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

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**FORM10-K/A**

| x       | **ANNUAL REPORT PURSUANTTO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934** |
|---------------------------------------|---------------------------------------------------------------------------------------------|

**For thefiscal year ended December 31, 2001**

**-OR-**

| o       | **TRANSITION REPORTPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934** |
|---------------------------------------|-------------------------------------------------------------------------------------------------|

**For thetransition period from              to              **

**Commission File No. 1-6035**

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

| **Delaware**                                                  |   | **95-2588754**                   |
|---------------------------------------------------------------|--------|----------------------------------|
| (State orother jurisdiction of incorporation or organization) |   | (IRSEmployer Identification No.) |

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

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

Securitiesregistered pursuant to Section 12(b) of the Act:

| **Title ofeach class**
****                                  | **     ** | **Name ofexchange on which registered**
**** |
|--------------------------------------------------------------|------------------------------------|----------------------------------------------|
| $1.00 CumulativeConvertible Preferred Stock, $1.00 par value |                               | New YorkStock Exchange                       |
| Common Stock, $.01 parvalue                                  |                               |                                         |
| Preferred Stock PurchaseRights                               |                               |                                         |

Securitiesregistered pursuant to Section 12(g) of the Act:None

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

        Indicateby check mark if disclosure of delinquent filers pursuant to Item405 of Regulation S-K is not contained herein, and will not becontained, to the best of registrant's knowledge, in definitiveproxy or information statements incorporated by reference in PartIII of this Form 10-K or any amendment to thisForm 10-K.  x

        Aggregatemarket value of the voting stock held by non-affiliates of theregistrant as of March 22,2002:  $1,294,955,114.

        Numberof shares of Common Stock outstanding as of March 22, 2002was:  77,237,800.

**Documents Incorporated ByReference:**

        ProxyStatement for the 2002 Annual Meeting of Stockholders on May 16,2002.  (The Company has filed a definitive proxy statementwith the Commission within 120 days after the close of the fiscalyear pursuant to Regulation 14A).  With the exception of thoseportions which are incorporated by reference in this Form 10-KAnnual Report, the Proxy Statement for the 2002 Annual Meeting ofStockholders is not deemed to be filed as part of this Report,Parts II and III. 

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**PART I**

**Item1.  Business**

**Overview**

    Weare a diversified technology company that creates, builds andlaunches technology-based businesses primarily from technologydeveloped for the government.  We were founded in 1981 as agovernment information technology company.  Today, TitanSystems, our core government business, is a key provider ofinformation technology and communications solutions, services andproducts in the growing federal government information technologymarket.  Titan Systems also serves as our engine, providing uswith government-funded research and development activities thatgenerate technology and intellectual property that often form thefoundation for our commercial technology applications and newbusinesses.  We have developed and continue to develop newbusinesses, like our SureBeam and Titan Wireless businesses, fromthe broad portfolio of technologies, intellectual property andexpertise that we have created and continue to create as part ofour work under government contracts and our self-funded researchand development program.  Our government contracts generallypermit us to retain intellectual property rights in commercialapplications of technologies developed under those contracts. We have also supplemented our internally developed portfolio withtechnologies, intellectual property and expertise through strategicacquisitions of other government information technologycompanies.  Our strategy is to continue to grow our governmentbusiness both internally and through acquisitions, while alsoleveraging our intellectual property portfolio by creatingcommercial technology applications or individual businesses thatcan be monetized through either an initial public offering of asubsidiary, a complete spin-off to our stockholders, an outrightsale of a business, or a technology license or sale.  We wereable to implement our monetization strategy with our initial publicoffering of our SureBeam subsidiary, which is quoted on the NasdaqNational Market under the symbol "SURE" and plan to spin off ourremaining majority interest in SureBeam to Titan shareholders laterthis year.  On October 16, 2001, Titan adopted adefinitive plan to spin off SureBeam in the form of a tax-freedividend to Titan shareholders within 12 months from thatdate.  The plan involves filing a letter ruling request withthe Internal Revenue Service seeking approval of the tax-freedistribution.  Titan received a favorable ruling in May 2002,and intends to execute the spin off in the third quarter of2002.  Titan has historically reported the SureBeam businessas a separate segment.  In accordance with AccountingPrinciples Board Opinion No. 30, "Reporting the Results ofOperations—Reporting the Effects of Disposal of a Segment ofa Business, and Extraordinary, Unusual and Infrequently OccurringEvents and Transactions," the consolidated financial statements ofTitan for all periods presented have been restated to reflectSureBeam as a discontinued operation.

    During the first quarterof 2002, the Company made the decision to sell certain of itscommercial information technology operations within its Cayentasegment and the AverCom business within the Titan Technologiessegment in order to allow management to focus on operations withthe most near term growth opportunities.  As a result,Cayenta’s federal government operations are being reported inTitan Systems, and Cayenta’s remaining continuing operationsare being reported in Titan Technologies, formerly Titan’sEmerging Technologies and Businesses segment.  In accordancewith Statement of Financial Accounting Standards No. 144,“Accounting for the Impairment or Disposal of Long-livedAssets and for Long-Lived Assets to be Disposed of,” allcommercial operations that are held for sale have been reflected asdiscontinued operations for all periods presented in Titan’sconsolidated financial statements.  All prior period financialinformation has been restated to reflect the newsegments.

**OperatingSegments**

    Wehave organized our business into five segments that reflect thefour markets and industries in which we operate, as well as ourTitan Technologies segment:
| **Segment******
****                                             | **     ** | **SegmentDescription******
****                                                                                                                                                                                                                                                                                                     |
|------------------------------------------------------------------|------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Titan Systems                                                    |           | Information technology andcommunications solutions, services and products for defense,intelligence, and other U.S. and allied government agencies                                                                                                                                                                              |
| Titan Wireless                                                   |           | Satellite-based andwireless-based communication services and systems which providecost-effective voice, data and Internet services in developingcountries                                                                                                                                                                      |
| Cayenta (Discontinued -included in our Software Systems segment) |           | Total services provider ofinformation technology services and software product applicationsfor its customers' business functions, including accounting,customer contact, supply chain management and equipment monitoringand maintenance primarily in two verticalmarkets:  manufacturing and logistics and retail   |
| SureBeam(Discontinued)                                           |           | Electronic foodirradiation systems and services                                                                                                                                                                                                                                                                                |
| TitanTechnologies                                                |           | Development of commercialapplications and businesses using technologies created byTitan.  We currently have several new businesses indevelopment, including businesses in which we have applied forpatent protection for the underlying technology                                                                        |

    The consolidated revenuesof our continuing business were approximately $1.1 billion for theyear ended December 31, 2001.

***Our Core GovernmentSegment — Titan Systems***

    *Overview.*  TitanSystems provides comprehensive information systems solutions andservices including design, architecture, installation, integration,test, logistics support, maintenance, training and complete systemupgrades to U.S. and allied government national security andintelligence organizations.  In addition, Titan Systemsprovides services and solutions to civil government agencies withsophisticated information system, information processing,information fusion, data management, and communication systemrequirements.  Titan Systems also develops and manufacturesdigital imaging products, sensors, lasers, electro-optical systems,threat simulation/training systems, intelligence electronichardware, signal intercept systems, and communicationssystems.  For the year ended December 31, 2001, Titan Systemshad revenues of approximately $940.3 million, which represented 87%of our consolidated revenues.

    *IndustryOverview.*  The U.S. government is among the largestbuyers of information technology systems and services in theworld.  According to INPUT, the U.S. government's informationtechnology budget for its fiscal year 2003 is projected to beapproximately $50 billion, an increase of 11% from 2002. Current forecasts are for a compound annual growth rate ofapproximately 10% over the next three to five years.

    While already growing ata steady rate over the past decade, the government informationtechnology budget is now expected to increase even moresignificantly than in the past as a result of severalfactors.  First, in outlining the priorities of the BushAdministration, Secretary of Defense Donald Rumsfeld has statedthat one of his five key objectives is to modernize the U.S.government's Command, Control, Communications, Computer,Intelligence, Surveillance and Reconnaissance, or C4ISR,capabilities.  The U.S. government's focus on modernizationthrough increased spending on information technology reflects thecritical role that this capability plays both in national securityand in improving government efficiency.  The U.S. military isplacing greater emphasis on interoperability and increasingproductivity while using fewer resources by employing systems thatact as force multipliers and increase operating capabilities underdiffering conditions.  To further this strategy, militaryagencies are relying on communications products and systems thatprovide secure, reliable and efficient transmission of voice anddata in demanding environments.

    Inaddition, heightened government concern over national security andchanging government priorities have resulted in proposed defensebudgets that are significantly higher than in prior years,especially in areas related to intelligence, surveillance, andreconnaissance and homeland security which have significantinformation technology components.  Finally, the U.S.government is increasingly using open systems that incorporatecommercial off-the-shelf products to increase the adaptability andoperability of its information technology systems architectures,creating greater contracting opportunities for systems and softwareintegration work.  The U.S. government is also increasinglyusing the Internet and web-based systems to improve its efficiency,providing contracting opportunities for Internet-based integrationwork.

    *CompetitiveStrengths.*  Titan Systems attributes its growth andperformance to several factors:
|        |     *Long Standing CustomerRelationships and Experienced Management.*  Founded in1981, Titan Systems has an extensive history of providinginformation technology and communications solutions to U.S.defense, intelligence, and civil government agencies. Collectively, Titan Systems' executives and general managers haveon average approximately 20 years of industry experience and havedeveloped long-standing, key customer relationships across all ofthe U.S. military services and several allied countries.  Theindustry experience of Titan Systems' executives and generalmanagers has also helped Titan Systems to develop a significantpresence with many civilian government agencies, which hascontributed to Titan Systems' success in securing newcontracts.                                                                                                                                                                                                                                                                                                                        |
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|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|        |     *Broad SolutionCapabilities.*  Titan Systems has extensive industryexpertise in the development of information technology andcommunications solutions for government customers.  TitanSystems' scientists and engineers provide solutions in areas suchas signal processing, antenna design, low detection waveforms,computer aided target and image recognition, satellitecommunications hardware and software, radio direction findingsystems, and real time object tracking and targeting.  Inaddition, Titan Systems has significant knowledge of legacyinformation technology and C4ISR systems currently in operation andthe ability to integrate its solutions into existing systems. This ability to provide full-service solutions, coupled with ouremployee base of over 5,700 "Secret" and above-cleared personnel,is enabling us to bid on larger, more comprehensive governmentcontracts than at any time in our history.                                                                                                                                                        |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|        |     *Extensive Acquisitionand Integration Experience.*  In anticipation ofchanges in U.S. government procurement policies toward awardingmore comprehensive contracts to meet its defense-relatedrequirements, we initiated an acquisition strategy in 1997. Since January 1, 1998, we have acquired and successfully integrated16 government information technology companies into TitanSystems.  These acquisitions occurred and are continuing tooccur at a time when a broad consolidation in the governmentinformation technology industry was and is ongoing.  We havesubstantial experience in identifying, acquiring and integratinggovernment information technology and communicationscompanies.  Successful integration of technologies, expertiseand intellectual property has enabled Titan Systems to bid on morecomprehensive government contracts.  Titan Systems has wonseveral new, large government contracts as a result of thesuccessful integration of acquired resources and capabilities andcontinues to bid on larger, more comprehensive governmentcontracts. |

    *Strategy.*  TitanSystems' objective is to be the premier provider of informationtechnology and communications solutions and services to U.S.defense, intelligence and civilian government agencies and toallied governments.  To achieve this objective, Titan Systemsintends to pursue the following strategies:
|        |     *Maintain TechnologyAdvantage.*  Titan Systems' successful track recordwith research and development projects has helped us create adiversified portfolio of technologies which in turn helps us obtainadditional research and development funding and ultimately newsystem and product contracts.  We believe that Titan Systems'expertise and capabilities with a wide range of technologies makesus well positioned to provide information technology andcommunications systems, products and services to ourcustomers.  Titan Systems will seek to maintain this advantageby keeping pace with new developments in technology, and bycontinuing to compete for contracts that require high-quality,sophisticated technical solutions. |
|--------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |     *Build Upon ourCompetitive Strengths to Bid on Larger, More ComprehensiveContracts.*  Titan Systems has an extensive history ofproviding information systems and communications solutions andservices to defense and intelligence-related governmentagencies.  We expect this experience, our reputation, ourproducts and services, and the enhanced technical and personnelresources resulting from Titan Systems' acquisitions to enableTitan Systems to bid on and win more comprehensive governmentcontracts. |
|--------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

    *Solutions, Servicesand Products.*  Titan Systems' information systemssolutions and services include systems analysis, design, andarchitecture, software development services and systemsintegration.  Titan Systems' initial work in this areagenerally involves a joint analysis of the customer's enterprisestructure and processes and information and communication systemneeds.  Once this analysis is completed, Titan Systems designsthe technology solution to meet the customer's needs.  Thisprocess typically involves software development by Titan Systems,coupled with integration of commercial off-the-shelf software andhardware.  Titan Systems also provides a variety ofprofessional and technical support services, including electronicsand mechanical design and fabrication, computer-aided design andmanufacturing services, technical documentation andprototyping.  In addition, Titan Systems offers a variety ofstandard products, including satellite communications modems andterminals, radio direction finding systems, lasers, sensors, andelectro-optical systems.  As a result of the complex nature ofTitan Systems' customer solutions, its engagements often arelong-term and involve follow-on contracts.  Examples of TitanSystems' information systems solutions, support services andcommunications products include the following:

    *Information SystemsSolutions*
|        | ·       | *Developing the JointRange Extension.*  Titan Systemshas developed an information solution that allows real-timetactical data link information developed by a variety of sensors tobe transmitted over any communications medium.  Thiscapability allows commanders to “see” and share theactual tactical events of a campaign at different locationssimultaneously.  This innovative capability was used verysuccessfully in the recent Afghanistan operations to providecommanders with a view of the battlespace at extended ranges, thusallowing forces to be coordinated, sequenced, and generated rapidlyto meet the needs of the operational commander.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
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|        |                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|        | ·       | *Developing AdvancedDigital Waveform for the U.S. Navy.*  Titan Systems' Advanced Digital Waveform, or ADW,increases data throughput rates on dedicated ultra-high frequencysatellite communication channels.  Titan Systems' Mini-DemandAssigned Multiple Access, or Mini-DAMA, terminals will be the firstU.S. Navy systems to receive ADW capability.  Once thiscapability is installed, the terminals will be capable of passinginformation at three to four times the previous rate.  Thecurrent project contemplates that the majority of the U.S. Navy'sMini-DAMA terminals will be outfitted with this improvedcommunications feature within the next couple of years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|        |                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|        | ·       | *Developing NewTechnologies for the U.S. Army's Mobile PositioningInitiative.*  Titan Systems isthe primary systems integrator for the U.S. Army's MobilePositioning Initiative, a unique initiative providing real-timevisibility, including satellite tracking, of military trucks,trailers, and cargo.  The initiative combines commercial,off-the-shelf hardware and software with government-furnishedequipment.  Titan Systems' team supports a growing, integratedin-transit visibility network that currently comprises 200 sites in13 countries supporting 1,000 global users and that has achieved anoperational system readiness of 95% or better.  Thisinitiative was used to track trains during the deployment of forcesin Kosovo.  We believe that the U.S. Army's success in Europewith Titan Systems' in-transit visibility solution was instrumentalin its selecting Titan Systems as the U.S. Army's proponent tosupport the Transportation Coordinators Automated Information forMovement System II Operational Test.  This system has beenselected for the Department of Defense's program to provide anintegrated transportation information system capability for routinedeployment, sustainment, and redeployment operations. |

    *SupportServices*
|        | ·       | *Supporting KeyTransformational Programs.*  TheUnited States Defense establishment is in the process oftransforming itself for the future.  Titan Systems is workingas a partner to all of the Services on key transformationalprograms such as the Navy's Littoral Surface Craft - Experimental,the ForceNet, Network Centric Warfare, the Army's Interim BrigadeCombat Team concept, the Air Force Global Strike Task Force, andmany other innovative service initiatives.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
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|        |                | *      *                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|        | ·       | *Supporting the JointDeployable Intelligence Support System (JDISS).*  Titan Systems is assisting with the systemsengineering for JDISS, a worldwide intelligence network with over7,000 nodes that Titan Systems' engineers and technicians maintainon a seven day per week/24 hour per day basis (7/24).  Thissecure network provides critical intelligence information to allfacets of the United States military. JDISS is a critical part ofevery military operation and located at all front line combatlocations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|        |                | *      *                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|        | ·       | *Supporting NavyCash.*  Titan Systems isassisting the U.S. Treasury, Naval Supply Systems Command, JPMorgan Chase and others in providing a cashless environment forsailors and marines deployed anywhere in the world, so that theirmoney is safe and their families have 7/24 access to it.  Itis an innovative system of point of sales, ATMs, and otherautomated financial services provided to servicemembers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|        |                | *      *                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|        | ·       | *Supporting the NavalAir Systems Command/Naval Air Warfare Center.*  Titan Systems is helping with the systemsengineering and integration of Naval Aviation Reconnaissance andSurveillance systems under a multi-year contract.  Undercurrent tasking, Titan Systems' engineers provide design andanalysis support for the installation and integration ofstate-of-the-art sensor systems in both manned and unmannedreconnaissance platforms.  Systems level support typicallyincludes concept exploration, specification preparation, interfacedesign, laboratory integration, and test and evaluation. Titan Systems also supports tactical manned and unmanned platformsand avionics equipment.  Titan Systems' engineers providedesign and analysis support for the integration of sophisticatedsubsystems into the avionics and weapons systems of many types ofaircraft.  These subsystems include electro optic/infra reddevices, radar, electronic warfare systems, mission planningmodules, and tactical data links. |
|        |                | *      *                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|        | ·       | *Supporting MilitarySatellite Communications.*  Titan Systems engineers and technicians provideengineering, program and operational support to the Space and NavalWarfare Systems Command and the Space Warfare Systems Centers inSan Diego, California and Charleston, South Carolina.  Oursatellite communications experts are involved in all aspects ofU.S. Navy and other military satellite programs including: thedetermination of requirements, laboratory and in-field operationaltesting, on-the-job and formal training, maintenance, operation,technical assistance, integration, and installation.  TitanSystems' members of the Fleet System Engineering Team provideon-site support at U.S. Navy satellite communications sites inNorfolk, Virginia, Wahiawa, Hawaii, Naples, Italy andBahrain.                                                                                                                                                                                                                                |
|        |                | *      *                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|        | ·       | *Information Assuranceand e-Government Services.*  Titan Systems provides systems and solutionsrelated to information assurance, security consulting ande-government applications.  Titan Systems also focuses on thedesign, installation and maintenance of local and wide areanetworks used to operate the U.S government's Internet-basedinitiatives.  Titan Systems designs electronic filing,procurement and payment systems for the government agenciesinvolved in those initiatives, along with Internet portals used toelectronically distribute confidential and non-confidentialinformation to other government entities and the public atlarge.                                                                                                                                                                                                                                                                                                                                                                                    |

    *CommunicationsProducts*
|        | ·       | *Designing Technologyfor the U.S. Army's Prophet Initiative.*  Titan Systems' initial role as part of thisinitiative was to design and integrate a multi-faceted, radiofrequency intercept and direction-finding system into an existingvehicle to provide that vehicle with receive/direction-findingcapabilities.  Titan Systems completed the initial 13 systemsahead of schedule and was awarded a contract to produce and fieldup to 83 production-level mobile systems, with the number thatTitan Systems will ultimately produce and field depending uponwhether options under the contract are exercised.  TitanSystems will initially produce and field six systems under thecontract.  In its eventual implementation, the U.S. Army'sProphet initiative is planned to be a combination of mobile,ground-based intercept/direction-finding receivers and an airbornecomplement of unmanned aerial vehicles.  The development andintegration of this product was a result of a collaborative effortof six of Titan Systems' divisions.  This innovative systemwas pressed into service in Afghanistan to hunt down Al Qaeda andTaliban forces. |
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|        |                | *      *                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|        | ·       | *Producing ChannelControl Modems for Integrated Monitoring and Power ControlSubsystems.*  Titan Systems isengineering, developing and producing a modem for the IntegratedMonitoring and Power Control Subsystem, or IMPCS. IMPCS is beingdeveloped to reduce manpower requirements and increase theefficiency of communication between the various control terminalsand deployed, tactical terminals that use the geosynchronoussatellites of the Defense Satellite Communications System. Satellite network efficiency is greatly improved by balancing thepower levels arriving at the satellites.  Today's system usesa manpower-intensive manual approach to monitor the entire globalnetwork and conduct point-to-point communications with terminaloperations to provide power-balancing direction. Titan Systems'modem is expected to fully automate this process.                                                                                                                                                                                                                                                                                             |
|        |                | *      *                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|        | ·       | *Designing andDeveloping DAMA Products.*  Titan Systems' DAMA products combine low cost, lowpower, reduced weight and size, and reduced component count withhigh reliability.  Each of Titan Systems' DAMA products hasbeen developed with an open-architecture format that allows futureupgrades and enhancements to be provided as communications needsevolve, and is designed to support commercial off-the-shelfcomponents.  Titan Systems markets its DAMA products directlyto all branches of the U.S. military, its allies and internationalcompanies that supply such allies, and also works with strategicpartners to incorporate its technologies into theirproducts.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |

    *ContractProfile.*  Titan Systems is currently performing workunder approximately 1,600 contracts.  No single Titan Systemscontract accounted for more than 2.2% of Titan Systems' total 2001revenues.  Of Titan Systems' total revenues from governmentbusiness in 2000, approximately 39% were generated by time andmaterials contracts, approximately 42% were generated by costreimbursement contracts, and approximately 19% were generated byfixed-price contracts.  Of Titan Systems' total revenues fromgovernment business for 2001, approximately 42% were generated bytime and materials contracts, approximately 40% were generated bycost reimbursement contracts, and approximately 18% were generatedby fixed-price contracts.  Since operating margins on time andmaterials contracts are generally higher than those generated bycost reimbursement contracts, Titan Systems has made and continuesto make an effort to generate an increasing amount of revenue fromtime and materials contracts.

