SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

|ý                                                             | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|------------------------------------------------------------- | ----------------------------------------------------------------------------------------
|For the quarterly period ended June 30, 2004                 
|or                                                           
|o                                                             | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|For the transition period
from                             to

Commission file number 1-6035

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THE TITAN 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.)
|--------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------
|3033 Science Park Road
San Diego, California 92121-1199(Address of principal executive offices, zip code)
|(Registrant's telephone number, including area code)(858) 552-9500                                       

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange
Act). Yes ý    No o

The number of shares of registrant's common stock outstanding at July 28, 2004, was 84,363,678.



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Part IFINANCIAL INFORMATION

Item 1. Financial Statements

THE TITAN CORPORATION  CONSOLIDATED STATEMENTS OF OPERATIONS  (Unaudited)  (in thousands, except per share data)

|                                                               |                                                       | Three months ended
June 30, |         | Six months ended
June 30, |        
|-------------------------------------------------------------- | ----------------------------------------------------- | --------------------------- | ------- | ------------------------- | -------
|
|Revenues                                                       |                                                       | $                           | 514,932 |                           | $      
|                                                               |                                                       |                             |         |                           |        
|Costs and expenses:                                            |                                                       |                             |         |                           |        
|                                                               | Cost of revenues                                      |                             |         | 438,082                   |        
|                                                               | Selling, general and administrative                   |                             |         | 38,235                    |        
|                                                               | Research and development                              |                             |         | 4,695                     |        
|                                                               | Merger, investigation and settlement costs (Note 2)   |                             |         | 34,332                    |        
|                                                               | Asset impairment charges (Note 3)                     |                             |         | 22,695                    |        
|                                                               |                                                       |                             |         |                           |        
|                                                               |                                                       | Total costs and expenses    |         |                           | 538,039
|                                                               |                                                       |                             |         |                           |        
|Operating profit (loss)                                        |                                                       |                             | (23,107 | )                         |        
|Interest expense                                               |                                                       |                             | (9,158  | )                         |        
|Interest income                                                |                                                       |                             | 240     |                           |        
|Debt extinguishment costs (Note 6)                             |                                                       |                             |        |                           |        
|Net gain on sale of assets (Note 7)                            |                                                       |                             |        |                           |        
|                                                               |                                                       |                             |         |                           |        
|Income (loss) from continuing operations before income taxes   |                                                       |                             | (32,025 | )                         |        
|Income tax provision (benefit)                                 |                                                       |                             | (2,596  | )                         |        
|                                                               |                                                       |                             |         |                           |        
|Income (loss) from continuing operations                       |                                                       |                             | (29,429 | )                         |        
|Loss from discontinued operations, net of tax benefit (Note 5) |                                                       |                             | (37,123 | )                         |        
|                                                               |                                                       |                             |         |                           |        
|Net income (loss)                                              |                                                       |                             | (66,552 | )                         |        
|Dividend requirements on preferred stock                       |                                                       |                             |        |                           |        
|                                                               |                                                       |                             |         |                           |        
|Net income (loss) applicable to common stock                   |                                                       | $                           | (66,552 | )                         | $      
|                                                               |                                                       |                             |         |                           |        
|Basic earnings (loss) per share:                               |                                                       |                             |         |                           |        
|                                                               | Income (loss) from continuing operations              |                             | $       | (0.35                     | )      
|                                                               | Loss from discontinued operations, net of tax benefit |                             |         | (0.44                     | )      
|                                                               |                                                       |                             |         |                           |        
|                                                               | Net income (loss)                                     |                             | $       | (0.79                     | )      
|                                                               |                                                       |                             |         |                           |        
|                                                               | Weighted average shares                               |                             |         | 83,970                    |        
|                                                               |                                                       |                             |         |                           |        
|Diluted earnings (loss) per share:                             |                                                       |                             |         |                           |        
|                                                               | Income (loss) from continuing operations              |                             | $       | (0.35                     | )      
|                                                               | Loss from discontinued operations, net of tax benefit |                             |         | (0.44                     | )      
|                                                               |                                                       |                             |         |                           |        
|                                                               | Net income (loss)                                     |                             | $       | (0.79                     | )      
|                                                               |                                                       |                             |         |                           |        
|                                                               | Weighted average shares                               |                             |         | 83,970                    |        
|                                                               |                                                       |                             |         |                           |        

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

1

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THE TITAN CORPORATION  CONSOLIDATED BALANCE SHEETS  (in thousands, except share and per share data)

|                                                              |                                                                                                                       | June 30,
2004                                                                                                                            |         | December 31,
2003 |          
|------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------- | ------- | ----------------- | ---------
|
|Assets                                                        |                                                                                                                       |                                                                                                                                          |         |                   |          
|Current Assets:                                               |                                                                                                                       |                                                                                                                                          |         |                   |          
|                                                              | Cash and cash equivalents                                                                                             |                                                                                                                                          | $       | 25,427            |          
|                                                              | Accounts receivablenet                                                                                               |                                                                                                                                          |         | 435,066           |          
|                                                              | Inventories                                                                                                           |                                                                                                                                          |         | 21,002            |          
|                                                              | Prepaid expenses and other                                                                                            |                                                                                                                                          |         | 31,759            |          
|                                                              | Deferred income taxes                                                                                                 |                                                                                                                                          |         | 103,630           |          
|                                                              | Current assets of discontinued operations (Note 5)                                                                    |                                                                                                                                          |         | 38,924            |          
|                                                              |                                                                                                                       |                                                                                                                                          |         |                   |          
|                                                              |                                                                                                                       | Total current assets                                                                                                                     |         |                   | 655,808  
|Property and equipmentnet                                    |                                                                                                                       |                                                                                                                                          | 49,472  |                   |          
|Goodwill                                                      |                                                                                                                       |                                                                                                                                          | 462,811 |                   |          
|Intangible assets                                             |                                                                                                                       |                                                                                                                                          | 21,944  |                   |          
|Other assetsnet                                              |                                                                                                                       |                                                                                                                                          | 41,676  |                   |          
|Deferred income taxes                                         |                                                                                                                       |                                                                                                                                          | 62,781  |                   |          
|Non-current assets of discontinued operations (Note 5)        |                                                                                                                       |                                                                                                                                          | 5,304   |                   |          
|                                                              |                                                                                                                       |                                                                                                                                          |         |                   |          
|                                                              |                                                                                                                       | Total assets                                                                                                                             |         | $                 | 1,299,796
|                                                              |                                                                                                                       |                                                                                                                                          |         |                   |          
|Liabilities and Stockholders' Equity                          |                                                                                                                       |                                                                                                                                          |         |                   |          
|Current Liabilities:                                          |                                                                                                                       |                                                                                                                                          |         |                   |          
|                                                              | Current portion of amounts outstanding under line of credit                                                           |                                                                                                                                          | $       | 3,500             |          
|                                                              | Accounts payable                                                                                                      |                                                                                                                                          |         | 92,524            |          
|                                                              | Current portion of long-term debt                                                                                     |                                                                                                                                          |         | 1,102             |          
|                                                              | Accrued compensation and benefits                                                                                     |                                                                                                                                          |         | 74,899            |          
|                                                              | Other accrued liabilities                                                                                             |                                                                                                                                          |         | 116,573           |          
|                                                              | Current liabilities of discontinued operations (Note 5)                                                               |                                                                                                                                          |         | 21,584            |          
|                                                              |                                                                                                                       |                                                                                                                                          |         |                   |          
|                                                              | Total current liabilities                                                                                             |                                                                                                                                          |         | 310,182           |          
|                                                              |                                                                                                                       |                                                                                                                                          |         |                   |          
|Long-term portion of amounts outstanding under line of credit |                                                                                                                       |                                                                                                                                          | 390,375 |                   |          
|                                                              |                                                                                                                       |                                                                                                                                          |         |                   |          
|Senior subordinated notes                                     |                                                                                                                       |                                                                                                                                          | 200,000 |                   |          
|                                                              |                                                                                                                       |                                                                                                                                          |         |                   |          
|Other long-term debt                                          |                                                                                                                       |                                                                                                                                          | 508     |                   |          
|                                                              |                                                                                                                       |                                                                                                                                          |         |                   |          
|Other non-current liabilities                                 |                                                                                                                       |                                                                                                                                          | 54,956  |                   |          
|                                                              |                                                                                                                       |                                                                                                                                          |         |                   |          
|Non-current liabilities of discontinued operations (Note 5)   |                                                                                                                       |                                                                                                                                          | 31,215  |                   |          
|                                                              |                                                                                                                       |                                                                                                                                          |         |                   |          
|Commitments and contingencies (Note 8)                        |                                                                                                                       |                                                                                                                                          |         |                   |          
|Stockholders' Equity:                                         |                                                                                                                       |                                                                                                                                          |         |                   |          
|                                                              | Preferred stock: $1 par value, authorized 5,000,000 shares:                                                           |                                                                                                                                          |         |                   |          
|                                                              |                                                                                                                       | Cumulative convertible, $0 and $13,700 liquidation preference, designated 1,068,102 shares: -0-and 686,829 shares issued and outstanding |         |                   |         
|                                                              |                                                                                                                       | Series A junior participating: designated 1,000,000 authorized shares: None issued                                                       |         |                   |         
|                                                              | Common stock: $.01 par value, authorized 200,000,000 shares, issued and outstanding: 84,624,156 and 82,182,250 shares |                                                                                                                                          |         | 846               |          
|                                                              | Capital in excess of par value                                                                                        |                                                                                                                                          |         | 675,100           |          
|                                                              | Deferred compensation                                                                                                 |                                                                                                                                          |         | (731              | )        
|                                                              | Accumulated deficit                                                                                                   |                                                                                                                                          |         | (361,714          | )        
|                                                              | Accumulated other comprehensive income (loss)                                                                         |                                                                                                                                          |         |                  |          
|                                                              | Treasury stock (271,074 and 265,124 shares), at cost                                                                  |                                                                                                                                          |         | (941              | )        
|                                                              |                                                                                                                       |                                                                                                                                          |         |                   |          
|                                                              |                                                                                                                       | Total stockholders' equity                                                                                                               |         |                   | 312,560  
|                                                              |                                                                                                                       |                                                                                                                                          |         |                   |          
|                                                              |                                                                                                                       | Total liabilities and stockholders' equity                                                                                               |         | $                 | 1,299,796
|                                                              |                                                                                                                       |                                                                                                                                          |         |                   |          

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

2

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THE TITAN CORPORATION  CONSOLIDATED STATEMENTS OF CASH FLOWS  (Unaudited)  (in thousands of dollars)

|                                                                                                                                                                             |                                                                                     | Six months ended
June 30,         |        
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------- | --------------------------------- | -------
|
|Cash Flows from Operating Activities:                                                                                                                                        |                                                                                     |                                   |        
|Income (loss) from continuing operations                                                                                                                                     |                                                                                     | $                                 | (25,808
|Adjustments to reconcile income (loss) from continuing operations to net cash provided by (used for) operating activities, net of effects of net assets and businesses sold: |                                                                                     |                                   |        
|                                                                                                                                                                             | Accrual for estimated settlement charge (Note 2)                                    |                                   |        
|                                                                                                                                                                             | Asset impairment charges (Note 3)                                                   |                                   |        
|                                                                                                                                                                             | Debt extinguishment costs                                                           |                                   |        
|                                                                                                                                                                             | Depreciation and amortization                                                       |                                   |        
|                                                                                                                                                                             | Deferred income taxes and other                                                     |                                   |        
|                                                                                                                                                                             | Deferred compensation                                                               |                                   |        
|                                                                                                                                                                             | Changes in operating assets and liabilities, net of the effects of net assets sold: |                                   |        
|                                                                                                                                                                             |                                                                                     | Accounts receivable               |        
|                                                                                                                                                                             |                                                                                     | Inventories                       |        
|                                                                                                                                                                             |                                                                                     | Prepaid expenses and other assets |        
|                                                                                                                                                                             |                                                                                     | Accounts payable                  |        
|                                                                                                                                                                             |                                                                                     | Accrued compensation and benefits |        
|                                                                                                                                                                             |                                                                                     | Other liabilities                 |        
|                                                                                                                                                                             |                                                                                     |                                   |        
|Net cash provided by (used for) continuing operations                                                                                                                        |                                                                                     |                                   | (37,081
|                                                                                                                                                                             |                                                                                     |                                   |        
|Loss from discontinued operations                                                                                                                                            |                                                                                     |                                   | (37,685
|Asset impairment charges (Note 5)                                                                                                                                            |                                                                                     |                                   | 43,183 
|Proceeds from divestiture of businesses (Note 5)                                                                                                                             |                                                                                     |                                   | 6,000  
|Holdback payment related to prior year acquisition (Note 7)                                                                                                                  |                                                                                     |                                   |       
|Changes in net assets and liabilities of discontinued operations                                                                                                             |                                                                                     |                                   | (9,205 
|                                                                                                                                                                             |                                                                                     |                                   |        
|Net cash provided by (used for) discontinued operations                                                                                                                      |                                                                                     |                                   | 2,293  
|                                                                                                                                                                             |                                                                                     |                                   |        
|Net cash provided by (used for) operating activities                                                                                                                         |                                                                                     |                                   | (34,788
|                                                                                                                                                                             |                                                                                     |                                   |        
|Cash Flows from Investing Activities:                                                                                                                                        |                                                                                     |                                   |        
|Capital expenditures                                                                                                                                                         |                                                                                     |                                   | (16,776
|Proceeds from sale of investments and net assets                                                                                                                             |                                                                                     |                                   | 2,880  
|Earnout payments related to prior year acquisitions (Note 7)                                                                                                                 |                                                                                     |                                   | (2,460 
|Other investments                                                                                                                                                            |                                                                                     |                                   | (1,243 
|Other                                                                                                                                                                        |                                                                                     |                                   | 1,103  
|                                                                                                                                                                             |                                                                                     |                                   |        
|Net cash used for investing activities                                                                                                                                       |                                                                                     |                                   | (16,496
|                                                                                                                                                                             |                                                                                     |                                   |        
|Cash Flows from Financing Activities:                                                                                                                                        |                                                                                     |                                   |        
|Extinguishment of High Tides and other debt reductions                                                                                                                       |                                                                                     |                                   | (241   
|Issuance of senior subordinated notes and other debt additions                                                                                                               |                                                                                     |                                   | 49,125 
|Preferred stock redemption (Note 4)                                                                                                                                          |                                                                                     |                                   | (12,518
|Deferred debt issuance costs                                                                                                                                                 |                                                                                     |                                   |       
|Debt extinguishment costs                                                                                                                                                    |                                                                                     |                                   |       
|Decrease in restricted cash                                                                                                                                                  |                                                                                     |                                   |       
|Proceeds from exercise of stock options and other                                                                                                                            |                                                                                     |                                   | 13,566 
|Dividends paid                                                                                                                                                               |                                                                                     |                                   | (190   
|Other                                                                                                                                                                        |                                                                                     |                                   | (220   
|                                                                                                                                                                             |                                                                                     |                                   |        
|Net cash provided by (used for) financing activities                                                                                                                         |                                                                                     |                                   | 49,522 
|                                                                                                                                                                             |                                                                                     |                                   |        
|Effect of exchange rate changes on cash                                                                                                                                      |                                                                                     |                                   | 215    
|                                                                                                                                                                             |                                                                                     |                                   |        
|Net decrease in cash and cash equivalents                                                                                                                                    |                                                                                     |                                   | (1,547 
|Cash and cash equivalents at beginning of period                                                                                                                             |                                                                                     |                                   | 26,974 
|                                                                                                                                                                             |                                                                                     |                                   |        
|Cash and cash equivalents at end of period                                                                                                                                   |                                                                                     | $                                 | 25,427 
|                                                                                                                                                                             |                                                                                     |                                   |        

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

3

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THE TITAN CORPORATION  CONSOLIDATED 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 |         | Accumulated
Deficit |   | Accumulated
Other
Comprehensive
Income (Loss) |       | Treasury
Stock |          | Total   |  
|------------------------------ | ------------------------------------------------------------------- | -------------------------------------- | --- | ------------ | - | ------------------------------ | -- | ----------------------- | ------- | ------------------- | - | --------------------------------------------- | ----- | -------------- | -------- | ------- | -
|Six Months Ended June 30, 2004 |                                                                     |                                        |     |              |   |                                |    |                         |         |                     |   |                                               |       |                |          |         |  
|Balances at December 31, 2003  |                                                                     | $                                      | 687 |              | $ | 822                            |    | $                       | 670,733 |                     | $ | (1,584                                        | )     | $              | (298,221 | )       | $
|                               | Exercise of stock options and other                                 |                                        |     |              |   |                                | 21 |                         |         | 13,673              |   |                                               |       |                |          |         |  
|                               | Redemption of preferred stock (Note 4)                              |                                        |     | (626         | ) |                                |    |                         |         | (11,892             | ) |                                               |       |                |          |         |  
|                               | Conversion of preferred stock                                       |                                        |     | (61          | ) |                                |    |                         |         | 61                  |   |                                               |       |                |          |         |  
|                               | Amortization of deferred compensation                               |                                        |     |              |   |                                |    |                         |         |                     |   |                                               | 853   |                |          |         |  
|                               | Foreign currency translation adjustment                             |                                        |     |              |   |                                |    |                         |         |                     |   |                                               |       |                |          |         |  
|                               | Shares contributed to employee benefit plans                        |                                        |     |              |   |                                | 3  |                         |         | 2,715               |   |                                               |       |                |          |         |  
|                               | Dividends on preferred stockCumulative convertible, $.28 per share |                                        |     |              |   |                                |    |                         |         | (190                | ) |                                               |       |                |          |         |  
|                               | Net loss                                                            |                                        |     |              |   |                                |    |                         |         |                     |   |                                               |       |                |          | (63,493 | )
|                               |                                                                     |                                        |     |              |   |                                |    |                         |         |                     |   |                                               |       |                |          |         |  
|Balances at June 30, 2004      |                                                                     | $                                      |    |              | $ | 846                            |    | $                       | 675,100 |                     | $ | (731                                          | )     | $              | (361,714 | )       | $
|                               |                                                                     |                                        |     |              |   |                                |    |                         |         |                     |   |                                               |       |                |          |         |  
|Six Months Ended June 30, 2003 |                                                                     |                                        |     |              |   |                                |    |                         |         |                     |   |                                               |       |                |          |         |  
|Balances at December 31, 2002  |                                                                     | $                                      | 688 |              | $ | 783                            |    | $                       | 647,752 |                     | $ | (8,791                                        | )     | $              | (327,318 | )       | $
|                               | Exercise of stock options and other                                 |                                        |     |              |   |                                | 8  |                         |         | 2,060               |   |                                               |       |                |          |         |  
|                               | Return of shares related to acquisition (See Note 7)                |                                        |     |              |   |                                |    |                         |         | (2,000              | ) |                                               |       |                |          |         |  
|                               | Amortization of deferred compensation                               |                                        |     |              |   |                                |    |                         |         |                     |   |                                               | 5,680 |                |          |         |  
|                               | Foreign currency translation adjustment                             |                                        |     |              |   |                                |    |                         |         |                     |   |                                               |       |                |          |         |  
|                               | Shares contributed to employee benefit plans                        |                                        |     |              |   |                                | 6  |                         |         | 5,102               |   |                                               |       |                |          |         |  
|                               | Dividends on preferred stockCumulative convertible, $.50 per share |                                        |     |              |   |                                |    |                         |         | (344                | ) |                                               |       |                |          |         |  
|                               | Net income                                                          |                                        |     |              |   |                                |    |                         |         |                     |   |                                               |       |                |          | 12,866  |  
|                               |                                                                     |                                        |     |              |   |                                |    |                         |         |                     |   |                                               |       |                |          |         |  
|Balances at June 30, 2003      |                                                                     | $                                      | 688 |              | $ | 797                            |    | $                       | 652,570 |                     | $ | (3,111                                        | )     | $              | (314,452 | )       | $
|                               |                                                                     |                                        |     |              |   |                                |    |                         |         |                     |   |                                               |       |                |          |         |  

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

4

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THE TITAN CORPORATION  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  June 30, 2004  (in thousands, except per share data, or as otherwise noted)

Note (1) Basis of Financial Statement Preparation

The accompanying consolidated financial information of The Titan Corporation and its subsidiaries (Titan or the Company) should be read in conjunction with the
Notes to Consolidated Financial Statements contained in our Annual Report on Form 10-K to the Securities and Exchange Commission for the year ended December 31, 2003. The
accompanying financial information includes substantially all subsidiaries on a consolidated basis and all normal recurring adjustments which are considered necessary by the Company's management for a
fair presentation of the financial position, results of operations and cash flows for the periods presented. However, these results are not necessarily indicative of results for a full fiscal year.
Additionally, certain prior period amounts have been reclassified to conform to the current period presentation.

