining balance due in eight equal quarterly installments withthe final payments due within 3 years from the sale date.  Inaddition, a maximum potential earn-out is available forapproximately $7.5 million based on certain future EBITDA(earnings before interest, taxes, depreciation and amortization)targets.  A charge of $4.3 million or $2.6 millionnet of tax, was recorded in the third quarter of 2002 to reflectthe excess of the carrying value over the collected saleproceeds.  Approximately $1.1 million of this charge wasrelated to additional impairment of goodwill in accordance withSFAS No. 142.  For the nine months endedSeptember 30, 2002, the charge for goodwill impairment inaccordance with SFAS No. 142 associated with these twobusinesses was approximately $28.6 million.  However,$27.5 million of the SFAS No. 142 impairment was reportedas a cumulative effect of a change in accounting principle in thefirst quarter of 2002.  In addition to the impairment chargesnoted above, operating losses, net of tax, for the three and ninemonths ended September 30, 2002 were $0.7 million and$1.6 million, respectively.

      Theconsolidated financial statements of Titan for all periodspresented have been restated to reflect all businesses discussedabove as discontinued in accordance with SFASNo. 144.

**Fiscal2001**

*TitanWireless*

      Included inTitan Wireless’ net income for the nine months endedSeptember 30, 2001 is a charge of $0.5 million foremployee termination costs related to certain organizationalchanges within that business unit.  Also included in the ninemonths ended September 30, 2001, is a $2.0 million chargetaken in the third quarter of 2001 representing employeetermination costs related to a reduction in employee workforce ofapproximately 35 employees resulting from the elimination ofWireless' internal product development group as the unit’slong-term strategy was shifted to the service and systemsintegration business, not the development and sale ofequipment.

*Cayenta*

      Included inCayenta’s net loss for the nine months endedSeptember 30, 2001 are charges of $5.0 million related tothe restructuring of Cayenta, consisting primarily of a write-offof $1.3 million of capitalized software designed for B2Bexchanges, a write-off of $2.0 million of accounts receivableand employee termination and lease termination costs ofapproximately $1.7 million.

*TitanTechnologies*

      Employeetermination costs of $0.8 million were recorded in the ninemonths ended September 30, 2001 related to a reduction inworkforce in AverCom resulting from the same economic conditionswhich impacted demand for corporate information technology servicesat Cayenta.

***2001 DiscontinuedOperations***

*SureBeam*

      OnMarch 16, 2001, SureBeam Corporation, Titan's subsidiary thatprovides electronic food irradiation systems and services,completed its initial public offering ("IPO").  OnOctober 16, 2001, Titan adopted a definitive plan to spin offSureBeam in the form of a tax-free dividend to Titan stockholderswithin 12 months from that date.  The plan involvedfiling a letter ruling request with the Internal Revenue Serviceseeking approval of the tax-free distribution.  Titan receiveda favorable ruling in May 2002 and the SureBeam stock wasdistributed to Titan stockholders on August 5, 2002. Titan stockholders of record on July 26, 2002, received .6986SureBeam shares for each share of Titan stock held.  Titan hadhistorically reported the SureBeam business as a separatesegment.  In accordance with APB Opinion No. 30,"Reporting the Results of Operations—Reporting the Effects ofDisposal of a Segment of a Business, and Extraordinary, Unusual andInfrequently Occurring Events and Transactions," the consolidatedfinancial statements of Titan for all periods presented have beenrestated to reflect SureBeam as a discontinued business.  Thenet assets of SureBeam as of August 5, 2002 and taxliabilities and other costs resulting from the spin-off resulted ina net dividend of approximately $105.4 million which wasrecorded as a decrease to paid-in-capital, partially offset by thereduction in deferred compensation related to deferred compensationcharges in 2000 and 2001, reflecting the net value distributed toTitan’s stockholders.  The net assets excludedSureBeam’s liability to Titan of $15 million atAugust 5, 2002 under SureBeam’s line of credit withTitan (see Note 12).  The line of credit balance atSeptember 30, 2002, was $20 million and is reflected as anon-current asset on the accompanying consolidated balancesheet.

      At the timethe Company adopted the plan to spin-off SureBeam, in accordancewith APB No. 30, the Company recorded a charge of$35.4 million for estimated costs of disposal and forestimated operating losses up to the date of disposal.  Thischarge was recorded in the quarter ended September 30, 2001,and is included in the results for the three and nine months of2001 above.  All losses incurred by SureBeam since that timehave been charged against this accrual.  Losses chargedagainst the accrual in 2001 were $14.9 million and in 2002were $20.5 million in the six months ended June 30,2002.  An additional charge of $11.0 million was takenduring the second quarter of 2002 to record the net losses (inexcess of the accrual) incurred by SureBeam during the secondquarter of 2002 as well as estimated operating losses and spin-offexpenses expected to be incurred through the spin-off date ofAugust 5, 2002.  Subsequent to that date, SureBeam is nolonger included in Titan’s results of operations. Losses through August 5, 2002 charged against the accrual inthe three months ended September 30, 2002 were$1.8 million.  Approximately $3.0 million of costsrelated to the spin-off have been charged against the lossaccruals.  As of September 30, 2002, $0.5 millionremains accrued for trailing spin-off costs. 

***2000 DiscontinuedOperations***

      InNovember 2000, the Company's Board of Directors adopted a planto dispose of the Company's commercial information assurance andnetwork monitoring businesses.  In addition, the accompanyingconsolidated financial statements reflect operations discontinuedby Titan in 2000.  Accordingly, all periods presented reflectthe commercial information assurance and network monitoringbusinesses as discontinued operations.  Management continuesto assess the estimated wind-down and/or disposal costs associatedwith the businesses, and may from time to time adjust theallowance for such costs accordingly.

**Balance SheetSummary**

      Following isa table of all related balance sheet categories for eachdiscontinued operation:

|                                                  |   | **Asof September 30, 2002** |    | **Asof December 31, 2001** |   |
|-------------------------------------------------------|--------|----------------------------------|---------|---------------------------------|--------|
|                                                       |        |                                  |         |                                 |        |
| Current assets ofdiscontinued operations:             |   |                                  |         |                            |        |  |   |
|       TitanWireless     |   | $                                | 28,448  |                                 | $      | 27,621 |  |
|       Cayenta           |   |                                  | 7,067   |                                 |        | 14,190 |   |
|       SureBeam          |   |                                  | — |                                 |        | 44,940 |  |
|       TitanTechnologies |   |                                  | 16,112  |                                 |        | 17,632 |  |
|       Other             |   |                             | — |                                 |        | 1,692 |  |
|                                                       |        |                                  |         |                                 |        |
|                                                       |        | $                                | 51,627  |                                 | $      | 106,075 |  |
|                                                       |        |                                  |         |                                 |        |
| Non-current assets ofdiscontinued operations:         |   |                             |         |                                 |   |  |  |
|       TitanWireless     |   | $                                | 90,476  |                                 | $      | 205,396 |  |
|       Cayenta           |   |                                  | — |                                 |        | 29,875 |   |
|       SureBeam          |   |                                  | — |                                 |        | 65,704 |  |
|       TitanTechnologies |   |                                  | 13,417  |                                 |        | 45,163 |  |
|       Other             |   |                             | — |                                 |        | — |  |
|                                                       |        |                                  |         |                                 |        |
|                                                       |        | $                                | 103,893 |                                 | $      | 346,138 |  |
|                                                       |        |                                  |         |                                 |        |
| Current liabilities ofdiscontinued operations:        |   |                                  |         |                                 |        |  |   |
|       TitanWireless     |   | $                                | 46,314  |                                 | $      | 21,174 |  |
|       Cayenta           |   |                                  | 2,364   |                                 |        | 6,303 |   |
|       SureBeam          |   |                                  | 500     |                                 |        | 30,977 |  |
|       TitanTechnologies |   |                                  | 11,305  |                                 |        | 8,013 |  |
|       Other             |   |                             | 382     |                                 |        | 2,493 |  |
|                                                       |        |                                  |         |                                 |        |
|                                                       |        | $                                | 60,865  |                                 | $      | 68,960 |  |
|                                                       |        |                                  |         |                                 |        |
| Non-current liabilities ofdiscontinued operations:    |   |                             |         |                                 |   |  |  |
|       TitanWireless     |   | $                                | 44,043  |                                 | $      | 42,456 |  |
|       Cayenta           |   |                                  | 1,992   |                                 |        | 451 |   |
|       SureBeam          |   |                                  | — |                                 |        | 7,608 |  |
|       TitanTechnologies |   |                                  | 77      |                                 |        | 510 |  |
|       Other             |   |                             | — |                                 |        | — |  |
|                                                       |        |                                  |         |                                 |        |
|                                                       |        | $                                | 46,112  |                                 | $      | 51,025 |  |
|                                                       |        |                                  |         |                                 |        |

      The reductionof current and non-current assets from December 31, 2001 toSeptember 30, 2002 were primarily a result of the assetimpairments discussed above in the operating results as well as dueto the spin-off of SureBeam on August 5, 2002.  The netassets of Titan Wireless of $28.6 million as ofSeptember 30, 2002 are comprised primarily of net receivableamounts due from customers primarily the Office of Post andTelegraph (OPT) of Benin and other African customers, as well asthe remaining net goodwill of GlobalNet.  The net assetbalance also reflects remaining obligations to be paid includingestimated exit costs.  The realizability of these net assetsis dependent upon collections to be received from these Africancustomers as well as the sale of GlobalNet for the estimated fairvalue.