    *Backlog.*  TitanSystems possesses a substantial backlog of contracts that providemultiyear revenues.  Most of its contracts generate revenueover a one to five-year period.  In the past, Titan Systemshas generally been successful in expanding the scope of itsprincipal contracts by offering more comprehensive informationtechnology solutions. Titan Systems had an estimated total backlog,including funded and unfunded backlog, of approximately $2.8billion at December 31, 2001, comprised of approximately $0.6million of funded backlog and $2.2 billion of unfundedbacklog.  “Funded backlog” consists of theaggregate contract revenue remaining to be earned by us at a giventime, but only to the extent such amounts have been appropriated byCongress and allocated to the contract by the procuring governmentagency.  “Unfunded backlog” consists of theaggregate contract revenues expected to be earned as our customersincrementally allot funding to existing contracts, whether we areacting as a prime contractor or subcontractor, and the aggregatecontract revenues to be funded on contracts which have been newlyawarded to us.  Unfunded backlog includes priced options,which consist of the aggregate contract revenues expected to beearned as a result of a customer exercising an option period thathas been specifically defined in the original contract award. “Backlog” is the total of the government and commercialfunded and unfunded backlog.  The determination of unfundedbacklog involves substantial estimation, particularly with respectto customer requirements and contracts.  These estimates arebased on our experience under such contracts and similar contracts,and we believe the use of such estimates to be reasonable. However, there can be no assurance that the unfunded contract valuewill be realized as contract revenue or earnings.

    Webelieve that year-to-year comparisons of backlog are notnecessarily indicative of future revenues.  Titan Systems'backlog is typically subject to large variations from quarter toquarter as existing contracts are renewed or new contracts areawarded.  Additionally, all U.S. government contracts includedin backlog, whether or not funded, may be terminated at theconvenience of the U.S. government.

    *Competition.*  TitanSystems is one of many companies involved in providing informationsystems solutions, support services and communications products fora variety of programs for agencies of the U.S. government and civilgovernments.  Most activities in which Titan Systems engagesare very competitive and require Titan Systems to have highlyskilled and experienced technical personnel to compete.  Manyof Titan Systems' competitors have significantly greater financial,personnel and other resources than Titan Systems.  Thesecompetitors include Booz, Allen & Hamilton Inc., ComputerSciences Corporation, General Dynamics Corporation, Lockheed MartinCorporation, Northrop Grumman, Raytheon Company, ScienceApplications International Corporation and TRW Inc.  Inaddition, Titan Systems competes with smaller and medium sizedcompanies such as:  Anteon Corporation, CACIInternational Inc., Dynamics Research Corporation, VeridianCorporation and ViaSat, Inc. Titan Systems believes that theprimary competitive factors for its information systems solutions,support services and communications products include reputation,technical skills, past contract performance, experience in theindustry and customer relationships.

***Our CommercialSegments***

    Our approach to creatingand building commercial technology-based businesses and attemptingto monetize our intellectual property involves the following threephases:

***PhaseI:  Technology and Market Evaluation***

    Aspart of our strategy of leveraging our intellectual propertyportfolio, we have a well defined process of continually evaluatingthe likelihood of successfully transitioning a technology orapplication of a technology developed under our governmentcontracts into a commercial business.  This evaluationtypically involves assessing potential market size, market demand,competitive strengths and whether the potential technologicaladvantages and strength of our intellectual property protectionprovide a competitive advantage.  We seek commercialapplications that address large, rapidly growing, potentiallyglobal markets where we believe our products and services candifferentiate themselves from competing products andservices.  To facilitate our assessments, we often call uponour relationships with technology-focused venture capital firms andthird-party market consultants.  We also seek intellectualproperty protections for our technology and applications oftechnologies that we have developed or acquired.

***PhaseII:  Technology Transfers and Creation of New CorporateSubsidiaries***

    Once we have made anassessment that a technology or application can be successfullytransitioned into the commercial market, we determine whether weshould finance the development of that business on our own or inconjunction with partners or whether we should sell or license thetechnology to a third party.  This determination againinvolves assessments of the business's market and competitiveposition, as well as time-to-market considerations andconsiderations relating to the capital requirements and risk/rewardprofile of the business.  The vast majority of technologiesreviewed are either licensed to third parties or left within TitanSystems, Titan's government business, and notcommercialized.

    For those few selecttechnologies that we choose to develop within Titan, we typicallytake a number of actions to create that business that we believedifferentiate our approach from that of other governmentinformation technology companies that have attempted to execute acommercialization strategy.  In our Titan Technologiessegment, we form a corporate subsidiary to operate thebusiness.  We also create an employee stock option plan forthe subsidiary, and use option grants under that plan to helprecruit a management team with relevant market expertise andmanagement skills in the business's industry.

    Webelieve that forming separate subsidiaries in our TitanTechnologies segment to operate our new technology-based businessesalso provides them with certain advantages compared withtechnology-based businesses backed by venture capitalists. Each of our new businesses benefits from the various resources thatwe have in-house and can make available to it.  Unlike manyother newly-formed technology-based businesses that must lookoutside their organization for many resources, we support our newbusinesses with financial, accounting, marketing, administrativeand legal expertise.  We may also loan funds to our newbusinesses, a financing alternative that is generally not readilyavailable to early-stage technology-based businesses.

    The subsidiaries thatbecome significant from a revenue and profit perspective becomesegments of Titan for financial reporting purposes.  Today, wehave three commercial business segments — Titan Wireless,Cayenta (discontinued) and SureBeam (discontinued) — inaddition to our core government segment, Titan Systems, and ourTitan Technologies segment, which comprises our remainingcommercial operations.

***PhaseIII:  Pursue Monetization for CommercialSubsidiaries***

    Weintend to pursue a monetization strategy for our subsidiaries thatincludes initial public offerings and complete spin-offs to ourstockholders; however, we may also pursue an outright sale of abusiness where appropriate.  Our preferred monetizationstrategy for our subsidiaries is to pursue, market and otherconditions permitting, an initial public offering.  We preferthis approach because we believe that by accessing capital marketsour subsidiaries will be better able to execute their strategiesand achieve greater value for our stockholders.  To the extentpossible, we create capital structures for and intend to structureany initial public offerings of our subsidiaries in order topreserve the ability to later distribute the stock we retain inthese subsidiaries to our stockholders on a tax-free basis. We create these capital structures because we believe that atax-free spin-off of subsidiary shares would ultimately be atax-efficient way to deliver value to our stockholders.  Wewere able to implement our monetization strategy with our initialpublic offering of our SureBeam subsidiary, which is quoted on theNasdaq National Market under the symbol“SURE.”

***TitanWireless***

    *Overview.*  TitanWireless provides communications services and systems to developingcountries primarily in Africa, Central Asia, the Middle East andLatin America.  In conjunction with its subsidiary, Sakon, andnewly acquired GlobalNet, Inc., Titan Wireless has built a globalcommunications network.  This network currently consistsof:
|        | ·       | leased transponder spaceon various satellites that together provides global geosynchronoussatellite coverage;                            |
|--------------------------------------|----------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------|
|        |                |                                                                                                            |
|        | ·       | three hubs that routenetwork transmissions between satellites and the internationalfiber optic network backbone;                         |
|        |                |                                                                                                            |
|        | ·       | international gatewaysthat route network transmissions between the satellites and acountry's public switched telephone network, or PSTN; |
|        |                |                                                                                                            |
|        | ·       | leased fiber optic routesproviding backbone infrastructures for internet protocol traffic;and                                            |
|        |                |                                                                                                            |
|        | ·       | network operations centersin California and New Jersey from which the network ismonitored.                                               |

    While Titan Wireless hashistorically generated most of its revenues by supplyingcommunications systems and products and providing relatedintegration services in developing countries, Titan Wireless isincreasingly generating revenues from providing communicationsservices over this network.  Service revenues are currentlygenerated from wholesale sales to long distance carriers that useour network to carry their long distance communications traffic andto a much lesser extent from business customers in developingcountries.  Titan Wireless's network has been built using itsown communications products and products purchased from otherequipment vendors, which include advanced satellite groundterminals, Very Small Aperture Terminals, or VSATs, monitoring andcontrol software, satellite voice/data modems, broadband accesssystems, packet switches and voice over Internet protocol (VoIP)gateways.

    Titan Wireless continuesto seek service revenues from communications systems it installs,and has recently installed fixed broadband wireless systems toconnect local businesses with the PSTN and/or to its long distanceinternational gateways in several of its target markets. Titan Wireless is now able to offer a full range of communicationsservices, including voice, facsimile, data, Internet and networkcommunications services, to customers in those markets.

    Titan Wireless's projectfor the national telephone company (Office des Postes etTélécommunications) of Benin, Africa illustrates ourfull product and system integration capabilities.  TitanWireless, the prime contractor for the project, was hired toinstall and operate several important components of thegovernment's communications infrastructure, including a globalsystem for mobile communications, or GSM, cellular network, a ruraltelephony network, fiber optic backbone, and local telephoneswitching equipment.  Alcatel of France was a majorsubcontractor to Titan Wireless on this project, withresponsibility for installing, among other parts of the project,the GSM cellular network.  Under the terms of the applicablecontracts governing the project, Titan Wireless will co-operate thesystem with the national telephone company until all equipment hasbeen paid for and then transfer the operations to the nationaltelephone company.  In addition to realizing revenue andprofit on the equipment portion of the project, Titan Wireless willshare in the service revenue generated by the system.  Theterms of the Titan Wireless agreement with the customer include,among other things, a revenue sharing of total net receipts on thisproject for up to a maximum of nine years, depending upon when theequipment has been paid for. Revenues of approximately $27.4million, or approximately 29.5%, of Titan Wireless's revenues weregenerated from the Benin project during 2001.  In October2000, we collected an $18.0 million receivable from an Africangroup related to a sale of a portion of our economic interest, netof all fixed equipment payments, in the revenue sharing of thisproject.

    Inthe third quarter of 2001, Titan Wireless entered into a contractwith Intercellular Nigeria, Ltd., a leading code division multipleaccess (CDMA) fixed wireless operator, to provide systemintegration services and equipment which will expandIntercellular's existing capacity and provide international longdistance service via the Titan Global Network.

    InJuly 2001, Titan Wireless, through its subsidiary Sakon, acquired aminority interest in Gateway Systems, one of the largest providersof data transmission services to the corporate market inIndia.  Gateway currently provides data and high speedInternet service to corporate customers in Mumbai, Bangalore andPune, and plans to expand into five additional cities within theyear, including New Delhi and the technology centers of Hyderabadand Chennai. Titan Wireless has subsequently opted to increase itsownership position and will own a majority interest in Gatewaypending regulatory approval.

    InMarch 2002, Titan acquired GlobalNet, Inc., an internationalwholesale long distance carrier, that utilizes voice over Internetprotocol (VoIP) technology to deliver long distance traffic todeveloping markets, primarily in Latin America.  GlobalNetwill become a part of Titan Wireless.

    Titan Wireless's corenetwork technology relies heavily on our DAMA technology, which wasdeveloped under U.S. Department of Defense contracts beginning in1983.  DAMA enables more cost-effective and efficient use ofsatellite transmission capacity by increasing the amount ofinformation that can pass through a satellite transponder and byallowing each VSAT in a satellite network to communicate with anyother VSAT in the network without going through a centralhub.  We believe that our DAMA technology allows us to routecustomer connectivity requests more efficiently than any of ourcompetitors.

    Titan Wireless has alsodeveloped substantial expertise in critical engineering disciplinessuch as satellite ground system design, radio frequency and digitalengineering, digital and communications signal processing software,network management and modem technology.  This expertise,combined with the adaptable core technologies and design supportingTitan Wireless's network, allows Titan Wireless to offer customersin emerging countries complete communications systems that can usesatellite-based technology, terrestrial-based wireless local looptechnology, and/or GSM technology.

    Through Sakon andGlobalNet, Titan Wireless is currently providing long distance orother communications services in more than 40 developingcountries.  For the year ended December 31, 2001, TitanWireless had revenues of approximately $92.7 million, whichrepresented 8.6% of our consolidated revenues.

    *IndustryOverview.*  Vast regions of the world remain withoutadequate communications infrastructure.  For this reason,developing countries constitute attractive and growingmarkets.  According to Telegeography, international voicetraffic increased by over 21% to 132.7 billion minutes in2000.  The continuing rise of international traffic has beenpropelled by two broader trends:  liberalization ofinternational markets and growth of mobile telephony. International VoIP, in particular, is growing very rapidly. Traffic tripled in 2000, increasing from 1.6 billion minutes to 5.3billion.  While specialist VoIP carriers carry most of thistraffic, many minutes are originated by traditional PSTN operatorswho have chosen to outsource some of their international traffic toVoIP operators.  International VoIP traffic reachedapproximately 10 billion minutes in 2001 and is expected tocontinue to grow over the next several years.

    Since countries in ourtargeted markets had fewer than two subscriber lines per 100inhabitants compared to 67.30 in the United States, Internetconnections and broadband systems are not readily available. Government deregulation combined with unmet demand forcommunications services, including voice, data, and Internetconnectivity, in many developing countries has provided numerousopportunities for companies able to provide cost-effective, highquality services.  A combination of several factors, includingadvancement in voice and data transmission technologies,development of low cost ground terminals, the existence ofcommercial satellite availability, and the development ofrelatively low cost terrestrial-based wireless local loop equipmenthas made the commercial delivery of communications services,including voice, facsimile, data, Internet and networkcommunications services, to developing countries morefeasible.

    *CompetitiveStrengths.*  Titan Wireless considers the following tobe its competitive strengths:
|        |     *Low Network andOperating Costs.*  Titan Wireless's globalcommunications network is well-suited for commercial deployment indeveloping countries because it is designed to function atrelatively low network and operating costs. In addition, TitanWireless leases access to the geosynchronous satellites that ituses in its operations rather than purchasing satellites outright,and as a result does not have to recover the substantial costsassociated with investments in satellites.  Titan Wireless hasalso established its hubs in locations where Titan Wireless hasbeen able to economically lease access to the international fiberoptic network, which has also contributed to its ability to provideits communications services at relatively low cost.  Finally,Titan Wireless makes extensive use of VoIP technology, whichutilizes bandwidth capacity more efficiently than circuit-switchedtechnology.  Because of these relatively low operating costs,Titan Wireless can charge prices for its communications services indeveloping countries that are both profitable to Titan Wireless andaffordable to customers. |
|--------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |     *  *                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|        |     *Strategic Allianceswith Local Partners.*  Titan Wireless develops andmarkets its broadband communications services and systems to retailcustomers through strategic alliances with local partners, such asregional and local communications services providers.  In eachlocation that Titan Wireless is operating broadband retail service,a local partner serves an important role as Titan Wireless'sintermediary with local regulators and experts in the localmarket.  Titan Wireless considers its ability to identify andenter into strategic relationships with effective local partners tobe one of its competitive advantages.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|        |     *  *                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|        |     *Adaptable Technologyand Integration Expertise.*  The core technologies anddesign supporting Titan Wireless's network can be adapted for usewith different types of services such as voice, data or Internet ordifferent technology such as VSAT technology, terrestrial-basedwireless local loop technology and GSM technology.  Thisadaptability, combined with Titan Wireless's expertise inintegrating these different types of communications technology,provides Titan Wireless with the ability to offer different typesof communications services to customers and to pursue manydifferent types of opportunities in developingcountries.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |

    *Strategy.  *Titan Wireless's objective is to become a leading provider ofcommunications services and systems in developing countries. To achieve this objective, Titan Wireless intends to pursue thefollowing strategies:
|        | ·       | *Grow InternationalVoice and Data Traffic.*  Through expansion of its internet protocol basedpacket networks, carrier grade quality, competitive pricing,effective customer service and account management, Titan Wirelessexpects to significantly grow the volume of traffic, revenues, andprofits of the international wholesale long distancebusiness.                                                                                                                                                          |
|--------------------------------------|----------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                | *      *                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|        | ·       | *Increase Usage ofExisting Broadband Local Access Systems.*  As backbone facilities continue to expand intodeveloping countries, Titan Wireless will address the bottleneckcreated by the lack of effective "last mile" by providing state ofthe art cost-effective fixed wireless broadband accesssystems.  This technology will be focused at multinationalcorporate customers, governments, and local partners that areproviding Internet access and other communications services to thelocal population. |
|        |                | *      *                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|        | ·       | *Add Value-addedFunctionality to the Network.*  The inherence architecture of Titan Wireless'snetwork provides for convergence, or the transmission of multipleapplications over a single bandwidth segment. Future applicationscomplimenting the voice, fax, and basic data services today will beunified messaging, video teleconferencing, virtual privatenetworks, and network security features.                                                                                                              |
|        |                | *      *                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|        | ·       | *Centrally Manage theGlobal Network Infrastructure.*  The central management, procurement and operationsof global backbone infrastructure facilities will allow the TitanWireless network to remain in a cost-effective position as varioustechnologies evolve and prices change over time.  This appliesto satellite bandwidth (space segment), fiber optic facilities,teleports, and network operations centers (NOC).                                                                                      |
|        |                | *      *                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|        | ·       | *Further Develop theSystems Integration Business.*  The principal core competencies historically havebeen in the design, building, integration and operation ofcommunications facilities.  Titan Wireless will continue tofocus on providing complete solutions to both governments andoperators in developing countries.                                                                                                                                                                                     |

    *Competition.*  Whilethe markets in which Titan Wireless competes are only somewhatcompetitive today, we expect that competition will increase in thefuture.  Titan Wireless encounters competition from numerouscompanies, including large and emerging domestic and internationalcompanies, many of which have far greater financial, engineering,technological, marketing, sales and distribution and customerservice resources than Titan Wireless.  Some of TitanWireless's competitors include tier 1 long distance carriers. In addition, Titan Wireless generally competes against one or morelocal companies in each market in which it is operating its fixedwireless retail business.

    ***Cayenta(Discontinued March 1, 2002)***

    *Overview.*  Cayentaprovides software applications and implementation and integrationservices to customers to solve specific business and operatingproblems.  These software applications can be tailored for thecustomers' business and operating requirements and made accessiblevia the Internet.  Cayenta's target markets include logistics,retailing and manufacturing.  Cayenta currently offersproprietary software applications and related customized servicesfor equipment monitoring and maintenance, supply chain management,accounting and customer contact.

    *The* features thatdifferentiate Cayenta include:
|        |     *Vertical Market Focusand Tailored Offerings for Customers' Business Processes andFunctions.  * Cayenta's vertical industry expertisehelps us define and deliver tailored software applications andservices for its customers.  We allow our customers to addadditional functions to standard software applications that arespecific to their needs.  Cayenta adds these functions byusing separate, tailored software applications that extend thecapabilities of standard software applications.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|--------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        | *      *                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|        |     *Proprietary EquipmentMonitoring and Maintenance Offering.*  Cayenta offerssoftware applications that enable manufacturing customers toefficiently manage their equipment monitoring and maintenanceprocesses. These software applications address maintenancescheduling, materials and parts management, and work orderprocessing.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|        | *      *                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|        |     *ProprietaryMulti-Channel Retailing Package.*  Cayenta integratesa customer's web site with the customer's existing softwareapplications and systems to support order processing, catalogmanagement, customer service, inventory management, orderfulfillment, billing and collections and account settlement. We believe that this multi-channel retailing package providesCayenta's retail customers with a single point of contact formanaging and monitoring all of their retailing transactions,including e-business, catalog and in-store transactions.                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|        | *      *                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|        |     *Increased Operabilityand Adaptability of Customers' Systems.*  Cayentadesigns server operating systems and software applications thatpermit its customers to integrate different systems within theirorganizations and between their organizations and those of theirtrading partners.  Cayenta's information technology productsand services also accommodate customer technology preferences forserver operating systems, and facilitate accessibility of softwareapplications over the Internet.  By providing its customers'systems with greater operability, we believe that Cayenta'sinformation technology products and services reduce their manualand redundant business processes and related costs, and enable themto use their systems to help create new business relationships withother companies.  By being adaptable, we believe that ourinformation technology products and services permit our customersto add or change software applications rapidly as their businessesevolve. |

***SureBeam(Discontinued October 16, 2001)***

    *Overview.*  SureBeamis a leading provider of electronic irradiation systems andservices for the food industry. SureBeam's patented electronic foodirradiation system combines its conveyor and shielding systems,proprietary software and electron beam and x-ray linear acceleratortechnology, developed from technology we developed under contractswith the federal government related to strategic defenseinitiatives during the 1980s.  SureBeam intends to generaterevenue from processing food using its electronic food irradiationsystem as well as from the sale of its systems.  SureBeam hasdesigned its systems so that it can install a system as part of acustomer's production line and plans to retain ownership andoperate any systems that it does install within customers'production lines.  SureBeam also operates company ownedservice centers.  SureBeam may also sell systems to thirdparties who would own and operate service centers in the UnitedStates or internationally.  SureBeam generally structuresthese sale transactions so that it can participate in the potentialfuture value created through the use of the systems that itsold.  Typically, SureBeam obtains a right to acquire aminority equity interest in the entity that owns and operates thesystem.  SureBeam has provided and may in the future providelimited working capital or project financing in connection withthese third party service centers.

***TitanTechnologies***

    *Overview.*  InTitan Technologies we leverage our intellectual property portfolioto create commercial technology applications or individualbusinesses from technologies primarily developed fromgovernment-sponsored research and development programs.  Weinclude in Titan Technologies at any given time those commercialtechnology applications and individual businesses that we have notat that point developed into separate operatingsegments.

    For the year endedDecember 31, 2001, Titan Technologies had revenues of approximately$51.3 million, which represented 4.7% of our consolidatedrevenues.