The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

Prior
to the discontinuance of certain operations in 2002, Titan grouped its businesses into five business segmentsTitan Systems, Titan Wireless, Software Systems (including
Cayenta), Titan Technologies and the SureBeam business. Titan is no longer reporting the results of operations by these segments, however, reference may be made to these segments in discussions of
other historical information. In accordance with Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosures about Segments of an Enterprise and Related Information," substantially
all of Titan's operations are aggregated into one reportable segment given the similarities of economic characteristics between the operations and the common nature of the products, services, and
customers.

Significant Accounting Pronouncements

Stock-Based Compensation.As allowed by SFAS No. 123, "Accounting for Stock-Based
Compensation", Titan has elected to continue to apply the intrinsic value based method of accounting for stock options and has adopted the disclosure only provisions of the fair value method contained
in SFAS No. 123. Compensation cost, if any, is measured as the excess of the quoted market price of Titan's stock on the date of grant over the exercise price of the grant. Had compensation
cost for Titan stock-based

5

---



compensation
plans been determined based on the fair value method at the grant dates for awards under those plans, our results of operations would have been reduced to the pro forma amounts indicated
below:

|                                                                                                                                    |                     | Three months ended
June 30, |         | Six months ended
June 30, |  
|----------------------------------------------------------------------------------------------------------------------------------- | ------------------- | --------------------------- | ------- | ------------------------- | -
|
|Net income (loss), as reported                                                                                                      |                     | $                           | (66,552 | )                         | $
|Add: Total stock-based employee compensation expense in reported net income (loss), net of related tax effects                      |                     |                             | 202     |                           |  
|Less: Total stock-based employee compensation expense determined under fair value method for all awards, net of related tax effects |                     |                             | (1,498  | )                         |  
|                                                                                                                                    |                     |                             |         |                           |  
|Net income (loss), pro forma                                                                                                        |                     | $                           | (67,848 | )                         | $
|                                                                                                                                    |                     |                             |         |                           |  
|Earnings (loss) per share:                                                                                                          |                     |                             |         |                           |  
|                                                                                                                                    | Basic as reported   |                             | $       | (0.79                     | )
|                                                                                                                                    | Basic pro forma     |                             | $       | (0.81                     | )
|                                                                                                                                    | Diluted as reported |                             | $       | (0.79                     | )
|                                                                                                                                    | Diluted pro forma   |                             | $       | (0.81                     | )

Goodwill and Other Intangible Assets.Goodwill represents the excess of costs over fair value of
assets of businesses acquired. Effective January 1, 2002, Titan adopted SFAS No. 142, "Goodwill and Other Intangible Assets," which establishes financial accounting and reporting for
acquired goodwill and other intangible assets and supersedes APB Opinion No. 17, "Intangible Assets". Goodwill and intangible assets acquired in a purchase business combination and determined
to have an indefinite useful life are not amortized, but instead tested for impairment at least annually in accordance with the provisions of SFAS No. 142. SFAS No. 142 also requires
that intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with SFAS
No. 144, "Accounting for Impairment or Disposal of Long-Lived Assets."

SFAS
No. 142 requires that goodwill be tested for impairment at the reporting unit level at adoption and at least annually thereafter, utilizing a two step methodology. The
initial step requires Titan to assess whether indications of impairment exist. If indications of impairment are determined to exist, the second step of measuring impairment is performed, wherein the
fair value of the relevant reporting unit is compared to the carrying value, including goodwill, of such unit. If the fair value exceeds the carrying value, no impairment loss is recognized. However,
if the carrying value of the reporting unit exceeds its fair value, the goodwill of the reporting unit is impaired.

Titan
performs its annual testing for impairment of goodwill and other intangible assets in the first quarter of each year, prior to the release of the financial statements for the
previous year. Based on management's annual testing as of January 1, 2004, there were no indicators of impairment. However, in June 2004, in connection with the decision to dispose of
certain operations as discussed more fully in Note 5, management determined that there were impairments related to certain goodwill and purchased intangibles of its Datron World Communications
business.

Note (2) Merger, Investigation and Settlement Costs

On June 26, 2004, Lockheed Martin Corporation terminated the merger agreement pursuant to which Lockheed Martin was to have acquired Titan. The merger
agreement was entered into in September 2003 and amended in March 2004 and April 2004 to provide additional time for Titan to resolve issues and concerns related to internal
reviews, and the related Securities and Exchange Commission (SEC) investigation and Department of Justice (DOJ) criminal inquiry, into whether payments involving Titan's international consultants were
made in violation of applicable law (see Note 8). Under the amended merger

6

---



terms,
it was a condition to closing that Titan either must have obtained written confirmation that the Criminal Division of the DOJ considered its criminal inquiry resolved and did not intend to
pursue any claims against Titan relating to this matter, or must have entered into a plea agreement with the Criminal Division of the DOJ and completed the sentencing process. Titan did not satisfy
either of these conditions.

In
the three months and six months ended June 30, 2004, respectively, Titan incurred approximately $8.8 million and $26.4 million in legal, investment banking,
accounting, printing and other professional fees and costs related to the terminated merger with Lockheed Martin, which are reflected in Merger, Investigation and Settlement Costs in the accompanying
consolidated statements of operations. The merger-related costs include the costs of an exchange offer and consent solicitation for Titan's senior subordinated notes and administrative costs
associated with the redemption of Titan's preferred stock (see Note 4), both of which were conditions to close the proposed merger. The investigation related costs, which approximated
$6.2 million and $18.0 million in the three months and six months ended June 30, 2004, respectively, include the costs associated with the comprehensive internal review being
conducted by Titan to evaluate whether payments involving international consultants for Titan or its subsidiaries were made in violation of applicable law. The legal, accounting and other professional
fees incurred also supported the related inquiry by the Department of Justice and the investigation by the Securities and Exchange Commission. Refer to Note 6 for a discussion of the impact of
the terminated merger on Titan's outstanding debt.

In
the three months and six months ended June 30, 2004, Titan recorded an additional provision of $25.5 million for anticipated settlement costs related to the government
Foreign Corrupt Practices Act
(FCPA) investigations. Titan had previously recorded $3.0 million as of December 31, 2003, for resolution of this matter, thereby bringing the total amount recorded to
$28.5 million representing Titan's estimate of potential liabilities related to this matter. The ultimate resolution of this matter is dependent upon the final results of such inquiries and
investigations, and associated liabilities could be different from the amount currently estimated. The Company did not accrue for any remaining legal costs expected to be incurred to reach resolution
of the FCPA matter, as those costs will be expensed as incurred in future periods. Titan is continuing to cooperate fully with the government to resolve the investigations (see Note 8).

Note (3) Asset Impairment Charges

During the three months and six months ended June 30, 2004, Titan recorded asset impairment charges totaling $22.7 million. Approximately
$10 million of these charges pertain to impairment of fixed assets directly related to the termination of a program by a U.S. civilian government agency in the second quarter, and impairment of
assets associated with a reduction in scope of planned business activities in Saudi Arabia. As a result of curtailing the activities in Saudi Arabia and with the U.S. civilian government agency,
future cash flows will be insufficient to recover the carrying value of certain dedicated assets. Approximately $7.2 million of these charges are related to a revised estimate of the net
realizable value of SureBeam-related assets transferred to Titan in the April 2004 bankruptcy court settlement of SureBeam's indebtedness and other obligations to Titan (see Note 8).
This revised estimate was made using updated information related to potential sales of assets and transfers of obligations. Approximately $5.5 million related to a charge for impairment of a
technology license Titan purchased from SureBeam in 2001 (see Note 8).

Note (4) Redemption of Cumulative Convertible Preferred Stock

On March 15, 2004, Titan redeemed all outstanding shares of its cumulative convertible preferred stock. The redemption was a condition to the close of the
then proposed merger with Lockheed Martin. An aggregate of 625,846 shares were redeemed at $20 per share, plus cumulative dividends in arrears of $0.03 per share, which utilized cash of approximately
$12.5 million, and the remaining 60,983 shares of

7

---



preferred
stock were converted by shareholders into 47,580 shares of common stock. The redemption of the preferred stock is recorded as a reduction to stockholders' equity.

Note (5) Discontinued Operations

In June 2004, Titan's board of directors made the decision to sell or otherwise divest Titan's Datron World Communications business (Datron World) and its
Titan Scan Technologies service business (Scan Services). These are non-core operations that have not performed to management's expectation, and their divestiture will allow Titan to
better focus on its National Security Solutions businesses. Previously, Datron World has been reported in the Titan Systems segment and the Titan Scan Technologies services business was reported in
the Titan Technologies segments, and are presented below within those segments. These businesses have been reported as a discontinued operation in accordance with SFAS No. 144, and all periods
presented have been restated accordingly to reflect these operations as discontinued.

The
results of discontinued operations for the three months and six months ending June 30, 2004, for Datron World include asset impairment charges of approximately
$20.3 million for impaired purchased intangible assets, mostly goodwill, of approximately $17.3 million, and approximately $3.0 million related to inventory value not expected to
be recovered in the disposal of this business. Revenues for Datron World for the six months ended June 30, 2004, were $6.6 million.

The
results of discontinued operations for the three months and six months ending June 30, 2004, for Scan Services include asset impairment charges of approximately
$8.5 million, primarily representing fixed asset values not expected to be recovered in the disposal of the business. The estimate of value expected to be recovered upon disposition is based on
indications of interest and proposed letters of intent received by Titan. Revenues for Scan Services for the six months ended June 30, 2004, were $2.8 million.

In
July 2002, Titan's board of directors made the decision to exit all of our international telecommunications business through a combination of selling and winding down our
operations within our Titan Wireless segment. Titan immediately began implementing these actions, which were substantially completed during 2003. Titan reported this exit of the Titan Wireless segment
as a discontinued operation in accordance with SFAS No. 144.

In
the third quarter of 2003, Titan completed the sale of its GlobalNet business. Payments received for the sale of GlobalNet consisted of approximately $2 million in cash, notes
receivable of approximately $1.5 million, and the buyer's assumption of all of the outstanding liabilities of GlobalNet, which aggregated to approximately $21 million at the time of the
consummation of the sale. Titan has collected approximately $0.6 million of the amounts due under the notes receivable; however, the remaining $0.9 million is past due and was previously
reserved, as Titan has no assurance that this remaining balance will ultimately be collected.In accordance with SFAS No. 144, all commercial
operations that have been sold or are held for sale have been reflected as discontinued operations for all periods presented in Titan's consolidated financial statements.

On
December 10, 1999, Titan's wholly owned subsidiary, Titan Africa, Inc. (Titan Africa), in connection with its contract to build a satellite-based telephone system for
its customer, the national telephone company of Benin, Africa (the OPT), entered into a Loan Facility agreement for up to 30.0 billion Francs CFA (the currency of the African 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 financing was subsequently increased by
6.0 billion francs CFA to approximately $54.0 million. This medium term financing is a non-recourse loan to Titan Africa which is guaranteed by the national telephone company
of Benin, Africa and secured by the national telephone company's equipment and revenues related to the project. The facility has a fixed interest rate of 9.5% per year and was originally to be repaid
in seven equal semi-annual payments from the net receipts of this project, or by the OPT in the event that such receipts are not adequate to make these payments, which commenced on
December 31, 2000 and were scheduled to end on December 31, 2003. The payment terms were subsequently amended

8

---



calling
for quarterly payments through mid 2006. The borrowings on this facility have been utilized to fund various equipment and subcontractor costs incurred most notably by Alcatel of France, a
major subcontractor to this project.

Related
to Titan's contract with the OPT, Titan has a $44.5 million gross receivable due from the OPT, which is reflected in current assets of discontinued operations as of
June 30, 2004, less a reserve of $14.3 million discussed below. Of this amount, approximately $30.2 million is recorded as a receivable on the project, reflecting the outstanding
balance on the non-recourse loan, drawn to cover subcontract costs. The $30.2 million balance on the non-recourse loan is included in non-current liabilities
of discontinued operations at June 30, 2004. The $14.3 million net receivable represents amounts due from the OPT under the Titan settlement agreement entered into with the OPT in 2003.
This agreement contemplated a $35 million payment by the OPT to Titan, which was due in full by November 30, 2003. On December 31, 2003, we received a partial payment of
$11 million on the settlement. Based on the facts available at June 30, 2004, principally the OPT's cash flow deficiencies and inability to obtain adequate financing, Titan recorded a
full reserve in the three months ended June 30, 2004, for the $14.3 million balance outstanding at June 30, 2004. Notwithstanding this reserve, Titan has commenced an
international arbitration against the OPT seeking collection of this receivable. The Wireless results of discontinued operations also reflect a reserve of approximately $3.9 million recorded in
the three months ended June 30, 2004, for estimated costs of resolving a contingent liability with a subcontractor related to its subcontract. The current liabilities of $13.6 million of
Titan Wireless include approximately $12.1 million of remaining exit costs.

On
June 2, 2004, Titan sold Cayenta Canada, its remaining commercial information technology business, for $6.0 million in cash, with no resulting gain or loss recorded on
the sale. Titan retained current liabilities related to this business which are included in Titan Technologies below, of approximately $2.3 million related to potential purchase price
adjustments due to the buyer, transaction-related costs and indemnification obligations related to the sale. Additionally, Titan had previously guaranteed performance on several customer contracts and
a facility lease related to this business and these guarantees were not transferred to the buyer in the June 2004 sale. The face value of these guarantees is approximately $14 million at
June 30, 2004. Substantially all of the guarantees were issued prior to December 31, 2003 and are therefore not required to be recognized and measured under the provisions of FASB
Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Othersan Interpretation of FASB Statements No. 5, 57, and 107 and Rescission of FASB Interpretation No. 34." Titan has not
had to make any payments with respect to contract guarantees related to this business since its acquisition in 1999 and has not provided any reserves for these contingencies at June 30, 2004,
based on management's assessment that such payments are not probable of being made.

The
current assets of Titan Systems and Titan Technologies below at June 30, 2004, are primarily comprised of accounts receivable and inventory balances.

9

---



Income Statement Summary

Following is a summary by original business segment of the income (loss) from discontinued operations for 2004 and 2003:

|                                  |  | Three months ended June 30, 2004 |        
|--------------------------------- |  | -------------------------------- | -------
|
|Loss from discontinued operations |  | $                                | (498   
|Impairment of assets              |  |                                  | (20,332
|Subcontractor contingency reserve |  |                                  |       
|                                  |  |                                  |        
|                                  |  |                                  | (20,830
|Tax benefit                       |  |                                  | (1,399 
|                                  |  |                                  |        
|Net loss                          |  | $                                | (19,431
|                                  |  |                                  |        

|                                  |  | Three months ended June 30, 2003 |       
|--------------------------------- |  | -------------------------------- | ------
|
|Loss from discontinued operations |  | $                                | (2,353
|Tax benefit                       |  |                                  | (1,004
|                                  |  |                                  |       
|Net income (loss)                 |  | $                                | (1,349
|                                  |  |                                  |       

|                                  |  | Six months ended June 30, 2004 |        
|--------------------------------- |  | ------------------------------ | -------
|
|Loss from discontinued operations |  | $                              | (566   
|Impairment of assets              |  |                                | (20,332
|Subcontractor contingency reserve |  |                                |       
|                                  |  |                                |        
|                                  |  |                                | (20,898
|Tax benefit                       |  |                                | (1,426 
|                                  |  |                                |        
|Net loss                          |  | $                              | (19,472
|                                  |  |                                |        

|                                  |  | Six months ended June 30, 2003 |       
|--------------------------------- |  | ------------------------------ | ------
|
|Loss from discontinued operations |  | $                              | (2,872
|Tax benefit                       |  |                                | (1,226
|                                  |  |                                |       
|Net loss                          |  | $                              | (1,646
|                                  |  |                                |       

10

---



Titan Technologies' 2004 and 2003 results above include operating income in Canada for which there is no tax impact. The tax benefit for Titan Systems' results in 2004 was reduced as a
result of the non-deductibility of the impairment of the intangible assets of Datron World. Included in the results for the quarter and six months ended June 30, 2003, is a tax
benefit of $2.3 million recorded to reflect the estimated tax impact of adjusting the carrying value of certain assets of Cayenta Canada, which was sold in June 2004.

|                                                    |                    | As of
June 30,
2004 |        | As of
December 31,
2003
|--------------------------------------------------- | ------------------ | ------------------- | ------ | -----------------------
|Current assets of discontinued operations:          |                    |                     |        |                        
|                                                    | Titan Systems      |                     | $      | 7,407                  
|                                                    | Titan Wireless     |                     |        | 30,172                 
|                                                    | Titan Technologies |                     |        | 1,345                  
|                                                    |                    |                     |        |                        
|                                                    |                    | $                   | 38,924 |                        
|                                                    |                    |                     |        |                        
|Non-current assets of discontinued operations:      |                    |                     |        |                        
|                                                    | Titan Systems      |                     | $      | 1,511                  
|                                                    | Titan Technologies |                     |        | 3,793                  
|                                                    |                    |                     |        |                        
|                                                    |                    | $                   | 5,304  |                        
|                                                    |                    |                     |        |                        
|Current liabilities of discontinued operations:     |                    |                     |        |                        
|                                                    | Titan Systems      |                     | $      | 4,106                  
|                                                    | Titan Wireless     |                     |        | 13,587                 
|                                                    | Cayenta            |                     |        |                       
|                                                    | Titan Technologies |                     |        | 3,891                  
|                                                    |                    |                     |        |                        
|                                                    |                    | $                   | 21,584 |                        
|                                                    |                    |                     |        |                        
|Non-current liabilities of discontinued operations: |                    |                     |        |                        
|                                                    | Titan Systems      |                     | $      | 208                    
|                                                    | Titan Wireless     |                     |        | 30,159                 
|                                                    | Cayenta            |                     |        |                       
|                                                    | Titan Technologies |                     |        | 848                    
|                                                    |                    |                     |        |                        
|                                                    |                    | $                   | 31,215 |                        
|                                                    |                    |                     |        |                        

Note (6) Debt

Senior Credit Facitlity

At June 30, 2004, total borrowings outstanding under Titan's senior credit facility were $393.9 million at a weighted average interest rate of
4.52%. Commitments under letters of credit, which reduce availability under the senior credit facility, were approximately $10 million at June 30, 2004, resulting in approximately
$75 million of borrowing availability on the senior revolver at June 30, 2004. Of the total outstanding borrowings, $3.5 million was short-term. At June 30,
2004, Titan was in compliance with all financial covenants under its various debt agreements. The remaining unamortized deferred costs and expenses of $7.5 million related to the senior credit
facility, which were incurred primarily in 2002, are included in Other Assets at June 30, 2004 and will be amortized over the remaining term of the senior credit facility, assuming no
prepayment is made.