**Note (7)Debt**

      OnMay 23, 2002, the Company entered into an agreement withWachovia Bank, National Association and Wachovia Securities for a$485 million credit facility from a syndicate of commercialbanks including Wachovia Securities acting as Sole Lead Arrangerand Wachovia Bank, National Association, as Administrative Agent,The Bank of Nova Scotia and Comerica Bank as Co-Syndication Agentsand Branch Banking Trust Company and Toronto Dominion Bank asCo-Documentation Agents and other financial institutions(collectively referred to hereafter as the “seniorlenders”).  The proceeds of the loan were used to repayoutstanding indebtedness on the Company’s $425 millioncredit facility arranged by Credit Suisse First Boston inFebruary 2000.  The senior secured credit facility issecured by substantially all of our and our subsidiaries’assets (other than the assets of SureBeam, LinCom Wireless, Sakonand our foreign operations) and guaranteed by substantially all ofour subsidiaries (except for SureBeam, LinCom Wireless, Sakon andour foreign subsidiaries).  The $485 million facility iscomprised of a seven-year term loan in an aggregate principalamount of $350 million and a six-year $135 millionrevolving credit facility.  Loans made under the term loanamortize at 1.0% per year for years one through six, with theremaining 94% due in four equal quarterly payments in year seven ofthe agreement.  Under the term loan and the revolvingfacility, the Company has the option to borrow at the bank’srate or at adjusted LIBOR plus, in each case, an applicable marginbased on our total debt to EBITDA ratio (earnings before interestand taxes and depreciation and amortization).  The agreementcontains financial covenants, which were comprised of the followingat September 30, 2002:  a maximum debt to EBITDA (asdefined) limit of 3.50 to 1, a minimum interest coverage ratio of2.75 to 1, a minimum fixed charge ratio of 1.20 to 1 and aminimum net worth (as defined) of $264 million.  AtSeptember 30, 2002, the Company was in compliance with allfinancial covenants.  No funds were drawn initially on therevolver, which will be available to the Company for generalcorporate needs, including strategic acquisitions. Additionally, the new facility excluded Titan’s ownership ofSureBeam stock as collateral, which enabled Titan to spin-offSureBeam in accordance with Titan’s plans to do so. However, the credit agreement of $50 million that Titan hasexecuted with SureBeam is secured by a first priority lien on allof SureBeam’s assets.  Titan is required to collaterallyassign its rights under this credit agreement and its security aswell as the license agreement it has with SureBeam to its seniorlenders under its senior secured credit facility (see Note13).

      Related toTitan's extinguishment of its prior credit facility of$425 million with Credit Suisse First Boston, all deferredfinancing costs related to that agreement were written off duringthe nine months ended September 30, 2002, resulting in anextraordinary loss in the amount of $5.4 million which is netof a tax benefit of $3.9 million, which has been reflected asan extraordinary item in the accompanying consolidated statementsof operations.

      AtSeptember 30, 2002, total borrowings outstanding under theCompany's senior credit facility were $350 million at aweighted average interest rate of 4.79%.  Commitments underletters of credit were $11.8 million at September 30,2002, $10.9 million of which reduces availability of theworking capital line.  Of the total borrowings,$3.5 million was short-term.  At September 30, 2002,the Company was in compliance with all financial covenants underits various debt agreements.

      As a resultof the spin-off of SureBeam by Titan, each HIGH TIDES(Titan’s remarketable term income deferrable equitysecurities), formerly convertible into 1.0076 shares of Titancommon stock, is now convertible into 1.3553 shares of Titan commonstock.

**Note (8) OtherFinancial Information**

      As a resultof the Company’s discontinuance of substantially all theoperations in the Company’s Titan Wireless and TitanTechnologies segments and the commercial businesses within Cayenta(See Note 6), and because most of Titan’s remainingoperations are its government businesses, Titan is no longerreporting the results of operations by operating segments inaccordance with SFAS No. 131, “Disclosures aboutSegments of an Enterprise and RelatedInformation.”

      The Company'sonly element of other comprehensive income resulted from foreigncurrency translation adjustments in all periods reported, which isreflected in the Consolidated Statements of Stockholders'Equity.

*Earnings PerShare:*

      The followingdata summarize information relating to the per share computationsfor income (loss) before extraordinary item:

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | **Threemonths ended September 30, 2002** |    | **Threemonths ended September 30, 2001** |    |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|---------|-----------------------------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |        |                                               |         |                                               |         |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | **Income (loss) (Numerator)**                 |    | **Shares (000's) (Denominator)**              |    | **Per Share Amounts** |   | **Income (loss) (Numerator)** |   | **Shares (000's) (Denominator)** |   | **Per Share Amounts** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |        |                                               |         |                                               |         |  |  |  |  |  |  |  |  |
| Income (loss) fromcontinuing       operations beforeextraordinary       loss and cumulative effectof       change in accountingprinciple                                                                                                                                                                                                                                                                                                                          |   | $                                             | (33,516 | )                                             |         |   |   |   |   | $ | 2,867 |  |   |   |   |   |   |
| Less preferred stockdividends                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                          | (172    | )                                             |    |   |   |   |   |   | (172 | ) |   |   |   |   |   |
| Effect of minorityinterests                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                          | — |                                               |         |   |   |   |   |   | 62 |  |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |        |                                               |         |                                               |         |  |  |  |  |  |  |  |  |
| Basic EPS:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |                                          |    |                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |
|       Income fromcontinuing             operationsbefore extraordinary             lossand cumulative effect of             changein accounting principle             availableto common             stockholders |   |                                          | (33,688 | )                                             | 77,820  |   | $ | (0.43 | ) | $ | 2,757 |  | 60,986 |   | $ | 0.04 |  |
| Effect of dilutivesecurities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                          |    |                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |
|       Stock optionsand warrants                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                                          | — |                                               | — |   |   | — |  |   | — |   | 1,861 |   |   | — |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |        |                                               |         |                                               |         |  |  |  |  |  |  |  |  |
| Diluted EPS:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                                          |    |                                          |    |   |   |   |   |   |   |   |   |   |   |   |   |
|       Income fromcontinuing operations             beforeextraordinary loss and             cumulativeeffect of change in             accountingprinciple available to             commonstockholders                                                                         |   | $                                             | (33,688 | )                                             | 77,820  |   | $ | (0.43 | ) | $ | 2,757 |  | 62,847 |   | $ | 0.04 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |        |                                               |         |                                               |         |  |  |  |  |  |  |  |  |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | **Ninemonths ended September 30, 2002** |    | **Ninemonths ended September 30, 2001** |    |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|---------|----------------------------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |        |                                              |         |                                              |         |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | **Income (loss) (Numerator)**                |    | **Shares (000's) (Denominator)**             |    | **Per Share Amounts** |   | **Income (loss) (Numerator)** |   | **Shares (000's) (Denominator)** |   | **Per Share Amounts** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |        |                                              |         |                                              |         |  |  |  |  |  |  |  |  |
| Income (loss) fromcontinuing       operations beforeextraordinary loss       and cumulative effect ofchange in       accountingprinciple                                                                                                                                                                                                                                                                                                                                 |   | $                                            | (15,441 | )                                            |         |   |   |   |   | $ | (14,078 | ) |   |   |   |   |   |
| Less preferred stockdividends                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                         | (517    | )                                            |         |   |   |   |   |   | (517 | ) |   |   |   |   |   |
| Effect of minorityinterests                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                         | — |                                              |         |   |   |   |   |   | 1,415 |  |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |        |                                              |         |                                              |         |  |  |  |  |  |  |  |  |
| Basic EPS:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                         |    |                                         |    |   |   |   |   |   |   |   |   |   |   |   |   |
|       Income (loss)from continuing             operationsbefore extraordinary             lossand cumulative effect of             changein accounting principle             availableto common             stockholders |   |                                              | (15,958 | )                                            | 75,270  |   | $ | (0.21 | ) | $  | (13,180 | ) | 56,019 |   | $ | (0.24 | ) |
| Effect of dilutivesecurities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                         |    |                                         |    |   |   |   |   |   |   |   |   |   |   |   |   |
|       Stock optionsand warrants                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |                                         | — |                                              | — |   |   | — |  |   | — |   | — |   |   | — |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |        |                                              |         |                                              |         |  |  |  |  |  |  |  |  |
| Diluted EPS:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                                         |    |                                         |    |   |   |   |   |   |   |   |   |   |   |   |   |
|       Income (loss)from continuing             operationsbefore extraordinary             lossand cumulative effect of             changein accounting principle             availableto common             stockholders |   | $                                            | (15,958 | )                                            | 75,270  |   | $ | (0.21 | ) | $ | (13,180 | ) | 56,019 |   | $ | (0.24 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |        |                                              |         |                                              |         |  |  |  |  |  |  |  |  |

      The effect ofthe minority interests primarily represents the dilutive effect ofoutstanding stock options of Titan’s subsidiaries, notablyTitan Systems in 2002 and Cayenta in 2001.

      In the threemonths ended September 30, 2002, options and warrants topurchase approximately 2,870,000 shares of common stock atprices ranging from $1.04 to $10.37 per share were not included inthe computation of diluted EPS, due to the loss from continuingoperations, and approximately 4,353,900 shares at prices rangingfrom $10.54 to $29.74 were not included in the computation, as theeffect would have been anti-dilutive due to the exerciseprice.  Options to purchase approximately1,365,000 shares of common stock at prices ranging from$19.20 to $47.50 per share were not included in thecomputation of diluted EPS for the three month period endedSeptember 30, 2001, as the effect would have beenanti-dilutive due to the exercise price.

      In the ninemonths ended September 30, 2002, options and warrants topurchase approximately 3,648,300 shares of common stock atprices ranging from $1.04 to $13.72 per share were notincluded in the computation of diluted EPS, due to the loss fromcontinuing operations, and approximately 2,060,400 shares at pricesranging from $13.85 to $29.74 were not included in the computation,as the effect would have been anti-dilutive due to the exerciseprice.  Options to purchase approximately3,471,000 shares of common stock at prices ranging from$1.12 to $47.50 per share were not included in thecomputation of diluted EPS for the nine month period endedSeptember 30, 2001, due to the loss from continuing operationsand/or the exercise price.

      Approximately6,776,500 and 5,038,000 shares in 2002 and 2001, respectively, fromthe potential conversion of remarketable term income deferrableequity securities (HIGH TIDES) were not included in thecomputations as their effect was anti-dilutive.  Approximately538,500 and 538,600 shares of common stock in the three months andnine months in 2002, respectively, that could result from theconversion of cumulative convertible preferred stock were notincluded in the computations of diluted EPS, as the effect wouldhave been anti-dilutive.  Similarly, approximately 460,000shares of common stock in 2001 that could result from theconversion of cumulative convertible preferred stock were notincluded in the computations of diluted EPS.  The primarychange in potential dilution from 2001 to 2002 for the HIGH TIDESand preferred stock is the change in conversion ratios due to theSureBeam spin-off (see Note 7 and Note 10).