    The following areexamples of some of the technology-based businesses and investmentsthat are currently included in our Titan Technologiessegment.
|        |     *e-tenna's* coretechnologies and expertise were acquired as part of our acquisitionof Atlantic Aerospace Electronics Corporation during 1999 and thenfurther developed by us.  We have chosen to utilize externalequity financing to help fund the development of this business andhave retained an investment in this company.  As a result,e-tenna's results are not consolidated with our results ofoperations.  e-tenna is developing antennas and radiofrequency systems based on electromagnetic technology that itexpects will establish new performance standards for the nextgeneration of radio frequency technology.  The key features ofthe technology are that it suppresses undesired radio frequencycurrents, thereby isolating the antenna from influences that coulddegrade performance.  It also improves signal strength bycausing power to radiate away from the device or equipment in whichthe technology is being used.  e-tenna is currently focused oncreating products for the mobile device market where theirtechnology has the potential to significantly reduce the size,increase the functionality, improve the performance, and decreasethe cost of wireless equipment.  Another key benefit ofe-tenna's technology is the isolation property that allowsmulti-frequency devices such as phones, PDAs, and laptops tofunction efficiently and without significantinterference. |
|--------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|        |     *LinCom Wireless's*core technologies and expertise were acquired as part of ouracquisition of LinCom during 2000 and then further developed byus.  LinCom Wireless is a fabless semiconductor companyfocused on commercializing wireless networking chipsets that willenable wireless connectivity among local area networks, personalarea networks, and home area networks.  LinCom Wireless'sinitial products are based on the dominant wireless local areanetworking standards known as 802.11.  LinCom Wireless hasdeveloped an 802.11b baseband chipset for 3Com and has been workingon the development of an 802.11a chipset for more than ayear.  LinCom Wireless's next product will be a combination802.11a/802.11b product which will bridge the gap between thedominant wireless lan standard today, 802.11b, and the nextgeneration, higher speed, 802.11a.  The development of thischipset is scheduled to be completed by the fourth quarter of2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|        |     *Titan ScanTechnologies'* core technologies and expertise were developed byus from our government contracts business.  Titan ScanTechnologies sells medical equipment sterilization systems andprovides medical equipment sterilization services, which utilizethe electron beam process that SureBeam uses for foodirradiation.  Titan Scan Technologies' medical equipmentsterilization systems are currently used in the medical deviceproduction lines of Guidant Corporation in San Diego, California,Baxter Corporation in the Dominican Republic, Mediscan in Austria,and Rochialle Corporation in Wales.  In addition, Titan ScanTechnologies is currently building a system for Isotron in theUnited Kingdom.  Titan Scan Technologies also offers contractsterilization services for medical product manufacturers atfacilities that it owns in San Diego, Denver, Colorado and Lima,Ohio.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|        |       Cayenta’score software products for the utility and municipality marketswere acquired as a part of our acquisition of SFG in 1999 andfurther developed by us.  Cayenta’s revenue cyclemanagement offering for municipalities and utilities providessoftware applications that utility and municipality customers useto track, collect and settle billing and payment transactions withtheir customers and trading partners.  These softwareapplications help Cayenta’s customers address their needsrelating to customer enrollment, creditworthiness, purchasing,contract management, bill generation, bill presentment, collectionsand settlement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |

     *Competition.*  Becauseit is attempting to commercialize a number of diverse technologiesand products, Titan Technologies effectively competes in manyareas.  Other companies are engaged in significant researchand development activities in these areas, either on their own orin collaboration with others.  Some of these companies havegreater financial and personnel resources, and more experience inthese specific areas than we do.  We anticipate that thecompanies that comprise Titan Technologies will face increasedcompetition in the future as new companies enter these areas andadditional and potentially more sophisticated technologies becomeavailable.

**GovernmentContracts**

    Asubstantial portion of our revenues are dependent upon continuedfunding of United States and allied government agencies, as well ascontinued funding of the programs targeted by our businesses. Our revenues from U.S. government business representedapproximately 88% of our total revenues for the year endedDecember 31, 1999, approximately 81% of our total revenues forthe year ended December 31, 2000, and approximately 84% of ourtotal revenues for the year ended December 31, 2001.  Anysignificant reductions in the funding of United States governmentagencies or in the funding areas targeted by our businesses couldmaterially and adversely affect our operating results and hinderour ability to execute our commercialization strategy.

    U.S. government contractsare subject to termination for the convenience of the government,as well as termination, reduction or modification in the event ofbudgetary constraints or any change in the government'srequirements.  When we subcontract with prime contractors,such subcontracts are also subject to the ability of the primecontractor to perform its obligations under its primecontract.  We often have little or no control over theresources allocated by the prime contractor to the prime contract,and any failure by the prime contractor to perform its obligationsunder the prime contract could result in our loss of oursubcontract.  In addition, our contract-related costs andfees, including allocated indirect costs, are subject to audits andadjustments by negotiation between us and the U.S.government.  As part of the audit process, the governmentaudit agency verifies that all charges made by a contractor againsta contract are legitimate and appropriate.  Audits may resultin recalculation of contract revenues and non-reimbursement of somecontract costs and fees.  Any audits of our contract-relatedcosts and fees could result in material adjustments to ourrevenues.  In addition, U.S. government contracts areconditioned upon the continuing availability of congressionalappropriations.  Congress usually appropriates funds on afiscal year basis even though contract performance may take severalyears.  Consequently, at the outset of a major program, thecontract is usually incrementally funded and additional funds arenormally committed to the contract by the procuring agency asCongress makes appropriations for future fiscal years.  Anyfailure of such agencies to continue to fund such contracts couldhave a material adverse effect on our operating results and hinderour ability to execute our commercialization strategy.

    Our business with theU.S. government and prime contractors is generally performed undercost reimbursement, fixed-price or time and materialscontracts.  Cost reimbursement contracts for the governmentprovide for reimbursement of costs plus the payment of a fee. Under fixed-price contracts, we agree to perform certain work for afixed price.  Under time and materials contracts, we arereimbursed for labor hours at negotiated hourly billing rates andare reimbursed for travel and other direct expenses at actual costsplus applied general and administrative expense.  Thefollowing table gives the percentage of revenues realized by usfrom the three primary types of government contracts during theperiods indicated.
| ** **        | ** ** | **YearEnded December 31,** | ** ** |
|-------------------|------------|----------------------------|------------|
| ** **        | ** ** | ****                       | ** ** |
| **ContractType**  | ** ** | **2001**                   | ** ** | **2000** | ** ** | **1999** | ** ** |
| ****              | ** ** | ****                       | ** ** | **** | ** ** | **** | ** ** |
| CostReimbursement |       | 37.9                       | %          | 42.3 | % | 49.4 | % |
| Time andMaterials |       | 42.0                       |       | 38.6 |   | 34.1 |   |
| Fixed-Price       |       | 20.1                       |       | 19.1 |   | 16.5 |   |
|              |       |                            |       |  |   |  |   |
|              |       | 100.0                      | %          | 100.0 | % | 100.0 | % |
|              |       |                            |       |  |   |  |   |

**Backlog**

    Contracts undertaken byus may extend beyond one year.  Accordingly, portions arecarried forward from one year to the next as part of backlog. Because many factors affect the scheduling of projects, noassurance can be given as to when revenue will be realized onprojects included in our backlog.  Although funded backlogrepresents only business which is considered to be firm, we cannotguarantee that cancellations or scope adjustments will notoccur.  The majority of funded backlog represents contractsunder the terms of which cancellation by the customer would entitleus to all or a portion of our costs incurred and potentialfees.

    Many of our contractswith the U.S. government are funded by the procuring agency fromyear to year, primarily based on its fiscal requirements. This results in two different categories of U.S. governmentbacklog: funded and unfunded backlog.  "Funded backlog"consists of the aggregate contract revenues remaining to be earnedby us at a given time, but only to the extent such amounts havebeen appropriated by Congress and allocated to the contract by theprocuring government agency.  "Unfunded backlog" consists ofthe aggregate contract revenues expected to be earned as ourcustomers incrementally allot funding to existing contracts,whether we are acting as a prime contractor or subcontractor, andthe aggregate contract revenues to be funded on contracts whichhave been newly awarded to us.  Unfunded backlog includespriced options, which consist of the aggregate contract revenuesexpected to be earned as a result of a customer exercising anoption period that has been specifically defined in the originalcontract award.  "Backlog" is the total of the government andcommercial funded and unfunded backlog.

    Our backlog consisted ofthe following approximate amounts as of the followingdates:

| ** **                      | ** ** | **As ofDecember 31,** |
|---------------------------------|------------|-----------------------|
| ** **                      | ** ** | ****                  |
| **Backlog**                     | ** ** | **2001**              | ** ** | **2000** | ** ** | **1999** |
| ****                            | ** ** | ****                  | ** ** | **** | ** ** | **** |
| ** **                      | ** ** | **(inthousands)**     |
| U.S. Government fundedbacklog   |       | $                     | 545,618 |   | $ | 332,099 |   | $ | 297,214 |
| U.S. Government unfundedbacklog |       |                  | 2,231,052 |   |   | 1,659,890 |   |   | 1,671,879 |
| Commercialbacklog               |       |                  | 46,996 |   |   | 56,438 |   |   | 74,930 |
|                            |       |                       |   |  |   |  |
| Total backlog                   |       | $                     | 2,823,666 |   | $ | 2,048,427 |   | $ | 2,044,023 |
|                            |       |                       |   |  |   |  |

    Weexpect to realize approximately 52% of our December 31, 2001backlog by December 31, 2002.

    Management believes thatyear-to-year comparisons of backlog are not necessarily indicativeof future revenues. The actual timing of receipt of revenues, ifany, on projects included in backlog could change because manyfactors affect the scheduling of projects.  In addition,cancellations or adjustments to contracts may occur.  Backlogis typically subject to large variations from quarter to quarter asexisting contracts are renewed or new contracts are awarded. Additionally, all United States government contracts included inbacklog, whether or not funded, may be terminated at theconvenience of the United States government.

**Manufacturing**

    Weoperate both fabrication and assembly facilities and also purchasecertain components and assemblies from other suppliers.  Noone supplier accounts for a significant portion of totalpurchases.  In limited cases, we obtain products from a solesupplier or a limited group of suppliers.  Consequently, werisk disruptions in our supply of key products and components ifthese suppliers fail or are unable to perform because of strikes,natural disasters, financial condition or other factors.

**Patents, Trademarks andTrade Secrets**

    Our policy is to applyfor patents and other appropriate statutory protection when wedevelop new or improved technology.  We presently hold over100 U.S. and foreign issued patents, as well as a number oftrademarks and copyrights.  However, we do not rely solely onthese statutory protections to protect our technology andintellectual property.  In addition to seeking patentprotection for our inventions, we rely on the laws of unfaircompetition and trade secrets to protect our unpatented proprietaryrights.  We attempt to protect our trade secrets and otherunpatented proprietary information through agreements withcustomers, vendors, employees and consultants.  In addition,various names used by us for our products and services have beenregistered with the United States Patent and TrademarkOffice.

    SureBeam owns 11 of ourU.S. and foreign issued patents.  SureBeam also owns 38 patentapplications that are pending in the United States andabroad.  The U.S. and foreign issued patents relating to theSureBeam technology have claims relating to methods of transportingproducts through the electron beam process, means of increasing theefficiency and reliability of the process, and ways of shieldingthe process that miniaturizes the size of the system. SureBeam's pending patent applications include claims relating toimprovements in the operation, efficiency, and reliability of theSureBeam technology, shielding, multiple pass x-ray system andin-line processing systems.  These patents will expire overthe period from 2009 to 2021, and have been issued or are pendingin markets that are key targets for SureBeam's expansionobjectives.  While electron beam, x-ray and linear acceleratormachines and technology are considered to be part of the publicdomain and not patentable, SureBeam believes its patents cover themost efficient method of utilizing electron beam, x-ray and linearaccelerator technology for food and other applications.  Titanhas purchased an exclusive license from SureBeam to the patentedtechnology in all fields other than food, flowers and animalhides.

    Third parties couldindependently develop competing technology or design around ourtechnology.  If we are unable to successfully detectinfringement and enforce our rights in our technology, we may losecompetitive position in the applicable market.  We cannot becertain that our means of protecting our proprietary rights in theU.S. or abroad will be adequate or that competing companies willnot independently develop similar technology.

    Todate we have not been notified that our technologies infringe theproprietary rights of any third parties, but third parties may, inthe future, claim that our current or future technologies infringeupon their proprietary rights.  In addition, third partieshave and may continue to challenge the validity or enforceabilityof our proprietary rights.  Any such claim, whethermeritorious or not, could be time consuming, result in costlylitigation, cause delays in our development of technologies andproducts, or require us to enter into royalty or licensingagreements.  Such royalty or licensing agreements may not beavailable on terms acceptable to us, or at all.  As a result,any such claim could harm our business and prospects.

**Research andDevelopment**

    Wemaintain a staff of engineers, other scientific professionals andsupport personnel engaged in development of new applications oftechnology and improvement of existing products.  Theseprograms' costs are expensed as incurred.  Titan-fundedresearch and development expenditures were $6.7 million in theyear ended December 31, 1999, $9.6 million in the year endedDecember 31, 2000 and $11.1 million in the year ended December 31,2001. A portion of our research and development activities during2001 was customer-funded and as such was paid for through contractrevenues with an associated expense in operating expenses. The majority of our customer-funded research and developmentactivity is funded under contracts with the U.S.government.

**Government andEnvironmental Regulations**

    Wemust comply with and are affected by various governmentregulations.  These regulations affect how we and ourcustomers can do business and, in some instances, impose addedcosts to our businesses.  Any changes in applicable laws couldadversely affect the financial performance of the business affectedby the changed regulations.  Any failure to comply withapplicable laws could result in material fines and penalties oraffect how we conduct our business in the future.

    Weare subject to environmental and safety laws and regulationsgoverning the use, storage and disposal of hazardous substances orwastes and imposing liability for the cleanup of contamination fromthese substances.  We cannot completely eliminate the risk ofcontamination or injury from these substances or wastes, and, inthe event of such an incident, we could be held liable for anydamages that result.  From time to time, we have been notifiedof violations of government and environmental regulations.  Weattempt to correct these violations promptly without any materialimpact on our operations.  In addition, we may be required toincur significant additional costs to comply with environmentallaws and regulations in the future.  These costs, and anyfuture violations or liability under environmental laws orregulations, could have a material adverse effect on our business,financial condition and results of operations.

    Titan Wireless mustcomply with applicable laws and obtain the approval of theregulatory authorities of each foreign country in which itoperates.  The laws and regulatory requirements relating tosatellite communications and other wireless communications systemsvary from country to country.  Some countries havesubstantially deregulated satellite communications and otherwireless communications, while other countries maintain strict andoften burdensome regulations.  The procedure to obtain theseregulatory approvals can be time-consuming and costly, and the termof the approvals vary from different countries.  In addition,in some countries there may be restrictions on the ability tointerconnect satellite communications with ground-basedcommunications systems.  Titan Wireless's sale of productsoutside the U.S. is also subject to compliance with the U.S. ExportAdministration Regulations.

**Employees**

    Asof December 31, 2001, we employed approximately 9,580employees, most of whom were located in the United States.  Wecurrently are not subject to collective bargaining arrangements,and we believe that our relationships with our employees aresatisfactory.

**Item2.  Properties**

    Our operations'facilities occupy approximately 2,500,000 square feet of spacelocated primarily throughout the United States.  The largemajority of the space is office space.  Substantially all ofour facilities are leased.  We describe our lease commitmentsin Note 10 to the accompanying consolidated financialstatements.

**Item3.  Legal Proceedings**

    OnJanuary 6, 2000, Ion Beam Applications s.a., a Belgian corporation,and some of its U.S. subsidiaries ("IBA") filed an action fordeclaratory judgment in a federal court in Virginia against Titanand the SureBeam Corporation ("SureBeam") relating to SureBeam'spatents for SureBeam systems.  The action attacked thevalidity of SureBeam's core patent, sought a declaration that IBAand its customers had not infringed any of the 62 claims inSureBeam's patent, and alleged that Titan and SureBeam engaged inunfair competition and that Titan and SureBeam's conductconstituted patent misuse.  The case was moved to the federalcourt in San Diego.  On November 22, 2000, IBA filed anamended complaint alleging, in addition to the original claims,that Titan and SureBeam engaged in false advertising,monopolization, restraint on trade and unfair businesspractices.

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

    Weare involved in legal actions in the normal course of our business,including audits and investigations by various governmentalagencies that result from our work as a defense contractor. We and our subsidiaries are named as defendants in legalproceedings from time to time and we or our subsidiaries may assertclaims from time to time.  In addition, we acquire companiesfrom time to time that have legal actions pending against them atthe time of acquisition.  Based upon current information andreview, we believe the ultimate liability or recovery with respectto pending actions would not materially affect our consolidatedfinancial position or our results of operations.   However,our evaluation of the likely impact of these actions could changein the future and an unfavorable outcome, depending upon the amountand timing, could have a material adverse effect on our results ofoperations or our cash flows in a future period.

**Item4.  Submission of Matters To a Vote of SecurityHolders**

    Noinformation is required by Item 4.

**PART II**

**Item5.  Market for the Company's Common Equity and RelatedStockholder Matters**

    The Company's commonstock and cumulative convertible preferred stock are traded on theNew York Stock Exchange (NYSE).  As of March 22, 2002,there were approximately 3,700 holders of record of the Company'scommon stock and 485 holders of record of the Company's preferredstock, excluding beneficial owners of shares held in the names ofbrokers or other nominees.  The closing prices for the commonand preferred stock on the NYSE as of March 22, 2002, were$19.78 and $19.50, respectively.  The quarterly market priceranges for the Company's common and preferred stock on the NYSE in2001 and 2000 were as follows:

| **CommonStock**   | ** ** | **2001** | ** ** | **2000** |
|-------------------|------------|----------|------------|----------|
|                   | ** ** | ****     | ** ** | ****     |
| **FiscalQuarter** | ** ** | **High** | ** ** | **Low**  | ** ** | **High** | ** ** | **Low** |
| ****              | ** ** | ****     | ** ** | ****     | ** ** | **** | ** ** | **** |
| First             |       | $        | 25.49      |     | $ | 15.75 |   | $ | 60.50 |   | $ | 32.50 |
| Second            |       |     | 25.15      |     |   | 13.20 |   |   | 55.50 |   |   | 25.31 |
| Third             |       |     | 22.48      |     |   | 16.24 |   |   | 44.56 |   |   | 15.38 |
| Fourth            |       |     | 29.01      |     |   | 17.82 |   |   | 21.81 |   |   | 11.13 |

| **CumulativeConvertible** | ** ** | **2001** | ** ** | **2000** |
|---------------------------|------------|----------|------------|----------|
| **PreferredStock**        | ** ** | ****     | ** ** | ****     |
| **Fiscal Quarter**        | ** ** | **High** | ** ** | **Low**  | ** ** | **High** | ** ** | **Low** |
| ****                      | ** ** | ****     | ** ** | ****     | ** ** | **** | ** ** | **** |
| First                     |       | $        | 21.25      |     | $ | 17.75 |   | $ | 11.98 |   | $ | 10.66 |
| Second                    |       |     | 20.85      |     |   | 15.55 |   |   | 11.74 |   |   | 11.11 |
| Third                     |       |     | 18.90      |     |   | 16.75 |   |   | 12.07 |   |   | 11.50 |
| Fourth                    |       |     | 21.30      |     |   | 17.00 |   |   | 12.28 |   |   | 11.28 |

        Nodividends were paid on the Company's common stock in 2001 or2000.  Regular quarterly dividends of $.25 per share were paidon the cumulative convertible preferred stock in bothyears.

**Item6.  Selected Financial Data**(in thousands of dollars, except per share data)

| ** **                                                                                                                                                                                                          | ** ** | **2001** | ** ** | **2000** | ** ** | **1999** | ** ** | **1998** | ** ** | **1997** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
| ** **                                                                                                                                                                                                          | ** ** | ****     | ** ** | ****     | ** ** | ****     | ** ** | ****     | ** ** | ****     | ** ** |
| ***OperatingResults:***                                                                                                                                                                                             |       |     |       |     |       |     |       |     |       |     |       |   |   |   |   |   |
| Revenues                                                                                                                                                                                                            |       | $        | 1,084,407  |     | $          | 941,213  |       | $        | 768,648    |     | $          | 532,236 |   | $ | 381,763 |   |
| Income (loss) fromcontinuing    operations before extraordinary loss    and cumulative effect of change in    accounting principle                                     |       |     | (1,520     | )        |       | (5,457   | )          |     | 41,144     |     |       | 14,021 |   |   | 552 |  |
| Income (loss) fromcontinuing    operations before extraordinary loss    and cumulative effect of change in    accounting principle per common    share: |       |     |       |     |       |     |       |     |       |     |       |   |   |   |   |   |
|       Basic                                                                                                                                                                           |       | $        | (.09       | )        | $          | (.16     | )          | $        | .86        |     | $          | .32 |  | $ | (.01 | ) |
|       Diluted                                                                                                                                                                         |       |     | (.09       | )        |       | (.16     | )          |     | .76        |     |       | .31 |  |   | (.01 | ) |
| ***Financial Position:***                                                                                                                                                                                           |       |     |       |     |       |     |       |     |       |     |       |   |   |   |   |   |
| Cash, cash equivalents andinvestments                                                                                                                                                                               |       | $        | 28,957     |     | $          | 27,291   |       | $        | 13,469     |     | $          | 13,868 |   | $ | 18,757 |   |
| Total assets                                                                                                                                                                                                        |       |     | 1,460,402  |     |       | 964,071  |       |     | 627,550    |     |       | 369,923 |   |   | 233,336 |   |
| Amounts outstanding underlines of    credit, long-term                                                                                                                                               |       |     | 317,187    |     |       | 260,625  |       |     | 215,987    |     |       | 98,215 |   |   | 7,833 |   |
| Other long-termdebt                                                                                                                                                                                                 |       |     | 5,612      |     |       | 1,585    |       |     | 6,302      |     |       | 36,796 |   |   | 42,057 |   |
| Non-recoursedebt                                                                                                                                                                                                    |       |     | 42,456     |     |       | 36,680   |       |     | 8,000      |     |       | — |   |   | — |   |
| Company obligatedmandatory    redeemable convertible preferred    securities                                                                                                          |       |     | 250,000    |     |       | 250,000  |       |     | —    |     |       | — |   |   | — |   |
| Redeemable preferredstock                                                                                                                                                                                           |       |     | —    |     |       | —  |       |     | —    |     |       | — |   |   | 3,000 |   |
| Stockholders'equity                                                                                                                                                                                                 |       |     | 496,958    |     |       | 167,416  |       |     | 166,348    |     |       | 98,440 |   |   | 74,892 |   |
| Preferreddividends                                                                                                                                                                                                  |       |     | 690        |     |       | 692      |       |     | 695        |     |       | 778 |   |   | 875 |   |

**Item7.  Management's Discussion And Analysis Of FinancialCondition And Results Of Operations**

    The following discussionis qualified in its entirety by the more detailed information andconsolidated financial statements, including the notes thereto,included in this document.  (Amounts in thousands, exceptshare and per share data, or as otherwise noted.)