Senior Subordinated Notes

On May 15, 2003, Titan sold $200 million of 8% senior subordinated notes due May 15, 2011, in a private placement (the Notes). Titan used the
net proceeds from the issuance of the Notes, plus borrowings of $50 million under the revolving credit facility and additional cash on hand, to redeem all of the $250 million of the
then-outstanding 53/4% HIGH TIDES convertible preferred securities. The redemption of HIGH TIDES occurred on June 4, 2003.

11

---



Titan
is required to make interest payments on the Notes semi-annually in arrears on May 15 and November 15 at the rate of 8% per annum. Titan may redeem the
Notes, in whole or in part, on or after May 15, 2007 at the following redemption prices, plus accrued and unpaid interest and liquidated damages, if any:

Year

Percentage2007

104.0
%2008

102.0
%2009 and thereafter

100.0
%


In
addition, on or prior to May 15, 2006, Titan may redeem up to 35% of the aggregate principal amount of the Notes with the net proceeds of certain equity offerings at a
redemption price of 108% of principal together with accrued and unpaid interest. The Notes are unsecured and rank or will rank equally with Titan's current or future senior subordinated indebtedness.
Each of Titan's domestic subsidiaries other than Cayenta guarantee the Notes. The guarantees are unsecured and rank equally with each guarantor's senior subordinated indebtedness. The Notes and the
guarantees are junior to all of
Titan's and each guarantor's senior indebtedness and senior to all of Titan's and each guarantor's subordinated indebtedness (see Note 10). On July 19, 2004, Titan completed an exchange
offer pursuant to which noteholders exchanged all but $0.4 million in principal amount of the Notes for newly issued 8% senior subordinated notes due 2011 registered under the Securities Act of
1933 with substantially the same terms and conditions and covenants as the Notes. Upon completion of the exchange offer, liquidated damages ceased to accrue on the notes.

Liquidated
damages of 0.25% per annum per $1,000 whole dollars in principal amount of the existing Notes began to accrue in October 2003. Beginning in January 2004, the
liquidated damages rate increased to 0.50% and such liquidated damages continued to accrue, at rates increasing every 90 days by 0.25% per annum per $1,000 whole dollars in principal amount of
existing notes up to a maximum of 2.00%, until the exchange offer described above was completed. The balance accrued at June 30, 2004 is $0.2 million. The liquidated damages are paid
with the regular semi-annual interest payment.

The
remaining unamortized deferred costs and expenses of $5.4 million related to the issuance of the Notes, which were incurred in 2003, are included in Other Assets at
June 30, 2004, and are amortized over the term of the Notes.

Note (7) Other Financial Information

Earnings Per Share

Basic and diluted earnings per share were computed based on net income, less the regular quarterly dividend requirement for preferred stock in 2004 and 2003 and
the accrued dividend to the date of redemption in 2004.

12

---



The
following data summarize information relating to the per share computations for income from continuing operations:

|                                         |                                                                           | Three months ended June 30, 2004 |         | Three months ended June 30, 2003
|---------------------------------------- | ------------------------------------------------------------------------- | -------------------------------- | ------- | --------------------------------
|
|Income (loss) from continuing operations |                                                                           | $                                | (29,429 | )                               
|Less preferred stock dividends           |                                                                           |                                  |        |                                 
|                                         |                                                                           |                                  |         |                                 
|Basic EPS:                               |                                                                           |                                  |         |                                 
|                                         | Income (loss) from continuing operations available to common stockholders |                                  |         | (29,429                         
|Effect of dilutive securities:           |                                                                           |                                  |         |                                 
|                                         | Stock options and warrants                                                |                                  |         |                                
|                                         |                                                                           |                                  |         |                                 
|Diluted EPS:                             |                                                                           |                                  |         |                                 
|                                         | Income (loss) from continuing operations available to common stockholders |                                  | $       | (29,429                         
|                                         |                                                                           |                                  |         |                                 

|                                         |                                                                           | Six months ended June 30, 2004 |         | Six months ended June 30, 2003 |  
|---------------------------------------- | ------------------------------------------------------------------------- | ------------------------------ | ------- | ------------------------------ | -
|
|Income (loss) from continuing operations |                                                                           | $                              | (25,808 | )                              |  
|Less preferred stock dividends           |                                                                           |                                | (190    | )                              |  
|                                         |                                                                           |                                |         |                                |  
|Basic EPS:                               |                                                                           |                                |         |                                |  
|                                         | Income (loss) from continuing operations available to common stockholders |                                |         | (25,998                        | )
|Effect of dilutive securities:           |                                                                           |                                |         |                                |  
|                                         | Stock options and warrants                                                |                                |         |                               |  
|                                         |                                                                           |                                |         |                                |  
|Diluted EPS:                             |                                                                           |                                |         |                                |  
|                                         | Income (loss) from continuing operations available to common stockholders |                                | $       | (25,998                        | )
|                                         |                                                                           |                                |         |                                |  

In
the three months ended June 30, 2004, options and warrants to purchase approximately 3,136,200 shares of common stock at prices ranging from $1.04 to $17.29 per share were not
included in the computation of diluted EPS, as the effect would have been anti-dilutive due to the net loss. In the three months ended June 30, 2004, options and warrants to
purchase approximately 362,500 shares of common stock at prices ranging from $19.43 to $29.74 were not included in the completion of EPS as their effect was anti-dilutive due to the
exercise price. For the three month period ended June 30, 2003, options and warrants to purchase approximately 4,629,700 shares of common stock at prices ranging from $8.61 to $29.74 per share
were not included in the computation as the effect would have been anti-dilutive due to the exercise price.

In
the six months ended June 30, 2004, options and warrants to purchase approximately 3,448,800 shares of common stock at prices ranging from $1.04 to $19.43 per share were not
included in the

13

---



computation
of diluted EPS, as the effect would have been anti-dilutive due to the net loss. In the six months ended June 30, 2004, options and warrants to purchase approximately
353,200 shares of common stock at prices ranging from $19.43 to $29.74 were not included in the computation of EPS, as the effect would have been anti-dilutive due to the exercise price.
In the six months ended June 30, 2003, options and warrants to purchase approximately 4,665,600 shares of common stock at prices ranging from $9.22 to $29.74 per share were not included in the
computation of diluted EPS as the effect would have been anti-dilutive due to the exercise price.

Approximately
223,600 shares of common stock in the six month period in 2004 that could have been issued from the potential conversion of cumulative convertible preferred stock were not
included in the computation of diluted EPS, as the effect would have been anti-dilutive due to the net loss. Approximately 537,400 shares of common stock in the three and six month periods
in 2003 that could have been issued from the potential conversion of cumulative convertible preferred stock were not included in the computations of diluted EPS, as the effect would have been
anti-dilutive. The change in potential dilution from 2003 to 2004 is due to the redemption of the preferred stock on March 15, 2004 (see Note 4). Approximately 4,989,300 and
5,862,800 shares in the three and six months ended June 30, 2003, that could have been issued from the potential conversion of remarketable term income deferrable equity securities (HIGH TIDES)
were not included in the computations as their effect was anti-dilutive. The HIGH TIDES were redeemed on June 4, 2003.

Select Statement of Operations Data

Included in the revenues for the quarter and six months ended June 30, 2004, are revenues related to a single contract with the U.S. Army to provide
linguist services of $55.6 million and $99.5 million, respectively, representing 10.8% and 10.3% of total revenues for the quarter and six months, respectively. No other single contract
provided more than 3.4% of total revenues for these periods.

The
net gain on sale of assets represents a gain on the sale of certain contracts and related assets and liabilities of $0.9 million, which sale was completed in order to mitigate
concerns raised by one customer related to organizational conflict of interest issues arising from the proposed merger with Lockheed Martin. The aforementioned gain was partially offset by a loss of
$0.3 million on another sale of certain contracts and related assets and liabilities, which were sold as part of Titan's ongoing strategy to divest non-core assets and operations.

Select Balance Sheet Data

Following are details concerning certain balance sheet data:

June 30,
2004

December 31,
2003Accounts Receivable:U.S. Government-billed

$
368,644

$
307,601U.S. Government-unbilled


55,010


63,141Trade


14,762


14,070Less allowance for doubtful accounts


(3,350
)

(3,547
)$
435,066

$
381,265Inventories:Materials

$
6,435

$
5,493Work-in-process


10,432


12,227Finished goods


4,135


3,710$
21,002

$
21,430


14

---



A
summary of the utilization of exit and restructuring accruals during the six months ended June 30, 2004 is as follows:

|                                 |                                          | Balance
December 31,
2003 |        | Cash paid |   | Change in
Estimate |        | Balance
June 30,
2004
|-------------------------------- | ---------------------------------------- | ------------------------- | ------ | --------- | - | ------------------ | ------ | ---------------------
|Titan Systems restructuring:     |                                          |                           |        |           |   |                    |        |                      
|                                 | Estimated facilities consolidation costs |                           | $      | 27,296    |   | $                  | (9,686 | )                    
|                                 |                                          |                           |        |           |   |                    |        |                      
|Cayenta headquarters exit costs: |                                          |                           |        |           |   |                    |        |                      
|                                 | Lease commitment costs                   |                           |        | 625       |   |                    | (312   | )                    
|                                 | Employee termination costs and other     |                           |        | 7         |   |                    | (7     | )                    
|                                 |                                          |                           |        |           |   |                    |        |                      
|                                 |                                          |                           | 632    |           |   | (319               | )      |                      
|                                 |                                          |                           |        |           |   |                    |        |                      
|                                 |                                          | $                         | 27,928 |           | $ | (10,005            | )      | $                    
|                                 |                                          |                           |        |           |   |                    |        |                      

At
June 30, 2004, $4.9 million of the exit and restructuring accruals are included in Other Accrued Liabilities on the consolidated balance sheet and $13.4 million
are included in Other Non-current Liabilities. The remaining accrual balance is primarily comprised of amounts due under the facilities consolidation, which requires payments in 2004 for
certain lease cancellation fees and other lease costs, net of assumed sublease income, with the remainder expected to be paid over the remaining lease terms, which expire in 2009. Activity in the
second quarter of 2004 included a payment of approximately $7.1 million to exit a leased facility.

Titan's
only element of other comprehensive income resulted from foreign currency translation adjustments in all periods reported, which is reflected in the Consolidated Statements of
Stockholders' Equity.

Supplemental Cash Flow Information

Supplemental disclosure of cash flow information:

Six months ended
June 30,2004

2003Noncash investing and financing activities:Shares contributed to employee benefit plans

$
2,718

$
5,108Write-off of deferred debt issuance costs





8,071Shares tendered for stock option exercises


128


133Cash paid for interest

$
17,430

$
14,485Cash paid for (provided by) income tax


869


944


Cash
earnout payments of $1.8 million and $0.7 million were made in the six months ended June 30, 2004, related to our acquisitions of Wave Science and International
Systems in 2002. These amounts were accrued for in 2003.

In
2002, Titan issued 172,153 shares of Titan common stock valued at $3.8 million as consideration for the purchase of assets of a company which became part of the Cayenta
business, and has been reported as discontinued operations until its sale in 2003. In the second quarter of 2003, the indemnification period as defined per the asset purchase agreement expired, and as
provided for in the purchase agreement, the company elected to exchange all of the Titan common stock for cash of $2.0 million and the extinguishment of notes receivable of $1.8 million
for cash advances made in 2002.

15

---



Note (8) Commitments and Contingencies

Legal Matters



As previously disclosed, during the first quarter of 2004, Titan learned of allegations that improper payments were made, or items of value were provided,
involving international consultants for Titan or its subsidiaries to foreign officials. The allegations were identified as part of internal reviews conducted by Titan and Lockheed Martin. Titan's
board of directors established a committee of the board to oversee Titan's internal review of these matters.

The
internal review began with a focus on Titan's Datron World Communications unit (which was discontinued in June 2004), but later was expanded to a number of Titan's
international businesses including Titan Wireless (which was discontinued in 2002) and Titan's National ID Card contract in Saudi Arabia. Titan agreed to and did provide the Securities Exchange
Commission (SEC) and Department of Justice (DOJ) with the results of the investigation on a continual basis. In connection with the internal review, the SEC commenced an investigation into whether
payments involving Titan's international consultants were made in violation of applicable law. In addition, the DOJ initiated a criminal inquiry in this matter. The government investigations are
ongoing.

Both
prior to and since the termination of the merger agreement with Lockheed Martin, Titan has had settlement discussions with the SEC and the DOJ. If settlement discussions fail, and
the government determines that unlawful payments were made, the government could take action against Titan and/or some of its employees. These actions could include criminal and civil fines,
penalties, criminal sanctions and limitations on Titan's ability to export products or enter into future U.S. government contracts.

As
previously disclosed, Titan had recorded a provision of $3 million as of December 31, 2003 for resolution of the government FCPA investigations. Titan now estimates the
total cost to resolve this matter with the government will be approximately $28.5 million and recorded a provision for the additional amount in the second quarter of 2004. However, Titan may be
required to record an additional
provision or reduce this provision if the actual settlement amount of these matters differs from the provision.



Since April 2, 2004, two purported stockholder class action lawsuits have been filed against Titan and certain of its officers, asserting claims under the
federal securities laws, which we refer to collectively as the federal securities actions. These federal securities actions were filed in the United States District Court for the Southern District of
California. These cases include Janet Cheung v. The Titan Corporation, et al., No. CV 04-0701JAH(LSP) and Jack McBride v. The Titan Corporation, et al., No. CV 04-0676K(NLS).

The
federal securities actions purport to be brought on behalf of all purchasers of Titan common stock during the period from July 24, 2003 through and including March 22,
2004. The federal securities actions allege, among other things, that the defendants violated Section 10(b) of the Securities Exchange Act of 1934, as amended, which is referred to as the
Exchange Act, and SEC Rule 10b-5 promulgated thereunder and Section 20(a) of the Exchange Act, by issuing a series of press releases and public statements and filings
disclosing significant historical and future revenue growth, but omitting to mention certain allegedly improper payments involving international consultants in connection with Titan's international
operations, thereby artificially inflating the trading price of Titan's common stock. The federal securities actions are in their early stages and it is impossible to predict the outcome of these
proceedings or their impact on Titan's financial position at this time. Titan believes the allegations against Titan and its officers are without merit and the Company intends to defend the claims
vigorously.

16

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Since April 7, 2004, two purported stockholder class action complaints have been filed against certain Titan officers, asserting that these officers breached their fiduciary
duties to Titan's stockholders. The complaints, which we refer to as the fiduciary duty actions, were filed in the Superior Court for the State of California in and for San Diego County. The cases
include Paul Berger v. Gene W. Ray, et al., No. GIC 828346, and Robert Garfield v. Mark W. Sopp, et. al, No. GIC 828345.

The
fiduciary duty actions purport to be brought on behalf of all holders of Titan common stock as of April 7, 2004. The fiduciary duty actions allege, among other things, that
the defendants breached their fiduciary duties by acquiescing in or condoning Titan's alleged violations of the FCPA, by failing to establish adequate procedures to prevent the alleged FCPA
violations, and by failing, in bad faith, to voluntarily report the alleged FCPA violations to government officials. The complaints seek compensatory damages in respect of the loss of value sustained
by Titan stockholders as a result of the reduction in merger consideration payable to them under the terms of the amendment to the merger agreement delivered on April 7, 2004. Titan believes
the allegations against the Titan officers are without merit and intends to defend the claims vigorously.

Since
June 28, 2004, three shareholder derivative lawsuits have been filed against the Titan directors and certain Titan officers, naming Titan as a nominal defendant, which we
refer to collectively as the derivative actions. The derivative actions include Theodore Weisgerber v. Gene Ray, et al., No. 832018, which was filed in the Superior Court for the State of
California, San Diego County, Robert Ridgeway v. Gene Ray, et al., No. 542-N, which was filed in Delaware Court of Chancery, New Castle County, and Bernd Bildstein V. Gene Ray, et
al., No. 833701, which was filed in the Superior Court for the State of California, San Diego County. The derivative actions are brought for the benefit of the nominal defendant, Titan, and
allege that the defendants breached their fiduciary duties by failing to monitor and supervise management in a way that would have either prevented alleged FCPA violations or would have detected the
FCPA violations. The plaintiffs seek to recover the costs incurred in the internal and external investigations. Titan believes the allegations against its officers and directors are without merit and
the Company intends to defend the claims vigorously.



Since June 9, 2004, two lawsuits have been filed alleging that Titan and other defendants either participated in, approved of or condoned mistreatment of
prisoners by the United States military officials in certain prison facilities in Iraq in violation of federal, state, and international law. The first of these cases, Saleh v. Titan Corporation,
No. 04-CV-1143 R, was filed in the
United States District Court for the Southern District of California against Titan, CACI International, Inc., and its affiliates, and three individuals (one formally employed by Titan and one
employed by a Titan subcontractor). Plaintiffs in Saleh seek class certification. The second case, Ibrahim v. Titan Corporation, NO. 04-CV-1248, was filed on July 27,
2004, on behalf of five individual plaintiffs against Titan, CACI, and CACI affiliates, and contains allegations similar to Saleh. Class certification has not been requested in Ibrahim. Titan believes
the allegations in both cases are without merit and intends to defend these lawsuits vigorously.

On
January 23, 2004, Titan, together with its wholly-owned subsidiaries, Titan Wireless, Inc. and Titan Africa, Inc., were named as defendants in Gonzales
Communications, Inc. v. Titan Wireless, Inc., Titan Africa, Inc., The Titan Corporation, Geolution International Inc., Mundi development, Inc., a lawsuit filed in
the U.S. District Court for the Southern District of California. The complaint relates to the purchase by Gonzales Communications of equipment and related services under an equipment purchase
agreement entered into with Titan Wireless in June 2001. Gonzales Communications contends that the equipment and services delivered were unsatisfactory. In the complaint, Gonzales
Communications seeks direct damages in the amount of $0.88 million plus interest, representing the amount Gonzales Communications alleges to have previously paid under the agreement, and
consequential damages of approximately $16.3 million. To date, Titan and its subsidiaries have not received payment in full under the agreement for

17

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the
equipment and services that were delivered to Gonzales Communications. Titan has filed a counterclaim against Gonzales Communications for in excess of $1.2 million. Titan believes that the
claims of Gonzales Communications are without merit, and the Company intends to defend its position vigorously.