*Select Balance SheetData*

      Following aredetails concerning certain balance sheet data:

|                                                |   | **September 30, 2002** |   | **December 31, 2001** |
|-----------------------------------------------------|--------|-----------------------------|--------|----------------------------|
|                                                     |        |                             |        |                            |
| Inventories:                                        |   |                        |   |                       |   |   |
|       Materials       |   | $                           | 11,874 |                       | $ | 11,143 |
|       Work-in-process |   |                        | 12,185 |                       |   | 8,853 |
|       Finishedgoods   |   |                        | 6,527  |                       |   | 3,926 |
|                                                     |        |                             |        |                            |
|                                                |   | $                           | 30,586 |                       | $ | 23,922 |
|                                                     |        |                             |        |                            |

      The change in the current portionof deferred income tax asset from $53.9 million atDecember 31, 2001 to $27.8 million at September 30,2002 primarily reflects the impact of the Company’s mostrecent estimate of net operating losses that will be utilized inthe next twelve months.  Accordingly, the current andnon-current portion of deferred income tax assets have beenadjusted to reflect these recent estimates.  In addition, theincrease in the non-current deferred income tax asset from $0 atDecember 31, 2001 to $110.5 million at September 30,2002 is a result of the tax benefit of the current period operatinglosses.

*Supplemental Cash FlowInformation:*

      Supplementaldisclosure of cash flow information:

| ** **                                                                                                                                                                       | ** ** | **Ninemonths ended September 30,****** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------|
|                                                                                                                                                                                  |            |                                             |
| ** **                                                                                                                                                                       | ** ** | **2002**                                    | ** ** | **2001** |
|                                                                                                                                                                                  |            |                                             |  |  |
| Noncash investing andfinancing activities:                                                                                                                                       |       |                                        |   |   |   |   |
|       Issuance ofstock for acquisitions                                                                                                            |       | $                                           | 139,657 |   | $ | 44,932 |
|       Extraordinaryloss on early extinguishment of debt                                                                                            |       |                                             | 5,408 |   |  | — |
|       Gain relatedto issuance of stock in subsidiary                                                                                               |       |                                             | — |   |  | 52,025 |
|       Sharescontributed to employee benefit plans                                                                                                  |       |                                        | 7,529 |   |   | 1,435 |
|       Write-off ofdeferred compensation related to discontinued             operations |       |                                        | 629 |   |   | — |
|       Deferredcompensation related to the issuance of stock             options        |       |                                        | 29,690 |   |   | 78,604 |
|                                                                                                                                                                                  |            |                                             |  |  |
| Cash paid forinterest                                                                                                                                                            |       | $                                           | 25,575 |   | $ | 28,974 |
| Cash paid for (providedby) income tax                                                                                                                                            |       |                                        | (8,591 | ) |   | 2,711 |

      In addition,net cash proceeds of $27.9 million resulting from theacquisition of businesses, net of cash acquired was reported forthe nine months ended September 30, 2002.  This wasprimarily the result of cash acquired from Jaycor, which was astock transaction completed in March 2002.

**Note (9) Merger ofTitan Systems**

      OnSeptember 25, 2002, Titan Systems, Titan’s nationalsecurity subsidiary, was merged into The Titan Corporation. As a result of this merger, outstanding stock options held byemployees of Titan Systems Corporation were exchanged using anexchange ratio of .8371, for approximately 5.4 million stockoptions in The Titan Corporation.  The exchange ratio wasdetermined by Titan using a valuation of Titan Systems Corporation,as determined by a globally recognized valuation firm, and theaverage Titan Corporation closing stock price for the20 trading days ending on the day before themerger.

      The exchangeof Titan options resulted in a non-cash deferred compensationcharge of approximately $21.3 million in the third quarter of2002, which is reflected in selling, general and administrativeexpense in the accompanying consolidated statements ofoperations.  Additional non-cash deferred compensation ofapproximately $8.2 million will be amortized over the nextthree years as the options vest over time.

**Note (10) CapitalStock**

      As a resultof the spin-off of SureBeam by Titan, each outstanding share ofcumulative convertible preferred stock, formerly convertible intoTitan common stock, at the option of the holder, at a rate oftwo-thirds share of common stock for each share of cumulativeconvertible preferred stock, is now convertible at a rate of .781share of common stock for each share of cumulative convertiblepreferred stock.

**Note (11)Stock-Based Compensation Plans**

      As a resultof the SureBeam spin-off, all Titan outstanding stock options undereach of the Company’s stock option plans were adjusted suchthat the number of options was increased by a factor of 1.345 andthe exercise price was decreased by dividing by 1.345.  Thisadjustment maintained the same aggregate intrinsic value of thestock options that existed prior to the spin-off compared to theaggregate intrinsic value of the stock options immediately afterthe transaction and ensured that the ratio of the exercise priceper share to the market value per share was not reduced.  Theadjustment was determined in accordance with the FASB’sFinancial Interpretation No. 44 (FIN 44), “Accountingfor Certain Transactions Involving Stock Compensation,” andresulted in no compensation charge.

**Note (12)Commitments and Contingencies**

      OnJanuary 6, 2000, Ion Beam Applications s.a., a Belgiancorporation, and some of its U.S. subsidiaries ("IBA") filed anaction for declaratory judgment in a federal court in Virginiaagainst Titan and the SureBeam Corporation ("SureBeam") relating toSureBeam's patents for SureBeam systems.  The action attackedthe validity of SureBeam's core patent, sought a declaration thatIBA and its customers had not infringed any of the 62 claims inSureBeam's patent, and alleged that Titan and SureBeam engaged inunfair competition and that Titan and SureBeam's conductconstituted patent misuse.  The case was moved to the federalcourt in San Diego.  On November 22, 2000, IBA filed anamended complaint alleging, in addition to the original claims,that Titan and SureBeam engaged in false advertising,monopolization, restraint on trade and unfair businesspractices.

      OnJanuary 25, 2002, Titan and SureBeam announced that theysettled the litigation with IBA.  Under the settlement, IBAdropped all the claims it made against Titan and SureBeam in thelitigation, including IBA's challenge to the validity andenforceability of SureBeam's core patent.  Titan and SureBeamagreed that IBA and its customers may continue to operate oruse IBA's electronic irradiation facility in Bridgeport, NewJersey.  The settlement terms include, among other things,that IBA will purchase its requirements in the United States fore-beam and x-ray systems for use for processing food and sanitizingmail from Titan and SureBeam during the next four years, providedTitan and SureBeam offer competitive terms.  Titan andSureBeam also agreed to purchase their requirements of acceleratorswith above 150 kilowatts of power from IBA during the samefour-year period, provided IBA offers competitive terms. Other terms of the settlement agreement are immaterial and were notdiscloseable.

      OnAugust 16, 2002, Perimex International Corporation filed acomplaint against Titan, Titan Wireless and a former Titan Wirelessemployee in San Diego Superior Court in San Diego,California.  The complaint alleges breach of contract, breachof the covenant of good faith and fair dealing, intentionalinterference with existing contractual relationships andprospective business advantage and violation of the Californiaunfair competition law arising from an alleged failure of TitanWireless to enter a joint venture with Perimex to provide wirelesstelecommunication services in Argentina and other related allegedmisconduct.  The complaint seeks damages of$53.65 million and seeks injunctive relief prohibiting Titanand Titan Wireless from transferring any of Titan Wireless’assets.  The court recently denied Perimex’s request fora preliminary injunction, sustained Titan and Titan Wireless’demurrer as to all causes of action in the complaint and grantedPerimex leave to amend the complaint.  The court also orderedPerimex to post a bond for $0.09 million to secure payment of Titan andTitan Wireless’ costs if they prevail.  The Companybelieves that Perimex’s claims are without merit and theCompany intends to defend its position vigorously.

      We areinvolved in legal actions in the normal course of our business,including audits and investigations by various governmentalagencies that result from our work as a defense contractor. We and our subsidiaries are named as defendants in legalproceedings from time to time and we or our subsidiariesmay assert claims from time to time.  In addition, weacquire companies from time to time that have legal actions pendingagainst them at the time of acquisition. The Company has received a grand jurysubpoena from the Antitrust Division of the Department of Justicerequesting the production of documents relating to informationtechnology services performed for the Air Force at Hanscom AirForce Base in Massachusetts.  The Company has been informedthat other companies who have performed such services have receivedsubpoenas as well.  The Company intends to cooperate fullywith the investigation.

      Based uponcurrent information and review, we believe the ultimate liabilityor recovery with respect to pending actions would not materiallyaffect our consolidated financial position or results ofoperations.  However, our evaluation of the likely impact ofthese actions could change in the future and an unfavorableoutcome, depending upon the amount and timing, could have amaterial adverse effect on the Company’s results ofoperations or cash flows in a future period.

**Note (13) Related PartyTransactions**

      Prior to thespin-off of SureBeam Corporation, Titan and SureBeam entered into anumber of agreements.

      *CreditAgreement*.  We have extended a $50 million seniorsecured revolving loan commitment to SureBeam that allows SureBeamto borrow up to $12.5 million in the second quarter of 2002,up to $17 million in the third quarter of 2002 and up to$12.5 million per quarter beginning in the fourth quarter of2002 through the fourth quarter of 2003, subject to the$50 million limitation on borrowing.  The amountavailable for borrowing in the second, third and fourth quarters of2003 is based upon SureBeam’s earnings before interest,taxes, depreciation and amortization (EBITDA) for the prior quarteras a percentage of the EBITDA target in its annual operatingplan.  If EBITDA is less than 25% of target EBITDA, then theamount available is $5 million, provided that no amounts areavailable unless SureBeam covenants during the current quarter tolimit its total operating expenses (defined as research anddevelopment and selling, general and administrative expenses) to$5 million.  If EBITDA is 25% of target, then the amountavailable is $6.25 million on 50% of the quarterly maximum andfor each percentage of EBITDA above 25% of target, the percentageof the quarterly maximum above 50% will be increased prorata.  To the extent SureBeam does not fully borrow themaximum amount during any quarter of 2002, the unutilized amountcan be borrowed in the subsequent quarters.  As of the end ofthe third quarter of 2002, SureBeam had borrowed $20 millionon this facility and had $9.5 million unutilizedamounts.  As of November 14, 2002, SureBeam has borrowed$25 million and had $7.0 million unutilizedamounts.