**Overview andOutlook**

    Weare a diversified technology company whose business is to create,build and launch technology-based businesses primarily fromtechnologies developed for the government.  For more than 20years we have been providing information systems solutions andservices to the Department of Defense (DoD) and intelligenceagencies.  Today, we are organized into four segments, ourcore government business and our three commercial businesses,(including our SureBeam business, which was discontinued onOctober 16, 2001) that reflect the specific markets andindustries in which we operate and our Titan Technologies segment. On October 16, 2001, Titan adopted a definitive planto spin off SureBeam in the form of a tax-free dividend to Titanshareholders within 12 months from that date.  The planinvolves filing a letter ruling request with the Internal RevenueService seeking approval of the tax-free distribution.  Titanreceived a favorable ruling in May 2002, and intends to execute thespin off in the third quarter of 2002.  Titan has historicallyreported the SureBeam business as a separate segment.  Inaccordance with Accounting Principles Board Opinion No. 30,"Reporting the Results of Operations—Reporting the Effects ofDisposal of a Segment of a Business, and Extraordinary, Unusual andInfrequently Occurring Events and Transactions," the consolidatedfinancial statements of Titan for all periods presented have beenrestated to reflect SureBeam as a discontinuedoperation.

    During the first quarterof 2002, the Company made the decision to sell certain of itscommercial information technology operations within its Cayentasegment and the AverCom business within the Titan Technologiessegment in order to allow management to focus on operations withthe most near term growth opportunities.  As a result,Cayenta’s federal government operations are being reported inTitan Systems, and Cayenta’s remaining continuing operationsare being reported in Titan Technologies, formerly Titan’sEmerging Technologies and Businesses segment.  In accordancewith Statement of Financial Accounting Standards No. 144,“Accounting for the Impairment or Disposal of Long-livedAssets and for Long-Lived Assets to be Disposed of,” allcommercial operations that are held for sale have been reflected asdiscontinued operations for all periods presented in Titan’sconsolidated financial statements.  All prior period financialinformation has been restated to reflect the newsegments.
| **Segment******
****                                             | **     ** | **SegmentDescription**
****                                                                                                                                                                                                                                                                                                        |
|------------------------------------------------------------------|------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Titan Systems                                                    |           | Information technology andcommunications solutions, services and products for defense,intelligence, and other U.S. and allied governmentagencies                                                                                                                                                                              |
| Titan Wireless                                                   |           | Satellite-based andwireless-based communication services and systems which providecost-effective voice, data and Internet services in developingcountries                                                                                                                                                                     |
| Cayenta (Discontinued -included in our Software Systems segment) |           | Total services provider ofinformation technology services and software product applicationsfor its customers' business functions including accounting,customer contact, supply chain management and equipment monitoringand maintenance primarily in two vertical markets:  manufacturing and logistics and retail  |
| SureBeam(Discontinued)                                           |           | Electronic foodirradiation systems and services                                                                                                                                                                                                                                                                               |
| TitanTechnologies                                                |           | Development of commercialapplications and businesses using technologies created byTitan.  We currently have several new businesses indevelopment, including businesses in which we have applied forpatent protection for the underlying technology                                                                            |

    The results of operationsshown for each of our operating segments includes each of thesegment's direct costs of operations and administration.  Thesegment performance is based upon profit or loss before interestexpense, income taxes and before allocated costs of corporateoverhead.  Corporate overhead may include, among other things,costs for financial, accounting, marketing, administrative andlegal activities incurred by Titan.  Consequently, the resultsof operations of the segments may not be indicative of the actualresults that would be shown in the financial statements of thesesegments if prepared on a stand-alone basis.

    Each of Titan Systems,Titan Wireless, Cayenta and SureBeam is a subsidiary of ours. We have created stock option plans for each of Titan Systems andTitan Wireless.  As of December 31, 2001, Titan Systems andTitan Wireless each had approximately 20% of their fully dilutedcommon stock that had been reserved for issuance under theirplans.

    AtDecember 31, 2001, we controlled approximately 98% of the votingpower and approximately 80% of the outstanding equity ownership ofSureBeam through our ownership of 46,774,235 shares of Class Bcommon stock.  SureBeam completed its initial public offeringof 6,700,000 shares of its Class A common stock inMarch 2001.  Upon completion of the initial publicoffering of SureBeam, the number of shares owned by Titanrepresented approximately 98% of the voting power ofSureBeam.  Each Class A share is entitled to one vote andeach Class B share is entitled to ten votes, with Class Aand Class B shares voting together on all matters submitted tothe vote of the holders of common stock.  As ofDecember 31, 2001, SureBeam had also reserved approximately7,731,210 shares of Class A common stock under stock optionand employee stock purchase plans.  On December 31, 2001, $2.0million of SureBeam's promissory note payable to Titan wasexchanged for 190,385 Class B common shares of SureBeam, and onFebruary 13, 2002, the remaining $73.0 million of SureBeam's notepayable to Titan was exchanged for 4,441,496 Class A and 3,225,765Class B common shares of SureBeam.  After these transactions,we own 4,441,496 Class A and 50,000,000 Class B common shares,resulting in our control of approximately 98% of the voting powerand 82% of the outstanding equity of SureBeam.

    We control approximately97% of the voting power of Cayenta through our ownership of 10million shares of Class B common stock, which representsapproximately 76% of Cayenta's outstanding equity ownership. Each Class A share is entitled to one vote and eachClass B share is entitled to ten votes, with Class A andClass B shares voting together on all matters submitted to thevote of the holders of common stock.  In addition toClass A and Class B common stock, Cayenta has outstanding2,345,000 shares of Series A preferred stock that areconvertible into its Class A common stock and warrants forapproximately 496,000 shares of its Class A common stock thathave a weighted average exercise price of $13.11 per share. As of December 31, 2001, Cayenta had also reservedapproximately 31% of its fully diluted common stock under stockoption plans.

***      ******·******      TitanSystems***

    Titan Systems providesand is expected to continue to provide the largest percentage ofour consolidated revenues.  During the year ended December 31,2001, Titan Systems had total revenues of $940.3 million, whichrepresented 87% of our consolidated revenues for the period. Titan Systems' revenues have grown internally and through ourwell-defined strategy of increasing our core competencies andexpanding our customer base through acquiring governmentinformation technology companies as part of the general trend ofthe defense and government information technology industryconsolidation.

    Titan Systems' backlog,including both funded and unfunded backlog, was approximately $2.8billion at December 31, 2001.  Although funded backlogrepresents only business which is considered to be firm, we cannotguarantee that cancellations or scope adjustments will notoccur.  "Funded backlog" consists of the aggregate contractrevenue remaining to be earned by us at a given time, but only tothe extent such amounts have been appropriated by Congress andallocated to the contract by the procuring government agency. "Unfunded backlog" consists of the aggregate contract revenuesexpected to be earned as our customers incrementally allot fundingto existing contracts, whether we are acting as a prime contractoror subcontractor, and the aggregate contract revenues to be fundedon contracts which have been newly awarded to us.  Unfundedbacklog includes priced options, which consist of the aggregatecontract revenues expected to be earned as a result of a customerexercising an option period that has been specifically defined inthe original contract award.  "Backlog" is the total of thegovernment and commercial funded and unfunded backlog.  Thedetermination of unfunded backlog involves substantial estimation,particularly with respect to customer requirements andcontracts.  These estimates are based on our experience undersuch contracts and similar contracts, and we believe the use ofsuch estimates to be reasonable.  However, there can be noassurance that the unfunded contract value will be realized ascontract revenue or earnings.

    Titan Systems' operatingmargin is affected by the mix of contract types (costreimbursement, fixed-price or time and materials) as well as by themix of prime contracts versus subcontracts.  Significantportions of Titan Systems' contracts are time and materials andcost reimbursement contracts.  Titan Systems is reimbursed forlabor hours at negotiated hourly billing rates and other directexpenses under time and materials contracts and reimbursed for allactual costs, plus a fee, or profit, under cost plus fixed feecontracts.  The financial risks under these contractsgenerally are lower than those associated with other types ofcontracts, and margins are also typically lower.  The U.S.government also has awarded Titan Systems fixed-pricecontracts.  Such contracts carry higher financial risksbecause Titan Systems must deliver the contracted services at acost below the fixed price in order to earn a profit.  OfTitan Systems’ total revenues from government business in2001, approximately 42.3% were generated by time and materialscontracts, approximately 40.1% were generated by cost reimbursementcontracts, and approximately 17.6% were generated by fixed pricecontracts.

    OnMarch 23, 2001, our subsidiary, Titan Systems Corporation,consummated an agreement to purchase certain assets from MaxwellTechnologies Systems Division, Inc., a subsidiary of MaxwellTechnologies, Inc., which specializes in research, developmentand technical services primarily for military applications. The purchase price was approximately $11.5 million in cash,subject to post-closing adjustments and indemnificationobligations, less a $1.7 million holdback, due 180 daysfrom the date of closing.  The initial $9.8 million ofthe purchase price was paid on April 2, 2001.  Wereceived approximately $0.6 million in July 2001 fromMaxwell Technologies, Inc. resulting from the resolution ofpost-closing working capital adjustments.  Under theagreement, we had full recourse to the seller for all accountsreceivable not collected within 180 days of the closing date. In October 2001, we paid approximately $1.5 million in fullsatisfaction of the $1.7 million holdback, as adjusted foruncollected accounts receivable.  The transaction wasaccounted for as a purchase, and the excess of the purchase priceover the estimated fair market value of the net assets acquired,which has been amortized on a straight line basis over 30 years,was approximately $6.8 million at December 31, 2001, and isreflected as goodwill in the accompanying consolidated balancesheet.

    OnSeptember 28, 2001, we completed the acquisition of the remainingshares of Datron Systems Incorporated ("Datron"), a provider ofradio and satellite-based communication systems and broadbandcommunication products for government and commercial markets, thatwere acquired through a stock for stock exchange tender offer thatclosed in August 2001.  The acquisition was to furtherTitan’s goal of acquiring government information technologycompanies which fit strategically with Titan Systems.  Weissued approximately 2.3 million shares of Titan common stock forall the outstanding shares of Datron common stock at an aggregatevalue of $44.9 million, based on $19.544 per Titan share, theaverage trading price ending July 27, 2001, the date on which the formula for consideration became fixed, and assumed Datronstock options representing approximately 437,000 shares of Titancommon stock at an aggregate value of $4.0 million, based on anexchange ratio of approximately .81919 shares of Titan common stockfor each share of Datron common stock.  The transaction wasaccounted for as a purchase, and the excess of the purchase priceover the estimated fair market value of the net assets acquired wasrecorded as goodwill of $27.4 million and intangible assets of $5.6million.  The intangible assets consist of backlog, customerrelationships and trademarks and patents of $1.0 million, $3.2million and $1.4 million, respectively, which will be amortizedover the estimated useful lives of 1 to 2 years, 10 years and 5years, respectively.  In connection with the determination ofthe fair value of assets acquired and pursuant to the provisions ofStatement of Financial Accounting Standards ("SFAS") No. 141,"Business Combinations," we have valued contracts in process atcontract price, minus the estimated costs to complete and anallowance for the normal industry profit on its effort to completesuch contracts which amounted to $1.4 million.  This deferredprofit has been reflected in the accompanying consolidated balancesheet as an increase to net liabilities assumed.  Werecognized approximately $0.8 million in the year ended December31, 2001, as a reduction of costs, with the remaining $0.6 millionto be recorded as a reduction of costs in future periods as work oncertain contracts is performed, which is estimated to be throughfiscal 2002.

    OnNovember 27, 2001, we completed the acquisition of BTG, Inc.("BTG"), a provider of information technology solutions andservices primarily to the U.S. military and other governmentagencies, for $13.35 per BTG share.  The acquisition was tofurther Titan’s goal of acquiring government informationtechnology companies which fit strategically with TitanSystems.  We issued approximately 4,024,100 shares of Titancommon stock at an aggregate value of $99.9 million, based on$24.814 per Titan share, the average trading price ending November19, 2001, the date on which the formula for consideration became fixed, and paid cash of $23.4 million for all the outstandingshares of BTG common stock and assumed BTG stock optionsrepresenting approximately 734,200 shares of Titan common stock atan aggregate value of $12.2 million, based on an exchange ratio ofapproximately 0.5380 shares of Titan stock for each share of BTGcommon stock.  We also paid off $37.1 million of BTG'soutstanding debt as of the closing date.  The transaction wasaccounted for as a purchase, and the excess of purchase price overthe estimated fair value of the net assets acquired was recorded asgoodwill of $141.8 million, intangible assets of $8.2 million anddeferred compensation of $0.5 million related to unvested optionsassumed.  The intangible assets consist of backlog, customerrelationships and a strategic relationship of $1.7 million,$5.5 million and $1.0 million, respectively, which willbe amortized over the estimated useful lives of 1 year, 2 to 5years and 2 years, respectively.  The deferred compensationwill be amortized over the remaining vesting period of the assumedoptions.  In connection with the determination of the fairvalue of assets acquired and pursuant to the provisions of SFAS No.141, we have valued contracts in process at contract price, minusthe estimated costs to complete and an allowance for the normalindustry profit on its effort to complete such contracts, whichamounted to $9.2 million.  This adjustment has been reflectedin the accompanying consolidated balance sheet as an increase inthe net liabilities assumed.  The Company recognizedapproximately $0.5 million in the year ended December 31, 2001, asa reduction of costs, with the remaining $8.7 million to berecorded as a reduction of costs in future periods as work oncertain contracts is performed, which is estimated to continuethrough fiscal 2016.

    During 2000, weconsummated a merger with Advanced Communication Systems, Inc., orACS, in a stock-for-stock, pooling of interests transaction. ACS provides communications, information systems and aerospaceservices and solutions primarily to U.S. government agencies. We issued approximately 5,082,000 shares of common stock forall the outstanding shares of ACS, and assumed ACS stock optionsrepresenting approximately 263,000 shares of our commonstock.  ACS's operations are included in TitanSystems.

    Also during 2000, weconsummated a merger with AverStar, Inc., or AverStar, in astock-for-stock, pooling of interests transaction.  AverStarprovides services and software focused on the areas of informationtechnology assurance, information technology development andinformation technology management and operations for themission-critical systems of civilian and defense agencies of theU.S. government.  We issued approximately 2,850,000 shares ofcommon stock for all the outstanding shares of AverStar commonstock, and assumed AverStar stock options representingapproximately 551,000 shares of our common stock.  AverStar'soperations are primarily included in Titan Systems.

    Also during 2000, weacquired Pulse Engineering (Pulse), LinCom Corporation (LinCom) andSenCom Corporation (SenCom) in transactions that were accounted foras purchases.  The excess of our purchase price for theseentities over the estimated fair market value of the net assetsacquired, which was being amortized on a straight line basis over30 years, was approximately $75.1 million at December 31,2001, and is reflected as Goodwill in the accompanying consolidatedbalance sheet.

    Wedescribe our acquisitions in Note 2 to our consolidatedfinancial statements.  For all acquisitions accounted for aspurchases, the acquired companys' results of operations areconsolidated with the Company's results of operations immediatelysubsequent to the acquisition date.

***      ******·******      TitanWireless***

    Titan Wireless hashistorically generated most of its revenues by supplyingcommunications systems and products and providing relatedintegration services in developing countries.  Titan Wirelessis increasingly generating revenues from providing communicationsservices over its global communications network.  While themajority of service revenues are currently being generated fromlong distance carriers that use our network to carry their longdistance communications traffic to and from developing countries,service revenues are starting to be generated from retail customersin developing countries.  In the retail business, TitanWireless installs an on-site antenna at businesses that use itsfixed wireless systems for local and/or long distancecommunications services.   The cost of that antenna and itsinstallation is paid for either by Titan Wireless or its customers,depending on the terms of the business arrangement.  TitanWireless derived approximately 51% of its revenues during 2001 fromproviding communications services to long distancecarriers.

    Titan Wireless'swholly-owned subsidiary, Titan Africa, Inc., completed work ona satellite-based communications system for Benin's nationaltelephone company during 2001.  Revenues for Titan Wirelessfor 2001 included revenues of approximately $27.4 million from theBenin project.  Titan Wireless, the prime contractor for theproject, was contracted to build, install and operate severalimportant components of the government's communicationsinfrastructure including a global system for mobile communications,or GSM, cellular network, rural telephony network, fiber opticbackbone, and local telephone switching equipment.  Alcatel ofFrance is a major subcontractor to Titan Wireless on this project,with responsibility for installing, among other parts of theproject, the GSM cellular network.  During 2001, the originalproject was expanded to include an additional 35,000 GSM lines, andexpansion of the capacity and capability of the VSAT sites by amultiple of 10 times more lines per site, resulting in an overallincrease of total lines in the country of Benin by 100%. Under the terms of the applicable contracts governing the project,as part of the financing of this project, Titan Wireless willco-operate the system with the national telephone company of Beninuntil all equipment costs, including integration costs, have beenpaid for via the revenues generated from the system and thentransfer the operations to the national telephone company ofBenin.  A portion of the build-out costs under this contractwere subcontracted costs payable by Titan Wireless toAlcatel.  The terms of Titan Wireless's agreement with thecustomer include, among other things, a revenue sharing of totalnet receipts on this project for up to a maximum period of9 years, depending upon when the equipment has been paidfor.

    Titan Wireless recognizesrevenue on systems integration contracts on apercentage-of-completion basis.  Service revenues arerecognized as the related services are performed.

    In1999, Titan Wireless formed Sakon LLC with Sakon Corporation toprovide carrier, direct dial telephony and enhanced communicationsservices, including voice over Internet protocol and Internetservices, in certain developing countries.  Titan Wirelessholds a 49.9% equity interest in Sakon LLC.  The excess of thepurchase price over the estimated fair market value of assetsacquired was approximately $26.8 million at December 31, 2001, andis reflected as goodwill in our accompanying consolidated balancesheet.

    InJune 2000, Titan Wireless Africa, a wholly-owned subsidiary ofTitan Wireless, made an investment in Ivoire Telecom S.A. Holding(Ivoire Telecom), acquiring an 80% interest in Ivoire Telecom andthrough such interest acquired a majority equity interest in eachof its subsidiaries which own communications licenses covering anumber of developing countries in Africa.  The investment ofapproximately $50.0 million is included in the accompanyingconsolidated balance sheet in Other Assets, and is accounted forunder the cost method, as a result of the Company’s inabilityto exercise control and significant influence over Ivoire Telecomor to receive any reliable or timely financial information fromIvoire Telecom.  Based upon the information available tomanagement, the Company believes Ivoire Telecom continues to incurlosses and negative cash flows consistent with its originalexpectations at the time of investment in this start-upenterprise.  To the extent Ivoire Telecom requires additionalcash in the future to fund operations, Titan has no obligation norcommitment to fund such cash flow needs.  Titan regularlyreviews its investment in Ivoire Telecom for impairment andbelieves that as of December 31, 2001, the fair value of thisinvestment exceeds its cost.  Hence, no write down torealizable value of this investment was necessary at December 31,2001. 

    This investment furthersTitan Wireless's strategic objective in the continent of Africa andsupports our Titan Wireless business initiative in the areas oflong distance communication services.  A key componentincluded in this strategy is to promote increased teledensity andincreased mobile and broadband services availability in Africa,which we believe will generate increased demand for our longdistance services.  We believe that this strategic investmenthelps advance our overall goal of being a leading provider of longdistance in emerging markets.  While financial returns are notour primary goal, we believe this strategic investment will provideboth strategic benefits as well as financial returns.

***      ******·******      Cayenta (Discontinued -included in our Software Systems segment)***

    Cayenta has historicallyderived its revenues from consulting services and from sales of itsproprietary software applications.  For the year endedDecember 31, 2001, Cayenta's revenues from consulting servicesrepresented 63.8% of its revenues and revenues from sales of itssoftware applications and hosting revenues represented 36.2% of itsrevenues.  Cayenta provides its services primarily on afixed-time, fixed-price basis and on a time and materialsbasis.  Under its fixed-time, fixed-price contracts, Cayentarecognizes revenues on a percentage-of-completion basis. Cayenta's fixed-time, fixed-price contracts usually require anadvance payment from its customer with additional payments due onachievement of specific milestones or on a predeterminedschedule.  Revenues earned but not yet billed are recorded asunbilled receivables.  Under its time and materials contracts,Cayenta is paid at an agreed upon hourly rate for the actual timespent on a customer's projects, and revenues are recorded at thetime services are performed.  Cayenta recognizes revenues fromthe sale of its proprietary software when the software is deliveredand accepted, in accordance with the American Institute ofCertified Public Accountants' Statement of Position 97-2, "SoftwareRevenue Recognition."  The related software support andmaintenance is billed at the beginning of the maintenance period,recognized ratably over the term of the applicable contract andrecorded as deferred revenues until recognized.  Cayenta hashistorically derived a significant portion of its revenues from alimited number of customers, and we expect that it will continue todo so during 2002.  During 2002, Cayenta intends to continueto reduce its selling, general and administrative expenses as apercentage of revenues.

    Historically, Cayenta'sinterest expense has related to borrowings from us to fund itsacquisitions and working capital requirements.  As ofDecember 31, 2001, Cayenta owed approximately $107.9 millionto us under a promissory note on which interest accrues at thegreater of the rate of 10% per annum or our effective weightedaverage interest rate under our senior credit facility. Principal under the promissory note is due in December 2004. Our effective weighted average interest rate under our seniorcredit facility as of December 31, 2001 was 5.0%.