Since
August 2003, Titan, certain corporate officers of SureBeam Corporation, a former subsidiary of Titan, Dr. Ray and Susan Golding, as SureBeam directors, and certain
investment banks that served as lead underwriters for SureBeam's March 2001 initial public offering, have been named as defendants in several purported class action lawsuits filed by holders of
common stock of SureBeam in the U.S. District Court. On October 6, 2003, these class action lawsuits were consolidated into In re SureBeam Corporation Securities Litigation,
No. 03-CV-001721-JM(POR), a single purported class action for which an amended consolidated class action was filed on March 24, 2004, with the U.S.
District Court for the Southern District of California. The complaints seek an unspecified amount of damages. The SureBeam class action complaint alleges that each of the defendants, including Titan,
as a "control person" of SureBeam within the meaning of Section 15 of the Securities Act of 1933, as amended, should be held liable under Section 11 of the Securities Act, because the
prospectus for SureBeam's initial public offering was allegedly inaccurate and misleading, contained untrue statements of material facts, and omitted to state other facts necessary to make the
statements made not misleading. The SureBeam class action complaint also alleges that the defendants, including Titan, as a control person of SureBeam within the meaning of Section 20(a) of the
Exchange Act should be held liable under Section 10(b) of the Exchange Act for false and misleading statements made during the period from March 16, 2001 to August 27, 2003. Titan
believes the allegations against Titan and its directors in the amended complaint are without merit and the Company intends to defend the claims vigorously.

On
August 16, 2002, Perimex International Corporation (Perimex) filed a complaint against Titan, Titan Wireless, and a former Titan Wireless employee in San Diego Superior Court
in San Diego, California. The complaint alleged breach of contract, breach of the covenant of good faith and fair dealing, intentional interference with existing contractual relationships and
prospective business advantage and violation of the California unfair competition law arising from an alleged failure of Titan Wireless to enter a joint venture with Perimex to provide wireless
telecommunication services in Argentina and other related alleged misconduct. The complaint sought damages of $52.65 million and sought injunctive relief prohibiting Titan and Titan Wireless
from transferring any of Titan Wireless's assets. The court denied Perimex's request for a preliminary injunction, sustained Titan's and Titan Wireless's demurrer as to all causes of action in the
complaint and granted Perimex leave to amend the complaint. Perimex dismissed its complaint voluntarily without prejudice. On May 22, 2003, however, Perimex filed a new complaint in the United
States District Court for the Southern District of California alleging substantially similar causes of action and claiming a similar amount of damages. Titan believes that Perimex's claims are without
merit and intends to defend the claims vigorously.

In
October 2002, Titan received a grand jury subpoena from the Antitrust Division of the Department of Justice requesting the production of documents relating to information
technology services performed for the Air Force at Hanscom Air Force Base in Massachusetts. Titan has been informed that other companies who have performed such services have received subpoenas as
well. Titan is not aware of any illegal or inappropriate conduct, and has been and will continue to cooperate fully with the investigation.

In
March 2003, Titan received a subpoena from the Office of Inspector General for the National Aeronautics and Space Administration, or NASA, seeking certain records relating to
billing for labor services in connection with our contracts with NASA. Titan also received a subpoena from the Office of Inspector General for the General Services Administration, or GSA, seeking
similar records relating to billing for labor categories in connection with contracts with GSA. Titan is not aware of any illegal or inappropriate conduct, and is fully cooperating with the
government's inquiries in these areas.

Titan
is involved in legal actions in the normal course of our business, including audits and investigations by various governmental agencies that result from our work as a defense
contractor. Titan

18

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and
its subsidiaries are named as defendants in legal proceedings from time to time and third parties including the government, may assert claims against Titan from time to time. In addition, Titan
has acquired companies from time to time that have legal actions pending against them at the time of acquisition. Based upon current information available, in the opinion of management, the amount of
ultimate liability or recovery with respect to these other actions and proceedings is not expected to materially affect Titan's consolidated financial position or results of operations taken as a
whole. However, Titan's evaluation of the likely impact of these other actions and proceedings could change in the future, and an unfavorable outcome, depending upon the amount and timing, could have
a material adverse effect on Titan's results of operations or cash flows in a future period.



Prior to and in connection with the spin-off of SureBeam Corporation, a former subsidiary of Titan, Titan and SureBeam entered into a number of
agreements, including the extension of $25 million under a senior secured revolving credit facility, which was secured by a lien on substantially all of SureBeam's assets. In addition, Titan
guaranteed certain lease obligations of SureBeam and subleased facilities to SureBeam. The aggregate amount of the lease obligations Titan has guaranteed as of June 30, 2004 is approximately
$18.2 million. The leases extend through periods ending in 2023. The aggregate amount payable by Titan as of June 30, 2004, for future obligations under Titan leases that were subleased
to SureBeam for periods through 2010 is approximately $4.4 million.

On
January 19, 2004, SureBeam voluntarily filed for bankruptcy relief to be liquidated under Chapter 7 of the United States Bankruptcy Code. As a result of this filing, Titan
recorded an estimated pre-tax impairment charge of $15.8 million (and an associated tax benefit of $6.3 million) in the fourth quarter of 2003 related to the senior credit
facility with SureBeam as well as SureBeam's other indebtedness and obligations to us. In the three months and six months ended June 30, 2004, Titan recorded an additional pre-tax
impairment charge of $7.2 million to reflect a change in estimate of the amount expected to ultimately be recovered through the liquidation of SureBeam assets, as well as amounts to be incurred
for facilities restoration costs. The ultimate amount of impairment to be recognized is contingent upon the amount of actual proceeds recovered by Titan from the liquidation of assets provided to
Titan under the settlement agreement with the SureBeam bankruptcy trustee described below. The current estimate of such proceeds, which includes estimated sales of equipment and inventory, primarily
electron beam systems and other related components, is approximately $3.8 million. To date, Titan has not yet subleased or otherwise transferred any of the guaranteed leases or lease
obligations to third parties. The current estimate of such mitigation of obligations under leases and lease guarantees is approximately $16.8 million. The impairment charge was offset by an
$8.1 million liability previously accrued by Titan to SureBeam under a tax allocation agreement. The actual amount of Titan's losses could be lower or higher than currently estimated depending
on the proceeds received from the liquidation of SureBeam assets provided to Titan under the settlement agreement and the amount of net payments made under its leases and lease guarantees issued on
behalf of SureBeam and bank debt guarantee related to Hawaii Pride.

On
April 5, 2004, the United States Bankruptcy Court for the Southern District of California approved the settlement agreement that Titan had entered into with the bankruptcy
trustee of SureBeam Corporation and SB Operating Co LLC (SureBeam). Under the settlement agreement, substantially all of the SureBeam assets were transferred to Titan. These assets include all
equipment and inventory, patents, intellectual property, certain customer receivables, and leased and subleased properties. Titan agreed to exclude from the settlement agreement approximately
$4 million in assets that will remain in the bankruptcy estate. The excluded assets consist of cash and two customer receivables. Costs incurred, primarily legal and other professional fees, in
the six months ended June 30, 2004, related to the bankruptcy settlement and other SureBeam related matters, including the defense of class action litigation, were approximately
$1.7 million, and are reflected on the Consolidated Statement of Operations in selling, general and administrative expenses.

19

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In
relation to SureBeam's strategic alliance with Hawaii Pride, Titan has guaranteed repayment of Hawaii Pride's bank debt up to the greater of SureBeam's equity interest in Hawaii Pride
(which is zero), or 19.9% of Hawaii Pride's $6.8 million, 15-year loan from its lender, WebBank. As of June 30, 2004, Titan has guaranteed approximately $1.1 million,
or 19.9% of the current loan balance of $5.6 million. In the event that Hawaii Pride defaults on the loan, Titan currently expects to be obligated to cover any defaults on the entire
outstanding balance of the loan if the default is not cured within 90 days. In late October 2003, Titan was notified by Hawaii Pride that Hawaii Pride had stopped receiving financial
support from SureBeam and did not have sufficient cash resources to make its monthly principal and interest payments to WebBank. Through June 30, 2004, Titan has loaned approximately
$0.4 million to Hawaii Pride under a new credit facility for a maximum amount of $0.6 million to be advanced to Hawaii Pride to cover shortfalls in debt service payments. The new credit
facility is secured by a second lien on Hawaii Pride's assets including real property and the facility. The lien is subordinate to the lien held by Hawaii Pride's bank, Web Bank. All amounts
outstanding under this facility are required to be repaid by May 2005. In the impairment charge discussed above, Titan has assumed that Hawaii Pride will repay amounts advanced on the new
credit facility, and that Hawaii Pride will not default on its loan guaranteed by Titan.

In
connection with the license Titan purchased to use SureBeam's intellectual property, the remaining unamortized balance of $1.2 million at June 30, 2004, is reflected as
a non-current asset in Other Assets in the Consolidated Balance Sheet. In the quarter ended June 30, 2004, management identified an impairment to the value of the asset based on
revised estimates of future cash flows from sales of systems, resulting in a charge of $5.5 million to reduce the carrying value (see Note 3). The remaining license balance will be
amortized over a 5 year period. The license was purchased in September 2001, and includes a world-wide perpetual and exclusive, non-royalty bearing license to use
SureBeam's intellectual property for all applications and fields other than the food, animal hide and flower markets. Titan utilizes this technology for its contract with the U.S. Postal Service to
provide mail sanitization systems and has outstanding bids using these technology rights.

Note (9) Related Party Transactions

Geolutions Agreement

In conjunction with Titan's exit of its international telecommunications business, Titan entered into an agreement with Geolutions, Inc. (Geolutions) to
assume and perform all of Titan Wireless's outstanding warranty obligations. Geolutions was a newly formed company, founded by a former executive of Titan Wireless and former officer of Titan. Titan
entered into a fixed price contract of $1.9 million, plus incidental expenses of up to $0.6 million and other third party costs of an aggregate maximum of $1.4 million, which was
subsequently reduced by $0.5 million. These fees were payable through June 30, 2004, the period over which Titan's warranty obligations exist on its existing customer contracts. In
March 2004, Titan settled its remaining contractual liability to Geolutions, and no longer has outstanding warranty obligations concerning Titan Wireless. Titan has entered into a
short-term time and materials contract for Geolutions to provide technical services related to certain equipment in Benin, Africa in conjunction with Titan's exit activities related to the
contract with the OPT (see Note 5).

Change in Control Agreements

In March 2000, we entered into executive agreements with Dr. Ray and Mr. Costanza, which provide special benefits after a change in control.
The parties subsequently amended these agreements on September 14, 2003 to clarify certain terms and conditions therein. Effective as of August 20, 2003, we also entered into an
executive agreement with Mr. Sopp, which mirrors the executive agreement, as amended, for Mr. Costanza. Pursuant to these agreements, as amended, if (1) there is a change in
control of Titan and (2) the executive is terminated by Titan other than for "Cause" (as defined below) or such executive terminates his employment for "Good Reason" (as defined below) within
three years following such

20

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change
in control or if the executive is terminated prior to a change in control and the executive reasonably believes that his termination arose in connection with or in anticipation of a change in
control, the terminated executive will be entitled to a lump sum payment amount equal to three times the sum of his base salary and his "Highest Annual Bonus" (as defined below). Each executive has
the right under these agreements to resign for "Good Reason" at the effective time of certain mergers involving Titan, including if Titan ceases to be a publicly traded company. Also, the executive
will receive a prorated bonus for the year of termination and continuation of the executive's and his family's welfare benefits (including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and travel accident insurance plans and programs) for three years after the later of the executive's date of termination or, as applicable, the
expiration of the executive's continuation coverage period under the Consolidated Omnibus Budget Reconciliation Act, referred to as COBRA. In addition, the agreements provide that all options that
have been previously granted to the executive to acquire shares of Titan or any affiliate of Titan that have not previously been forfeited or exercised will vest and become exercisable in full, and,
to the extent not exercised by the executive, will, subject to the terms of the option plans, be cancelled immediately prior to the completion of certain mergers involving Titan. Following certain
mergers involving Titan, each executive will be entitled to outplacement services at a cost not to exceed $0.1 million, which will be paid by Titan (or, after the merger, the surviving entity).
Furthermore, the executive will be deemed to have attained not less than six years of service and to have vested for all purposes under Titan's supplemental retirement plan for key executives. In
addition, unrelated to any change in control agreement, Dr. Ray and his wife also will receive medical benefits for life. Based on their respective life expectancies and assuming constant
annual cost of such benefits, as of June 30, 2004, these benefits would have an estimated cost of $0.3 million. Titan's 401(k) plan provides for full vesting of all accounts under the
plan upon a change in control (as defined in the plan). In the event that the executive becomes subject to excise tax pursuant to Section 4999 of the Internal Revenue Code, the executive,
subject to certain limitations, will be entitled to an additional tax gross-up payment in an amount that will result in the executive retaining an amount equal to the excise tax imposed
upon the executive.

For
purposes of the agreements with Dr. Ray, Mr. Costanza, and Mr. Sopp, the following definitions apply:



21

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In
June 2004, our Board adopted resolutions that provide for executive agreements with Dr. Delaney and each of Messrs. Branch, Brennan, Frederickson, Gorda,
Osterloh, Pontius, Rose and Sullivan, which shall provide for the same rights of such individuals upon a change of control as Messrs. Costanza and Sopp are entitled under their current
agreements of similar purpose. The one difference between the rights under these executive agreements and those of Messrs. Costanza and Sopp is that "Good Reason" to terminate employment with
Titan does not include Titan ceasing to be a publicly traded company as it does for Messrs. Costanza and Sopp. Mr. Gorda may, in his sole discretion, retain his existing rights pursuant
to an executive severance agreement between Mr. Gorda and the Company entered into in November 1995, or he may elect to receive benefits of the new executive agreement, but not both.

Note (10) Guarantor Condensed Consolidating Financial Statements

As discussed in Note 6, on May 15, 2003, Titan sold $200 million of 8% senior subordinated notes in a private placement. These notes were
exchanged for registered notes with identical terms and conditions and covenants on July 19, 2004. We used the net proceeds from the issuance of the 8% senior subordinated notes, plus
borrowings of $50 million made under our revolving credit facility and additional cash on hand, to redeem all of the $250 million of the then-outstanding 53/4%
HIGH TIDES convertible preferred securities. The redemption of HIGH TIDES occurred on June 4, 2003.

Following
are consolidating condensed balance sheets as of June 30, 2004 (unaudited) and December 31, 2003, and unaudited statements of operations for the three and six
months ended June 30, 2004 and 2003, and statements of cash flows for the six months ended June 30, 2004 and 2003 for the Guarantor Subsidiaries and the Non-Guarantor
Subsidiaries as defined below. The following consolidated condensed financial statements present financial information for:

Parent:
The Titan Corporation on a stand-alone basis.

Guarantor
Subsidiaries: All directly and indirectly owned domestic subsidiaries of Parent other than Cayenta Inc. on a stand-alone basis.

Non-Guarantor
Subsidiaries: Cayenta Inc., and all direct and indirect subsidiaries of Parent that are not organized under the laws of the United States, any state of
the United States or the District of Columbia and that conduct substantially all business operations outside the United States.

Reclassifications
and Eliminations: Entries that eliminate the investment in subsidiaries and intercompany balances and transactions.

The
Titan Corporation and Subsidiaries: The financial information for The Titan Corporation on a condensed consolidated basis.

The
classification of operating entities within each of the columns is based on the legal status of the entity as of June 30, 2004. Accordingly, certain legal entities that
existed in prior years that have been merged into Titan as of June 30, 2004 have been reclassified in the prior year condensed financial statements to conform with the current year
presentation.

22

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Condensed Consolidating Parent Company, Guarantor and Non-guarantor  Statement of Operations  For the Three Months Ended June 30, 2004  (Unaudited)  (In thousands)

|                                                             |                                            | Parent |         | Guarantor
Subsidiaries |   | Non-
guarantor
Subsidiaries |        | Reclassifications
and
Eliminations |         | The Titan
Corporation
and
Subsidiaries |  
|------------------------------------------------------------ | ------------------------------------------ | ------ | ------- | ---------------------- | - | --------------------------- | ------ | ---------------------------------- | ------- | -------------------------------------- | -
|Revenues                                                     |                                            | $      | 491,387 |                        | $ | 20,235                      |        | $                                  | 5,611   |                                        | $
|                                                             |                                            |        |         |                        |   |                             |        |                                    |         |                                        |  
|Costs and expenses:                                          |                                            |        |         |                        |   |                             |        |                                    |         |                                        |  
|                                                             | Cost of revenues                           |        |         | 410,699                |   |                             | 18,013 |                                    |         | 11,135                                 |  
|                                                             | Selling, general and administrative        |        |         | 36,301                 |   |                             | (4     | )                                  |         | 1,938                                  |  
|                                                             | Research and development                   |        |         | 3,952                  |   |                             | 743    |                                    |         |                                       |  
|                                                             | Merger, investigation and settlement costs |        |         | 34,332                 |   |                             |       |                                    |         |                                       |  
|                                                             | Asset impairment charges                   |        |         | 12,700                 |   |                             |       |                                    |         | 9,995                                  |  
|                                                             |                                            |        |         |                        |   |                             |        |                                    |         |                                        |  
|                                                             | Total costs and expenses                   |        |         | 497,984                |   |                             | 18,752 |                                    |         | 23,068                                 |  
|                                                             |                                            |        |         |                        |   |                             |        |                                    |         |                                        |  
|Operating profit (loss)                                      |                                            |        | (6,597  | )                      |   | 1,483                       |        |                                    | (17,457 | )                                      |  
|Interest expense                                             |                                            |        | (9,158  | )                      |   |                            |        |                                    |        |                                        |  
|Interest income                                              |                                            |        | 228     |                        |   |                            |        |                                    | 12      |                                        |  
|                                                             |                                            |        |         |                        |   |                             |        |                                    |         |                                        |  
|Income (loss) from continuing operations before income taxes |                                            |        | (15,527 | )                      |   | 1,483                       |        |                                    | (17,445 | )                                      |  
|Income tax provision (benefit)                               |                                            |        | 4,003   |                        |   | 593                         |        |                                    | (6,978  | )                                      |  
|                                                             |                                            |        |         |                        |   |                             |        |                                    |         |                                        |  
|Income (loss) from continuing operations                     |                                            |        | (19,530 | )                      |   | 890                         |        |                                    | (10,467 | )                                      |  
|Loss from discontinued operations, net of taxes              |                                            |        | (19,454 | )                      |   | (16,595                     | )      |                                    | (1,074  | )                                      |  
|                                                             |                                            |        |         |                        |   |                             |        |                                    |         |                                        |  
|Earnings (loss) before equity in earnings of subsidiaries    |                                            |        | (38,984 | )                      |   | (15,705                     | )      |                                    | (11,541 | )                                      |  
|Equity in losses of subsidiaries                             |                                            |        | (27,246 | )                      |   |                            |        |                                    |        |                                        |  
|                                                             |                                            |        |         |                        |   |                             |        |                                    |         |                                        |  
|Net earnings (loss)                                          |                                            | $      | (66,230 | )                      | $ | (15,705                     | )      | $                                  | (11,541 | )                                      | $
|                                                             |                                            |        |         |                        |   |                             |        |                                    |         |                                        |  