      SureBeam isobligated to make quarterly principal payments on the creditfacility as follows:  13.75% of the outstanding principalbalance as of December 31, 2003 during each quarter in 2004;25% of the outstanding principal balance as of December 31,2004 during each quarter in 2005; and all remaining principal byDecember 31, 2005.  In addition, with some exceptions,SureBeam is obligated to use net proceeds from the sale of assetsand its securities to repay amounts advanced under thisfacility.  Interest is payable monthly beginning inJanuary 2003.  The credit agreement contains affirmativeand negative covenants, including covenants limitingSureBeam’s incurrence of debt, capital expenditures,operating expenses, investments, declaration of dividends and otherrestricted payments, sale of stock of subsidiaries andconsolidations and mergers.  The credit agreement, however,does not contain any financial covenants requiring SureBeam tomaintain specific financial ratios.  The credit agreement issecured by a first priority lien on all of SureBeam’sassets.  Titan is required to collaterally assign our rightsunder this credit agreement and our security as well as the LicenseAgreement to our senior lenders under our senior credit facility(see Note 7). 

      *TaxAllocation Agreement and Tax Disaffiliation and Tax SharingAgreement*.  We have agreed to pay SureBeam for any taxbenefits we realized through our use of net operating lossesgenerated by SureBeam while it was a member of our consolidatedgroup for federal income tax purposes.  Payment is due in thefirst year in which SureBeam could have used those losses to reduceits taxes and we do not know when such payment may becomedue.  We and SureBeam also have allocated responsibility forthe payment of taxes we each owe and agreed to reimburse the otherparty for the tax liabilities we assume.  We also agree to beresponsible for taxes imposed on the spin-off under Section 355(e)of the Internal Revenue Code that result from our respectiveactions, including the sale of our respective equitysecurities.  We have agreed to share equally any tax that isimposed for reasons other than an action by us orSureBeam.

      InSeptember 2001, Titan purchased a world-wide perpetual andexclusive, non-royalty bearing license to use SureBeam'sintellectual property for all applications and fields other thanthe food, animal hide and flower markets, for the followingconsideration: 1) a $50 million senior secured line of credit,2) the exchange of the $75 million debt owed by SureBeam toTitan for additional shares of Class B and Class A common stock ofSureBeam, and 3) a cash payment of $8 million, with$4 million paid at September 30, 2001 and fourinstallments of $1 million each payable on March 31,2002, June 30, 2002, September 30, 2002 andDecember 31, 2002. 

      In addition,Titan has guaranteed certain lease obligations of SureBeam, andSureBeam is obligated to reimburse us for any payments we makeunder these guarantees.  Any guarantee payments we make reduceamounts available for future borrowing under the creditagreement.  Some of the guaranteed leases have longer termsthan the credit facility.  If Titan remains a guarantor at thematurity date for the credit facility, then SureBeam will enterinto a reimbursement agreement with Titan covering the outstandingguarantees.

      InDecember 2001, Titan exchanged $2 million of debt owed toTitan by SureBeam for 190,385 Class B common shares ofSureBeam, and exchanged the remaining $73 million of thebalance on February 13, 2002 for 4,441,496 Class Aand 3,225,765 Class B common shares of SureBeam. These shares were part of the distribution to Titan stockholders asa result of the spin-off.

      Titan hasentered into subcontract agreements with SureBeam for them tobuild, design and integrate linear accelerators we are providingfor our customers in our Scan Technologies business to providemedical sterilization electron beam accelerators as well as mailsanitization systems for the United States Postal Service("USPS").  All appropriate intercompany eliminations have beenmade in our consolidated financial statements for the periods thatSureBeam was part of Titan’s consolidated financialstatements.

      Titan hasagreed to purchase all of its requirements for electron beamaccelerators from SureBeam through December 31, 2003 andrelated integration services through December 31, 2002 unlessSureBeam does not offer competitive pricing or cannot meet requireddelivery schedules.  The equipment and services are priced atSureBeam’s cost plus a 20% markup unless we agree to analternative pricing arrangement for a purchase order. SureBeam has supplied equipment and services under this contract inconnection with our contract with the U.S. Postal Service and inconnection with our medical sterilization business.

      In relationto SureBeam's strategic alliance with Hawaii Pride, Titan hasguaranteed up to the greater of SureBeam's equity interest inHawaii Pride (which is currently zero), or 19.9% of Hawaii Pride's$6.8 million, 15-year loan from its lender, Web Bank.  Asof September 30, 2002, Titan has guaranteed approximately$1.4 million, or 19.9% of the loan balance.

      We havesubleased to SureBeam approximately 70,522 square feet used for itsservice center in Sioux City, Iowa, as well as facilities inDublin, California, Omaha, Nebraska and Saudi Arabia. Generally, SureBeam is paying us sublease payments equal to ourmonthly expense under these leases.  SureBeam will continue toseek to have itself substituted as the direct lessee under eachmaster lease so that the sublease can be terminated.

      InMarch 2002, our Board of Directors adopted a stock optionrelinquishment program, the primary purpose of which was to alignthe interests of our directors and senior executives more closelywith our stockholders' interests by allowing directors and seniorexecutives to participate in the appreciation in our equityvalue:
|              | •       | without requiring ourdirectors and executive officers to trade shares of our commonstock obtained through the exercise of options on the open market;and |
|--------------------------------------------------------------------------|--------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                     |                             |                                                                                                                                                |
|              | •       | without the dilutive andpotentially stock-price depressive effects associated with theexercise and subsequent sale of stock option shares.               |

      The programalso was intended to assist our directors and executive officerswith their individual financial planning.  Under the program,a participant who gave notice of his intent to participate byMarch 29, 2002, could relinquish eligible, in-the-money stockoptions in exchange for a loan, the principal amount of which is150% of the difference between the aggregate exercise price of theoptions and the product of (i) the number of shares issuableupon exercise of the options and (ii) a 20 day trailingaverage of the daily high and low sales price of our common stockprior to relinquishment.  The loans bear interest at a rateequal to the applicable federal rate as published by the InternalRevenue Service for the month in which the loan was made.  Theloans were contingent upon the participants, within 90 days,utilizing a portion of the loan proceeds to purchase a lifeinsurance policy with a death benefit sufficient to repay the loanand accrued interest thereon upon maturity. 

      If,subsequent to the individual's notice to participate and within90 days (or such longer period agreed to by the Company incompliance with the Sarbanes-Oxley Act) after receiving the loanproceeds, the individual elected not to participate in the programor no life insurance policy was obtained, the loans were repaidwith accrued interest thereon and the options were returned to theindividual.  The loans mature on the death of the second todie of the participant and his/her spouse.  Under the program,the following transactions have occurred:
|              | •       | Dr. Ray, Chairman ofthe Board and Chief Executive Officer: 222,380 optionsrelinquished, $3,985,725 principal amount of loan, 5.48% interestper annum; |
|--------------------------------------------------------------------------|--------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                     |                                       |                                                                                                                                                  |
|              | •       | Mr. Fink, director:15,000 options relinquished, $336,337.50 principal amount of loan,5.48% interest per annum;                                        |
|                                                                     |                                       |                                                                                                                                                  |
|              | •       | Mr. Alexander,director: 19,972 options relinquished, $499,999 principal amount ofloan, 5.48% interest per annum.                                      |

      In connectionwith the same program, loans were conditionally made to Mr.Costanza, Senior Vice President, General Counsel and Secretary inthe amount of $614,400, and Mr. Hanisee, director, in the amount of$220,184.  In June 2002, Mr. Costanza and Mr. Haniseerepaid the outstanding balance of their loans infull. 

      Inconjunction with Titan’s plan to exit its internationaltelecommunications business, Titan entered into an agreement withGeolutions, Inc. to subcontract Titan’s outstandingcontractual and warranty obligations.  Geolutions is a newlyformed company, founded by a former executive of Titan Wireless andformer officer of Titan.  Titan has a fixed price contract of$1.9 million, plus incidental expenses of up to$0.6 million and other third party costs of an aggregatemaximum of $1.4 million, which is payable through mid 2004,the period over which Titan’s warranty obligations exist onits existing customer contracts.  In conjunction withTitan’s agreement with Geolutions, Titan has assigned itsexisting warranty obligations in its internationaltelecommunications business with its existing customers toGeolutions.

**THE TITANCORPORATION**

**Item 2.   Management’s Discussion and Analysis ofFinancial Condition and Results of Operations**

**(Dollaramounts in thousands, except share and per share data, or asotherwise noted)**

## **Results ofOperations**

      During thefirst quarter of 2002, the Company made the decision to sellcertain of its commercial information technology operations withinits Cayenta and Titan Technologies segments.  During the thirdquarter of 2002, the Company made the decision to exit itsinternational telecommunications business of its Titan Wirelesssegment, and to exit its LinCom Wireless business and sell aremaining operation of Cayenta, both of which were previouslyreported in the Titan Technologies segment.  Further, thecommercial information technology operations which were held forsale at the end of the first and second quarters of 2002 were soldduring the third quarter of 2002.  Effectively, almost allcommercial operations of Titan have either been sold, are held forsale, have been exited or will be exited shortly.  As aresult, all commercial operations that are held for sale or havebeen sold or exited have been reflected as discontinued operationsfor all periods presented in Titan’s consolidated financialstatements.  Since nearly all commercial operations have beendisposed of or will be disposed of, and most of Titan’sremaining business is its government business, Titan is no longerreporting the results of operations by reporting segments. All prior period financial information has been restated to reflectthe discontinuances and the elimination of the reportingsegments.

### ***Revenues***

      Ourconsolidated revenues increased from $237.2 million in thethird quarter of 2001 to $352.8 million in the third quarterof 2002, reflecting a 48.7% increase.  Increased revenues wereprimarily attributable to revenue generated by the acquiredcompanies of BTG, Inc. in the fourth quarter of 2001 and Jaycor inthe first quarter of 2002, which contributed an aggregate ofapproximately $93.8 million, coupled with internal revenuegrowth in both the business units of the acquired companies as wellas in our other businesses.  Internal revenue growth came fromthe following sources.  Increased work in areas related tohomeland security such as continuity of operations planning,vulnerability assessments and risk mitigation plans for criticalinfrastructure, and weapons of mass destruction modeling and sensorintegration contributed to our revenue growth.  Increasedrevenues were also driven by continued work on Titan’senterprise information technology contract with the SpecialOperations Command, as well as from Titan’s informationservices contract with the Program Executive Office, Standard ArmyManagement Information Systems.  In addition, work for the AirForce’s Electronic Systems Center on a variety of technical,engineering, and acquisition support contracts contributed tointernal growth.  Revenues from the Navy also increased in thethird quarter in part as a result of work for the Naval SpaceCommand for satellite communications support and for the Naval SeaSystems Command for systems engineering and program supportservices for the Naval Fires Network.  Lastly, increaseddemand for cryptology products, mini-DAMA terminals, and continuedwork on the Prophet Program (an Army signals intelligence system)also contributed to the third quarter internal revenuegrowth.