***      ******·******      SureBeam(Discontinued)***

    Wedeveloped our SureBeam electron beam process from technologydeveloped under contracts with the federal government related tostrategic defense initiatives during the 1980s.  InAugust 2000, SureBeam Corporation was formed and wecontributed to it specified assets, liabilities and operationsrelated to our electronic food irradiation business.  In thefourth quarter of 2000, we formed a new business unit, Titan ScanTechnologies, within our Titan Technologies  segment. The new business unit encompasses all of our medical productsterilization operations which were previously a part ofSureBeam.  As a result, all prior period data have beenrestated to reflect this change in our segmentreporting.

    Historically, SureBeam'scash requirements have been met primarily through advances from usand from cash flows from operations.  In connection with ourcontribution of the specified assets, liabilities and operationsrelated to our electronic food irradiation business to SureBeam inAugust 2000, SureBeam assumed the cumulative advances ofapproximately $39 million, as evidenced by a subordinated,unsecured promissory note payable to us.  Under this note, weagreed to lend SureBeam a maximum of $75 million.  Thepromissory note had a maturity date of August 2005 and boreinterest, payable quarterly, at the greater of the rate of 10% perannum or our effective weighted average interest rate under oursenior credit facility.  Our effective weighted averageinterest rate under our senior credit facility as of December 31,2001 was 5.0%.  On December 31, 2001, $2.0 million of the notewas exchanged for 190,385 Class B common shares of SureBeam, at$10.505 per share, the fifteen day trading average of SureBeamstock as of December 30, 2001.  As of December 31, 2001,SureBeam had approximately $73.0 million in principaloutstanding under the note.  On February 13, 2002, theremaining outstanding balance on the note of $73.0 million wasexchanged for 4,441,496 Class A and 3,225,765 Class B common sharesof SureBeam, at $9.521 price per share, the twenty day tradingaverage of SureBeam stock as of February 12, 2002.

***      ******·******      TitanTechnologies***

    Titan Technologiespursues commercial applications for technologies originallydeveloped by Titan.  This segment's operating activitiesconsist primarily of various early stage or developing commercialbusinesses in which we hold equity interests, including, in somecases, less than 20% equity interests.  The businessesincluded in Titan Technologies may change over time as we developnew commercial applications and transition those applications intobusinesses in which we hold a minority or controlling equityinterest that becomes included in Titan Technologies.  Thebusinesses included in Titan Technologies also change over timewhen we designate businesses that had been historically included inthat segment as stand-alone operating segments and as a resultreport their results of operations separately or when we sell orspin-off businesses that have previously been included.  Wealso may move businesses that had been historically included in adifferent operating segment into Titan Technologies when weconsider it appropriate to include those businesses' results ofoperations in Titan Technologies.

    Examples of businessescurrently included in our Titan Technologies segment are LinComWireless, Titan Scan Technologies and Cayenta’s utility andmunicipality operations, each of which are subsidiaries ofTitan.  LinCom Wireless is a fabless semiconductor companyfocused on standards-based solutions for wireless connectivity ofvoice, data, and video in the enterprise and home environments,whose core technologies and expertise were acquired as part of ouracquisition of LinCom during 2000 and then further developed byus.  Titan Scan Technologies sells medical equipmentsterilization systems and provides medical equipment sterilizationservices, which utilize the electron beam process that SureBeamuses for food irradiation.  Following the outbreak of anthraxin several major cities in the US, Titan Scan Technologies becameknown for its efforts to sanitize the mail to remove thisbioterrorism threat from treated mail and parcels.  Inaddition to contracting for use of Titan Scan's facility for mailsanitization, the Postal Service also signed a contract with Titanfor the purchase of eight mail sanitization systems.  TitanScan has also begun to enter markets for electron beam technologyoutside of its traditional medical device customer base, includingthe use of electron beam technology to improve material performancein semiconductors, aerospace composites, wire and cable, plasticsand packaging films.

    Cayenta’s revenuecycle management offering for municipalities and utilities providessoftware applications that utility and municipality customers useto track, collect and settle billing and payment transactions withtheir customers and trading partners.  These softwareapplications help Cayenta’s customers address their needsrelating to customer enrollment, creditworthiness, purchasing,contract management, bill generation, bill presentment, collectionsand settlement. 

    In1996, we contributed the core technology to form Servnow!NetTechnologies, Inc., which later became known asIPivot.  In October 1999, as a result of the acquisitionby Intel Corporation of IPivot, we received approximately $41.8million for our approximate 8% equity interest, which was reportedas a gain in 1999.  We received an additional $3 millionin October 2000 as final consideration for our equityinterest, which was recorded as a gain in 2000, net ofexpenses.

    InJune 2000, e-tenna Corporation was formed to facilitate thetransfer of an antenna technology originally designed forgovernment and military customers to the commercial wirelessmarket.  Titan's initial investment of approximately $0.6million in e-tenna in 2000 consisted of its contribution of certainintellectual property and patents.  As of December 31, 2001,Archery Capital and other investors invested a total of $9.9million for common and voting preferred stock, and Titan invested$5.8 million in non-voting preferred stock and $0.4 million incommon stock.  Through February 28, 2002, Titan paid $1.9million in satisfaction of its commitment to acquire additionalnon-voting preferred stock.  As of December 31, 2001, Titan'sinvestment of approximately $6.8 million is included in theaccompanying consolidated balance sheet in Other Assets, and isreflected under the cost method.  As of February 28, 2002,Titan's investment in e-tenna represented approximately 58.7% ofthe total equity of e-tenna and approximately 29.1% of the votingpower of e-tenna.

**DeferredCompensation**

    Weand each of our SureBeam and Cayenta subsidiaries have recordeddeferred compensation as follows:

*    Titan.*  Option grants to our employees in 1999exceeded the remaining common shares available under our stockoption plans.  Our stockholders approved our 2000 Employee andDirector Stock Option and Incentive Plan on May 30,2000.  The option grants in 1999 that were in excess of theshares available under our stock option plans at the time of theirgrant were placed under the 2000 stock option plan following itsapproval by our stockholders.  Under the provisions ofFinancial Accounting Standards Board Interpretation No. 44"Accounting for Certain Transactions Involving Stock Compensation"(an Interpretation of APB Opinion No. 25), the approval date forthe 2000 stock option plan becomes the grant date for purposes ofcomparing the market value of the shares covered by those optiongrants against those options' exercise price.  This resultedin deferred compensation of $15.6 million in 2000.  Thedeferred compensation is being amortized to expense over thefour-year vesting period of the applicable option grants, including$4.9 million and $3.9 million expensed in 2000 and 2001,respectively.  Unamortized deferred compensation as ofDecember 31, 2001, was $6.3 million.

*    SureBeam(Discontinued).*  During 1999,SureBeam granted 3,237,578 options to purchase shares of itsClass A common stock with a weighted average exercise price of$0.1438 per share.  These option grants resulted in deferredcompensation to SureBeam calculated as the difference between thefair market value of the shares of common stock underlying theoption at the date of grant and the option exercise price. The deferred compensation is amortized over the vesting period ofthe underlying options which is four years.  Accordingly,SureBeam recorded deferred compensation of approximately $17million which resulted in an insignificant non-cash compensationamortization expense for the year ended December 31,1999.  During 2000, SureBeam recorded deferred compensation ofapproximately $3.2 million which resulted in a non-cashcompensation amortization expense of approximately$0.6 million.  SureBeam also recorded $78.6 millionas deferred compensation at the time its initial public offeringclosed reflecting the difference between the fair value of theoptions on the date of grant and the initial public offering priceof $10.00 per share.  This amount was recognized as a non-cashcharge to SureBeam's earnings of approximately $38.9 millionin March 2001 at the time its initial public offering closed,with the balance being recognized over the remaining vesting periodof the options of up to four years.  For the year endedDecember 31, 2001, approximately $54.3 million of deferredcompensation was expensed, with a remaining balance ofapproximately $26.9 million to be amortized in future periods overthe remaining vesting period.

*    Cayenta(Discontinued).*  Under itsvariable stock option plan, Cayenta has granted options to certainemployees who have agreed to resell shares purchased with thoseoptions to Cayenta.  Cayenta recorded a deferred compensationcharge related to these option grants of approximately $0.6 millionin the year ended December 31, 2000.  Cayenta also issuedoptions to employees not covered by this buyback option at exerciseprices that were less than the deemed fair market value of theunderlying common shares on the date of grant.  Cayenta hasrecognized deferred compensation relating to these grants ofapproximately $1.2 million and is amortizing this deferred chargeto expense over the four-year vesting period of theseoptions.

**Consolidated Financial Data**
| ** **                                                | ** ** | **YearEnded December 31,****** | ** ** |
|-----------------------------------------------------------|------------|-------------------------------------|------------|
| ** **                                                | ** ** | ****                                | ** ** |
| ** **                                                | ** ** | **2001******                        | ** ** | **2000****** | ** ** | **1999****** | ** ** |
| ** **                                                | ** ** | ****                                | ** ** | **** | ** ** | **** | ** ** |
| Revenues                                                  |       | $                                   | 1,084,407  |   | $ | 941,213 |   | $ | 768,648 |   |
| Cost ofrevenues                                           |       |                                | 819,589    |   |   | 708,119 |   |   | 584,436 |   |
| Selling, general andadministrative                        |       |                                | 190,969    |   |   | 167,672 |   |   | 122,425 |   |
| Research anddevelopment                                   |       |                                | 11,101     |   |   | 9,624 |   |   | 6,681 |   |
| Valuation allowance foraccounts receivable                |       |                                | —    |   |   | 10,000 |   |   | — |   |
| Gain on sale ofIPivot                                     |       |                                | —    |  |   | (2,140 | ) |   | (41,788 | ) |
| Acquisition andintegration related charges and other      |       |                                | 30,371     |  |   | 28,820 |  |   | 13,102 |  |
|                                                      |       |                                     |       |  |   |  |   |
| Operatingprofit                                           |       |                                | 32,377     |   |   | 19,118 |   |   | 83,792 |   |
| Interest expense,net                                      |       |                                | 34,874     |   |   | 32,059 |   |   | 17,335 |   |
| Income tax provision(benefit)                             |       |                                | 3,752      |  |   | (4,918 | ) |   | 25,313 |  |
| Minorityinterests                                         |       |                                | 4,729      |   |   | 2,566 |   |   | — |   |
| Loss from discontinuedoperations, net                     |       |                                | (97,094    | ) |   | (8,527 | ) |   | (3,387 | ) |
| Extraordinary loss fromearly extinguishments of debt, net |       |                                | —    |   |   | (4,744 | ) |   | — |  |
|                                                      |       |                                     |       |  |   |  |   |
| Net income(loss)                                          |       | $                                   | (98,614    | ) | $ | (18,728 | ) | $ | 37,757 |  |
|                                                      |       |                                     |       |  |   |  |   |

**As a Percentage ofRevenues**

| ** **                                                | ** ** | **YearEnded December 31,****** | ** ** |
|-----------------------------------------------------------|------------|-------------------------------------|------------|
| ** **                                                | ** ** | ****                                | ** ** |
| ** **                                                | ** ** | **2001******                        | ** ** | **2000****** | ** ** | **1999****** | ** ** |
| ** **                                                | ** ** | ****                                | ** ** | **** | ** ** | **** | ** ** |
| Revenues                                                  |       | 100.0                               | %          | 100.0 | % | 100.0 | % |
| Cost ofrevenues                                           |       | 75.6                                |       | 75.2 |   | 76.0 |   |
| Selling, general andadministrative                        |       | 17.6                                |       | 17.8 |   | 15.9 |   |
| Research anddevelopment                                   |       | 1.0                                 |       | 1.0 |   | 0.9 |   |
| Valuation allowance foraccounts receivable                |       | —                             |       | 1.1 |   | — |   |
| Gain on sale ofIPivot                                     |       | —                             |       | (0.2 | ) | (5.4 | ) |
| Acquisition andintegration related charges and other      |       | 2.8                                 |            | 3.1 |  | 1.7 |  |
|                                                      |       |                                     |       |  |   |  |   |
| Operatingprofit                                           |       | 3.0                                 |       | 2.0 |   | 10.9 |   |
| Interest expense,net                                      |       | 3.2                                 |       | 3.4 |   | 2.3 |   |
| Income tax provision(benefit)                             |       | 0.3                                 |            | (0.5 | ) | 3.3 |  |
| Minorityinterests                                         |       | 0.4                                 |       | 0.3 |   | — |   |
| Loss from discontinuedoperations, net                     |       | (9.0                                | )          | (0.9 | ) | (0.4 | ) |
| Extraordinary loss fromearly extinguishments of debt, net |       | —                             |       | (0.5 | ) | — |  |
|                                                      |       |                                     |       |  |   |  |   |
| Net income(loss)                                          |       | (9.1                                | )%         | (2.0 | )% | 4.9 | % |
|                                                      |       |                                     |       |  |   |  |   |

**Segment FinancialData**

| ** **                         | ** ** | **YearEnded December 31,****** | ** ** |
|------------------------------------|------------|-------------------------------------|------------|
| ** **                         | ** ** | ****                                | ** ** |
| ** **                         | ** ** | **2001******                        | ** ** | **2000****** | ** ** | **1999****** | ** ** |
| ** **                         | ** ** | ****                                | ** ** | **** | ** ** | **** | ** ** |
| **TitanSystems**                   |       |                                |       |   |   |   |   |   |   |   |
|    Revenues         |       | $                                   | 940,338    |   | $ | 826,110 |   | $ | 715,351 |   |
|    Operating profit |       |                                | 67,602     |   |   | 35,749 |   |   | 49,954 |   |
| **TitanWireless**                  |       |                                |       |   |   |   |   |   |   |   |
|    Revenues         |       |                                | 92,748     |   |   | 81,450 |   |   | 27,325 |   |
|    Operating profit |       |                                | 5,219      |  |   | 11,644 |   |   | 5,063 |   |
| **TitanTechnologies**              |       |                                |       |   |   |   |   |   |   |   |
|    Revenues         |       |                                | 51,321     |   |   | 33,653 |   |   | 25,972 |   |
|    Operating profit |       |                                | 3,211      |   |   | 1,790 |   |   | 43,986 |   |
| ***Cayentaheadquarters costs***    |            |                                     | (24,701    | ) |   | (11,097 | ) |   | (794 | ) |
| **Corporate**                      |       |                                | (18,954    | ) |   | (18,968 | ) |   | (14,417 | ) |
|                               |       |                                     |       |  |   |  |   |
| **TotalRevenues**                  |       | $                                   | 1,084,407  |   | $ | 941,213 |   | $ | 768,648 |   |
| **Total OperatingProfit**          |       | $                                   | 32,377     |   | $ | 19,118 |   | $ | 83,792 |   |

| ** **                                             | ** ** | **YearEnded December 31,****** | ** ** |
|--------------------------------------------------------|------------|-------------------------------------|------------|
| ** **                                             | ** ** | ****                                | ** ** |
| ** **                                             | ** ** | **2001******                        | ** ** | **2000****** | ** ** | **1999****** | ** ** |
| ** **                                             | ** ** | ****                                | ** ** | **** | ** ** | **** | ** ** |
| **Segment Revenues as aPercentage of Total Revenues:** |       |                                |       |   |   |   |   |
| Titan Systems                                          |       | 86.7                                | %          | 87.8 | % | 93.1 | % |
| Titan Wireless                                         |       | 8.6                                 |       | 8.6 |   | 3.5 |   |
| TitanTechnologies                                      |       | 4.7                                 |       | 3.6 |   | 3.4 |   |
|                                                   |       |                                     |       |  |   |  |   |
|                                                   |       | 100.0                               | %          | 100.0 | % | 100.0 | % |
|                                                   |       |                                     |       |  |   |  |   |

    OnOctober 1, 2000, we formed a new business unit, Titan ScanTechnologies, within our Titan Technologies segment.  The newbusiness unit encompasses all of our medical equipmentsterilization operations, which were previously a part of SureBeam,and prior to the initial public offering of SureBeam, was reportedas part of the results of operations of the SureBeam segment. Accordingly, our discontinued SureBeam business is comprisedentirely of our electronic food irradiation business.  Thefinancial information included in this document has been restatedto reflect this change in our segment accounting.

    During the first quarterof 2002, the Company made the decision to sell certain of itscommercial information technology operations within its Cayentasegment and the AverCom business within the Titan Technologiessegment in order to allow management to focus on operations withthe most near term growth opportunities.  As a result,Cayenta’s federal government operations are being reported inTitan Systems, and Cayenta’s remaining continuing operationsare being reported in Titan Technologies, formerly Titan’sEmerging Technologies and Businesses segment.  In accordancewith Statement of Financial Accounting Standards No. 144,“Accounting for the Impairment or Disposal of Long-livedAssets and for Long-Lived Assets to be Disposed of,” allcommercial operations that are held for sale have been reflected asdiscontinued operations for all periods presented in Titan’sconsolidated financial statements.  All prior period financialinformation has been restated to reflect the newsegments.

    OnOctober 16, 2001, Titan adopted a definitive plan to spin offSureBeam in the form of a tax-free dividend to Titan shareholderswithin the next 12 months from that date.  The plan involvesfiling a letter ruling request with the Internal Revenue Service("IRS") seeking approval of the tax-free distribution.  Titanreceived a favorable ruling in May 2002 and intends to execute thespin off in the third quarter of 2002.   Titan hashistorically reported the SureBeam business as a separatesegment.  In accordance with Accounting Principles BoardOpinion No. 30, "Reporting the Results ofOperations—Reporting the Effects of Disposal of a Segment ofa Business, and Extraordinary, Unusual and Infrequently OccurringEvents and Transactions," the consolidated financial statements ofTitan have been restated to reflect SureBeam as a discontinuedbusiness for all periods presented.

**Results ofOperations**

***Fiscal Years EndedDecember 31, 1999, 2000 and 2001***

*Revenues*

    *Consolidated.*  Ourconsolidated revenues increased from $768.6 million in 1999 to$941.2 million in 2000 and from $941.2 million in 2000 to $1.1billion in 2001.  Increased revenues of $114.2 million, $11.3million, and $17.7 million were reported across our TitanSystems, Titan Wireless and Titan Technologies segments,respectively in 2001.  Revenue growth in 2001 was primarilyattributable to internal revenue growth in certain of ourinformation and intelligence solutions and logistics managementbusinesses in our Titan Systems segment, as well as to a lesserextent, the impact of the acquisitions of Datron Systems, Inc.("Datron") and BTG, Inc. ("BTG") made in 2001 which contributedapproximately $34.1 million in 2001 in our Titan Systems segment,and to a lesser degree increased service revenues of $17.5 milliongenerated by Titan's consolidated joint venture, Sakon LLC("Sakon") in our Titan Wireless segment and revenues ofapproximately $16.4 million generated on Titan's new contract withthe United States Postal Service (USPS) to provide mailsanitization systems in our Titan Technologiessegment. 

    Revenue growth in 2000was in part attributable to the impact of the acquisitions ofSenCom Corporation ("SenCom"), Pulse Engineering ("Pulse") andLinCom Corporation ("LinCom") made in 2000 and a full year’soperating results for the acquisitions of System ResourcesCorporation (“SRC”) and Atlantic Aerospace ElectronicsCorporation (“AAEC”) made in 1999, in our Titan Systemssegment, which contributed in aggregate approximately $100.3million in revenues, a full year’s operating results for theacquired SFG Technologies, Inc. ("SFG") made in the fourth quarterof 1999 by Cayenta, which resulted in approximately $9.4 million ofincreased revenues in our Titan Technologies segment, and continuedshipments of hardware to our customer in Benin, Africa in our TitanWireless segment, in which we built a telecommunications system forthe national telephone company resulting in increased revenues ofapproximately $39.1 million.

    *TitanSystems.*  Titan Systems' revenues increased from$715.4 million in 1999 to $826.1 million in 2000 and from $826.1million in 2000 to $940.3 million in 2001.  The increase in2001 reflects strong demand from the Air Force for informationsolutions support, and from the Army for acquisition and logisticsmanagement, systems engineering for intelligence agencies, softwaretest and evaluation, and a variety of other technical services, aswell as assisting the Navy in transformation initiatives, coupledwith the impact of the acquisitions of Datron and BTG in the lasthalf of 2001, which contributed approximately $34.1 million in2001.  The increase in 2000 reflects the impact of theacquisitions of SenCom, Pulse and LinCom, which contributedapproximately $100.3 million in 2000, as well as theacquisitions of System Resources Corporation ("SRC") and AtlanticAerospace Electronics Corporation ("AAEC") made in mid 1999. In addition, to a lesser degree, 2000 revenues were impacted byincreased production of Titan Systems' compact infantry signalintercept systems and increased demand for signal processingantennas, as well as increased demand for systems design andintegration services from the Air Force, Army and intelligencecommunity.

    *TitanWireless.*  Titan Wireless' revenues increased from$27.3 million in 1999 to $81.4 million in 2000 and from $81.4million in 2000 to $92.7 million in 2001.  Decrease in priceper minute in our long distance business have been offset byincreased volumes as we expand our service into new countries andexpand volumes with existing customers resulting in approximately365 million minutes at an average of $0.12 per minute during2001 compared to approximately 200 million minutes in 2000 atan average of $0.15 per minute.  Increased service revenues in2001 of $17.5 million generated by Titan's consolidated jointventure, Sakon, in Latin America, Africa, and the Middle East, andincreased revenues of $17.2 million in new international business,primarily in certain countries in Africa, were offset by reducedrevenues of approximately $23.4 million on Titan Wireless' projectin Benin to build a telecommunications system for its customer, TheOffice of Post and Telecommunication of Benin ("OPT"), as TitanWireless completed the system during 2001.  The revenues in2001 recorded on this project are a result of the expansion of theoriginal project to include: increased GSM lines, expansion of thecapacity and capability of the VSAT sites and an overall increaseof lines in the country of Benin.  The increase in 2000revenues was due primarily to Titan Wireless's contract with theOPT, resulting in increased revenues of approximately $39.1million, and to a lesser extent, the increased services revenues ofapproximately $24.0 million generated by Titan's consolidated jointventure, Sakon LLC, in Latin America, Africa, and the MiddleEast.