23

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Condensed Consolidating Parent Company, Guarantor and Non-guarantor  Statement of Operations  For the Six Months Ended June 30, 2004  (Unaudited)  (In thousands)

|                                                             |                                            | Parent |         | Guarantor
Subsidiaries |   | Non-
guarantor
Subsidiaries |        | Reclassifications
and
Eliminations |         | The Titan
Corporation
and
Subsidiaries |  
|------------------------------------------------------------ | ------------------------------------------ | ------ | ------- | ---------------------- | - | --------------------------- | ------ | ---------------------------------- | ------- | -------------------------------------- | -
|Revenues                                                     |                                            | $      | 927,320 |                        | $ | 32,283                      |        | $                                  | 13,305  |                                        | $
|                                                             |                                            |        |         |                        |   |                             |        |                                    |         |                                        |  
|Costs and expenses:                                          |                                            |        |         |                        |   |                             |        |                                    |         |                                        |  
|                                                             | Cost of revenues                           |        |         | 775,597                |   |                             | 28,757 |                                    |         | 19,368                                 |  
|                                                             | Selling, general and administrative        |        |         | 69,625                 |   |                             | 1,223  |                                    |         | 3,292                                  |  
|                                                             | Research and development                   |        |         | 7,129                  |   |                             | 984    |                                    |         |                                       |  
|                                                             | Merger, investigation and settlement costs |        |         | 51,911                 |   |                             |       |                                    |         |                                       |  
|                                                             | Asset impairment charges                   |        |         | 12,700                 |   |                             |       |                                    |         | 9,995                                  |  
|                                                             |                                            |        |         |                        |   |                             |        |                                    |         |                                        |  
|                                                             | Total costs and expenses                   |        |         | 916,962                |   |                             | 30,964 |                                    |         | 32,655                                 |  
|                                                             |                                            |        |         |                        |   |                             |        |                                    |         |                                        |  
|Operating profit (loss)                                      |                                            |        | 10,358  |                        |   | 1,319                       |        |                                    | (19,350 | )                                      |  
|Interest expense                                             |                                            |        | (18,274 | )                      |   |                            |        |                                    |        |                                        |  
|Interest income                                              |                                            |        | 391     |                        |   |                            |        |                                    | 12      |                                        |  
|Gain (loss) on sale of assets                                |                                            |        | 863     |                        |   | (300                        | )      |                                    |        |                                        |  
|                                                             |                                            |        |         |                        |   |                             |        |                                    |         |                                        |  
|Income (loss) from continuing operations before income taxes |                                            |        | (6,662  | )                      |   | 1,019                       |        |                                    | (19,338 | )                                      |  
|Income tax provision (benefit)                               |                                            |        | 7,802   |                        |   | 408                         |        |                                    | (7,735  | )                                      |  
|                                                             |                                            |        |         |                        |   |                             |        |                                    |         |                                        |  
|Income (loss) from continuing operations                     |                                            |        | (14,464 | )                      |   | 611                         |        |                                    | (11,603 | )                                      |  
|Loss from discontinued operations, net of taxes              |                                            |        | (19,611 | )                      |   | (17,209                     | )      |                                    | (865    | )                                      |  
|                                                             |                                            |        |         |                        |   |                             |        |                                    |         |                                        |  
|Loss before equity in losses of subsidiaries                 |                                            |        | (34,075 | )                      |   | (16,598                     | )      |                                    | (12,468 | )                                      |  
|Equity in losses of subsidiaries                             |                                            |        | (29,066 | )                      |   |                            |        |                                    |        |                                        |  
|                                                             |                                            |        |         |                        |   |                             |        |                                    |         |                                        |  
|Net earnings (loss)                                          |                                            | $      | (63,141 | )                      | $ | (16,598                     | )      | $                                  | (12,468 | )                                      | $
|                                                             |                                            |        |         |                        |   |                             |        |                                    |         |                                        |  

24

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Condensed Consolidating Parent Company, Guarantor and Non-guarantor  Statement of Operations  For the Three Months Ended June 30, 2003  (Unaudited)  (In thousands)

|                                                             |                                     | Parent |         | Guarantor
Subsidiaries |   | Non-
guarantor
Subsidiaries |        | Reclassifications
and
Eliminations |        | The Titan
Corporation
and
Subsidiaries |  
|------------------------------------------------------------ | ----------------------------------- | ------ | ------- | ---------------------- | - | --------------------------- | ------ | ---------------------------------- | ------ | -------------------------------------- | -
|Revenues                                                     |                                     | $      | 413,748 |                        | $ | 12,616                      |        | $                                  | 7,717  |                                        | $
|                                                             |                                     |        |         |                        |   |                             |        |                                    |        |                                        |  
|Costs and expenses:                                          |                                     |        |         |                        |   |                             |        |                                    |        |                                        |  
|                                                             | Cost of revenues                    |        |         | 343,947                |   |                             | 11,007 |                                    |        | 7,271                                  |  
|                                                             | Selling, general and administrative |        |         | 35,394                 |   |                             | 314    |                                    |        | 2,608                                  |  
|                                                             | Research and development            |        |         | 1,403                  |   |                             | 638    |                                    |        |                                       |  
|                                                             |                                     |        |         |                        |   |                             |        |                                    |        |                                        |  
|                                                             | Total costs and expenses            |        |         | 380,744                |   |                             | 11,959 |                                    |        | 9,879                                  |  
|                                                             |                                     |        |         |                        |   |                             |        |                                    |        |                                        |  
|Operating profit (loss)                                      |                                     |        | 33,004  |                        |   | 657                         |        |                                    | (2,162 | )                                      |  
|Interest expense                                             |                                     |        | (8,663  | )                      |   |                            |        |                                    |       |                                        |  
|Interest income                                              |                                     |        | 817     |                        |   |                            |        |                                    | 2      |                                        |  
|Debt extinguishment costs                                    |                                     |        | (12,423 | )                      |   |                            |        |                                    |       |                                        |  
|                                                             |                                     |        |         |                        |   |                             |        |                                    |        |                                        |  
|Income (loss) from continuing operations before income taxes |                                     |        | 12,735  |                        |   | 657                         |        |                                    | (2,160 | )                                      |  
|Income tax provision (benefit)                               |                                     |        | 5,177   |                        |   | 267                         |        |                                    | (878   | )                                      |  
|                                                             |                                     |        |         |                        |   |                             |        |                                    |        |                                        |  
|Income (loss) from continuing operations                     |                                     |        | 7,558   |                        |   | 390                         |        |                                    | (1,282 | )                                      |  
|Income (loss) from discontinued operations, net of taxes     |                                     |        | (1,349  | )                      |   | (557                        | )      |                                    | 1,104  |                                        |  
|                                                             |                                     |        |         |                        |   |                             |        |                                    |        |                                        |  
|Income (loss) before equity in losses of subsidiaries        |                                     |        | 6,209   |                        |   | (167                        | )      |                                    | (178   | )                                      |  
|Equity in losses of subsidiaries                             |                                     |        | (345    | )                      |   |                            |        |                                    |       |                                        |  
|                                                             |                                     |        |         |                        |   |                             |        |                                    |        |                                        |  
|Net earnings (loss)                                          |                                     | $      | 5,864   |                        | $ | (167                        | )      | $                                  | (178   | )                                      | $
|                                                             |                                     |        |         |                        |   |                             |        |                                    |        |                                        |  

25

---





Condensed Consolidating Parent Company, Guarantor and Non-guarantor  Statement of Operations  For the Six Months Ended June 30, 2003  (Unaudited)  (In thousands)

|                                                             |                                     | Parent |         | Guarantor
Subsidiaries |   | Non-
guarantor
Subsidiaries |        | Reclassifications and Eliminations |        | The Titan
Corporation
and
Subsidiaries |  
|------------------------------------------------------------ | ----------------------------------- | ------ | ------- | ---------------------- | - | --------------------------- | ------ | ---------------------------------- | ------ | -------------------------------------- | -
|Revenues                                                     |                                     | $      | 771,931 |                        | $ | 20,758                      |        | $                                  | 15,643 |                                        | $
|                                                             |                                     |        |         |                        |   |                             |        |                                    |        |                                        |  
|Costs and expenses:                                          |                                     |        |         |                        |   |                             |        |                                    |        |                                        |  
|                                                             | Cost of revenues                    |        |         | 644,150                |   |                             | 17,157 |                                    |        | 12,832                                 |  
|                                                             | Selling, general and administrative |        |         | 70,568                 |   |                             | 1,829  |                                    |        | 4,420                                  |  
|                                                             | Research and development            |        |         | 2,936                  |   |                             | 1,130  |                                    |        |                                       |  
|                                                             |                                     |        |         |                        |   |                             |        |                                    |        |                                        |  
|                                                             | Total costs and expenses            |        |         | 717,654                |   |                             | 20,116 |                                    |        | 17,252                                 |  
|                                                             |                                     |        |         |                        |   |                             |        |                                    |        |                                        |  
|Operating profit (loss)                                      |                                     |        | 54,277  |                        |   | 642                         |        |                                    | (1,609 | )                                      |  
|Interest expense                                             |                                     |        | (16,736 | )                      |   |                            |        |                                    | (2     | )                                      |  
|Interest income                                              |                                     |        | 1,424   |                        |   |                            |        |                                    | 7      |                                        |  
|Debt extinguishment costs                                    |                                     |        | (12,423 | )                      |   |                            |        |                                    |       |                                        |  
|                                                             |                                     |        |         |                        |   |                             |        |                                    |        |                                        |  
|Income (loss) from continuing operations before income taxes |                                     |        | 26,542  |                        |   | 642                         |        |                                    | (1,604 | )                                      |  
|Income tax provision (benefit)                               |                                     |        | 10,724  |                        |   | 259                         |        |                                    | (648   | )                                      |  
|                                                             |                                     |        |         |                        |   |                             |        |                                    |        |                                        |  
|Income (loss) from continuing operations                     |                                     |        | 15,818  |                        |   | 383                         |        |                                    | (956   | )                                      |  
|Income (loss) from discontinued operations, net of taxes     |                                     |        | (1,646  | )                      |   | (1,581                      | )      |                                    | 862    |                                        |  
|                                                             |                                     |        |         |                        |   |                             |        |                                    |        |                                        |  
|Income (loss) before equity in losses of subsidiaries        |                                     |        | 14,172  |                        |   | (1,198                      | )      |                                    | (94    | )                                      |  
|Equity in losses of subsidiaries                             |                                     |        | (1,292  | )                      |   |                            |        |                                    |       |                                        |  
|                                                             |                                     |        |         |                        |   |                             |        |                                    |        |                                        |  
|Net earnings (loss)                                          |                                     | $      | 12,880  |                        | $ | (1,198                      | )      | $                                  | (94    | )                                      | $
|                                                             |                                     |        |         |                        |   |                             |        |                                    |        |                                        |  

26

---





Condensed Consolidating Parent Company, Guarantor and Non-guarantor  Balance Sheet  As of June 30, 2004  (Unaudited)  (In thousands)

|                                                              |                                                             | Parent                       |         | Guarantor
Subsidiaries |           | Non-
guarantor
Subsidiaries |        | Reclassifications and Eliminations |          | The Titan
Corporation
and
Subsidiaries
|------------------------------------------------------------- | ----------------------------------------------------------- | ---------------------------- | ------- | ---------------------- | --------- | --------------------------- | ------ | ---------------------------------- | -------- | --------------------------------------
|Assets                                                        |                                                             |                              |         |                        |           |                             |        |                                    |          |                                       
|Current Assets:                                               |                                                             |                              |         |                        |           |                             |        |                                    |          |                                       
|                                                              | Cash and cash equivalents                                   |                              | $       | 26,244                 |           | $                           | (802   | )                                  | $        | (15                                   
|                                                              | Accounts receivablenet                                     |                              |         | 398,988                |           |                             | 19,083 |                                    |          | 16,995                                
|                                                              | Inventories                                                 |                              |         | 16,812                 |           |                             |       |                                    |          | 4,190                                 
|                                                              | Prepaid expenses and other                                  |                              |         | 31,128                 |           |                             | 1,027  |                                    |          | 189                                   
|                                                              | Deferred income taxes                                       |                              |         | 103,630                |           |                             |       |                                    |          |                                      
|                                                              | Current assets of discontinued operations                   |                              |         | 7,407                  |           |                             | 31,517 |                                    |          |                                      
|                                                              |                                                             |                              |         |                        |           |                             |        |                                    |          |                                       
|                                                              |                                                             | Total current assets         |         |                        | 584,209   |                             |        | 50,825                             |          |                                       
|Property and equipment, net                                   |                                                             |                              | 36,870  |                        |           | 11,446                      |        |                                    | 1,156    |                                       
|Goodwill                                                      |                                                             |                              | 455,033 |                        |           | 7,719                       |        |                                    | 59       |                                       
|Other assetsnet                                              |                                                             |                              | 63,492  |                        |           | 56                          |        |                                    | 72       |                                       
|Deferred income taxes                                         |                                                             |                              | 62,781  |                        |           |                            |        |                                    |         |                                       
|Non-current assets of discontinued operations                 |                                                             |                              | 1,511   |                        |           | 3,793                       |        |                                    |         |                                       
|Intercompany investments, advances and liabilitiesnet        |                                                             |                              | 333,567 |                        |           | (183,918                    | )      |                                    | (149,649 | )                                     
|                                                              |                                                             |                              |         |                        |           |                             |        |                                    |          |                                       
|                                                              |                                                             | Total assets                 |         | $                      | 1,537,463 |                             | $      | (110,079                           | )        | $                                     
|                                                              |                                                             |                              |         |                        |           |                             |        |                                    |          |                                       
|Liabilities and Stockholders' Equity                          |                                                             |                              |         |                        |           |                             |        |                                    |          |                                       
|Current Liabilities:                                          |                                                             |                              |         |                        |           |                             |        |                                    |          |                                       
|                                                              | Current portion of amounts outstanding under line of credit |                              | $       | 3,500                  |           | $                           |       |                                    | $        |                                      
|                                                              | Accounts payable                                            |                              |         | 87,980                 |           |                             | 3,036  |                                    |          | 1,508                                 
|                                                              | Current portion of long-term debt                           |                              |         | 1,102                  |           |                             |       |                                    |          |                                      
|                                                              | Accrued compensation and benefits                           |                              |         | 70,253                 |           |                             | 2,020  |                                    |          | 2,626                                 
|                                                              | Other accrued liabilities                                   |                              |         | 108,237                |           |                             | 7,514  |                                    |          | 822                                   
|                                                              | Current liabilities of discontinued operations              |                              |         | 4,550                  |           |                             | 14,740 |                                    |          | 2,294                                 
|                                                              |                                                             |                              |         |                        |           |                             |        |                                    |          |                                       
|                                                              |                                                             | Total current liabilities    |         |                        | 275,622   |                             |        | 27,310                             |          |                                       
|                                                              |                                                             |                              |         |                        |           |                             |        |                                    |          |                                       
|Long-term portion of amounts outstanding under line of credit |                                                             |                              | 390,375 |                        |           |                            |        |                                    |         |                                       
|Senior subordinated debt                                      |                                                             |                              | 200,000 |                        |           |                            |        |                                    |         |                                       
|Other long-term debt                                          |                                                             |                              | 508     |                        |           |                            |        |                                    |         |                                       
|Other non-current liabilities                                 |                                                             |                              | 53,060  |                        |           |                            |        |                                    | 1,896    |                                       
|Non-current liabilities of discontinued operations            |                                                             |                              | 1,056   |                        |           | 30,159                      |        |                                    |         |                                       
|Stockholders' equity (deficit)                                |                                                             |                              | 616,842 |                        |           | (167,548                    | )      |                                    | (136,149 | )                                     
|                                                              |                                                             |                              |         |                        |           |                             |        |                                    |          |                                       
|                                                              |                                                             | Total liabilities and equity |         | $                      | 1,537,463 |                             | $      | (110,079                           | )        | $                                     
|                                                              |                                                             |                              |         |                        |           |                             |        |                                    |          |                                       

27

---





Condensed Consolidating Parent Company, Guarantor and Non-guarantor  Balance Sheet  As of December 31, 2003  (In thousands)

|                                                              |                                                             | Parent                       |         | Guarantor
Subsidiaries |           | Non-
guarantor
Subsidiaries |        | Reclassifications
and
Eliminations |          | The Titan
Corporation
and
Subsidiaries
|------------------------------------------------------------- | ----------------------------------------------------------- | ---------------------------- | ------- | ---------------------- | --------- | --------------------------- | ------ | ---------------------------------- | -------- | --------------------------------------
|Assets                                                        |                                                             |                              |         |                        |           |                             |        |                                    |          |                                       
|Current Assets:                                               |                                                             |                              |         |                        |           |                             |        |                                    |          |                                       
|                                                              | Cash and cash equivalents                                   |                              | $       | 25,950                 |           | $                           | (941   | )                                  | $        | 1,965                                 
|                                                              | Accounts receivablenet                                     |                              |         | 339,580                |           |                             | 14,324 |                                    |          | 27,361                                
|                                                              | Inventories                                                 |                              |         | 12,676                 |           |                             | 1,918  |                                    |          | 6,836                                 
|                                                              | Prepaid expenses and other                                  |                              |         | 23,076                 |           |                             | 538    |                                    |          | 296                                   
|                                                              | Deferred income taxes                                       |                              |         | 91,272                 |           |                             |       |                                    |          |                                      
|                                                              | Current assets of discontinued operations                   |                              |         | 13,747                 |           |                             | 47,852 |                                    |          | 8,185                                 
|                                                              |                                                             |                              |         |                        |           |                             |        |                                    |          |                                       
|                                                              |                                                             | Total current assets         |         |                        | 506,301   |                             |        | 63,691                             |          |                                       
|Property and equipment, net                                   |                                                             |                              | 37,541  |                        |           | 3,028                       |        |                                    | 11,939   |                                       
|Goodwill                                                      |                                                             |                              | 455,016 |                        |           | 7,834                       |        |                                    | 59       |                                       
|Other assetsnet                                              |                                                             |                              | 57,825  |                        |           | 8,295                       |        |                                    | 5        |                                       
|Deferred income taxes                                         |                                                             |                              | 62,781  |                        |           |                            |        |                                    |         |                                       
|Non-current assets of discontinued operations                 |                                                             |                              | 19,153  |                        |           | 12,732                      |        |                                    |         |                                       
|Intercompany investments, advances and liabilitiesnet        |                                                             |                              | 348,309 |                        |           | (182,666                    | )      |                                    | (165,643 | )                                     
|                                                              |                                                             |                              |         |                        |           |                             |        |                                    |          |                                       
|                                                              |                                                             | Total assets                 |         | $                      | 1,486,926 |                             | $      | (87,086                            | )        | $                                     
|                                                              |                                                             |                              |         |                        |           |                             |        |                                    |          |                                       
|Liabilities and Stockholders' Equity                          |                                                             |                              |         |                        |           |                             |        |                                    |          |                                       
|Current Liabilities:                                          |                                                             |                              |         |                        |           |                             |        |                                    |          |                                       
|                                                              | Current portion of amounts outstanding under line of credit |                              | $       | 3,500                  |           | $                           |       |                                    | $        |                                      
|                                                              | Accounts payable                                            |                              |         | 76,685                 |           |                             | 10,499 |                                    |          | 2,902                                 
|                                                              | Current portion of long-term debt                           |                              |         | 863                    |           |                             |       |                                    |          |                                      
|                                                              | Accrued compensation and benefits                           |                              |         | 77,271                 |           |                             | 2,752  |                                    |          | 1,309                                 
|                                                              | Other accrued liabilities                                   |                              |         | 87,695                 |           |                             | 3,667  |                                    |          | 1,767                                 
|                                                              | Current liabilities of discontinued operations              |                              |         | 3,810                  |           |                             | 14,148 |                                    |          | 4,723                                 
|                                                              |                                                             |                              |         |                        |           |                             |        |                                    |          |                                       
|                                                              |                                                             | Total current liabilities    |         |                        | 249,824   |                             |        | 31,066                             |          |                                       
|                                                              |                                                             |                              |         |                        |           |                             |        |                                    |          |                                       
|Long-term portion of amounts outstanding under line of credit |                                                             |                              | 341,250 |                        |           |                            |        |                                    |         |                                       
|Senior subordinated debt                                      |                                                             |                              | 200,000 |                        |           |                            |        |                                    |         |                                       
|Other long-term debt                                          |                                                             |                              | 988     |                        |           |                            |        |                                    |         |                                       
|Other non-current liabilities                                 |                                                             |                              | 47,152  |                        |           |                            |        |                                    | 3,200    |                                       
|Non-current liabilities of discontinued operations            |                                                             |                              | 1,249   |                        |           | 32,798                      |        |                                    | 998      |                                       
|Stockholders' equity (deficit)                                |                                                             |                              | 646,463 |                        |           | (150,950                    | )      |                                    | (123,896 | )                                     
|                                                              |                                                             |                              |         |                        |           |                             |        |                                    |          |                                       
|                                                              |                                                             | Total liabilities and equity |         | $                      | 1,486,926 |                             | $      | (87,086                            | )        | $                                     
|                                                              |                                                             |                              |         |                        |           |                             |        |                                    |          |                                       