      Ourconsolidated revenues increased from $681.5 million in thenine months ended September 30, 2001 to $1.0 billion in thenine months ended September 30, 2002, a 48.6%increase.  Increased revenues were primarilyattributable to internal revenue growth generated by business unitsof the acquired company BTG, Inc. in the fourth quarter of 2001 andthe acquisitions of Datron in the third quarter of 2001 and Jaycorin the first quarter of 2002, which contributed an aggregate ofapproximately $255.6 million, coupled with internal revenuegrowth in our other businesses as described previously.

***Selling, General andAdministrative***

      Our SG&Aexpenses increased from $38.7 million and $113.3 millionin the third quarter and first nine months of 2001, respectively,to $60.7 million and $137.4 million in the third quarterand first nine months of 2002, respectively.  This reflects a57% increase and 21% increase for the quarter and nine months endedSeptember 30, 2002, respectively.  Included in SG&Awas amortization of goodwill of $2.5 million and$7.4 million for the three months and nine months endedSeptember 30, 2001, and amortization of purchased intangiblesof $1.5 million and $4.2 million for the three months andnine months ended September 30, 2002, and deferredcompensation amortization expense of $1.1 million and$3.2 million in the quarter and nine months endedSeptember 30, 2001 and $22.4 million and$24.9 million in the quarter and nine months endedSeptember 30, 2002.  The increase in the deferredcompensation in the quarter and nine months endedSeptember 30, 2002 resulted from the merger of Titan’sdefense subsidiary, Titan Systems, into Titan, which occurred onSeptember 25, 2002, which resulted in the exchange of alloutstanding Titan Systems stock options for Titan Corporation stockoptions.  Excluding the amortization of goodwill and purchasedintangibles and deferred compensation, SG&A decreased from14.8% of revenues in the quarter ended September 30, 2001 to10.4% in the quarter ended September 30, 2002, and from 15.1%in the nine months ended September 30, 2001, to 10.7% in thenine months ended September 30, 2002.  The decrease in2002 is, in part, attributable to certain cost reductions Titanmade during 2002, as well as due to a difference in the methodologyof the classification of operating costs reported as costs of salesversus SG&A costs, as defined by the acquired companyBTG’s stated disclosure statement with its appropriategovernment customers.  We expect to conform BTG’sdisclosure statement and classification of operating costs to thoseclassifications used by Titan by the end of 2002.

***Research andDevelopment***

      Our R&Dexpenses increased from $3.0 million in the third quarter of2001 to $4.0 million in the third quarter of 2002 and remainedconstant at $7.1 million for the nine months endedSeptember 30, 2001 and 2002, respectively.  The increasein the third quarter of 2002 is primarily attributable to increaseddevelopment expenses incurred to develop software programmablemodems and digital radios for military and homeland securityapplications***. *** As a percentage of revenues,R&D expenses remained fairly constant at approximately 1.0% forall periods in 2001 versus the comparable periods in2002.

### ***Exit andRestructuring Charges and Other***

*Fiscal 2002Charges*

      Exit andrestructuring charges and other of $46.7 million and$50.1 million in the third quarter and first nine months of2002, respectively, were comprised of costs of $8.0 millionand $11.4 million incurred in the third quarter and first ninemonths of 2002, respectively, related to the shut-down ofCayenta’s headquarters office, and $38.7 million in thethird quarter and first nine months of 2002 related primarily tocertain facility consolidation costs of TitanSystems. 

      The shut-downcosts of the Cayenta headquarters and network operations center of$8.0 million that were recorded in the third quarter of 2002included approximately $4.8 million of future lease commitmentcosts, which are expected to be paid through future periods endingin January 2007, approximately $2.4 million of assetimpairments primarily related to the unamortized leaseholdimprovements and other fixed assets at the Cayenta headquarters,and employee termination costs and other liabilities ofapproximately $0.8 million.  The amounts recorded in thefirst and second quarters of 2002 of $3.4 million primarilyrelate to employee termination costs and lease costs.

      The chargeof  $38.7 million that was recorded in the third quarterof 2002 related to Titan Systems’ merger into TitanCorporation and other associated reorganization and consolidationcosts included approximately $32.2 million for theconsolidation of various Titan Systems facilities into centralizedlocations in Virginia and California.  This charge reflectsthe estimated losses, net of estimated sublease income, on futurelease commitments of facilities with terms extending through theyear 2009.  The Company intends to actively market thefacilities for sublease opportunities.  Approximately$6.5 million of the restructuring costs discussed aboverelated to employee termination costs, employee retention costs,duplicate transition costs related to certain reorganization andconsolidation activities within Titan Systems, and professionalfees.

***Acquisition andIntegration Related Charges and Other***

### ***Fiscal 2001Charges***

      Acquisitionand integration related charges and other of $27.8 million inthe first nine months of 2001 were comprised of costs of$12.4 million primarily related to the integration of ACS andAverStar, and a realignment of the business to better align themajor categories of customers of the Company’s governmentbusiness, which together resulted in personnel reductions and theclosing of several facilities.  Included in these costs isapproximately $3.3 million of employee termination andretention costs, $3.5 million of costs to eliminate duplicateand excess facilities and assets, $1.1 million of duplicatepersonnel costs to transition processes and functions, and$1.5 million of asset impairment costs of certain assetbalances for which the recoverability of such balances was impaireddue to the exit of a satellite services business within theCompany’s government business.  Approximately$3.0 million of the charge was related to another subsidiaryacquired in a prior year for contingencies arising from matterspre-existing to Titan’s acquisition of the business. That acquisition was accounted for as a purchase, and those matterswere resolved in 2001. 

      Also,included in the acquisition and integration related charges for thenine months of 2001 is a charge of  $15.5 million relatedto the restructuring of Cayenta’s headquarters office. As a result of reduced corporate spending on commercial informationtechnology services and e-business software applications, theCompany developed and approved a plan to restructure the Cayentaheadquarters and network operations center, which included areduction in workforce of approximately 40 personnel, resulting ina charge of approximately $1.7 million, and the elimination ofduplicate and excess facilities, resulting in a charge ofapproximately $0.8 million.  As a result ofmanagement’s evaluation of the recoverability of all of theassets of Cayenta, in accordance with Statement of FinancialAccounting Standards No. 121, “Accounting for theImpairment of Long-Lived Assets and for Long-Lived Assets to beDisposed Of”, management concluded from this evaluation thata significant impairment of intangible as well as long-lived assetshad occurred.  An impairment charge was required because theestimated fair value was less than the carrying value of theassets.  The resulting impairment charge of $13.0 millionwas comprised of the following: $5.5 million for fixed assetsassociated with Cayenta’s network operations center,$2.0 million for prepaid advertising costs, $5.3 millionfor Cayenta’s investment in Soliance, LLC, a joint venturethat markets and delivers information technology systems andsolutions to the utility industry, and $0.2 million forcertain other assets.

***Operating Profit(Loss)***

*Consolidated.*  Ouroperating profit decreased from operating profit of$13.9 million in the three months ended September 30,2001 to an operating loss of $45.6 million in the three monthsended September 30, 2002.  Included in the operatingresults for the three months ended September 30, 2001 isdeferred compensation amortization expense of $1.1 million andamortization of goodwill of $2.5 million.  Included inthe operating results for the three months ended September 30,2002 is deferred compensation amortization expense of$22.4 million, amortization of purchased intangibles of$1.5 million and exit and restructuring charges and other of$46.7 million.  Excluding the impact of these charges,operating income increased from $17.4 million in the thirdquarter of 2001 to $25.2 million in the third quarter of2002.  The increased operating income is primarily a result ofthe increase in revenues noted previously.

      Our operatingprofit decreased from $8.7 million for the nine months endedSeptember 30, 2001 to $1.1 million for the nine monthsended September 30, 2002.  Included in the operatingresults for the nine months ended September 30, 2001 isdeferred compensation amortization expense of $3.2 million,amortization of goodwill of $7.4 million and acquisition andintegration related charges and other of $27.8 million. Included in the operating results for the nine months endedSeptember 30, 2002 is deferred compensation amortizationexpense of $24.9 million, amortization of purchasedintangibles of $4.2 million and exit and restructuring chargesand other of $50.1 million.  Excluding the impact ofthese charges, operating income increased from $47.1 millionin the nine months ended September 30, 2001 to$80.2 million****in the nine months endedSeptember 30, 2002.  The increased operating income isprimarily a result of the increase in revenues noted previously, aswell as the impact of the revenues recorded in 2002 from theCompany’s mail sanitization systems business.

***Interest Expense,Net***

       Our netinterest expense decreased from $8.3 million and$27.3 million in the third quarter and first nine months of2001, respectively, to $7.7 million and $23.5 million inthe third quarter and first nine months of 2002,respectively.  Net interest expense decreased primarily as aresult of reduced effective interest rates.*** ***Borrowings from our primary bank lines of credit, excluding workingcapital lines from acquired companies, averaged $350.0 millionfor the three and nine months ended September 30, 2002,respectively, at a weighted average rate of 5.2% for both periods,compared to $354.6 million and $341.5 million in thethree and nine months ended September 30, 2001, respectively,at weighted average interest rates of 6.6% and 7.9%,respectively.

***IncomeTaxes***

       Consolidatedincome taxes reflect effective rates of a provision rate of 49% anda benefit rate of 24% in the quarter and nine months endedSeptember 30, 2001, respectively, compared to a benefit rateof 37% and 31% in the quarter and nine months endedSeptember 30, 2002, respectively.  The lower rate for thetax benefit in 2001 compared to the rates used in 2002 is primarilydue to significant non-deductible expenses which were recorded forfinancial reporting purposes, which resulted in a reduced benefitrate for the net loss reported.