    *TitanTechnologies.*  Titan Technologies' revenues increasedfrom $26.0 million in 1999 to $33.7 million in 2000 and from $33.7million in 2000 to $51.3 million in 2001.  The increase in2001 is principally related to revenues of approximately $16.4million generated on Titan's new contract with the U.S. PostalService to provide mail sanitization systems.  The increase in2000 was principally a result of the acquisition of LinComWireless, a part of LinCom, in March 2000, which contributedapproximately $4.1 million of the increase, and theacquisition of SFG Technologies, Cayenta’s utilities andmunicipalities business, which contributed approximately$9.4 million of the increase.

*Selling, General andAdministrative*

    Our SG&A expensesincreased from $122.4 million in 1999 to $167.7 million in2000 and from $167.7 million in 2000 to $190.9 million in2001. SG&A, as a percentage of revenues, increased from 15.9%in 1999 to 17.8% in 2000 and decreased slightly from 17.8% in 2000to 17.6% in 2001.  The 2001 SG&A was impacted by increasedgoodwill amortization from $14.1 million in 2000 to $15.3 millionin 2001, partially offset by reduced deferred compensation from$5.5 million in 2000 to $4.3 million in 2001.  Excluding thegoodwill amortization and deferred compensation, SG&A remainedfairly flat at 15.7% in 2000 and 15.8% in 2001.  The increasein 2000 is due to increased goodwill amortization of $6.1 million,as well as an increase in deferred compensation of $5.4million.  Excluding the impact of the amortization anddeferred compensation, SG&A increased from 14.9% in 1999 to15.7% in 2000.

*Research andDevelopment*

    Our R&D expensesincreased from $6.7 million in 1999 to $9.6 million in 2000 andfrom $9.6 million in 2000 to $11.1 million in 2001.  Theincreased R&D expenditures in 2001 were primarily related todevelopment of software reprogrammable modems and network controlsoftware in our Titan Systems segment.  The increased R&Dexpenditures in 2000 were principally incurred, to develop the nextgeneration Xpress Connection product within our Titan Wirelesssegment.

*Acquisition andIntegration Related Charges and Other*

    Acquisition andintegration related charges and other for the years ended 2001,2000 and 1999 are described in more detail below (amounts inmillions):

| ** **                                    | ** ** | **Yearended December 31,****** | ** ** |
|-----------------------------------------------|------------|-------------------------------------|------------|
| ** **                                    | ** ** | ****                                | ** ** |
| ** **                                    | ** ** | **2001******                        | ** ** | **2000****** | ** ** | **1999****** | ** ** |
| ** **                                    | ** ** | ****                                | ** ** | **** | ** ** | **** | ** ** |
| Employee terminationcosts                     |       | $                                   | 6.4        |   | $ | 7.6 |   | $ | 3.1 |   |
| Elimination of duplicatefacilities and assets |       |                                | 4.4        |   |   | 4.1 |   |   | 3.4 |   |
| Acquisition relatedtransaction costs          |       |                                | —    |   |   | 11.6 |   |   | — |   |
| Other costs                                   |       |                                | 2.0        |   |   | — |   |   | — |   |
| Non-cash assetimpairments                     |       |                                | 14.6       |  |   | 5.5 |  |   | 2.1 |  |
| Pre-acquisitioncontingencies                  |       |                                | 3.0        |   |   | — |   |   | 4.5 |   |
|                                          |       |                                     |       |  |   |  |   |
|                                               |       | $                                   | 30.4       |  | $ | 28.8 |  | $ | 13.1 |  |
|                                          |       |                                     |       |  |   |  |   |

    AtDecember 31, 2001, a total of $1.3 million of liabilities remainedon the accompanying consolidated balance sheet in Other AccruedLiabilities, related primarily to restructuring activitiesinitiated in 2000 and 2001.  We anticipate that the remainingliabilities will be paid in 2002.

*Fiscal 2001Charges*

    Acquisition andintegration related charges and other of $30.4 million in 2001included $2.5 million for employee termination costs andrestructuring costs in Titan Wireless, $12.2 million related to theintegration of ACS and AverStar and other restructuring andrealignment activities in Titan Systems, a $5.5 million impairmentcharge for fixed assets associated with Cayenta’s networkoperations center and $10.0 million related to other assetimpairments and restructuring activities associated withCayenta’s headquarters office, and $0.2 million relatedto personnel reductions in Cayenta’s federal governmentbusiness, which is now a part of Titan Systems.

    The $2.5 million chargein the Company's Titan Wireless segment was comprised of $0.5million related to a reduction in employee workforce ofapproximately 35 employees resulting from the elimination ofWireless's internal product development group and $2.0 million ofrestructuring costs, including $1.3 million of employee terminationcosts.  The segment's long-term strategy is now centered onthe service and systems integration business, not the developmentand sale of equipment.

    The $12.2 million chargein Titan Systems is primarily related to the integration of ACS andAverStar, and a realignment of the business around the majorcategories of customers of Titan Systems, which together resultedin a reduction in employee workforce of approximately 50 employeesand the closing of several facilities.  Included in thesecosts is approximately $3.1 million of employee termination costs,$3.5 million of costs to eliminate duplicate and excess facilitiesand assets, $1.1 million of duplicate personnel costs to transitionprocesses and functions, and $1.5 million of asset impairment costsof certain asset balances.  The recoverability of suchbalances was impaired due to our exit from a satellite servicesbusiness within the Titan Systems segment.  Approximately $3.0million of the charge was related to another subsidiary acquired ina prior year for contingencies arising from matters pre-existing toTitan's acquisition of the business.  That acquisition wasaccounted for as a purchase, and the matters pre-existing Titan'sacquisition were resolved in 2001. 

    Included in Cayenta'sheadquarters office operating results is a charge for$15.5 million related to the restructuring of Cayenta’sheadquarters office.  As a result of reduced corporatespending on commercial information technology services ande-business software applications, the Company developed andapproved a plan to restructure the Cayenta headquarters and networkoperations center, which included a reduction in workforce ofapproximately 40 personnel, resulting in a charge of$1.7 million, and the elimination of duplicate and excessfacilities, resulting in a charge of approximately$0.8 million.  As a result of management's evaluation ofthe recoverability of all the assets of Cayenta, in accordance withStatement of Financial Accounting Standards No. 121, "Accountingfor the Impairment of Long-Lived Assets and for Long-Lived Assetsto be Disposed Of", management concluded from this evaluation thata significant impairment of intangible as well as long-lived assetshad occurred.  An impairment charge was required because theestimated fair value was less than the carrying value of theassets.  The impairment charge of $13.0 million wascomprised of the following: $5.5 million for fixed assetsassociated with Cayenta's network operations center, $2.0 millionfor prepaid advertising costs and $5.3 million for Cayenta'sinvestment in Soliance, LLC, a joint venture that markets anddelivers information technology systems and solutions to theutility industry, and $0.2 million for certain otherassets.

*Fiscal 2000Charges*

    Acquisition relatedcharges of $28.8 million in 2000 include costs of $20.5 millionrelated to the ACS merger including direct transaction costs ofapproximately $9.1 million comprised of accounting, legal,investing banking, financial printing and other direct costs. Also included in the ACS merger costs was a write-down ofapproximately $5.5 million related to the impairment of certainreceivables, for which the realizability of such assets wasimpaired as a result of the merger with Titan, which impacted therecoverability of certain contract costs, employee terminationcosts of approximately $2.1 million, and $3.8 million of costs toeliminate duplicate facilities and assets.  In addition, theCompany recorded a valuation allowance of $10.0 million inconnection with certain of the Company's integration activities,particularly as they relate to conforming ACS to Titan's accountingpolicies and procedures, and in determining appropriate valuationallowances against unbilled receivables which may not be realizableunder normal contract reimbursement cycles.

    Included in acquisitionrelated charges is $8.3 million related to the merger withAverStar.  These costs consisted of approximately $2.5 millionof direct transaction costs, approximately $5.5 million of employeetermination costs, and costs to eliminate duplicate facilities ofapproximately $0.3 million. 

*Fiscal 1999Charges*

    Acquisition and relatedcharges in 1999 were $13.1 million, which included approximately$4.5 million of legal costs and approximately $8.6 million ofintegration and restructuring expenses.  The integration andrestructuring expenses include $2.1 million related to thewind-down of our Year 2000 business, consisting primarily ofemployee termination costs and lease termination costs, a $2.1million write-off of intangible costs to estimated realizablevalue, approximately $1.0 million for severance, outplacement andrelocation costs related to approximately 31 employees across theCompany, and $3.4 million related to the closure and elimination ofleased facilities, primarily duplicate field offices.

*Gain on sale ofIPivot*

    OnOctober 26, 1999, the Company received approximately $41.8 millionin cash as a result of the acquisition by Intel Corporation ofIPivot, Inc. ("IPivot"), a technology spin-off from Titan. The cash payment to the Company was for its ownership interest inIPivot of approximately 8% after the dilutive impact of IPivotstock options, warrants and other equity investments.  Inaddition, approximately $3 million was received in October 2000 asfinal consideration, net of expenses, resulting in a net gain ofapproximately $2.1 million.  A gain of $41.8 millionand $2.1 million is reflected in the gain on sale ofTitan’s interest IPivot for the years ended December 31, 1999and 2000, respectively.

*OperatingProfit*

    *Consolidated.  *Our operating profit decreased from $83.8 million in 1999 to $19.1million in 2000 and increased from $19.1 million in 2000 to $32.4million in 2001.  Our operating profits have beensignificantly impacted by a number of factors in each of 1999, 2000and 2001.  The 2001 operating results include the integrationrelated charges and other of $30.4 million noted above, the 2000operating results include the acquisition charges of$28.8 million noted above, as well as a $10.0 millioncharge for a valuation allowance for accounts receivable balancesand a $2.1 million gain on sale, and the 1999 operatingresults include acquisition and integration related charges of$13.1 million and a $41.8 million gain we realized on thesale of our minority ownership interest in IPivot.  Inaddition, the decrease in operating profit from 1999 to 2000 wasimpacted by the increase in goodwill amortization from $8.0 millionin 1999 to $14.1 million in 2000, as well as the $5.5 millionin deferred compensation in 2000, up from $0.1 million in1999.  Amortization of goodwill and deferred compensation were$15.3 million and $4.3 million, respectively, in 2001. Excluding the impact of the gain on sale of IPivot and theacquisition related charges and valuation allowance for accountsreceivable, amortization of goodwill and the deferred compensation,operating profit increased from $63.2 million in 1999 to $75.4million in 2000 and increased from $75.4 million in 2000 to $82.3million in 2001.

    *Segment OperatingProfit.*  Operating profit reported by businesssegment includes substantially all of the segment's costs ofoperations and administration.  The segment performance isbased upon profit or loss before interest expense, income taxes andbefore allocated costs of corporate overhead.  Corporateoverhead may include, among other things, costs for financialaccounting, marketing, administrative and legal activities incurredby Titan.  For the year ended December 31, 2000, included incorporate overhead is $2.7 million of transaction costs related tothe filing of a registration statement with the Securities andExchange Commission (SEC) for the initial public offering ofCayenta which was ultimately withdrawn by the Company in February2001.  These costs are primarily comprised of directtransaction costs, including accounting, legal, investment banking,financial printing, and other direct costs.  Consequently, theresults of operations of the segments may not be indicative of theactual results that would be shown in the financial statements ofthese segments if prepared on a stand-alone basis.  Thediscussion of segment operating profit below includes only theoperating profits for each of our business segments, and does notinclude separate discussion of our corporate overhead.  Alsoincluded in segment operating profit for the years ended December31, 1999, 2000 and 2001 are overhead and administrative costsassociated with the previous corporate headquarters and networkoperations center of Cayenta, which was eliminated in the firstquarter of 2002, when certain components of Cayenta werediscontinued.  Included in these costs for the Cayentaheadquarters are certain charges of $15.6 million related tothe impairment of assets of Cayenta’s network operationscenter and the restructuring of the Cayenta headquarters which areincluded in the acquisition and integration related charges for theyear ended December 31, 2001.

*    TitanSystems.*  Titan Systems'operating profit decreased from $50.0 million in 1999 to $35.7million in 2000 and increased from $35.7 million in 2000 to $67.6million in 2001.  The operating results for 1999, 2000 and2001 include acquisition and integration related charges and otherof $5.5 million, $28.8 million, and $12.4 million,respectively.  The 2001 integration related charges wererelated to the continued integration of ACS and AverStar, and arealignment of businesses around the major categories of customersof Titan Systems, which together resulted in personnel reductionsand the closing of several facilities.  The 2000 acquisitionrelated charges were incurred to consummate the ACS and AverStaracquisitions, as well as for certain activities to integrate thesebusinesses into Titan Systems.  The 1999 acquisition relatedcosts were primarily comprised of costs to eliminate duplicatefacilities, estimated costs to integrate and consolidate employeebenefit plans and employee termination costs.  In addition,the 2000 operating results include a charge to record a valuationallowance of $10.0 million provided in connection with certain ofthe Company’s integration activities, particularly as theyrelate to conforming ACS to Titan’s accounting policies andprocedures, in determining appropriate valuation allowances againstunbilled receivables which may not be realizable under normalcontract reimbursement cycles.  Included in 1999, 2000 and2001 operating results is amortization of goodwill of$8.0 million, $9.7 million and $9.8 million,respectively.  Excluding the impact of these charges and theamortization of goodwill, Titan Systems' operating income increasedfrom $63.5 million in 1999 to $84.2 million in 2000 and from $84.2million in 2000 to $89.8 million in 2001.  Operating income in2000 and 2001 increased primarily due to the increased revenuevolume discussed previously.

    *TitanWireless.  * Titan Wireless' operating performanceincreased from operating profit of $5.1 million in 1999 to $11.6million in 2000 and decreased from $11.6 million in 2000 to $5.2million in 2001.  Included in the 2001 operating results isamortization of goodwill of $1.5 million as well as a charge of$2.5 million, comprised of $2.0 million of restructuring costsrelated to the elimination of the internal product developmentgroup and $0.5 million for employee termination costs. The 2000 operating results include amortization of goodwill ofapproximately $0.5 million.  Excluding the impact ofthese charges and the amortization of goodwill, operating profitincreased from $5.1 million in 1999 to $12.1 million in 2000 anddecreased from $12.1 million in 2000 to $9.2 million in 2001. The reduced operating profit in 2001 was a result of increasedinvestment in the development of Titan Wireless' corporate retailbusiness and new very small aperture terminal ("VSAT") developmentcosts.

    *Titan**Technologies.*  Titan Technologies' operatingresults decreased from operating profit of $44.0 million in1999 to $1.8 million in 2000 and increased from $1.8 million in2000 to $3.2 million in 2001.  Included in the operatingresults of 1999 and 2000 is a $41.8 million gain and a net $2.1million gain, respectively, resulting from the sale of theCompany's approximate 8% equity interest in IPivot.  TheCompany sold its interest in IPivot in October 1999, for which thefinal consideration was paid in October 2000.  Included inoperating results for 2000 and 2001 is amortization of goodwill of$4.3 million and $3.9 million, respectively.  Excluding theamortization of goodwill and the gain from IPivot, net of anapproximate $0.2 million charge for reorganization costs in 2000,operating profit decreased from $4.5 million in 1999 to $3.9million in 2000 and increased from $3.9 million in 2000 to $7.2million in 2001.  The primary cause for the increase inoperating profit in 2001 was the operating profit generated by theincreased revenues, partially offset by increased developmentexpenditures in our LinCom Wireless business of approximately$3.2 million.

*Interest Expense,Net*

    Our net interest expenseincreased from $17.3 million in 1999 to $32.1 million in 2000 andfrom $32.1 million in 2000 to $34.9 million in 2001.  Netinterest expense has increased over 1999, 2000 and 2001, primarilyas a direct result of the increased level of our borrowings, toprimarily fund the growth in the various segments, and to fund theacquisitions made in our Titan Systems segment during 1999, 2000and 2001 and in our Software Systems segment (discontinued duringthe first quarter of 2002) during 1999.  Our increasedeffective interest rate in 2000 also resulted in increased interestexpense in 2000.  In addition, net interest expense in 2000increased due to the issuance of our Remarketable Term IncomeDeferrable Equity Securities or HIGH TIDES.  Borrowings fromour primary bank lines of credit, excluding working capital linesfrom acquired companies, averaged $88.8 million at a weightedaverage interest rate of 7.9% during 1999, $196.9 million at aweighted average interest rate of 10.5% during 2000 and $337.3million at a weighted average interest rate of 7.5% during2001.  Also included in interest expense is interest on ourdeferred compensation and retiree medical obligations. Interest expense related to these items was $1.1 million for 1999,$0.6 million for 2000 and $0.7 million for 2001.

*IncomeTaxes*

    Consolidated income taxesreflect effective rates of a provision rate of 38% in 1999 and 2000and a provision rate of 150% in 2001 reflecting a $3.8 million provision on a pre-tax loss of$2.5 million.  The increased provision in 2001 isprimarily due to the impact of the relationship of significantpermanent non-deductible items compared to the book loss for theperiod.

*Net Income(Loss)*

    Wereported net income of $37.8 million in 1999 and a net loss of$18.7 million in 2000 and a net loss of $98.6 million in2001.  Included in net income (loss) for 1999, 2000 and 2001are net losses from discontinued operations of $3.4 million, $8.5million and $97.1 million, respectively.  The discontinuedoperations in these years include SureBeam, certain components ofour Cayenta business and our AverCom business, and to a lesserdegree, our access control systems business and the disposal of ourcommercial information security and assurance business, as well asoperations discontinued by certain of the companies acquired by usduring 2000.  Included in the net loss for 2000 is anextraordinary loss of $4.7 million, net of tax, related to theearly extinguishments of AverStar's credit facility in the secondquarter of 2000 and our credit facility with Scotia Bank in thefirst quarter of 2000.  Also included in the 1999, 2000 and2001 results are goodwill amortization of $8.0 million, $14.1million and $15.3 million, respectively, a deferredcompensation charge of $0.1 million, $5.5 million and $4.3million, respectively, and acquisition and integration relatedcharges and other of $13.1 million, $28.8 million and$30.4 million, respectively.  Also included in 2000 is avaluation allowance for accounts receivable balances of $10.0million.  Included in the 1999 and 2000 net loss is a gainfrom the sale of our interest of IPivot for $41.8 million and$2.1 million, respectively.

**Liquidity and CapitalResources**

    Wehave used our cash and cash equivalents principally to fundacquisitions and investments, capital expenses and working capital.We fund our cash requirements principally from borrowings fromunder our senior credit facility, proceeds from the sale of oursecurities, and to a lesser degree, from cash flows from our coregovernment operations.  Net cash flow from our continuingoperations used $13.0 million, primarily resulting from anincrease in accounts receivable balances of $70.2 million, with themost notable increases in our Titan Wireless and Titan Systemssegments.  The impact of the acquisition of BTG and Datron onour accounts receivable balance in the accompanying consolidatedbalance sheet as of December 31, 2001 was approximately$78.2 million compared to 2001 revenues of approximately $34.1million generated by BTG and Datron which are included in ourconsolidated revenues for the year ended December 31,2001.

    Our investing activitiesused cash of $140.1 million in 2001, primarily to financeacquisitions of $87.2 million and equity and other investmentsof $24.1 million, and to fund capital expenditures of$24.4 million, with the most significant capital expendituresin our Titan Wireless segment to develop its retail fixed wirelessservice business.  Our financing activities provided cash of$174.1 million, reflecting increased borrowings of $66.9 million onour credit facility as well as the net proceeds of $136.2 millionfrom the sale of our common stock in a public offering, net of areduction of debt of approximately $38.3 million, primarilyreflecting our pay-off of BTG's existing debt at the time ofacquisition.  The exercise of Titan stock options alsoprovided $11.4 million.

    OnFebruary 23, 2000, we entered into a credit agreement for $275million of financing from a syndicate of commercial banks. The credit facility also allowed us to increase total availabilityby an additional $100 million, if needed, for an aggregate of $375million.  The credit facility was subsequently amended on June1, 2000 to provide for an increase in total availability for anadditional $50 million, for an aggregate total of $425million.  The proceeds of the loan were used in part torefinance outstanding indebtedness on our $190 million creditfacility arranged by Bank of Nova Scotia in June 1999.  Thecredit facility is secured by substantially all of our and oursubsidiaries' assets and guaranteed by substantially all of oursubsidiaries, other than, in each case, SureBeam and our foreignoperations. SureBeam ceased being a guarantor and having its assetspledged as collateral for the credit facility following thecompletion of its initial public offering on March 16, 2001. The $425 million credit facility is comprised of a six-year seniorsecured multi-draw term loan facility in an aggregate principalamount of up to $75 million, two seven-year senior securedterm loan facilities in an aggregate principal amount of $250million, and a five-year senior secured revolving credit facilityin a aggregate principal amount of up to $100 million.  Loansmade under the multi-draw term loan facility mature on the sixthanniversary of the closing date of the credit facility, andamortize beginning in the credit facility's second year, whichbegan with the quarter ended June 30, 2001 and ends with thequarter ending March 31, 2002, as follows:  2.5%quarterly in the third and fourth quarters of year two of thecredit facility, 3.75% quarterly in year three of the creditfacility, 5% quarterly in year four of the credit facility, 6.25%quarterly in year five of the credit facility, 7.5% quarterly inthe first and second quarters of year six of the credit facilityand 10% in the third quarter of year six of the credit facility andon the sixth anniversary of the closing date of the creditfacility.  Loans made under the term loan facilities mature onthe seventh anniversary of the closing date of the credit facility,and began amortizing in the credit facility's first year, whichbegan with the quarter ended June 30, 2000 and ended with thequarter ended March 31, 2001, with the following amortizationschedule:  0.25% quarterly for years one through six ofthe credit facility and 23.5% quarterly for the first threequarters of year seven of the credit facility and on the seventhanniversary of the closing date of the credit facility.  Undereach of the term loan facilities and the revolving facility, wehave the option to borrow at the bank's base rate or at adjustedLIBOR plus, in each case, an applicable ratio based on the ratio ofour total debt to EBITDA, or earnings before interest and taxes anddepreciation and amortization.  The agreement containsfinancial covenants that were comprised of the following atDecember 31, 2001:  a maximum debt to EBITDA limit of3.50 to 1, a minimum interest coverage ratio of 3.75 to 1, aminimum fixed charge coverage ratio of 1.0 to 1 and a minimum networth of $256.8 million.  Titan is in compliance with allfinancial covenants as of December 31, 2001.