28

---





Condensed Consolidating Parent Company, Guarantor and Non-guarantor  Statement of Cash Flows  For the Six Months Ended June 30, 2004  (Unaudited)  (In thousands)

|                                                                                                                  |  | Parent |         | Guarantor
Subsidiaries |   | Non-
guarantor
Subsidiaries |   | Reclassifications and Eliminations |         | The Titan
Corporation
and
Subsidiaries |  
|----------------------------------------------------------------------------------------------------------------- |  | ------ | ------- | ---------------------- | - | --------------------------- | - | ---------------------------------- | ------- | -------------------------------------- | -
|Cash Flows from Operating Activities:                                                                             |  |        |         |                        |   |                             |   |                                    |         |                                        |  
|Income (loss) from continuing operations                                                                          |  | $      | (14,464 | )                      | $ | 611                         |   | $                                  | (11,603 | )                                      | $
|Adjustments to reconcile income (loss) from continuing operations to net cash used for continuing operations      |  |        | (15,279 | )                      |   | (7,326                      | ) |                                    | 10,980  |                                        |  
|                                                                                                                  |  |        |         |                        |   |                             |   |                                    |         |                                        |  
|Net cash used for continuing operations                                                                           |  |        | (29,743 | )                      |   | (6,715                      | ) |                                    | (623    | )                                      |  
|                                                                                                                  |  |        |         |                        |   |                             |   |                                    |         |                                        |  
|Loss from discontinued operations                                                                                 |  |        | (19,611 | )                      |   | (17,209                     | ) |                                    | (865    | )                                      |  
|Adjustments to reconcile loss from discontinued operations to cash provided by (used for) discontinued operations |  |        | 13,016  |                        |   | 11,753                      |   |                                    | 15,209  |                                        |  
|                                                                                                                  |  |        |         |                        |   |                             |   |                                    |         |                                        |  
|Net cash provided by (used for) discontinued operations                                                           |  |        | (6,595  | )                      |   | (5,456                      | ) |                                    | 14,344  |                                        |  
|                                                                                                                  |  |        |         |                        |   |                             |   |                                    |         |                                        |  
|Net cash provided by (used for) operating activities                                                              |  |        | (36,338 | )                      |   | (12,171                     | ) |                                    | 13,721  |                                        |  
|                                                                                                                  |  |        |         |                        |   |                             |   |                                    |         |                                        |  
|Cash Flows from Investing Activities:                                                                             |  |        |         |                        |   |                             |   |                                    |         |                                        |  
|Capital expenditures                                                                                              |  |        | (6,494  | )                      |   | (10,001                     | ) |                                    | (281    | )                                      |  
|Proceeds from sale of investments and net assets                                                                  |  |        | 2,494   |                        |   | 386                         |   |                                    |        |                                        |  
|Earnout payments related to prior year acquisitions                                                               |  |        | (2,460  | )                      |   |                            |   |                                    |        |                                        |  
|Other investments                                                                                                 |  |        | (1,243  | )                      |   |                            |   |                                    |        |                                        |  
|Proceeds (payments) on intercompany investments, advances and liabilities                                         |  |        | (6,078  | )                      |   | 22,072                      |   |                                    | (15,994 | )                                      |  
|Other                                                                                                             |  |        | 706     |                        |   | 27                          |   |                                    | 370     |                                        |  
|                                                                                                                  |  |        |         |                        |   |                             |   |                                    |         |                                        |  
|Net cash provided by (used for) investing activities                                                              |  |        | (13,075 | )                      |   | 12,484                      |   |                                    | (15,905 | )                                      |  
|                                                                                                                  |  |        |         |                        |   |                             |   |                                    |         |                                        |  
|Cash Flows from Financing Activities:                                                                             |  |        |         |                        |   |                             |   |                                    |         |                                        |  
|Additions to debt                                                                                                 |  |        | 49,125  |                        |   |                            |   |                                    |        |                                        |  
|Retirement of debt                                                                                                |  |        | (241    | )                      |   |                            |   |                                    |        |                                        |  
|Preferred stock redemption                                                                                        |  |        | (12,518 | )                      |   |                            |   |                                    |        |                                        |  
|Proceeds from exercise of stock options and other                                                                 |  |        | 13,566  |                        |   |                            |   |                                    |        |                                        |  
|Dividends paid                                                                                                    |  |        | (190    | )                      |   |                            |   |                                    |        |                                        |  
|Other                                                                                                             |  |        | (35     | )                      |   | (174                        | ) |                                    | (11     | )                                      |  
|                                                                                                                  |  |        |         |                        |   |                             |   |                                    |         |                                        |  
|Net cash provided by (used for) financing activities                                                              |  |        | 49,707  |                        |   | (174                        | ) |                                    | (11     | )                                      |  
|                                                                                                                  |  |        |         |                        |   |                             |   |                                    |         |                                        |  
|Effect of exchange rate changes on cash                                                                           |  |        |        |                        |   |                            |   |                                    | 215     |                                        |  
|                                                                                                                  |  |        |         |                        |   |                             |   |                                    |         |                                        |  
|Net increase (decrease) in cash and cash equivalents                                                              |  |        | 294     |                        |   | 139                         |   |                                    | (1,980  | )                                      |  
|Cash and cash equivalents at beginning of year                                                                    |  |        | 25,950  |                        |   | (941                        | ) |                                    | 1,965   |                                        |  
|                                                                                                                  |  |        |         |                        |   |                             |   |                                    |         |                                        |  
|Cash and cash equivalents at end of period                                                                        |  | $      | 26,244  |                        | $ | (802                        | ) | $                                  | (15     | )                                      | $
|                                                                                                                  |  |        |         |                        |   |                             |   |                                    |         |                                        |  

29

---





Condensed Consolidating Parent Company, Guarantor and Non-guarantor  Statement of Cash Flows  For the Six Months Ended June 30, 2003  (Unaudited)  (In thousands)

|                                                                                                                           |  | Parent |          | Guarantor
Subsidiaries |   | Non-
guarantor
Subsidiaries |   | Reclassifications
and
Eliminations |         | The Titan
Corporation
and
Subsidiaries |  
|-------------------------------------------------------------------------------------------------------------------------- |  | ------ | -------- | ---------------------- | - | --------------------------- | - | ---------------------------------- | ------- | -------------------------------------- | -
|Cash Flows from Operating Activities:                                                                                      |  |        |          |                        |   |                             |   |                                    |         |                                        |  
|Income (loss) from continuing operations                                                                                   |  | $      | 15,818   |                        | $ | 383                         |   | $                                  | (956    | )                                      | $
|Adjustments to reconcile income (loss) from continuing operations to net cash provided by (used for) continuing operations |  |        | 32,672   |                        |   | (8,963                      | ) |                                    | (6,073  | )                                      |  
|                                                                                                                           |  |        |          |                        |   |                             |   |                                    |         |                                        |  
|Net cash provided by (used for) continuing operations                                                                      |  |        | 48,490   |                        |   | (8,580                      | ) |                                    | (7,029  | )                                      |  
|                                                                                                                           |  |        |          |                        |   |                             |   |                                    |         |                                        |  
|Income (loss) from discontinued operations                                                                                 |  |        | (1,646   | )                      |   | (1,581                      | ) |                                    | 862     |                                        |  
|Adjustments to reconcile income (loss) from discontinued operations to cash used for discontinued operations               |  |        | (1,407   | )                      |   | (8,652                      | ) |                                    | (4,244  | )                                      |  
|                                                                                                                           |  |        |          |                        |   |                             |   |                                    |         |                                        |  
|Net cash used for discontinued operations                                                                                  |  |        | (3,053   | )                      |   | (10,233                     | ) |                                    | (3,382  | )                                      |  
|                                                                                                                           |  |        |          |                        |   |                             |   |                                    |         |                                        |  
|Net cash provided by (used for) operating activities                                                                       |  |        | 45,437   |                        |   | (18,813                     | ) |                                    | (10,411 | )                                      |  
|                                                                                                                           |  |        |          |                        |   |                             |   |                                    |         |                                        |  
|Cash Flows from Investing Activities:                                                                                      |  |        |          |                        |   |                             |   |                                    |         |                                        |  
|Capital expenditures                                                                                                       |  |        | (4,944   | )                      |   | (343                        | ) |                                    | (31     | )                                      |  
|Other investments                                                                                                          |  |        | (93      | )                      |   |                            |   |                                    |        |                                        |  
|Proceeds (payments) on intercompany investments, advances and liabilities                                                  |  |        | (30,142  | )                      |   | 18,097                      |   |                                    | 12,045  |                                        |  
|Other                                                                                                                      |  |        | 252      |                        |   | (6                          | ) |                                    | 7       |                                        |  
|                                                                                                                           |  |        |          |                        |   |                             |   |                                    |         |                                        |  
|Net cash provided by (used for) investing activities                                                                       |  |        | (34,927  | )                      |   | 17,748                      |   |                                    | 12,021  |                                        |  
|                                                                                                                           |  |        |          |                        |   |                             |   |                                    |         |                                        |  
|Cash Flows from Financing Activities:                                                                                      |  |        |          |                        |   |                             |   |                                    |         |                                        |  
|Extinguishment of High Tides and other debt reductions                                                                     |  |        | (250,429 | )                      |   |                            |   |                                    |        |                                        |  
|Issuance of senior subordinated notes and other debt additions                                                             |  |        | 239,125  |                        |   |                            |   |                                    |        |                                        |  
|Deferred debt issuance costs                                                                                               |  |        | (7,727   | )                      |   |                            |   |                                    |        |                                        |  
|Debt extinguishment costs                                                                                                  |  |        | (4,352   | )                      |   |                            |   |                                    |        |                                        |  
|Decrease in restricted cash                                                                                                |  |        | 394      |                        |   |                            |   |                                    |        |                                        |  
|Proceeds from stock issuances                                                                                              |  |        | 1,935    |                        |   |                            |   |                                    |        |                                        |  
|Dividends paid                                                                                                             |  |        | (344     | )                      |   |                            |   |                                    |        |                                        |  
|Other                                                                                                                      |  |        | (88      | )                      |   | (6                          | ) |                                    | (28     | )                                      |  
|                                                                                                                           |  |        |          |                        |   |                             |   |                                    |         |                                        |  
|Net cash used for financing activities                                                                                     |  |        | (21,486  | )                      |   | (6                          | ) |                                    | (28     | )                                      |  
|                                                                                                                           |  |        |          |                        |   |                             |   |                                    |         |                                        |  
|Effect of exchange rate changes on cash                                                                                    |  |        |         |                        |   |                            |   |                                    | (30     | )                                      |  
|                                                                                                                           |  |        |          |                        |   |                             |   |                                    |         |                                        |  
|Net increase (decrease) in cash and cash equivalents                                                                       |  |        | (10,976  | )                      |   | (1,071                      | ) |                                    | 1,552   |                                        |  
|Cash and cash equivalents at beginning of year                                                                             |  |        | 33,390   |                        |   | 793                         |   |                                    | (60     | )                                      |  
|                                                                                                                           |  |        |          |                        |   |                             |   |                                    |         |                                        |  
|Cash and cash equivalents at end of period                                                                                 |  | $      | 22,414   |                        | $ | (278                        | ) | $                                  | 1,492   |                                        | $
|                                                                                                                           |  |        |          |                        |   |                             |   |                                    |         |                                        |  

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THE TITAN CORPORATION

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Dollar amounts in thousands, except share and per share data, or as otherwise  noted)

Overview and Outlook

We are a leading technology developer and systems integrator for the Department of Defense, the Department of Homeland Security and intelligence and other key
government agencies. We provide a range of services and systems solutions. These solutions and services include research and development, design, installation, integration, test, logistics support,
maintenance and training. We also provide services and solutions to government agencies with sophisticated information systems. These include information processing, information fusion, data
management, and communications systems. In addition, we develop and produce digital imaging products, sensors, lasers, electro-optical systems, threat simulation/training systems, intelligence
electronic hardware, signal intercept systems, satellite communications equipment, cryptographic equipment, and complex military specific systems.

We
focus on the following four markets: C4ISR (Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance), Transformational Programs, Enterprise
Information Technology, and the War on Terrorism/Homeland Security.

Our
revenues have grown organically by using our broader capabilities to win larger, more complex and long-term government contracts, and to a lesser extent through
acquisitions of other government information technology companies. We expect to continue our recent trend of bidding on
larger government contracts with potential revenues of more than $100 million or more as well as continuing to bid on smaller contracts within our targeted markets.

In
June 2004, our board of directors made the decision to sell or otherwise divest our Datron World Communications business (Datron World) and Titan Scan Technologies service
business (Scan Services). These are non-core operations that have not performed to management's expectation, and their divestiture will allow us to better focus on our core government
businesses. These businesses have been reported as a discontinued operation in accordance with SFAS No. 144, and all periods presented have been restated accordingly to reflect these operations
as discontinued. During the second quarter, we also divested of our remaining commercial information technology business which was part of discontinued businesses and divested of a small
government-related business due to organizational conflicts of interest with Lockheed Martin. The discontinuance of the Datron World and Scan Services businesses is not expected to have a material
impact on our revenue, as the total revenue of these discontinued businesses aggregated approximately $18.8 million during the fiscal year ended December 31, 2003 and $9.4 million
during the six months ended June 30, 2004.

Our
operating margins are affected by the mix of contract types (cost reimbursement, fixed-price or time and materials) as well as by the mix of prime contracts versus subcontracts.
Significant portions of our contracts are time and materials and cost reimbursement contracts. We are reimbursed for labor hours at negotiated hourly billing rates and other direct expenses under time
and materials contracts and reimbursed for all actual costs, plus a fee, or profit, under cost reimbursement contracts. The financial risks under these contracts generally are lower than those
associated with other types of contracts, and margins are also typically lower than those on fixed-price contracts. The U.S. government also has awarded us fixed-price contracts. Such contracts carry
higher financial risks because we must deliver the products, systems or contracted services at a cost below the fixed price in order to earn a profit.

On
June 26, 2004, Lockheed Martin Corporation terminated the merger agreement pursuant to which Lockheed Martin was to have acquired Titan. The merger agreement was entered into
in September 2003 and amended in March 2004 and April 2004 to provide additional time for Titan to resolve issues and

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concerns
related to internal reviews, and the related Securities and Exchange Commission (SEC) investigation and Department of Justice (DOJ) criminal inquiry, into whether payments involving Titan's
international consultants were made in violation of applicable law (refer to Note 8 of the Notes to Consolidated Financial Statements).

RESULTS OF OPERATIONS

Revenues

Three Months Ended June 30, 2003 and 2004:

Consolidated revenues for the second quarter increased from $433.9 million in 2003 to $514.9 million in 2004, a 19% increase. Revenues in 2004
increased due to the increased work on a number of existing contracts as well as work on new contracts. Most notably our revenues increased by $37.1 million for work on three
intelligence-related contracts, including our linguist contract with the U.S. Army. Two enterprise information technology contracts supporting Department of Defense (DoD) military and intelligence
operations contributed increased revenues of approximately $10.3 million, and one of Titan's development contracts for the U.S. Navy contributed approximately $6.2 million to the revenue
increase. The acquisition of Advent Systems in the fourth quarter of 2003 contributed an aggregate of approximately $4.8 million to the total revenue increase. The increase in revenues from
Advent was more than offset by reductions in revenue resulting from a government-related asset sale transaction in the first quarter of 2004 and a contract terminated due to organizational conflicts
of interest with Lockheed Martin. The asset sale was related to certain contracts providing scientific engineering and technical assistance (SETA) support to the DoD, which was sold due to an
organizational conflict of interest with Lockheed Martin in anticipation of the then proposed merger (see Note 7 to the Notes to Consolidated Financial Statements). Included in revenues for the
second quarter in 2004 are revenues of $55.6 million related to our linguist contract representing 10.8% of total revenues and $17.5 million related to our enterprise information
technology contract for U.S. Special Operations Command, representing 3.4% of total revenue. No other single contract provided more than 3% of total revenues for the same period.

Six months ended June 30, 2003 and 2004:

Consolidated revenues increased from $808.2 million in 2003 to $969.0 million in 2004, a 20% increase. Revenues increased due to the increased work
on a number of existing contracts as well as work on new contracts. Three intelligence-related contracts, including the linguist contract, contributed an increase of approximately
$76.8 million. Also, revenues related to enterprise information technology contracts supporting DOD military and intelligence operations increased $20.6 million, and revenues increased
$9.6 million for work on one of our development contracts with the Navy. In addition, revenues increased by approximately $12.9 million from two Navy contracts that provide engineering
services
and support, system integration, installation, and life cycle support. The acquisition of Advent Systems in the fourth quarter of 2003 contributed $9.1 million to the total revenue increase.
The increase related to Advent was more than offset by reductions in revenue resulting from the aforementioned government-related asset sale transaction in the first quarter of 2004 and the contract
terminated due to organizational conflicts of interest with Lockheed Martin. Total revenues from the linguist contract of $99.5 million represents approximately 10.3% of Titan's total revenues
and revenues of $32.8 million related to our enterprise information technology contract for U.S. Special Operations Command, represents 3.4% of total revenue. No other single contract provided
more than 3% of total revenues for the six months ended June 30, 2004.

Our
linguist contract with the Army expires on September 30, 2004. The Army has cancelled the procurement process that it had initiated to award a new contract following a protest
of the request for proposal it had issued. The Army has informed us that the linguist services we are providing are mission critical and that the Army cannot allow a lapse in services during the
procurement process. We expect that

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the
Army will extend our services for up to one year while the Army develops and implements a new procurement strategy. However, the Army has not notified us of the extension of our services and we
cannot be certain that our services will be used following the expiration of our existing contract on September 30, 2004.

Selling, General and Administrative Expenses

Three months ended June 30, 2003 and 2004:

Our SG&A expenses decreased slightly from $38.3 million in the second quarter of 2003 to $38.2 million in the second quarter of 2004. As a
percentage of revenues, SG&A decreased from 8.8% of revenues in the quarter ended June 30, 2003 to 7.4% in the quarter ended June 30, 2004. The decrease is primarily attributable to
overall increased economies of scale with higher revenues, as well as cost reductions and facilities consolidation activities executed in 2002 and 2003. Our SG&A expense in the second quarter of 2004
also included $0.3 million in legal and other professional fees related to the SureBeam bankruptcy settlement and other SureBeam related matters, including the defense of class action
litigation.