      The change inthe current portion of deferred income tax asset from$53.9 million at December 31, 2001 to $27.8 millionat September 30, 2002 primarily reflects the impact of theCompany’s most recent estimate of net operating losses thatwill be utilized in the next twelve months.  Accordingly, thecurrent and non-current portion of deferred income tax assets havebeen adjusted to reflect these recent estimates.  In addition,the increase in the non-current deferred income tax asset from $0at December 31, 2001 to $110.5 million atSeptember 30, 2002 is a result of the tax benefit of thecurrent period operating losses.

***Loss FromDiscontinued Operations***

      In thequarter and nine months ended September 30, 2001, loss fromdiscontinued operations was $41.7 million and$97.1 million, respectively.  The loss in these periodsincluded $31.9 million of estimated operating losses to beincurred by SureBeam, which was discontinued in the third quarterof 2001, through the estimated date of disposal.  In addition,the loss for the nine months ended September 30, 2001 includeda $35.0 million charge for deferred compensation resultingfrom the initial public offering of SureBeam inMarch 2001. 

      In thequarter and nine months ended September 30, 2002, loss fromdiscontinued operations was $191.8 million and$209.7 million, respectively.  The loss in these periodsincluded approximately $161.9 million and $165.4 million,respectively, related to the exit of the Company’sinternational telecommunications business, Titan Wireless. The remainder of the loss in the quarter and nine months endedSeptember 30, 2002 relates to the operating losses and theloss from the disposal or wind-down of the Cayenta businesses,AverCom, and LinCom Wireless businesses which were discontinued inthe first and third quarters of 2002.

***Net Income(Loss)***

      In thequarter and nine months ended September 30, 2001, we reporteda net loss of $38.8 million and $106.5 million,respectively, compared to a net loss of $225.3 million and$270.7 million in the quarter and nine months endedSeptember 30, 2002.  Loss from discontinued operationswas $41.7 million and $97.1 million in the quarter andnine months ended September 30, 2001, respectively, comparedto a loss of $191.8 million and $209.7 million in thequarter and nine months ended September 30, 2002,respectively.   Included in the net loss for the ninemonths ended September 30, 2002, is a charge of$40.1 million for the Company’s adoption of SFASNo. 142, which is reported as a cumulative effect of a changein accounting principle, and an extraordinary loss of$5.4 million which is related to the Company’sextinguishment of its former credit facility.

## **Liquidity and CapitalResources**

      We generatedcash of approximately $122.2 million from our continuingoperations during the nine months ended September 30, 2002,primarily resulting from our government business, coupled with areduction of receivable balances of approximately$73.3 million, partially offset by decreases in other workingcapital components.  Our investing activities generated netcash of approximately $2.9 million, resulting primarily fromnet cash acquired of approximately $27.9 million, primarilyfrom the Jaycor acquisition which closed in late March 2002,offset by advances on the SureBeam line of credit of$20 million and other investments and capitalexpenditures.  Financing activities provided$13.3 million, primarily from an increase in our termdebt.

      Our financingactivities generated cash of $13.3 million, primarilyreflecting additions to debt of $20.0 million, resulting fromthe Company’s new credit facility, partially offset by thepayment of deferred financing costs of $8.8 million for theCompany’s new credit facility and other debt pay downs of$4.4 million.  Proceeds from stock issuances of$8.3 million were primarily received from the exercise ofstock options.

      OnMay 23, 2002, the Company entered into an agreement withWachovia Bank, National Association and Wachovia Securities for a$485 million credit facility from a syndicate of commercialbanks including Wachovia Securities acting as Sole Lead Arrangerand Wachovia Bank, National Association, as Administrative Agent,The Bank of Nova Scotia and Comerica Bank as Co-Syndication Agentsand Branch Banking Trust Company and Toronto Dominion Bank asCo-Documentation Agents and other financial institutions.  Theproceeds of the loan were used to repay outstanding indebtedness onthe Company’s $425 million credit facility arranged byCredit Suisse First Boston in February 2000.  The seniorsecured credit facility is secured by substantially all of our andour subsidiaries’ assets (other than the assets of SureBeam,LinCom Wireless, Sakon and our foreign operations) and guaranteedby substantially all of our subsidiaries (except for SureBeam,LinCom Wireless, Sakon and our foreign subsidiaries).  The$485 million facility is comprised of a seven-year term loanin an aggregate principal amount of $350 million and asix-year $135 million revolving credit facility.  Loansmade under the term loan amortize at 1.0% per year for years onethrough six, with the remaining 94% due in four equal quarterlypayments in year seven of the agreement.  Under the term loanand the revolving facility, the Company has the option to borrow atthe bank’s rate or at adjusted LIBOR plus, in each case, anapplicable margin based on our total debt to EBITDA ratio (earningsbefore interest and taxes and depreciation and amortization). The agreement contains financial covenants, as defined per thesenior secured credit agreement, which were comprised of thefollowing at September 30, 2002:  a maximum debt toEBITDA limit of 3.50 to 1, a minimum interest coverage ratio of2.75 to 1, a minimum fixed charge ratio of 1.20 to 1 and aminimum net worth (as defined) of $264 million. At September 30, 2002, total borrowings under our creditfacility were $350 million at a weighted average interest rateof 4.79%.  Commitments under letters of credit were$11.8 million at September 30, 2002, $10.9 millionof which reduce availability of our working capital line, resultingin $124.1 million of availability on our working capital lineat September 30, 2002.  Of the total borrowings,$3.5 million was short-term.  At September 30, 2002,the Company was in compliance with all financialcovenants. 

      Thecredit agreement of $50 million that Titan has executed withSureBeam is secured by a first priority lien on all ofSureBeam’s assets.  Titan is required to collaterallyassign its rights under this credit agreement and its security aswell as the license agreement it has with SureBeam to its seniorlenders under its senior secured credit facility.

      OnDecember 10, 1999, our wholly owned subsidiary, Titan Africa,Inc. ("Titan Africa"), in connection with its contract to build asatellite-based telephone system for its customer, the nationaltelephone company of Benin, Africa, entered into a Loan Facilityagreement for up to 30.0 billion Francs CFA (the currency of theAfrican Financial Community), equivalent to approximately$45.0 million U.S. dollars, with a syndicate of five banks,with Africa Merchant Bank as the arranger.  This medium termfinancing is a non-recourse loan to Titan Africa which isguaranteed by the national telephone company of Benin, Africa andsecured by the national telephone company's equipment and revenuesrelated to the project.  The facility has a fixed interestrate of 9.5% and will be repaid in seven equal semi-annual paymentsfrom the net receipts of this project, or by the OPT in the eventthat such receipts are not adequate to make these payments, whichcommenced on December 31, 2000.  The borrowings on thisfacility have been utilized to fund the subcontractor costsincurred by Alcatel of France, a major subcontractor to thisproject.  The non-Alcatel equipment provided by Titan Africawas financed through arrangement with the OPT whereby Titan Africawould be paid in seven equal semi-annual installments, whichcommenced on December 31, 2000.  Due to the approximatesix to nine month delay in the delivery of the system, which wasimpacted by the expansion of the original project to includeincreased GSM lines, increased capacity and capability of the VSATsites and an overall increase in lines in Benin, the AfricaMerchant Bank and Titan Africa collectively agreed to extend thedue date of the semi-annual principal payments until such time asthe service revenues have achieved certain levels, which occurredin mid 2002.  The terms of Titan Africa's agreement with thecustomer include, among other things, a revenue sharing of totalnet receipts earned on this project for up to a period of 9 yearsdepending upon when the equipment has been paid for.  As ofSeptember 30, 2002, approximately $40.5 million was drawnon this facility, which has been reflected as non-recourseliability in Non-current liabilities of discontinued operations inthe accompanying consolidated balance sheet.  The$40.5 million drawn on the facility reflects the amount thathas been funded by the Africa Merchant Bank to cover subcontractcosts.  In October 2000, we collected an $18 millionprogress payment from an African group related to the constructionfinancing of this project.  As of September 30, 2002, theoutstanding receivable balance, net of the non-recourse debt, dueon this contract was approximately $28.7 million. Management believes that the appropriate insurance policies are inplace to cover risk related to loss in Benin and certain otherforeign countries.

      In relationto our investment in Ivoire Telecom, we provided equipment with anapproximate aggregate value of $4.5 million and we committedto provide up to a maximum of $35 million for capitalexpenditures and other expenditures necessary to build out theIvoire Telecom network.  As of the end of 2001, this maximumcommitment had been substantially funded, resulting in aninvestment balance of approximately $50.0 million, whichincludes our initial equity investment of approximately$10.5 million and equipment we provided.  OnJuly 11, 2002, Titan made the decision to exit and dispose ofits international telecommunications business.  In connectionwith our attempts to sell this investment, Titan has yet to receiveany offers for its equity interest in Ivoire Telecom. Management believes this is due in part to current politicalinstability in certain countries in which Ivoire Telecom’ssubsidiaries operate.  Accordingly, Titan recorded animpairment equal to the carrying value of this investment as ofSeptember 30, 2002 (refer to Note 6 of the accompanyingfinancial statements for further discussion). 

      In connectionwith our agreement to acquire an additional 30.0% equity interestin Sakon, an additional $12.5 million of consideration was dueand payable upon certain revenue targets being attained. These targets were met in January 2001, and a$5.0 million installment was made in the second quarter of2001, a $3.75 million installment was made in the firstquarter of 2002, and the remaining $3.75 million was paid inJuly 2002.

      There are noTitan guarantees of debt, either directly or indirectly, associatedwith Ivoire Telecom or Sakon or any other unconsolidatedsubsidiaries other than approximately $1.3 million ofequipment financing.

      As part ofour strategy of seeking external financing to grow our commercialbusinesses, our discontinued SureBeam subsidiary completed itsinitial public offering of its common stock on March 16, 2001and raised gross proceeds of $67.0 million.  We extendeda credit facility for up to a maximum of $75.0 million underwhich SureBeam owed us approximately $73.0 million as ofDecember 31, 2001.  On December 31, 2001,$2.0 million of the note was exchanged for common stock ofSureBeam, at $10.505, the fifteen day trading average of SureBeamstock as of December 30, 2001, which resulted in the exchangefor 190,385 Class B common shares of SureBeam.  As ofDecember 31, 2001, SureBeam had approximately$73.0 million in principal outstanding under the note. On February 13, 2002, the remaining outstanding balance on thenote of $73.0 million was exchanged for equity of SureBeam, at$9.521 per share, the twenty day trading average of SureBeam stockas of February 12, 2002, which resulted in the exchange for4,441,496 Class A and 3,225,765 Class B common shares ofSureBeam.