    AtDecember 31, 2001, total borrowings outstanding under our creditfacility were $330.0 million at a weighted average interest rate of5.0%.  Commitments under letters of credit were $13.9 millionat December 31, 2001, $9.1 million of which reduceavailability of our working capital line, resulting in $75.9million of availability on our working capital line at December 31,2001. Of the total borrowings, $12.8 million wasshort-term.

    OnMay 23, 2002, the Company entered into an agreement with WachoviaBank, National Association and Wachovia Securities for a$485 million credit facility from a syndicate of banks. The Company’s existing credit facility was extinguished atthat time. The new agreement containsfinancial covenants, which are comprised of the following at March31, 2002, on a pro forma basis for the new bankfacility:  a maximum debt to EBITDA limit of 3.1 to 1, aminimum interest coverage ratio of 2.75 to 1, a minimum fixedcoverage ratio of 1.2 to 1 and a minimum net worth of$475 million.  As of March 31, 2002, on a pro formabasis, taking into effect the new bank facility, Titan was incompliance with all financial covenants. See Note 15 of the accompany notes to the consolidatedfinancial statements.

    OnDecember 10, 1999, our wholly owned subsidiary, Titan Africa, Inc.("Titan Africa"), in connection with its contract to build asatellite-based telephone system for its customer, the nationaltelephone company of Benin, Africa, entered into a Loan Facilityagreement for up to 30.0 billion Francs CFA (the currency of theAfrican Financial Community), equivalent to approximately $45.0million U.S. dollars, with a syndicate of five banks, with AfricaMerchant Bank as the arranger.  This medium term financing isa non-recourse loan to Titan Africa which is guaranteed by thenational telephone company of Benin, Africa and secured by thenational telephone company's equipment and revenues related to theproject.  The facility has a fixed interest rate of 9.5% andwill be repaid in seven equal semi-annual payments from the netreceipts of this project, or by the OPT in the event that suchreceipts are not adequate to make these payments, which commencedon December 31, 2000 and were scheduled to end on December 31,2003.  The borrowings on this facility have been utilized tofund the subcontractor costs incurred by Alcatel of France, a majorsubcontractor to this project.  The non-Alcatel equipmentprovided by Titan Africa was financed through arrangement with theOPT whereby Titan Africa would be paid in seven equal semi-annualinstallments, which commenced on December 31, 2000.  Due tothe approximate six to nine month delay in the delivery of thesystem, which was impacted by the expansion of the original projectto include increased GSM lines, increased capacity and capabilityof the VSAT sites and an overall increase in lines in Benin, theAfrica Merchant Bank and Titan Africa have collectively agreed toextend the due date of the semi-annual principal payments untilsuch time as the service revenues have achieved certain levels,which is anticipated to occur in mid to late 2002.  The termsof Titan Africa's agreement with the customer include, among otherthings, a revenue sharing of total net receipts earned on thisproject for up to a period of 9 years depending upon when theequipment has been paid for.  As of December 31, 2001,approximately $42.5 million was drawn on this facility, which hasbeen reflected as Non-recourse debt in the accompanyingconsolidated balance sheet and approximately $93.1 million has beenreflected as Long-term contract receivables, related to the grossamount due from the OPT on the contract.  The $42.5 milliondrawn on the facility reflects the amount that has been funded bythe Africa Merchant Bank to cover subcontract costs.  InOctober 2000, we collected an $18 million receivable from anAfrican group related to the sale of a portion of our economicinterest, net of all fixed equipment payments, in the revenuesharing of this project.  As of December 31, 2001, theoutstanding receivable balance, net of non-recourse debt, due onthis contract was approximately $50.7 million.  Managementbelieves that the appropriate insurance policies are in place tocover risk related to loss in certain foreign countries such asBenin and other foreign countries.

    Inrelation to our investment in Ivoire Telecom, we provided equipmentwith an approximate aggregate value of $4.5 million and wecommitted to provide up to a maximum of $35 million for capitalexpenditures and other expenditures necessary to build out theIvoire Telecom network.  At December 31, 2001, this maximumcommitment has been substantially funded, resulting in aninvestment balance of approximately $50.0 million, which includesour initial equity investment of approximately $10.5 million andequipment we provided.  Our investment is reflected in OtherAssets in the accompanying consolidated balance sheet.  Inaddition, in connection with our agreement to acquire an additional30.0% equity interest in Sakon, an additional $12.5 million ofconsideration was due and payable upon certain revenue targetsbeing attained.  These targets were met in January 2001, and a$5.0 million installment was made in the second quarter of 2001, a$3.75 million installment was made in the first quarter of 2002,and the remaining $3.75 million is expected to be satisfied byissuance of Titan common stock later in 2002.

    There are no Titanguarantees of debt, either directly or indirectly, associated withIvoire Telecom or Sakon or any other unconsolidated subsidiariesother than approximately $2.0 million of equipmentfinancing.

    Aspart of our strategy of seeking external financing to grow ourcommercial businesses, our discontinued SureBeam subsidiarycompleted its initial public offering of its common stock on March16, 2001 and raised gross proceeds of $67 million.  Weextended a credit facility for up to a maximum of $75.0 millionunder which SureBeam owed us approximately $73.0 million as ofDecember 31, 2001.  On December 31, 2001, $2.0 million of thenote was exchanged for common stock of SureBeam, at $10.505, thefifteen day trading average of SureBeam stock as of December 30,2001, which resulted in the exchange for 190,385 Class B commonshares of SureBeam.  As of December 31, 2001, SureBeam hadapproximately $73.0 million in principal outstanding under thenote.  On February 13, 2002, the remaining outstanding balanceon the note of $73.0 million was exchanged for equity of SureBeam,at $9.521 per share, the twenty day trading average of SureBeamstock as of February 12, 2002, which resulted in the exchange for4,441,496 Class A and 3,225,765 Class B common shares ofSureBeam.

    OnOctober 16, 2001, Titan adopted a definitive plan to spin offSureBeam in the form of a tax-free dividend to Titan stockholderswithin 12 months from that date.  The plan involves filing aletter ruling request with the Internal Revenue Service seekingapproval of the tax-free distribution.  Titan received afavorable ruling in May 2002, and intends to execute the spin offin the third quarter of 2002.  Titan has purchased aworld-wide perpetual and exclusive, non-royalty bearing license touse SureBeam's intellectual property for all applications andfields other than the food, animal hide and flower markets for thefollowing consideration: 1) a $50 million senior secured line ofcredit, with customary financial, affirmative and negativecovenants, 2) the exchange of the $75 million debt owed by SureBeamto Titan for additional shares of Class B and Class A common stockof SureBeam, and 3) a cash payment of $8 million, with $4 millionpaid at September 30, 2001 and four installments of $1.0 millionpayable on each of March 31, 2002, June 30, 2002, September 30,2002 and December 31, 2002.  The Company has obtained approvalfrom its senior lenders under its new credit facility entered intoin May 2002 to extend an aggregate of $50 million of thiscredit facility to SureBeam.  In addition, Titan and SureBeamare currently negotiating revisions to the currently in place taxsharing agreements and corporate services agreement as well assublease arrangements with respect to three SureBeam servicecenters and a reimbursement agreement with respect to guarantees ofSureBeam obligations provided by Titan.  Titan and SureBeamhave entered into an exclusive contract for the purchase and saleof electronic beam accelerators through December 31, 2003 andrelated integration services through December 31, 2002 unlessSureBeam does not offer competitive pricing.

    OnJuly 26, 2001 we sold 8,048,685 shares of our common stock in apublic offering, which included an over-allotment of 1,125,000shares, at a price of $18.00 per share.  We receivedapproximate aggregate proceeds from the offering of $137.6 million,net of underwriters' commissions, in July 2001.  Transactionexpenses related to the offering were approximately $1.4million.  We used the net proceeds from this offering to fundacquisitions, capital expenditures and other investments.  Inaddition, certain Titan stockholders sold 576,315 shares, including489,972 shares from the exercise of options, from which we receivedproceeds of $3.0 million.

    Funding for theadvancement of our strategic goals, including acquisitions andcontinued investment in targeted commercial businesses and start-upventures and capital expenditures, is expected to continue. We plan to finance these requirements from a combination ofsources, which include cash generation from our core businesses,our credit facility and other available cash sources. Management believes that the combination of our existing cash,amounts available under our credit facility and cash flow expectedto be generated from our operations will be sufficient to fundplanned investments and working capital requirements for at leastthe next twelve months.  However, we could elect, or we couldbe required, to raise additional funds during that period and wemay need to raise additional capital in the future. Additional capital may not be available at all, or may not beavailable on terms favorable to us.  Any additional issuanceof equity or equity-linked securities may result in substantialdilution to our stockholders.  Management is continuallymonitoring and reevaluating its level of investment in all of itsoperations, specifically the investment required in fiscal 2002 tofurther grow its commercial businesses, and the financing sourcesavailable to achieve our goals in each business area.

**Long-Term Debt andOther Commitments**

    Our contractual cashobligations as of December 31, 2001, including principal maturitiesof long-term debt and other commitments, were as follows, excludingnon-recourse debt, contingent obligations and interest:

|                                                                            |                   |   | **2002** |  |   | **2003** |  |   | **2004** |  |   | **2005** |  |   | **2006** |  |   | **Thereafter** |  |   | **Total** |  |
|---------------------------------------------------------------------------------|-------------------|---|----------|--|---|----------|--|---|----------|--|---|----------|--|---|----------|--|---|----------------|--|---|-----------|--|
|                                                                            |                   |   |          |  |   |          |  |   |          |  |   |          |  |   |          |  |   |                |  |   |           |  |
|                                                                            | **(inthousands)** |
| Long-term debt:    Senior credit facility                        |                   | $ | 12,813   |  | $ | 16,562   |  | $ | 20,313   |  | $ | 280,312  |  | $ | —  |  | $ | —        |  | $ | 330,000   |  |
|    Other                                                         |                   |   | 1,413    |  |   | 948      |  |   | 963      |  |   | 416      |  |   | 540      |  |   | 2,745          |  |   | 7,025     |  |
| HIGH TIDES (1)                                                                  |                   |   | —  |  |   | —  |  |   | —  |  |   | —  |  |   | —  |  |   | 250,000        |  |   | 250,000   |  |
|                                                                                 |                   |   |          |  |   |          |  |   |          |  |   |          |  |   |          |  |   |                |  |   |           |  |
| Other commitments:    Operating leases                           |                   |   | 36,161   |  |   | 28,073   |  |   | 20,523   |  |   | 17,820   |  |   | 15,844   |  |   | 38,830         |  |   | 157,251   |  |
|    Capitalleases                                                 |                   |   | 342      |  |   | 285      |  |   | 211      |  |   | 453      |  |   | —  |  |   | —        |  |   | 1,291     |  |
|    Investment ine-tenna                                          |                   |   | 1,914    |  |   | —  |  |   | —  |  |   | —  |  |   | —  |  |   | —        |  |   | 1,914     |  |
|    SureBeamlicense       agreement |                   |   | 4,000    |  |   | —  |  |   | —  |  |   | —  |  |   | —  |  |   | —        |  |   | 4,000     |  |
|                                                                                 |                   |   |          |  |   |          |  |   |          |  |   |          |  |   |          |  |   |                |  |   |           |  |
| Total contractualcash  obligations                                         |                   | $ | 56,643   |  | $ | 45,868   |  | $ | 42,010   |  | $ | 299,001  |  | $ | 16,384   |  | $ | 291,575        |  | $ | 751,481   |  |
|                                                                                 |                   |   |          |  |   |          |  |   |          |  |   |          |  |   |          |  |   |                |  |   |           |  |

(1)  The HIGHTIDES has a remarketing feature beginning approximately five yearsafter the date of issuance, at which time we may elect to refinanceor retire the HIGH TIDES.  See Note 8 to the accompanyingconsolidated financial statements.

**Critical AccountingPolicies**

*Use ofEstimates*

    The preparation offinancial statements in conformity with accounting principlesgenerally accepted in the United States requires management to makeestimates and assumptions that affect the reported amounts ofassets and liabilities and disclosures of contingent assets andliabilities at the date of the financial statements and thereported amounts of revenues and expenses during the reportingperiod.  Actual results could differ from thoseestimates.  Specifically, management must make estimates inthe following areas:

    *Allowance for doubtfulaccounts.*  We provide a reserve against ourreceivables for estimated losses that may result from ourcustomers' inability to pay.  These reserves are based onpotential uncollectible accounts, aged receivables, historicallosses, our customers' credit-worthiness, changes in governmentfunding on certain of our contracts and adjustments that may arisefrom audits by the Defense Contract Audit Agency ("DCAA") ofcertain of our government contracts. Should a customer's accountbecome past due, we generally will place a hold on the account anddiscontinue further shipments and/or services provided to thatcustomer, minimizing further risk of loss.  The likelihood ofa material loss to Titan on an uncollectible account in ourcommercial business would be principally dependent on adeterioration in economic and/or political conditions in aparticular country, such as Benin, Africa, in which our receivablesdue from the government controlled phone company of Benin may beimpacted.

    Our accounts receivablebalances include unbilled receivables which are comprised ofwork-in-process which will be billed in accordance with contractterms and delivery schedules, as well as amounts billable uponfinal execution of contracts, contract completion, milestones orcompletion of rate negotiations.  Payments to us forperformance on certain of our U.S.  Government contracts aresubject to audit by the DCAA, and are subject to governmentfunding.  We provide a reserve against our receivables forestimated losses that may result from rate negotiations, auditadjustments, and/or government funding availability.  To theextent that actual adjustments due to rate negotiations, auditadjustments, or government funding availability differ from ourestimates, our provisions for doubtful accounts may beimpacted.  Due to a high degree of diversification in ourgovernment business, where any one contract accounts for no morethan 2.2 percent of Titan Systems' annual revenues, the likelihoodof a material loss to Titan on an uncollectible account from thisactivity is not probable.

    *Inventoryadjustment.*  Inventories are stated at lower of costor market.  We review the components of our inventory on aregular basis for excess, obsolete and impaired inventory based onestimated future usage and sales.  The likelihood of anymaterial inventory write-downs is dependent on changes incompetitive conditions, new product introductions by us or ourcompetitors, or rapid changes in customer demand.

    *Determining ImpairmentLosses on Non-Marketable Securities.  * We evaluateour investment in non-marketable securities taking intoconsideration the financial condition of the investee, thenear-term prospects of the investee, including the opportunities inthe region and industry of the investee, changes in technology, andthe progress of the investee in achieving operational milestonesaccording to its operating plan.  We also evaluate variousalternatives relative to realizing the value of ourinvestment.  Factors that would influence the likelihood of amaterial change in our evaluation of whether there is a declineother than temporary include significant changes in theinvestee’s ability to generate positive cash flow, asignificant change in technology, loss of legal ownership or titleto the asset, a significant decline in the economic and competitiveenvironment on which the investee depends, and a significant changein the economic and/or political conditions in certain countries,particularly Africa, in which we have investments.

    *Valuation of goodwill,intangible and other long-lived assets.*  We useassumptions in establishing the carrying value, fair value andestimated lives of our long-lived assets and goodwill.  Thecriteria used for these evaluations include management's estimateof the asset's continuing ability to generate positive income fromoperations and positive cash flow in future periods compared to thecarrying value of the asset, as well as the strategic significanceof any identifiable intangible asset in our businessobjectives.  If assets are considered to be impaired, theimpairment recognized is the amount by which the carrying value ofthe assets exceeds the fair value of the assets.  Useful livesand related amortization or depreciation expense are based on ourestimate of the period that the assets will generate revenues orotherwise be used by the Company.  Factors that wouldinfluence the likelihood of a material change in our reportedresults include significant changes in the asset's ability togenerate positive cash flow, loss of legal ownership or title tothe asset, a significant decline in the economic and competitiveenvironment on which the asset depends, significant changes in ourstrategic business objectives, utilization of the asset, and asignificant change in the economic and/or political conditions incertain countries, particularly Africa, in which we haveinvestments.

    *Benefitplans.*  We provide for postretirement benefitobligations of operations discontinued in prior years for formeremployees and for certain current senior executive officers. Accounting and reporting for the pension plans requires the use ofassumptions for discount rates, expected mortality rates andestimated growth rates in medical and healthcare costs, allassumptions our actuaries rely upon in preparing their estimatesfor us.  Any materially different valuations for actuarialassumptions that are different from our current expectations couldimpact our accruals for these postretirement benefitobligations.  As the population that participates in theseplans is limited, we do not believe changes in valuations wouldhave a material impact on our provisions for these postretirementobligations.

    *Valuation of deferredincome taxes.*  Valuation allowances are established,when necessary, to reduce deferred tax assets to the amountexpected to be realized.  The likelihood of a material changein our expected realization of these assets is dependent on futuretaxable income, our ability to deduct tax loss carryforwardsagainst future taxable income, the effectiveness of our taxplanning and strategies among the various tax jurisdictions that weoperate in, and any significant changes in the tax treatmentreceived on our business combinations.

    *Estimated losses fromdiscontinued operations.*  We provided for an accrualfor the estimated loss on our discontinued SureBeam business basedupon management's estimates of the estimated operating losses to beincurred by SureBeam from the date we adopted our plan to spin offSureBeam on October 16, 2001, through October 16, 2002, as well asestimated spin-off related costs.  To the extent that theactual operating losses incurred by SureBeam differ from theestimates we used to calculate our estimated loss on disposal andto the extent that the estimated spin-off costs differ from theactual costs we incur, the loss from discontinued operations maychange.

    *Revenuerecognition.*  We recognize a portion of our revenueusing the percentage-of-completion method, which includes revenuesrecognized as units are delivered, in accordance with Statement ofPosition (SOP) 81-1.  Total estimated costs are based onmanagement's assessment of costs to complete the project based uponevaluation of the level of work achieved and costs expended todate.  To the extent that our estimated costs materiallychange, our revenues recorded under such contracts could materiallybe affected and could have a material adverse effect on ouroperations in the future periods.  In 2001, approximately16.6% of Titan Systems' revenues were generated by fixed pricecontracts, which are generally recognized using thepercentage-of-completion method.  The remaining 83.4% ofTitans Systems' revenues in 2001 were generated by cost plus fixedfee contracts and time and material contracts, for whichpercentage-of-completion is not used, and revenues are generallyrecognized as work is performed and billed to thecustomer.

    Titan contracts with itsgovernment customers using various cost-type contracts.  Theyinclude cost-plus fixed fee, cost-plus award fee, cost-plusincentive fee with incentives based upon both cost and/orperformance, cost-with no fee, and cost sharing contracts. Revenues and profits are recognized in accordance with AccountingResearch Bulletin No. 45 and SOP 81‐1.  For award andincentive fee type contracts, we recognize the expected fee to beawarded by the customer at the time such fee can be reasonablyestimated, based on factors such as our prior award experience andcommunications with the customer regarding our performance,including any interim performance evaluations rendered by thecustomer.  Revenues are recognized under fixed price contractsbased on the percentage-of-completion basis, using the cost-to-costor units-of-delivery methods.

    *Accounting forbusiness combinations.*  Since February of 2000, wehave acquired two companies (ACS and AverStar), that have beenaccounted for under the pooling of interests method ofaccounting.  To qualify for the pooling of interests method,criteria relating to the attributes of the combining companiesprior to the combination, the manner of combining the companies andthe absence of certain planned transactions after the combinationmust be met.  Under the pooling of interests method, the valueof the assets and liabilities of the combined companies are carriedforward at their recorded amounts and the reported income for allperiods prior to the combination are combined and restated as ifthe combination had occurred at the beginning of the periodpresented.

    Ifthe criteria for pooling of interests accounting treatment are notmet, then the purchase method of accounting would have beenapplied.  Under the purchase method of accounting, all assetsand liabilities acquired are recorded at their fair values at thedate of the acquisition and results of operations are included inthe consolidated financial statements from the date ofacquisition.  Accounting for these two acquisitions under thepurchase method of accounting would have resulted in materiallydifferent reported results.

    Inrelation to our allocation of purchase price to the fair value ofassets acquired and contingencies assumed in acquisitions accountedfor as purchase transactions, management makes estimates of suchamounts as the fair value of assets and contingenciesassumed.  To the extent that the actual values orcontingencies may differ from the estimates used, our allocation ofpurchase price may differ, which may result in a change to theamount of goodwill and/or purchased intangibles.

    *Principles ofconsolidation.*  Management evaluates its investmentin each joint venture and investment on an individual basis forpurposes of determining whether consolidation or the cost or equitymethod is appropriate, based upon management's evaluation of thelevel of our ability to retain and exercise control throughdecision-making ability and exercise significant influence, as wellas our equity ownership interest.  In the event that ourability to obtain control and exercise significant influencechanges materially from management's evaluation in determiningwhether consolidation should occur, or whether or not the cost orequity method is appropriate, then our operating results could bematerially impacted, either positively or negatively.

***Risks Relating toOur Business***

**Titan depends ongovernment contracts for a substantial majority of its revenues andthe loss of government contracts or a decline in funding ofexisting or future government contracts could adversely affectTitan's revenues and cash flows and Titan's ability to fund itscommercial businesses.**

    Titan's revenues fromU.S. government business represented approximately 81% of Titan'stotal revenues in 2000, and approximately 84% of Titan's totalrevenues in 2001.  Titan's U.S. government contracts are onlyfunded on an annual basis, and the U.S. government may cancel thesecontracts at any time without penalty or may change itsrequirements, programs or contract budget or decline to exerciseoption periods, any of which could reduce Titan's revenues and cashflows from U.S. government contracts.  Titan's revenues andcash flow from U.S. government contracts could also be reduced bydeclines in U.S. defense and other federal agencybudgets.

    Asignificant percentage of Titan's products and services arepredominantly sold and performed under contracts with various partsof the U.S. Navy or U.S. Air Force or with prime contractors to theU.S. Navy or U.S. Air Force. Although these various parts of theU.S. Navy or U.S. Air Force are subject to common budgetarypressures and other factors, Titan's various U.S. Navy and U.S. AirForce customers exercise independent purchasing decisions. However, because of such concentration of Titan's contracts, Titanis vulnerable to adverse changes in its revenues and cash flows ifa significant number of Titan's U.S. Navy or U.S. Air Forcecontracts and subcontracts are simultaneously delayed or canceledfor budgetary or other reasons.