Six months ended June 30, 2003 and 2004:

Consolidated SG&A expenses decreased from $76.8 million in 2003 to $74.1 million in 2004, a 3.5% decrease. As a percentage of revenues, SG&A
decreased from 9.5% of revenues in the six months ended June 30, 2003 to 7.7% in the six months ended June 30, 2004. The decrease is primarily attributable to the same factors affecting
the decrease for the second quarter of 2004 compared to 2003. SG&A expense in the six months ended June 30, 2004, also included $1.7 million in legal and other professional fees related
to the SureBeam bankruptcy settlement and other SureBeam related matters, including the defense of class action litigation. We expect to incur approximately $2.0 million to $3.0 million
in the second half of 2004 connection with our implementation of the internal controls documentation and testing procedures required by Section 404 of the Sarbanes-Oxley Act of 2002, primarily
for hiring outside consultants. Because of the planned merger with Lockheed Martin, which was terminated at the end of June, we had not previously planned on incurring the external expense of the
Section 404 implementation. Our actual expenses for this implementation may exceed our current best estimates.

Research and Development

Our R&D expenses increased year-to-year, from $2.0 million in the second quarter of 2003 to $4.7 million in the second
quarter of 2004. As a percentage of revenues, R&D expenses remained at less than 1% in both quarters. R&D expenses increased from $4.1 million in the six months ended June 30, 2003 to
$8.1 million in the same period in 2004, in both years less than 1% of revenues. R&D expenses in 2003 were incurred primarily in our development of low cost radar systems, satellite
communications modems and signal intelligence technologies. R&D expenses in 2004 were incurred primarily in our development of a high speed modem and related antennas, secure communications devices
and the next generation of the Affordable Weapon. Our research and development expenses are impacted by specific projects we undertake from time to time and we do not expect our research and
development expenses during the second half of 2004 to continue at the same rate as our second quarter expenses.

Merger, Investigation and Settlement Costs

In the three months and six months ended June 30, 2004, respectively, we incurred approximately $8.8 million and $26.4 million in legal,
investment banking, accounting, printing and other professional fees and costs related to the terminated merger with Lockheed Martin. The merger-related costs include the costs of an exchange offer
and consent solicitation for our 8% senior subordinated notes and the redemption of our preferred stock (see Note 2 to the Notes to Consolidated Financial Statements), both of which were
conditions to close the proposed merger. Approximately $6.2 million and $18.0 million of these

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costs
in the three months and six months ended June 30, 2004, respectively, were associated with our comprehensive investigation and evaluation of whether payments involving our international
consultants were made in violation of the Foreign Corrupt Practices Act (FCPA). The legal, accounting and other professional fees incurred also supported the related inquiry by the DOJ and SEC. We
expect to incur approximately $5.0 to $10.0 million in legal and other expenses in the second half of 2004 in connection with the ongoing DOJ and SEC FCPA-related investigations.
Actual legal expenses may differ significantly from these estimates due to developments in these investigations, the timing of the resolution of these matters, if any, and other factors which are not
within our control and are inherently uncertain.

In
the three months and six months ended June 30, 2004, we recorded an additional provision of $25.5 million for anticipated settlement costs related to the FCPA
investigations. We had previously reserved $3.0 million as of December 31, 2003, for resolution of the government FCPA investigations, thereby bringing the total amount reserved to
$28.5 million representing our estimate of potential liabilities related to this matter. The ultimate resolution of this matter is dependent upon the final results of such inquiries and
investigations and associated liabilities could be different from the amount currently estimated. We did not accrue for any remaining legal costs expected to be incurred to reach resolution of the
FCPA matter, as those costs will be expensed as incurred in future periods. We are continuing to cooperate fully with the government to resolve the investigations (see Note 8 to the Notes to
Consolidated Financial Statements).

Asset Impairment Charges

During the three months and six months ended June 30, 2004, we recorded asset impairment charges totaling $22.7 million. Approximately
$10 million of these charges pertain to impairment of fixed assets directly related to the termination of a program by a civilian government agency in the second quarter, and impairment of
assets associated with a reduction in scope of our planned business activities in Saudi Arabia. Approximately $7.2 million of these charges are related to a reduction in the estimated net
realizable value of SureBeam-related assets that were transferred to us to settle our claims against SureBeam (see Note 8 to the Notes to Consolidated Financial Statements). Approximately
$5.5 million
related to a charge for impairment of a technology license we purchased from SureBeam in 2001 (see Note 8 to the Notes to Consolidated Financial Statements).

Operating Profit (Loss)

Three months ended June 30, 2003 and 2004:

Our operating profit decreased from $31.5 million in the three months ended June 30, 2003 to an operating loss of $23.1 million in the three
months ended June 30, 2004. Included in the operating results for the quarter ended June 30, 2004 are merger, investigation and settlement costs of approximately $34.3 million and
asset impairment charges of approximately $22.7 million, as discussed above. Excluding these costs and charges in 2004, operating profit increased in the second quarter from
$31.5 million in 2003 to $33.9 million in 2004. This increase was primarily due to the increase in revenues in 2004, as well as cost reduction measures we initiated in 2002 and 2003,
offset by $5.1 million in losses resulting from our National ID card system contract in Saudi Arabia.

Six Months ended June 30, 2003 and 2004:

Our operating profit decreased from $53.3 million in 2003 to an operating loss of $8.3 million in 2004. Included in the 2004 results are merger,
investigation and settlement costs of $51.9 million and asset impairment charges of $22.7 million as discussed above. Excluding these costs and charges in 2004, operating profit
increased from $53.3 million in 2003 to $66.3 million in 2004. This increase was primarily attributable to the increase in revenues in 2004, as well as to cost reduction measures, offset
by the aforementioned $5.1 million in losses from our National ID Card System contract in Saudi Arabia.

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Interest Expense, Net

Three Months Ended June 30, 2003 and 2004:

Our net interest expense increased from $7.8 million in the second quarter of 2003 to $8.9 million in the second quarter of 2004, due primarily to
the higher interest rate due to the issuance of Titan's senior subordinated notes issued May 15, 2003, compared to the HIGH TIDES securities which the notes replaced, and higher average
balances on our senior credit facility. The three months in 2003 also included interest income of $0.6 million related to the line of credit advanced to SureBeam. Borrowings from our senior
credit facility, excluding working capital lines from acquired companies (which were immaterial), averaged $363.2 million for the three months ended June 30, 2003, at a weighted average
interest rate of 4.6%, compared to $387.2 million in the three months ended June 30, 2004, at a weighted average interest rate of 4.7%.

Six Months Ended June 30, 2003 and 2004:

Our net interest expense increased from $15.3 million in 2003 to $17.9 million in 2004, due primarily to the higher interest rate on our 8% senior
subordinated notes issued May 15, 2003, compared to the HIGH TIDES securities which the notes replaced, and to higher average balances on our senior credit facility. The six months in 2003 also
included interest income of $1.1 million related to the line of credit advanced to SureBeam. Borrowings from our senior credit facility, excluding working capital lines from acquired companies
(which were immaterial), averaged $358.8 million for the six months ended June 30, 2003, at a weighted average interest rate of 4.7% compared to $370.9 million in the six months
ended June 30, 2004, at a weighted average interest rate of 4.7%.

Debt Extinguishment Costs

In the three months and six months ended June 30, 2003, we recorded approximately $12.4 million in charges related to the extinguishment of the HIGH
TIDES, comprised of the write-off of $8.1 million of remaining deferred financing costs of HIGH TIDES, a call premium of $3.6 million to redeem the HIGH TIDES, and
approximately $0.7 million of interest during the call period. All debt extinguishment charges were recorded as a charge to income from continuing operations.

Gain on Sale of Assets

The net gain on sale of assets in the six months ended June 30, 2004 represents a gain on the sale of certain contracts and related assets and liabilities
of $0.9 million, which sale was completed in order to
mitigate concerns raised by one customer related to organizational conflict of interest issues arising from the then pending merger with Lockheed Martin. The aforementioned gain was partially offset
by a loss of $0.3 million on another sale of certain contracts and related assets and liabilities, which were sold as part of our ongoing strategy to divest non-core assets and
operations.

Income Taxes

Income taxes for continuing operations reflect effective rates of a 40.6% provision in the quarter ended June 30, 2003, and an 8.1% benefit in the quarter
ended June 30, 2004. Income taxes for continuing operations reflect an effective provision rate of 40.4% in the six months ended June 30, 2003, and reflect a tax provision of
$0.2 million on a net loss of $25.6 million in the six months ended June 30, 2004. The expected tax provision rates are impacted by estimated changes in the annual book income and
the estimated tax deductibility of certain operating expenses. The rates in 2004 primarily reflect the expected non-deductibility of the settlement charge related to the government FCPA
investigations. Based on current projected taxable income, management believes that the benefit of net operating losses will be applied against future taxable income; however, if we continue to incur
losses, there could be a need to establish a valuation allowance against the deferred tax asset.

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Loss From Discontinued Operations

In the quarter ended June 30, 2003, loss from discontinued operations was $0.8 million, net of a tax benefit of $3.7 million. The net loss
was related to net operating losses of $1.4 million, $0.2 million, $0.2 million, and $0.1 million in our Datron World, Scan Services, Titan Wireless, and LinCom Wireless
businesses, respectively, and net operating income of $1.1 million in our Cayenta Canada commercial information technology business. In the quarter ended June 30, 2004, loss from
discontinued operations was $37.1 million, net of a tax benefit of $12.5 million. The net loss related to net operating losses of $0.3 million, $0.1 million, and
$0.5 million in our Datron World, Scan Services, and Titan Wireless businesses, respectively, $0.1 million in wind-down costs of other former Titan Technologies businesses,
and a net operating loss of $1.1 million in our Cayenta Canada business. Included in the results for the second quarter of 2004 are asset impairment charges of $20.3 million,
$14.4 million, and $8.5 million in our Datron World, Scan Services and Titan Wireless businesses, respectively, and a contingency reserve charge of $3.9 million in our Titan
Wireless business relating to a subcontractor and its subcontract related to the Benin contract.

In
the six months ended June 30, 2003, loss from discontinued operations was $2.4 million, net of a tax benefit of $4.7 million. The net loss was related to net
operating losses of $1.6 million, $0.6 million, $0.6 million, and $0.4 million in our Datron World, Scan Services, Titan Wireless, and LinCom Wireless
businesses, respectively, and net operating income of $0.9 million in our Cayenta Canada and other commercial technology businesses that we subsequently sold.

In
the six months ended June 30, 2004, loss from discontinued operations was $37.7 million, net of a tax benefit of $13.0 million. The net loss related to net
operating losses of $0.3 million, $0.1 million, $1.0 million, and $0.9 million in our Datron World, Scan Services, Titan Wireless, and commercial information technology
businesses, respectively, and $0.2 million in wind-down costs of other Titan Technologies businesses. The results also included asset impairment charges of $20.3 million,
$8.5 million, and $14.4 million in our Datron World, Scan Services, and Titan Wireless businesses, respectively, and a contingency reserve charge of $3.9 million in the Titan
Wireless business.

Net Income

Three Months Ended June 30, 2003 and 2004:

In the quarter ended June 30, 2003, we reported net income of $5.9 million, compared to a net loss of $66.6 million in the quarter ended
June 30, 2004. Loss from discontinued operations was $0.8 million in the quarter ended June 30, 2003, compared to $37.1 million in the quarter ended June 30, 2004.
Included in the results for 2003 are pre-tax debt extinguishment charges of $12.4 million. Included in the results for the quarter ended June 30, 2004, are
pre-tax merger, investigation and settlement costs of $34.3 million, impairment of assets charges of $22.7 million, and legal and other professional fees of
$0.3 million related to the SureBeam bankruptcy settlement and the defense of SureBeam-related class action litigation.

Six Months Ended June 30, 2003 and 2004:

In the six months ended June 30, 2003, we reported net income of $12.9 million, compared to a net loss of $63.5 million in the six months
ended June 30, 2004. Loss from discontinued operations was $2.4 million in 2003, compared to $37.7 million in 2004. Included in the results for 2003 are pre-tax debt
extinguishment charges of $12.4 million. Included in the results for 2004 are pre-tax merger, investigation and settlement costs of $51.9 million, asset impairment charges of
$22.7 million, and legal and other professional fees of $1.7 million related to the SureBeam bankruptcy settlement and the defense of SureBeam-related class action litigation.

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LIQUIDITY AND CAPITAL RESOURCES

We used cash of approximately $37.1 million from our continuing operations during the six months ended June 30, 2004, primarily resulting from a net
increase in receivable balances of approximately $57.2. The increase in accounts receivable balances primarily reflects the growth in our revenue and longer payment cycles on certain contracts,
including our linguist contract. Our payment cycles are within industry norms and are subject to fluctuations that may adversely affect our receivable balances and our liquidity in subsequent periods.
Cash payments in the six months ended June 30, 2004 also included a payment of approximately $7.1 million to exit a leased facility, which was accrued for in 2002 as part of our
facilities consolidation. Our investing activities used net cash of approximately $16.5 million, primarily for capital expenditures of $16.8 million. Our capital expenditures were higher
in the six months ended June 30, 2004 than in prior periods due to substantial expenditures incurred related to our new facility in northern Virginia which consolidates several operations in
the greater Washington, D.C. area. Financing activities provided $49.5 million, primarily from the increase in borrowing under our revolver in our senior credit facility of
$49.1 million. Proceeds from stock issuances, primarily the exercise of stock options, provided $13.6 million. These increases were partially offset by the use of approximately
$12.5 million in cash for the redemption of our cumulative convertible preferred stock made in March 2004.

Discontinued
operations provided approximately $2.3 million in the first six months of 2004 due primarily to cash proceeds of $6.0 million from the sale of Cayenta Canada
in June 2004. These proceeds were partially offset by payments totaling approximately $3.7 million for vendor and lease obligations, exit costs, and for operating losses of our
discontinued operations.

At
June 30, 2004, total borrowings under our senior credit facility were $393.9 million at a weighted average interest rate of 4.52%. Commitments under letters of credit,
which reduce availability under
our senior credit facility, were $10 million at June 30, 2004, resulting in $75 million of borrowing availability on the senior revolver at June 30, 2004. Of the total
borrowings, $3.5 million was short-term. At June 30, 2004, we were in compliance with all financial covenants.

We
have a $485 million senior credit facility from a syndicate of commercial banks including Wachovia Securities acting as sole lead arranger and Wachovia Bank, National
Association, as Administrative Agent, The Bank of Nova Scotia and Comerica Bank as Co-Syndication Agents and Branch Banking and Trust Company and Toronto Dominion Bank as
Co-Documentation Agents. The senior credit facility is comprised of an aggregate credit commitment of $485 million, consisting of a seven-year term loan in an aggregate
principal amount of $350 million and a six-year $135 million revolving credit facility.

The
senior credit facility provides for interest rates per annum applicable to amounts outstanding under the term loan and the revolving credit facility that are, at our option, either
the administrative agent's most recently established base rate for U.S. dollars loaned in the United States (or, if greater, the Federal Funds Rate plus 0.5%) plus a margin of 0.75% per annum to 2.00%
per annum, based on our ratio of total debt to EBITDA (as defined in the senior credit facility), or the LIBOR rate for the applicable interest period plus a margin of 2.00% per annum to 3.25% per
annum, based on our ratio of total debt to EBITDA. Our interest rates for base rate and LIBOR revolving loans are generally 0.50% to 0.75% lower than our interest rates for base rate and LIBOR term
loans at the same ratio of total debt to EBITDA. We are required to pay the lenders under the senior credit facility a non-utilization fee ranging from 0.50% per annum to 1.00% per annum,
payable quarterly in arrears, based on the applicable percentage of the undrawn portion of the revolving credit facility. We are also required to pay letter of credit fees for outstanding letters of
credit equal to 0.25% per annum of the stated amount of the letter of credit, plus the product of the applicable margin (from 2.00% to 2.75%, based on its ratio of total debt to EBITDA) for loans
under the revolving credit facility maintained as LIBOR loans multiplied by the stated amount of the letter of credit.

Our
seven-year term loan matures on June 30, 2009 and the revolving credit facility matures on May 23, 2008. The seven-year term loan amortizes at
1.0% per year for years one through six (through the

37

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quarter
ending June 30, 2008), with the remaining 94% due in four equal quarterly payments in year seven of the loan (through the quarter ending June 30, 2009). We may prepay amounts
borrowed under the term loan and the revolving credit facility at our option without any fee. We are also required to make prepayments, subject to certain exceptions, of the outstanding amounts under
the term loan and the revolving credit facility from asset sales, issuance of subordinated debt and equity securities, insurance or condemnation proceeds and from excess cash flows.

The
terms of the senior credit facility require us to provide certain customary covenants for a senior credit facility, including certain financial covenants. As amended, these financial
covenants, as defined per the senior credit agreement, are comprised of a maximum total debt to EBITDA ratio of 5.0 to 1,
a maximum total senior debt to EBITDA ratio of 3.25 to 1, declining to 2.75 to 1 in subsequent years, a minimum interest coverage ratio of 3.0 to 1, a minimum fixed charge coverage ratio of 1.35 to 1
and a minimum net worth of approximately $255 million at June 30, 2004.

On
May 15, 2003, Titan sold $200 million of 8% senior subordinated notes due May 15, 2011 in a private placement (the Notes). We used the net proceeds from the
issuance of the Notes, plus borrowings of $50 million under our revolving credit facility and additional cash on hand, to redeem all of the $250 million of the
then-outstanding 53/4% HIGH TIDES convertible preferred securities. The redemption of HIGH TIDES occurred on June 4, 2003.

Titan
is required to make interest payments on the Notes semi-annually in arrears on May 15 and November 15 at the rate of 8% per annum. Titan may redeem the
Notes, in whole or in part, on or after May 15, 2007 at the following redemption prices, plus accrued and unpaid interest and liquidated damages, if any:

Year

Percentage2007

104.0
%2008

102.0
%2009 and thereafter

100.0
%


In
addition, on or prior to May 15, 2006, we may redeem up to 35% of the aggregate principal amount of the Notes with the net proceeds of certain equity offerings at a redemption
price of 108% of principal together with accrued and unpaid interest. The Notes are unsecured and rank or will rank equally with our current or future senior subordinated indebtedness. Each of our
domestic subsidiaries other than Cayenta guarantee the Notes. The guarantees are unsecured and rank equally with each guarantor's senior subordinated indebtedness. The Notes and the guarantees are
junior to all of ours and each guarantor's senior indebtedness and senior to all of ours and each guarantor's subordinated indebtedness.

On
July 19, 2004, Titan completed the exchange of the existing Notes for a new series of substantially identical 8% senior subordinated notes due May 15, 2011 registered under the
Securities Act of 1933.

Liquidated
damages of 0.25% per annum per $1,000 whole dollars in principal amount of the Notes began to accrue in October 2003 when we did not complete an exchange offer required
under the registration rights agreement because of the proposed merger with Lockheed Martin. Beginning in January 2004, the liquidated damages rate increased to 0.50% and such liquidated
damages continued to accrue, at rates increasing every 90 days by 0.25% per annum per $1,000 whole dollars in principal amount of existing notes up to a maximum of 2.00%, until the exchange
offer described above was completed. The balance accrued at June 30, 2004 is $0.2 million. The liquidated damages are paid with the regular semi-annual interest payment.