      OnOctober 16, 2001, Titan adopted a definitive plan to spin offSureBeam in the form of a tax-free dividend to Titan stockholderswithin 12 months from that date.  The plan involved filing aletter ruling request with the Internal Revenue Service seekingapproval of the tax-free distribution.  Titan filed the letterruling request, and received a favorable determination inMay 2002.  Titan announced a completed spin-off onAugust 5, 2002.  Titan has purchased a world-wideperpetual and exclusive, non-royalty bearing license to useSureBeam's intellectual property for all applications and fieldsother than the food, animal hide and flower markets for thefollowing consideration: 1) Titan provides to SureBeam a$50.0 million senior secured line of credit, 2) the exchangeof the $75.0 million debt owed by SureBeam to Titan foradditional shares of Class B and Class A common stock of SureBeam,and 3) a cash payment of $8.0 million, with $4.0 millionpaid at September 30, 2001 and four installments of$1.0 million payable on each of March 31, 2002,June 30, 2002, September 30, 2002 and December 31,2002. 

      OnAugust 5, 2002, as part of our commitment to extend a$50.0 million line of credit to SureBeam, Titan executed a$50.0 million senior secured revolving loan commitment toSureBeam that allowed SureBeam to borrow up to $12.5 millionin the second quarter of 2002, up to $17.0 million in thethird quarter of 2002 (of which $20.0 million was borrowed bythe end of the third quarter) and up to $12.5 million perquarter beginning in the fourth quarter of 2002 through the fourthquarter of 2003, subject to the $50.0 million limitation onborrowing.  The amount available for borrowing in the second,third and fourth quarters of 2003 is based upon certain minimumratios of SureBeam’s earnings before interest, taxes,depreciation and amortization (EBITDA) as a percentage compared totarget EBITDA amounts in SureBeam’s financial plan submittedto Titan, but subject to a maximum of $12.5 million perquarter in 2003.  As of the end of the third quarter of 2002,SureBeam has borrowed $20 million on this facility and had$9.5 million unutilized amounts.  As of November 6,2002, SureBeam had borrowed $25.0 million under the creditfacility and Titan expects SureBeam to borrow additional funds inthe future.

      In addition,we have guaranteed certain lease obligations of SureBeam, andSureBeam is obligated to reimburse us for any payments we makeunder these guarantees.  Any guarantee payments we make reduceamounts available for future borrowing under the creditagreement.  Some of the guaranteed leases have longer termsthan the credit facility.  If Titan remains a guarantor at thematurity date for the credit facility, then SureBeam will enterinto a reimbursement agreement with Titan covering the outstandingguarantees.

      SureBeam isobligated to make quarterly principal payments on the creditfacility as follows:  13.75% of the outstanding principalbalance as of December 31, 2003 during each quarter in 2004;25% of the outstanding principal balance as of December 31,2004 during each quarter in 2005; and all remaining principal byDecember 31, 2005.  In addition, with some exceptions,SureBeam is obligated to use net proceeds from the sale of assetsand its securities to repay amounts advanced under thisfacility.  Interest is payable monthly beginning inJanuary 2003.  The credit agreement contains affirmativeand negative covenants, including covenants limitingSureBeam’s incurrence of debt, capital expenditures,operating expenses, investments, declaration of dividends and otherrestricted payments, sale of stock of subsidiaries andconsolidations and mergers.  The credit agreement, however,does not contain any financial covenants requiring SureBeam tomaintain specific financial ratios.  The credit agreement issecured by a first priority lien on all of SureBeam’sassets.  We are required to collaterally assign our rightsunder this credit agreement and our security as well as the LicenseAgreement to our senior lenders under our senior creditfacility. 

      Funding forthe advancement of our strategic goals, including acquisitions andcapital expenditures, is expected to continue. We plan to financethese requirements from a combination of sources, which includecash generation from our government businesses, our credit facilityand other available cash sources. Management believes that thecombination of our existing cash, amounts available under ourcredit facility and cash flow expected to be generated from ouroperations will be sufficient to fund planned investments andworking capital requirements for at least the next twelve months.However, we could elect, or we could be required, to raiseadditional funds during that period and we may need to raiseadditional capital in the future. Additional capital may notbe available at all, or may not be available on termsfavorable to us. Any additional issuance of equity or equity-linkedsecurities may result in substantial dilution to ourstockholders. Management is continually monitoring and reevaluatingits level of investment in all of its operations and the financingsources available to achieve our goals.

**Forward LookingInformation: Certain Cautionary Statements: "Safe Harbor" Statementunder the Private Securities Litigation Reform Act of1995:**

      Statementscontained in this Management's Discussion and Analysis of FinancialCondition and Results of Operations and otherwise which are nothistorical facts are forward looking statements within the meaningof Section 27A of the Securities Act of 1933 andSection 21E of the Securities Exchange Act of 1934. Examples of such forward looking statements include ourexpectations regarding our continuing funding for the advancementof our strategic goals, including acquisitions, the Company’sexpectations regarding the operations of Titan Wireless, that itbelieves that it will be able to complete planned exit actions inTitan Wireless, that it will collect remaining receivable balancesand sell GlobalNet in Titan Wireless, that the Company will be ableto sell or dispose of any assets which are not material to its corebusiness, and management’s belief as to the outcome ofpending litigation or claims and any other expressions of belief,expectation, anticipation, plan, strategies, intention,possibilities or elections, including statements of events orcontingencies that may or could occur or similarstatements.  Actual results may differ materially fromthose stated or implied in the forward looking statements. Further, certain forward looking statements are based uponassumptions of future events which may not prove to beaccurate and are subject to risks and uncertainties that couldcause actual results to differ materially from those set forth orimplied by forward looking statements.  These risks anduncertainties include but are not limited to those referred to inthe Company's Annual Report on Form 10-K/A for the year endedDecember 31, 2001, and in the Company’s RegistrationStatement on Form S-4, as amended, filed with the Securities andExchange Commission on August 8, 2002, including its abilityto access the capital markets, dependence on continued funding ofU.S. Department of Defense and federal civilian agency programs,that the Government will fund, continue to make awards or exerciseoptions, and issue task orders against the potential fundingceiling of contracts, contract termination risks, risks associatedwith acquiring other companies, including integration risks, therisks of doing business in developing countries and internationalmarkets, including foreign currency risks, and other risksdescribed in the Company's Securities and Exchange Commissionfilings.

**Item 4.  Controls andProcedures.**

      Evaluation ofDisclosure Control and Procedures.

      Under thesupervision and with the participation of our executive management,including our Chief Executive Officer and Chief Financial Officer,we performed an evaluation of the effectiveness and design of ourdisclosure controls and procedures within 90 days before the filingdate of this quarterly report.  Based on that evaluation, ourexecutive management, including our Chief Executive Officer and ourChief Financial Officer, concluded that our disclosure controls andprocedures are effective.

      Changes ininternal controls.

      There havebeen no significant changes in our internal controls or proceduresor other factors that could significantly affect our internalcontrols.

**PARTII—OTHER INFORMATIONTHE TITAN CORPORATION**

**Item 1.  LegalProceedings.**

      OnJanuary 6, 2000, Ion Beam Applications s.a., a Belgiancorporation, and some of its U.S. subsidiaries ("IBA") filed anaction for declaratory judgment in a federal court in Virginiaagainst Titan and the SureBeam Corporation ("SureBeam") relating toSureBeam's patents for SureBeam systems.  The action attackedthe validity of SureBeam's core patent, sought a declaration thatIBA and its customers had not infringed any of the 62 claims inSureBeam's patent, and alleged that Titan and SureBeam engaged inunfair competition and that Titan and SureBeam's conductconstituted patent misuse.  The case was moved to the federalcourt in San Diego.  On November 22, 2000, IBA filed anamended complaint alleging, in addition to the original claims,that Titan and SureBeam engaged in false advertising,monopolization, restraint on trade and unfair businesspractices.

      OnJanuary 25, 2002, Titan and SureBeam announced that theysettled the litigation with IBA.  Under the settlement, IBAdropped all the claims it made against Titan and SureBeam in thelitigation, including IBA's challenge to the validity andenforceability of SureBeam's core patent.  Titan and SureBeamagreed that IBA and its customers may continue to operate oruse IBA's electronic irradiation facility in Bridgeport, NewJersey.  The settlement terms include, among other things,that IBA will purchase its requirements in the United States fore-beam and x-ray systems for use for processing food and sanitizingmail from Titan and SureBeam during the next four years, providedTitan and SureBeam offer competitive terms.  Titan andSureBeam also agreed to purchase their requirements of acceleratorswith above 150 kilowatts of power from IBA during the samefour-year period, provided IBA offers competitive terms. Other terms of the settlement agreement are immaterial and were notdiscloseable.

      OnAugust 16, 2002, Perimex International Corporation filed acomplaint against Titan, Titan Wireless and a former Titan Wirelessemployee in San Diego Superior Court in San Diego,California.  The complaint alleges breach of contract, breachof the covenant of good faith and fair dealing, intentionalinterference with existing contractual relationships andprospective business advantage and violation of the Californiaunfair competition law arising from an alleged failure of TitanWireless to enter a joint venture with Perimex to provide wirelesstelecommunication services in Argentina and other related allegedmisconduct.  The complaint seeks damages of$53.65 million and seeks injunctive relief prohibiting Titanand Titan Wireless from transferring any of Titan Wireless’assets.  The Court recently denied Perimex’s request fora preliminary injunction, sustained Titan and Titan Wireless’demurrer as to all causes of action in the complaint and grantedPerimex leave to amend the complaint.  The court also orderedPerimex to post a bond for $0.09 million to secure payment of Titan andTitan Wireless’ costs if they prevail.  The Companybelieves that Perimex’s claims are without merit and theCompany intends to defend its position vigorously.

      In theordinary course of business, defense contractors are subject tomany levels of audit and investigation by various governmentagencies. TheCompany has received a grand jury subpoena from the AntitrustDivision of the Department of Justice requesting the production ofdocuments relating to information technology services performed forthe Air Force at Hanscom Air Force Base in Massachusetts.  TheCompany has been informed that other companies who have performedsuch services have received subpoenas as well.  The Companyintends to cooperate fully with the investigation. 