Deferred
costs and expenses of $7.5 million related to the senior credit facility are included in Other Assets at June 30, 2004 and will be amortized over the remaining
term of the senior credit facility. Deferred costs and expenses of $5.4 million related to the issuance of the Notes are also included in Other Assets at June 30, 2004, and will be
amortized over the term of the Notes.

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Except
as discussed related to SureBeam in Note 8 to the Notes to Consolidated Financial Statements, "Commitments and Contingencies", and except for our performance guarantees of
certain Cayenta contracts as discussed in Note 5 to the Notes to Consolidated Financial Statments, there are no Titan guarantees of debt or performance by any third party, including any
unconsolidated subsidiary.

In
relation to our acquisition of International Systems in 2002, additional consideration may be payable through 2011 based upon earnings level achieved. Approximately
$0.7 million additional consideration was accrued for earnings in 2003, which was paid in April 2004. In relation to the ongoing FCPA investigations by the DOJ and SEC, we may be
required to pay certain liabilities in the future related to this matter. We recorded a $3 million provision in the quarter ended December 31, 2003, and an additional
$25.5 million in the quarter and six months ended June 30, 2004, representing our estimates at the time of potential liabilities related to this matter. The ultimate resolution of this
matter, and timing of any payment, is dependent upon the final results of such inquiries and investigations and associated liabilities if any, could be different from the amount currently estimated.
We also expect to continue to incur legal, accounting and other professional fees in connection with the ongoing government investigation and in connection with other ongoing litigation. Refer to
Note 2 and Note 8 to the Notes to Consolidated Financial Statements for further discussion.

We
expect to incur approximately $12 million to $15 million in capital expenditures in the second half of 2004, primarily attributable to the completion of our new facility
in Maryland, which consolidates our operations that serve the National Security Agency.

We
plan to finance our operations and working capital from a combination of sources, which include cash generation from our core businesses, our credit facility and potential cash
generated from the disposal of discontinued businesses. Management believes that the combination of our existing cash, amounts available under our credit facility and cash flow expected to be
generated from our operations will be sufficient to fund planned investments, the payment of additional consideration on acquisitions, potential liabilities related to the current government
investigation and working capital requirements for at least the next twelve months. Our strategy is to use cash flow from operations generated by the business to pay down debt. We may need to raise
additional capital in the future. Additional capital may not be available at all, or may not be available on terms favorable to us. Any additional issuance of equity or equity-linked securities may
result in substantial dilution to our stockholders. Also, while our current senior credit facility and senior subordinated bonds do not have "ratings triggers", or provisions that change credit
pricing if and when ratings agencies change their credit ratings on Titan, Titan's ability to raise additional funds under new credit facilities may be more difficult, or altogether not possible, and
the pricing of any new credit facility may be affected, if the credit rating on Titan overall is downgraded by rating agencies. Management is continually monitoring and reevaluating its level of
investment in all of its operations and the financing sources available to achieve our goals.

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Critical Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those estimates. Specifically, management must make estimates in the following areas:

Revenue adjustments and allowance for doubtful accounts.We provide a reserve against our receivables for estimated losses
that may result from our customers' inability to pay. These reserves are recorded as an allowance for doubtful accounts and included in bad debt expense. These reserves are based on potential
uncollectible accounts, aged receivables, historical losses, and our customers' credit-worthiness. We also record reserves against receivables for estimated adjustments to revenue that may result from
changes in expected government funding on certain of our contracts and adjustments that may arise from audits by the Defense Contract Audit Agency (DCAA) of certain of our government contracts. Should
a customer's account become past due, we generally will place a hold on the account and discontinue further shipments and/or services provided to that customer, minimizing further risk of loss. The
likelihood of a material loss to Titan on an uncollectible account in our discontinued operations would be principally dependent on a deterioration in economic and/or political conditions in a
particular country, such as Benin, Africa, in which our receivables due from the government controlled phone company of Benin may be impacted by such an event, or in the Middle East, in which our
receivables due from a government agency in the Middle East may be impacted by political conditions.

Our
accounts receivable balances include unbilled receivables which are comprised of work-in-process which will be billed in accordance with contract terms and
delivery schedules, as well as amounts billable upon final execution of contracts, contract completion, milestones or completion of rate negotiations. Payments to us for performance on certain of our
U.S. Government contracts are subject to audit by the DCAA, and are subject to government funding. We provide a reserve against our receivables for estimated losses that may result from rate
negotiations, audit adjustments, and/or government funding availability. To the extent that actual adjustments
due to rate negotiations, audit adjustments, or government funding availability differ from our estimates, our revenue may be impacted. Due to a high degree of diversification in our government
business, the likelihood of a material loss to Titan on an uncollectible account from this activity is not probable.

Inventory.Inventories are stated at lower of cost or market. We review the components of our inventory on a regular basis
for excess, obsolete and impaired inventory based on estimated future usage and sales. The likelihood of any material inventory write-downs is dependent on changes in competitive conditions, new
product introductions by us or our competitors, or rapid changes in customer demand.

Determining impairment losses on non-marketable securities.We evaluate our investment in
non-marketable securities taking into consideration the financial condition of the investee, the near-term prospects of the investee, including the opportunities in the region
and industry of the investee, changes in technology, the progress of the investee in achieving operational milestones according to its operating plan, and indications of implied fair value as a result
of recent financing transactions. We also evaluate various alternatives relative to realizing the value of our investment. Factors that would influence the likelihood of a material change in our
evaluation of whether there is a decline other than temporary include significant changes in the investee's ability to generate positive cash flow, a significant change in technology, loss of legal
ownership or title to the asset or a significant decline in the economic and competitive environment on which the investee depends.

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Impairment charge related to SureBeam.We estimated the impairment charges recorded in 2003 and 2004 related to SureBeam
based upon assumptions we made regarding estimated proceeds we expect to recover from the liquidation of assets provided to us under the settlement agreement with the SureBeam bankruptcy trustee. We
estimated these proceeds based upon discounted sales values we believe the SureBeam equipment and inventory, primarily electron beam systems and other related components, can be sold for to third
parties. We based these discounted sales values on recent sales prices as well as preliminary indications of interest from third parties. We evaluated the obligations due under the guarantee and lease
agreements by taking into consideration the estimated sublease income and cash flows anticipated from all sources. We estimated the net amounts owed under the facilities lease agreements and lease
guarantees issued on behalf of SureBeam by taking into consideration the estimated sublease income based on current market lease property values. Related to the bank guarantee we issued on behalf of
Hawaii Pride, we evaluated the estimated cash flow to be generated from the operations of Hawaii Pride to determine the estimated amount that may be required to be loaned to Hawaii Pride to enable it
to make its debt payments. We did not take into consideration the potential proceeds resulting from a sale of the intellectual property of SureBeam.

Valuation of goodwill, intangible and other long-lived assets.We use assumptions in establishing the carrying
value, fair value and estimated lives of our long-lived assets and
goodwill. The criteria used for these evaluations include management's estimate of the asset's continuing ability to generate positive income from operations and positive cash flow in future periods
compared to the carrying value of the asset, as well as the strategic significance of any identifiable intangible asset in our business objectives. If assets are considered to be impaired, the
impairment recognized is the amount by which the carrying value of the assets exceeds the fair value of the assets. Useful lives and related amortization or depreciation expense are based on our
estimate of the period that the assets will generate revenues or otherwise be used by us. Factors that would influence the likelihood of a material change in our reported results include significant
changes in the asset's ability to generate positive cash flow, loss of legal ownership or title to the asset, a significant decline in the economic and competitive environment on which the asset
depends, significant changes in our strategic business objectives, utilization of the asset, and a significant change in the economic and/or political conditions, particularly in which we have
investments.

Benefit plans.We provide for limited postretirement medical benefit obligations of operations discontinued in prior years
for former employees and our Chairman, President and Chief Executive Officer. Accounting and reporting for the pension plans requires the use of assumptions for discount rates, expected mortality
rates and estimated growth rates in medical and healthcare costsall assumptions our actuaries rely upon in preparing their estimates for us. Any materially different valuations for
actuarial assumptions that are different from our current expectations could impact our accruals for these postretirement benefit obligations. As the population that participates in these plans is
limited, we do not believe changes in valuations would have a material impact on our provisions for these postretirement obligations.

Valuation of deferred income taxes.Valuation allowances are established, when necessary, to reduce deferred tax assets to
the amount expected to be realized. The amount of the net deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the
carryforward period are reduced. Also, under Federal tax law, certain potential changes in ownership of Titan may limit annual future utilization of these carryforwards. As such, the valuation
allowance recorded is provided against certain carryforwards which may not be utilized. The likelihood of a material change in our expected realization of these assets is dependent on future taxable
income, our ability to deduct tax loss carryforwards against future taxable income, the effectiveness of our tax planning and strategies among the various tax jurisdictions that we operate in, and any
significant changes in the tax treatment received on our business combinations and/or divestitures.

Revenue recognition.We recognize a portion of our revenue using the percentage-of-completion method,
which includes revenues recognized as costs are incurred or as output measures are identified, in accordance with Statement of Position (SOP) 81-1 "Accounting for Performance of
Construction-Type and

41

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Certain
Production-Type Contracts." Total estimated costs are based on management's assessment of costs to complete the project based upon evaluation of the level of work achieved and
costs expended to date. To the extent that our estimated costs materially change, our revenues recorded under such contracts could materially be affected and could have a material adverse effect on
our operations in the future periods. In 2003, approximately 20% of our total revenues were generated by fixed-price contracts, which are generally recognized using the
percentage-of-completion method. The remaining 80% of our revenues in 2003 were generated by cost reimbursable contracts and time and materials contracts, for which
percentage-of-completion is not used, and revenues are generally recognized as work is performed and billed to the customer.

Titan
contracts with its government customers using various cost-type contracts. They include cost-plus fixed fee, cost-plus award fee,
cost-plus incentive fee with incentives based upon both cost and/or performance, and cost sharing contracts. Revenues and profits are recognized in accordance with Accounting Research
Bulletin No. 45 and SOP 81-1. For award and incentive fee type contracts, we recognize the expected fee to be awarded by the customer at the time such fee can be reasonably
estimated, based on factors such as our prior award experience and communications with the customer regarding our performance, including any interim performance evaluations rendered by the customer.
Revenues are recognized under fixed price contracts based on the percentage-of-completion basis, using the cost-to-cost or
units-of-delivery methods. On occasion we receive unpriced and priced change orders from our customers, whereby we are requested to make modifications to the contract, which
may include changes in specifications or design, method or manner of performance, equipment, materials, and period for completion of work. Some change orders are unpriced; that is, the work to be
performed is defined, but the adjustment to the contract price is to be negotiated later. We evaluate these change orders according to their characteristics and the circumstances in which they occur
after taking all factors into consideration such as probability of recovery, our experience in negotiating change orders, and separate documentation for change order costs that are identifiable and
reasonable. We record the costs and associated revenue as appropriate, in accordance with SOP 81-1.

Accounting for business combinations.In relation to our allocation of purchase price to the fair value of assets acquired
and contingencies assumed in acquisitions accounted for as purchase transactions, management makes estimates of such amounts as the fair value of assets and contingencies assumed. To the extent that
the actual values or contingencies may differ from the estimates used, our allocation of purchase price may differ, which may result in a change to the amount of goodwill and/or purchased intangibles.
Generally, management also obtains an independent purchase valuation to assist in its purchase price allocation.

Principles of consolidation.Management evaluates its investment in each joint venture and investment on an individual basis
for purposes of determining whether consolidation or the cost or equity method is appropriate, based upon management's evaluation of the level of our ability to retain and exercise control through
decision-making ability and exercise significant influence, as well as our equity ownership interest. In the event that our ability to obtain control and exercise significant influence changes
materially from management's evaluation in determining whether consolidation should occur, or whether or not the cost or equity method is appropriate, then our operating results could be materially
impacted, either positively or negatively.

Forward Looking Information: Certain Cautionary Statements: "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995:

Some
of the statements contained in Management's Discussion and Analysis of Financial Condition and Results of Operations and otherwise contained in this report that are not historical
facts are forward looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended. These forward looking statements relate to future events or our future
financial and/or operating performance and can be generally identified as such because the context of the statement will include

42

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words
such as "may," "will," "intends," "plans," "believes," "anticipates," "expects," "estimates," "predicts," "potential," "possible," "continue," or "opportunity," the negative of these words or
words of similar import. Similarly, statements that describe our reserves or provisions, our estimates, and our future plans, strategies, intentions, expectations, objectives, goals or prospects are
also forward looking statements. These forward looking statements are based largely on our expectations and projections about future events and future trends affecting our business and so are subject
to risks and uncertainties, including those risks and uncertainties identified below, that could cause our actual results to differ materially from those anticipated as of the date of this report. The
risks and uncertainties also include, without limitation, those referred to under "Cautionary Statements" in our Annual Report on Form 10-K for the year ended December 31,
2003, and risks discussed in other reports filed by us with the SEC. In addition, past financial or operating performance is not necessarily a reliable indicator of future performance. Except as
required by law, we undertake no obligation to publicly revise these forward looking statements to reflect events or circumstances that arise after the date of this report.

Factors
that may affect the accuracy of the forward looking information, include the following:



Item 4. Controls and Procedures.

Under the supervision 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 our disclosure controls and procedures as of the end of the quarter covered by this quarterly report. Based on that evaluation, our executive management,
including our Chief Executive Officer and our Chief Financial Officer, concluded that our disclosure controls and procedures are effective as of June 30, 2004.

Our
management, including our Chief Executive Officer and Chief Financial Officer, also supervised and participated in an evaluation of any changes in internal controls over financial
reporting that occurred during the last fiscal quarter and that have materially, or are reasonably likely to materially affect, our internal controls over financial reporting. That evaluation did not
identify any such changes to our internal controls over financial reporting.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes during the six months ended June 30, 2004, to the information as of December 31, 2003, contained in our Annual
Report on Form 10-K for the year ended December 31, 2003.

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PART IIOTHER INFORMATION        THE TITAN CORPORATION

Item 1. Legal Proceedings.

See Note 8 of the Notes to Consolidated Financial Statements.

Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities.

On March 15, 2004, the Company redeemed all outstanding shares of its cumulative convertible preferred stock pursuant to the Company's redemption right in
its certificate of incorporation. The redemption was a condition to the close of the Company's proposed merger with Lockheed Martin. The redemption was announced on February 9, 2004, for
redemption on March 15, 2004, at $20 per share plus cumulative dividends in arrears.

|               |  | Issuer Purchases of Equity Securities
|-------------- |  | -------------------------------------
|
|
|March 15, 2004 |  | 625,846                              

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

At
the Special Meeting of Stockholders of The Titan Corporation held on April 12, 2004, to consider the proposed merger with Lockheed Martin, the following votes were cast for
adjournment:

Affirmative

42,238,436Negative

11,542,593Abstaining

2,296,138


At
the Special Meeting of Stockholders of The Titan Corporation held on June 7, 2004, to consider the proposed merger with Lockheed Martin, the following votes were cast:

Affirmative

55,244,545Negative

815,209Abstaining

72,907


44

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Item 6. Exhibits and Reports on Form 8-K.

2.1

Amendment No. 3 dated April 7, 2004 to Agreement and Plan of Merger dated September 15, 2003, as amended on February 6, 2004 and March 11, 2004, by and among Lockheed Martin Corporation, LMC Sub One, Inc., LMC LLC One, LLC
and The Titan Corporation, which was Exhibit 2.1 to the Company's Form 8-K filed on April 7, 2004, is incorporated herein by this reference.3.1

The Company's Certificate of Amendment of Restated Certificate of Incorporation dated as of October 21, 1998, which was Exhibit No. 3.1 to the Company's Quarterly Report on Form 10-Q dated November 16, 1998, is incorporated herein by this reference.
The Company's Restated Certificate of Incorporation dated as of November 6, 1986, which was Exhibit No. 3.1 to the Company's 1987 Annual Report on Form 10-K is incorporated herein by this reference. The Company's Certificate of Amendment of Restated
Certificate of Incorporation dated as of June 30, 1987, which was Exhibit 3.2 to the Company's 1987 Annual Report on Form 10-K is incorporated herein by this reference.3.2

The Company's Bylaws, which were Exhibit 3.3 to the Company's 1999 Annual Report on Form 10-K, are incorporated herein by this reference.3.3

Amendments to Bylaws of the Company, dated March 22, 2000 and August 16, 2000, which were Exhibit 3.4 to the Company's 2001 Annual Report on Form 10-K, is incorporated herein by this reference.10.1

Form of Executive Agreement between The Titan Corporation and Executive, entered into in June 2004 by The Titan Corporation with each of Lawrence J. Delaney, Allen D. Branch, Thomas J. Brennan, A. Anton Frederickson,
Ronald B. Gorda, Robert J. Osterloh, Earl A. Pontius, Leslie A. Rose and Paul W. Sullivan.31.1

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1

Certification of Periodic Financial Reports pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.


45

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46

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THE TITAN CORPORATION  SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

|Dated: August 9, 2004 |  | THE TITAN CORPORATION
|--------------------- |  | ---------------------
|                      |  | By:                  
|                      |  | By:                  

47

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|Exhibit
No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | Page
No.
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------
|2.1         |  | Amendment No. 3 dated April 7, 2004 to Agreement and Plan of Merger dated September 15, 2003, as amended on February 6, 2004 and March 11, 2004, by and among Lockheed Martin Corporation, LMC Sub
One, Inc., LMC LLC One, LLC and The Titan Corporation, which was Exhibit 2.1 to the Company's Form 8-K filed on April 7, 2004, is incorporated herein by this reference.                                                                                                                                                                                                                                                                                                                  |  | *       
|3.1         |  | The Company's Certificate of Amendment of Restated Certificate of Incorporation dated as of October 21, 1998, which was Exhibit No. 3.1 to the Company's Quarterly Report on Form 10-Q dated November 16, 1998, is incorporated herein by
this reference. The Company's Restated Certificate of Incorporation dated as of November 6, 1986, which was Exhibit No. 3.1 to the Company's 1987 Annual Report on Form 10-K is incorporated herein by this reference. The Company's
Certificate of Amendment of Restated Certificate of Incorporation dated as of June 30, 1987, which was Exhibit 3.2 to the Company's 1987 Annual Report on Form 10-K is incorporated herein by this reference. |  | *       
|3.2         |  | The Company's Bylaws, which were Exhibit 3.3 to the Company's 1999 Annual Report on Form 10-K, are incorporated herein by this reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | *       
|3.3         |  | Amendments to Bylaws of the Company, dated March 22, 2000 and August 16, 2000, which were Exhibit 3.4 to the Company's 2001 Annual Report on Form 10-K, is incorporated herein by this reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | *       
|10.1        |  | Form of Executive Agreement between The Titan Corporation and Executive, entered into in June 2004 by The Titan Corporation with each of Lawrence J. Delaney, Allen D. Branch, Thomas J. Brennan, A. Anton Frederickson,
Ronald B. Gorda, Robert J. Osterloh, Earl A. Pontius, Leslie A. Rose and Paul W. Sullivan.                                                                                                                                                                                                                                                                                                                                                                          |  |         
|31.1        |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |         
|31.2        |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |         
|32.1        |  | Certification of Periodic Financial Reports pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |         

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