      Further, we are subject toclaims and from time to time are named as defendants in varioustypes of legal proceedings.  We may also assert claimsfrom time to time. Based upon current information and review, in the opinion of management, the amountof ultimate liability or recovery with respect to these actionswill not materially affect our financial position or results ofoperations taken as a whole.  However, our evaluation of thelikely impact of these actions could change in the future and anunfavorable outcome, depending upon the amount and timing, couldhave a material adverse effect on our results of operations or ourcash flows in a future period.

**Item 2.  Changes inSecurities. **
|        | (a)       | Conversion Rights of TitanCumulative Convertible Preferred Stock.                                                                                                                                                                                                                                                                                                                                              |
|--------------------------------------|-----------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                 |                                    |                                                                                                                                                                                                                                                                                                                                                                                                           |
|                                 |                                    | As a result of thespin-off of SureBeam by Titan, each outstanding share of cumulativeconvertible preferred stock, formerly convertible into Titan commonstock, at the option of the holder, at a rate of .667 share ofcommon stock for each share of cumulative convertible preferredstock, is now convertible at a rate of .781 share of common stockfor each share of cumulative convertible preferredstock. |
|                                 |                                    |                                                                                                                                                                                                                                                                                                                                                                                                           |
|                                 | (b)       | Conversion Rights andRedemption Rights of Convertible Trust Preferred Securities(Remarketable Term Income Deferrable Equity Securities, or HIGHTIDESsm).                                                                                                                                                                                                                                                       |
|                                 |                                    |                                                                                                                                                                                                                                                                                                                                                                                                           |
|                                 |                                    | As a result of thespin-off of SureBeam by Titan, each HIGH TIDES, formerlyconvertible into 1.0076 shares of Titan common stock, is nowconvertible into 1.3553 shares of Titan common stock.                                                                                                                                                                                                                    |
|                                 |                                    |                                                                                                                                                                                                                                                                                                                                                                                                           |
|                                 |                                    |                                                                                                                                                                                                                                                                                                                                                                                                                |

**Item 6.  Exhibits and Reports on Form8-K.**

| a.                                                              |        | List ofexhibits:                                                                                                                               |
|--------------------------------------------------------------------------------|--------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                           |
|               | 99.1                                 |                                                                                                                  | Certification of PeriodicFinancial Reports pursuant to 18 U.S.C. Section 1350, as adoptedpursuant to Section 906 of the Sarbanes-Oxley Act of2002. |
|                                                                                |                                      |                                            |
| b.                                                                             |                                 | During the three monthsended September 30, 2002, and through the date of this filing,the Company filed the following Forms 8-K and 8-K/A: |
|                                                                           |
|                                                                           | (1)                                  |                                                                                                                                           | Current report on Form8-K/A dated May 23, 2002, and filed on August 9, 2002, toprovide as an exhibit Annex I to Exhibit D to theRegistrant’s Senior Secured Credit Agreement previouslyfiled. |
|                                                                           |
|                                                                           | (2)                                  |                                                                                                                                           | Current Report on Form 8-Kdated July 30, 2002, and filed on August 1, 2002, toreport that the Company announced the ratio of SureBeam Corporationshares owned by the Company to the number of Company common sharesoutstanding.  The ratio will be used to determine the SureBeamCorporation dividend to be received by the holders of Titan commonstock in connection with the tax-free spin-off of SureBeamCorporation by the Company.  The distribution date will beAugust 5, 2002. |
|                                                                           |
|                                                                           | (3)                                  |                                                                                                                                           | Current Report on Form 8-Kdated August 2, 2002, and filed on August 14, 2002, toreport that the Company had entered into a $50 million SeniorSecured Credit Agreement with SureBeam Corporation in connectionwith the distribution of the Company’s majority ownership ofSureBeam to Titan stockholders (the “Spin-off”) and tofile certain exhibits to that Credit Agreement and other agreementsentered into between the Company and SureBeam in connection withthe Spin-off of SureBeam on August 5, 2002. |
|                                                                                |                                      |                                                                                                                                                |                |

**THE TITAN CORPORATIONSIGNATURES**

      Pursuant tothe requirements of the Securities Exchange Act of 1934, theRegistrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized.

| Dated:  November 14,2002 |   | THE TITANCORPORATION |
|-----------------------------------------|--------|----------------------|
|                                    |   | By:                  | /s/ GENE W. RAY |
|                                         |        |                      |  |
|                                         |        |                      | Gene W.Ray*Chief Executive Officer, Chairman of the Board* |
|                                    |   | By:                  | /s/ MARK W. SOPP |
|                                         |        |                      |  |
|                                         |        |                      | Mark W.Sopp*Senior Vice President, Chief Financial Officer* |
|                                    |   | By:                  | /s/ DEANNA J. HOM |
|                                         |        |                      |  |
|                                         |        |                      | Deanna J.Hom*Vice President, Corporate Controller (Principal Accounting Officer)* |

CERTIFICATION

I, Gene W. Ray, certifythat:

1. I havereviewed this quarterly report on Form 10-Q of The TitanCorporation;

2. Basedon my knowledge, this quarterly report does not contain any untruestatement of a material fact or omit to state a material factnecessary to make the statements made, in light of thecircumstances under which such statements were made, not misleadingwith respect to the period covered by this quarterlyreport;

3. Basedon my knowledge, the financial statements, and other financialinformation included in this quarterly report, fairly present inall material respects the financial condition, results ofoperations and cash flows of The Titan Corporation as of, and for,the periods presented in this quarterly report;

4. TitanCorporation’s other certifying officers and I are responsiblefor establishing and maintaining disclosure controls and procedures(as defined in Exchange Act Rules 13a-14 and 15d-14) for theregistrant and we have:

a)designed such disclosure controls and procedures to ensure thatmaterial information relating to the registrant, including itsconsolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which thisquarterly report is being prepared;

b)evaluated the effectiveness of the registrant's disclosure controlsand procedures as of a date within 90 days prior to the filing dateof this quarterly report (the "Evaluation Date"); and

c)presented in this quarterly report our conclusions about theeffectiveness of the disclosure controls and procedures based onour evaluation as of the Evaluation Date;

5. TitanCorporation’s other certifying officers and I have disclosed,based on our most recent evaluation, to the registrant's auditorsand the audit committee of registrant's board of directors (orpersons performing the equivalent function):

a) allsignificant deficiencies in the design or operation of internalcontrols which could adversely affect the registrant's ability torecord, process, summarize and report financial data and haveidentified for the registrant's auditors any material weaknesses ininternal controls; and

b) anyfraud, whether or not material, that involves management or otheremployees who have a significant role in the registrant's internalcontrols; and

6. TitanCorporation's other certifying officers and I have indicated inthis quarterly report whether or not there were significant changesin internal controls or in other factors that could significantlyaffect internal controls subsequent to the date of our most recentevaluation, including any corrective actions with regard tosignificant deficiencies and material weaknesses.

Date:November 14, 2002

| /s/ GENE W. RAY                    |                                                                                                                                                                                                                                                                                                                                         |                         |
|------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------|
|                                    |                                                                                                                       |
| Gene W.Ray Chief Executive Officer |                                                                |

CERTIFICATION

I, Mark W. Sopp, certifythat:

1. I havereviewed this quarterly report on Form 10-Q of The TitanCorporation;

2. Basedon my knowledge, this quarterly report does not contain any untruestatement of a material fact or omit to state a material factnecessary to make the statements made, in light of thecircumstances under which such statements were made, not misleadingwith respect to the period covered by this quarterlyreport;

3. Basedon my knowledge, the financial statements, and other financialinformation included in this quarterly report, fairly present inall material respects the financial condition, results ofoperations and cash flows of The Titan Corporation as of, and for,the periods presented in this quarterly report;

4. TitanCorporation’s other certifying officers and I are responsiblefor establishing and maintaining disclosure controls and procedures(as defined in Exchange Act Rules 13a-14 and 15d-14) for theregistrant and we have:

a)designed such disclosure controls and procedures to ensure thatmaterial information relating to the registrant, including itsconsolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which thisquarterly report is being prepared;

b)evaluated the effectiveness of the registrant's disclosure controlsand procedures as of a date within 90 days prior to the filing dateof this quarterly report (the "Evaluation Date"); and

c)presented in this quarterly report our conclusions about theeffectiveness of the disclosure controls and procedures based onour evaluation as of the Evaluation Date;

5. TitanCorporation’s other certifying officers and I have disclosed,based on our most recent evaluation, to the registrant's auditorsand the audit committee of registrant's board of directors (orpersons performing the equivalent function):

a) allsignificant deficiencies in the design or operation of internalcontrols which could adversely affect the registrant's ability torecord, process, summarize and report financial data and haveidentified for the registrant's auditors any material weaknesses ininternal controls; and

b) anyfraud, whether or not material, that involves management or otheremployees who have a significant role in the registrant's internalcontrols; and

6. TitanCorporation's other certifying officers and I have indicated inthis quarterly report whether or not there were significant changesin internal controls or in other factors that could significantlyaffect internal controls subsequent to the date of our most recentevaluation, including any corrective actions with regard tosignificant deficiencies and material weaknesses.

Date:November 14, 2002

| /s/ MARK W. SOPP                     |                                                                                                                                                                                                                                                                                                                                         |                         |
|--------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------|
|                                      |                                                                                                                       |
| Mark W.Sopp**Chief Financial Officer |                                                                |

QuickLinks

Part I — FINANCIALINFORMATION

        Item1.  Financial Statements

                  CONSOLIDATED STATEMENTS OFOPERATIONS                  CONSOLIDATED BALANCE SHEETS                  CONSOLIDATED STATEMENTS OF CASHFLOWS                  CONSOLIDATED STATEMENTS OFSTOCKHOLDERS' EQUITY

                  NOTES TO CONSOLIDATED FINANCIALSTATEMENTS

        Item 2.  MANAGEMENT'S DISCUSSION ANDANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS        Item 4.  Controls andProcedures.

Part II — OTHERINFORMATION THE TITAN CORPORATION

        Item 1.  LegalProceedings.        Item 2.  Changes in Securities.        Item 6.  Exhibits andReports on Form 8-K.

SIGNATURES