    Inaddition to contract cancellations and declines in agency budgets,Titan may be adversely affected by:
|        | ·       | curtailment of the U.Sgovernment's use of technology services and productsproviders;      |
|--------------------------------------|----------------------------------------------|------------------------------------------------------------------------------------------------|
|        |                |                                                                       |
|        | ·       | technological developmentsthat impact purchasing decisions or Titan’s competiveposition. |

    These or other factorscould cause U.S. defense and other federal agencies to reduce theirpurchases under contracts, to exercise their right to terminatecontracts or not to exercise options to renew contracts or limitTitan’s ability to obtain new contract awards.  Any ofthese actions or any of the other actions described above couldreduce Titan's revenues and cash flows and impair Titan's abilityto make equity investments in or intercompany advances to Titan'scommercial subsidiaries as part of Titan's approach to creating andbuilding new businesses.

**Government audits ofTitan's government contracts could result in a material charge toTitan's earnings and have a negative effect on Titan's cashposition following an audit adjustment.**

    Titan's governmentcontracts are subject to cost audits by the government.  Theseaudits may occur several years after completion of the auditedwork.  If a cost audit were to identify significantunallowable costs, Titan could have a material charge to itsearnings or reduction in its cash position as a result of an audit,including an audit of one of the companies Titan hasacquired.  Some of Titan's acquired companies did nothistorically impose internal controls as rigorous as those Titanimposes on the government contracts Titan performs, which mayincrease the likelihood that an audit of their government contractscould cause a charge to Titan's earnings or reduction in Titan'scash position.

**Titan's operatingmargins may decline under its fixed-price contracts if Titan failsto estimate accurately the time and resources necessary to satisfyTitan's obligations.**

    Some of Titan's contractsare fixed-price contracts under which Titan bears the risk of anycost overruns.  Titan's profits are adversely affected if itscosts under these contracts exceed the assumptions Titan used inbidding for the contract. In 2001, approximately 20% of Titan'srevenues were derived from fixed-price contracts for both defenseand non-defense related government contracts.  Often, Titan isrequired to fix the price for a contract before Titan finalizes theproject specifications, which increases the risk that Titan willmisprice these contracts.  The complexity of many of Titan'sengagements makes accurately estimating Titan's time and resourcesmore difficult.

**If Titan is not able toretain its contracts with the U.S. government and subcontractsunder U.S. government prime contracts in the competitive rebiddingprocess, Titan's revenues may suffer.**

    Upon expiration of a U.S.government contract or subcontract under a U.S. government primecontract, if the government customer requires further services ofthe type provided in the contract, there is frequently acompetitive rebidding process.  Titan cannot guarantee thatTitan, or if we are a subcontractor that the prime contractor, willwin any particular bid, or that Titan will be able to replacebusiness lost upon expiration or completion of a contract. Further,all U.S. government contracts are subject to protest bycompetitors.  The termination of several of Titan'ssignificant contracts or nonrenewal of several of Titan'ssignificant contracts, the imposition of fines or damages, orTitan's suspension or debarment from bidding on additionalcontracts could result in significant revenueshortfalls.

**Titan may be liable forpenalties under a variety of procurement rules and regulations, andchanges in government regulations could adversely impact Titan'srevenues, operating expenses and profitability.**

    Titan's defense andcommercial businesses must comply with and are affected by variousgovernment regulations that impact Titan’s operating costs,profit margins and its internal organization and operation of itsbusinesses.  These regulations affect how Titan's customersand Titan do business and, in some instances, impose added costs onTitan's businesses.  Any changes in applicable laws couldadversely affect the financial performance of the business affectedby the changed regulations.  With respect to U.S. governmentcontracts, any failure to comply with applicable laws could resultin contract termination, price or fee reductions or suspension ordebarment from contracting with the U.S. government.  Amongthe most significant regulations are the following:
|        | ·       | the U.S. FederalAcquisition Regulations, which comprehensively regulate theformation, administration and performance of governmentcontracts;                         |
|--------------------------------------|----------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                |                                                                                                                                                  |
|        | ·       | the U.S. Truth inNegotiations Act, which requires certification and disclosure ofall cost and pricing data in connection with contractnegotiations;                  |
|        |                |                                                                                                                                                  |
|        | ·       | the U.S. Cost AccountingStandards, which impose accounting requirements that govern Titan'sright to reimbursement under certain cost-based governmentcontracts; and  |
|        |                |                                                                                                                                                  |
|        | ·       | laws and regulatoryrequirements relating to satellite communications and otherwireless communication systems in the developing countries whereTitan Wireless operates.    |

**Titan has a limitedhistory of commercializing new technologies and Titan's commercialbusinesses may never contribute to Titan’s revenue, revenuegrowth or operating profit at the levels expected by Titan or atlevels that justify the investment.**

    In1991, Titan adopted a strategy of seeking to develop commercialbusinesses using technology developed for government purposes inTitan's government defense business in order to enhance its growthand profitability.  SureBeam, Cayenta and the Titan Wirelessbusinesses as well as the commercial businesses in TitanTechnologies are a product of this strategy.  For the mostpart, Titan's commercial businesses are in a relatively early stageof development.  Titan cannot guarantee that these businesseswill grow as much as Titan anticipates.  It is also possiblethat these businesses could require greater investment by Titanthan anticipated, could reduce Titan’s earnings and/or willnot be capable of being monetized to enable Titan and itsstockholders to realize value from this process. 

    These technology-basedbusinesses are subject to risks and uncertainties inherent incompanies at these early stages of development,including:
|        | ·       | the risk that Titan maynot identify markets with sufficient opportunities to justifyTitan's investments in products and solutions for thesemarkets;                                            |
|--------------------------------------|----------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                |                                                                                                                                                                       |
|        | ·       | the risks that their basetechnology will never gain market acceptance or becomes obsoleteand Titan  fails to respond in a timely and cost-effectivemanner to rapid technological changes; |
|        |                |                                                                                                                                                                       |
|        | ·       | the risks associated withoperating in markets that are subject to a high degree ofcompetition;                                                                                            |
|        |                |                                                                                                                                                                       |
|        | ·       | the risk that they willhave inadequate management resources to capitalize on marketopportunities and execute their strategy;                                                              |
|        |                |                                                                                                                                                                       |
|        | ·       | the risk that they will beunable to manage rapid growth effectively;                                                                                                                      |
|        |                |                                                                                                                                                                       |
|        | ·       | the risk that they will beunable to execute successfully their business strategy onschedule;                                                                                              |
|        |                |                                                                                                                                                                       |
|        | ·       | the risk that adequatecapital may not be available to fund their continueddevelopment.                                                                                                    |

**Titan may make equityinvestments, intercompany advances or loans to wholly or partiallyowned subsidiaries or spun-off entities which Titan could lose orhave to write off.**

    Titan has historicallyfunded businesses in its Titan Technologies segment, as well as itsother commercial businesses, with equity investments and/orintercompany advances, and expects to continue to do so in thefuture.  From time to time, we also make investments in orloans to businesses that are not controlled by Titan to further itsstrategic objectives.  For example, Titan has advanced $107million to Cayenta and may not be able to fully recoup thisinvestment given the current market for commercial software andservices businesses.  Titan also has invested approximately$50 million in Ivoire Telecom and approximately $6.8 million ine-tenna as of December 31, 2001.  At the time Titan makesthese investments or advances, these businesses are typically at anearly stage of development.  If these businesses do not becomeprofitable or Titan is unable to monetize its investments in them,Titan could lose all or a portion of its equity in those businessesand be required to write off some or all of any amountsadvanced.

    Titan previously fundedits publicly traded subsidiary, SureBeam, through a $75 millionsubordinated promissory note of which Titan exchanged $73 millionon February 13, 2002 for equity of SureBeam at an average price of$9.521 per share and $2 million on December 31, 2001 at an averageprice of $10.505 per share.  Titan has agreed to extend a new$50 million senior secured revolving line of credit to SureBeamthat matures on December 31, 2005.  Once Titan completes thespin-off of SureBeam, Titan will no longer have any influence orcontrol over the management of SureBeam.  If SureBeam does notbecome profitable or is unable to service its debt for any reason,Titan may be required to write off some or all of any amountsloaned to SureBeam under this credit facility.  In addition,Titan has guaranteed certain facility leases for SureBeam,aggregating approximately $15.1 million for lease termsthrough 2020.

**Titan's commercialbusinesses' growth may be impaired because of investment or fundingchoices Titan makes or because Titan is unable to generatesufficient cash flow or to access capital from externalsources.**

    Titan typically funds itsbusinesses' growth with equity investments, intercompany advancesand/or public or private financing.  Titan may choose not tofund potential growth opportunities for its businesses with equityinvestments or intercompany advances based on risk considerationsor Titan's balancing of its investment objectives for thosebusinesses with its overall profitability objectives.  Inaddition, Titan may be unable to fund potential growthopportunities for its businesses to the extent that Titan Systemsdoes not generate sufficient cash flow for Titan to do so or Titandoes not otherwise have capital on hand and/or cannot accessadequate capital.  Titan may also be precluded from fundingpotential growth opportunities for its commercial businesses withpublic or private financing based on market conditions.  Tothe extent that Titan is unable to, or chooses not to, providecapital to its commercial businesses to fund potential growthopportunities, Titan's commercial businesses' growth could beimpaired.

**Market conditions andlegal and contractual restrictions may impair Titan's ability tomonetize its investments in its commercial technology applicationsand businesses.**

    Titan cannot guaranteethat it will be able to monetize any of its investments in itscommercial technology applications or businesses, whether throughan initial public offering of a subsidiary, a complete spin-off toTitan's stockholders, an outright sale of a subsidiary, or atechnology license or sale.  Market, competitive conditions oradverse business developments with respect to one of the commercialbusinesses may be such that Titan is unable to complete initialpublic offerings of its subsidiaries or spin-offs of itssubsidiaries to Titan's stockholders at valuations that Titanconsiders appropriate, in which case Titan may choose to delay orforego initial public offerings or spin-offs of thesesubsidiaries.  Based on market or competitive conditions,Titan may also be unable to sell or license its commercialtechnology applications or sell its businesses at valuations or forother consideration Titan considers appropriate, in which caseTitan may choose to delay or forego those sales or licenses. To the extent possible, Titan intends to structure any initialpublic offerings that its subsidiaries conduct in a manner topreserve the ability to later distribute the stock Titan retains inthe subsidiaries to its stockholders on a tax-free basis. Under current law, there are a number of tax and other legalrequirements that must be satisfied in order to successfullyexecute this strategy and Titan cannot guarantee that they will bemet.  Contractual restrictions may also restrict Titan'sability to successfully execute this strategy.  With theexception of SureBeam, Titan's credit facility does not permit itssubsidiaries to conduct initial public offerings or allow Titan todistribute the stock of its subsidiaries to Titan stockholderswithout the consent of the lenders*.* 

**Titan's failure toidentify, attract and retain qualified technical and managementpersonnel could adversely affect its existing businesses and itsability to build additional commercial businesses.**

    Titan cannot guaranteethat Titan will be able to attract and retain the highly qualifiedtechnical personnel for each of its segments, including engineers,computer programmers and personnel with security clearancesrequired for classified work, that are necessary for maintainingand growing Titan's existing businesses or building additionalcommercial businesses.  Titan's success also depends to asignificant extent on the continued contributions of Titan'smanagement personnel for each of its segments.  Titan'sability to build additional commercial businesses in its TitanTechnologies segment will depend in part on Titan's ability toattract management personnel from outside Titan with relevantmarket expertise and management skills, and on Titan's ability toretain and motivate these managers.

**Risks of Titan'sinternational operations, including economic conditions in othercountries, could adversely affect the revenues and profitability ofits Titan Wireless and SureBeam businesses and adversely affectTitan’s ability to execute on its strategy for financingthese businesses and monetizing its investment.**

    SureBeam’s revenuesin 2002 are materially dependent on a purchase order for the saleof systems to a Saudi Arabian company, and Titan Wireless’principal strategy is to provide communications services andsystems primarily in developing countries primarily in Asia,Africa, the Middle East and Latin America.  Although Titancurrently sells its communications services and systems primarilyin U.S. dollars, currency devaluations and adverse marketconditions in developing countries in the past have and in thefuture could negatively affect demand for Titan's communicationsservices and systems and, consequently, Titan's revenues for TitanWireless.  As a result, revenues in Titan Wireless may beadversely affected by economic conditions in developingcountries.  SureBeam’s ability to sell systems ininternational markets may also depend upon economic conditions aswell as consumer acceptance in these markets for irradiation offood. 

    Titan's businesses thatoperate in international markets also face the possibility ofbecoming subject to reduction in revenue or added costs as part ofmaintaining compliance with varied foreign regulatory requirementsor as a result of changes in applicable laws and regulations,including licensing laws, tax laws and regulations.  Titandoes not believe that the international operations of its existingbusinesses currently subject it to material risks from fluctuationsin currency exchange rates.  However, as Titan increases theinternational operations of its businesses, Titan's risks fromfluctuations in currency exchange rates, to the extent Titan billsfor its products in foreign currencies, will increase.

    Selling products orservices in international markets also entails other market,economic, cultural, legal and political risks, conditions andexpenses.  These risks include:
|        | ·       | trade protective measuresand import or export licensing requirements or other restrictiveactions by foreign governments; |
|--------------------------------------|----------------------------------------------|--------------------------------------------------------------------------------------------------------------------------|
|        |                |                                                                                                 |
|        | ·       | reduced protection ofintellectual property rights;                                                                       |
|        |                |                                                                                                 |
|        | ·       | political and economicinstability;                                                                                       |
|        |                |                                                                                                 |
|        | ·       | difficulties in collectingamounts owed to Titan; and                                                                     |
|        |                |                                                                                                 |
|        | ·       | difficulties in managingoverseas employees and contractors.                                                              |

    Any one of these factorsor other international business risks could adversely affectTitan's financial performance and its return on its investment inTitan Wireless.

**Titan competes inhighly competitive markets against many companies that are larger,better financed and better known than Titan.  If Titan isunable to compete effectively, Titan's business and prospects willbe adversely affected.**

    Titan's businessesoperate in highly competitive markets.  Many of itscompetitors are larger, better financed and better known companieswho may compete more effectively than Titan can.  Titan'scommercial businesses compete against other technologies as well asagainst companies with similar products and services.  Inorder to remain competitive, Titan must invest to keep its productstechnically advanced and compete on price and on value added toTitan's customers.  Titan's ability to compete may beadversely affected by limits on Titan's capital resources andTitan's ability to invest in maintaining and expanding its marketshare.

**Titan has completednumerous strategic acquisitions and may complete others, whichcould increase Titan's costs or liabilities or bedisruptive.**

    Since January 1, 1998,Titan has acquired 17 government information technology businesses,including the recently completed acquisition of Jaycor, Inc., andhas entered into a merger agreement to acquire Science andEngineering Associates as part of Titan's strategy of consolidatinggovernment information technology businesses.  In addition,Titan has made investments in a wireless telecommunicationscompany, Ivoire Telecom, and acquired an international voice, data,and internet services provider, and GlobalNet, as part of TitanWireless's business.  Several of the businesses that Titanacquired had themselves acquired other businesses prior to theiracquisition by Titan.  Titan may not be able to complete itsproposed acquisition of Science and Engineering Associates or tointegrate successfully any acquired businesses without substantialexpense, delay or other operational or financial problems. The acquisition and integration of new businesses involvesrisk.  The integration of acquired businesses may be costlyand may result in a decrease in the value of Titan's common stockfor the following reasons, among others:
|        | ·       | Titan may need to divertmore management resources to integration than Titan planned, whichmay adversely affect Titan's ability to pursue other moreprofitable activities;                                                    |
|--------------------------------------|----------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                |                                                                                                                                                                                                          |
|        | ·       | the difficulties ofintegration may be increased by the necessity of coordinatinggeographically separated organizations, integrating personnel withdisparate business backgrounds and combining different corporatecultures;  |
|        |                |                                                                                                                                                                                                          |
|        | ·       | Titan may not eliminate asmany redundant costs as Titan anticipated in selecting itsacquisition candidates; and                                                                                                              |
|        |                |                                                                                                                                                                                                          |
|        | ·       | one or more of Titan'sacquisition candidates also may have liabilities or adverseoperating issues that Titan failed to discover through itsdiligence prior to the acquisition.                                                    |

    Titan intends to continueto look for additional strategic acquisitions.  Instability inthe U.S. securities markets and volatility in Titan's common stockprice may make acquisitions with Titan's common stock moreexpensive.

**Titan may incursignificant costs in protecting Titan's intellectual property whichcould adversely affect Titan's profit margins.  Titan'sinability to protect its patents and proprietary rights in the U.S.and foreign countries could adversely affect Titan's businesses'prospects and competitive positions.**

    Aspart of Titan's strategy, Titan seeks to protect its proprietarytechnology and inventions through patents and otherproprietary-right protection in the U.S. and other countries. The laws of some foreign countries do not protect proprietaryrights to the same extent as the laws of the U.S.  If Titan isunable to obtain or maintain these protections, Titan may not beable to prevent third parties from using its proprietaryrights.  In addition, Titan may incur significant expense bothin protecting its intellectual property and in defending orassessing claims with respect to intellectual property owned byothers.

    Titan assesses thestrength of its patent and intellectual property protection for itstechnologies and products.  Despite Titan's assessments andTitan's belief in the strength of its patent protection forparticular technologies or products, Titan's patents may notprovide effective barriers to entry against competitors in themarkets targeted by particular technologies and products becauseTitan's competitors may develop competing technologies and productsthat do not infringe upon Titan's patents.  Titan also couldchoose to modify or abandon one or more planned or current productsbecause of these assessments or actual or threatened claims byother companies.  Titan is not certain that its pending patentapplications will be issued.

    Titan also relies ontrade secrets, proprietary know-how and continuing technologicalinnovation to remain competitive.  Titan has taken measures toprotect its trade secrets and know-how, including the use ofconfidentiality agreements with Titan's employees, consultants andadvisors.  It is possible that these agreements may bebreached and that any remedies for a breach will not be sufficientto compensate Titan for damages incurred.  Titan generallycontrols and limits access to, and the distribution of, its productdocumentation and other proprietary information.  Titan alsocannot guarantee that other parties will not independently developTitan's know-how or otherwise obtain access to Titan'stechnology.

**The covenants inTitan's credit facility restrict Titan's financial and operationalflexibility and Titan's failure to comply with them could have amaterial adverse effect on Titan's business.**

    Titan's credit facilitycontains covenants that restrict, among other things, Titan'sability to borrow money, make particular types of investments,including investments in Titan's subsidiaries, or other restrictedpayments, swap or sell assets, merge or consolidate, or makeacquisitions.  An event of default under Titan's creditfacility could allow the lenders to declare all amounts outstandingto be immediately due and payable.  Titan has pledgedsubstantially all of its consolidated assets and the stock ofTitan's subsidiaries to secure the debt under Titan's creditfacility, excluding SureBeam and Titan's foreign affiliates. If the amounts outstanding under the credit facility wereaccelerated, the lenders could proceed against those consolidatedassets and the stock of Titan's subsidiaries.  Any event ofdefault, therefore, could have a material adverse effect on Titan'sbusiness.  Titan's credit facility also requires Titan tomaintain specified financial ratios.  Titan's ability to meetthese financial ratios can be affected by events beyond Titan'scontrol, and Titan cannot assure you that Titan will meet thoseratios.  Titan also may incur future debt obligations thatmight subject Titan to restrictive covenants that could affectTitan's financial and operational flexibility or subject Titan toother events of default.  Any such restrictive covenants inany future debt obligations Titan incurs could limit Titan'sability to fund its commercial businesses with equity investmentsor intercompany advances, which would impede Titan's ability toexecute its approach to creating and building newbusinesses.

**Titan's operatingresults may be adversely affected by disruptions in its supply ofproducts and components or services.**

    Because Titan's internalmanufacturing capacity is limited, Titan uses contractmanufacturers.  While Titan uses care in selecting itsmanufacturers, this arrangement gives Titan less control over thereliability of supply, quality and price of products or componentsthan if Titan manufactured them itself.  In some cases, Titanobtains products from a sole supplier or a limited group ofsuppliers.  For example, Titan relies upon SureBeam as anexclusive supplier of linear accelerators and SureBeam, in turn,relies on one supplier for some of the key components used tomanufacture SureBeam's linear accelerators.  Consequently,Titan risks disruptions in its supply of key products andcomponents if Titan's suppliers fail or are unable to performbecause of strikes, natural disasters, financial condition or otherfactors.  Any material supply disruptions could adverselyaffect Titan's business, financial condition and results ofoperations as well as Titan's ongoing product coststructure.

**Titan's business issubject to significant environmental regulation.  Compliancecosts, or any future violations or liability under environmentallaws, could harm Titan's business.**

    Titan is subject toenvironmental and safety laws and regulations governing the use,storage and disposal of hazardous substances or wastes and imposingliability for the cleanup of contamination from thesesubstances.  Titan cannot completely eliminate the risk ofcontamination or injury from these substances or wastes, and, inthe event of such an incident, Titan could be held liable for anydamages that result.  From time to time, Titan has beennotified of violations of government and environmentalregulations.  Titan attempts to correct these violationspromptly without any material impact on Titan's operations. In addition, Titan may be required to incur significant additionalcosts to comply with environmental laws and regulations in thefuture.  These costs, and any future violations or liabilityunder environmental laws or regulations, could have a materialadverse effect on Titan's business.

**Titan's results ofoperations have historically fluctuated and may continue tofluctuate significantly in the future, which could adversely affectthe market price of its common stock.**

    Titan's revenues areaffected by factors such as the unpredictability of sales andcontracts awards due to the long procurement process for most ofits products and services, defense and intelligence budgets, thetime it takes for the new markets Titan targets to develop and forTitan to develop and provide products and services for thosemarkets, competition and general economic conditions.  Titan'sproduct mix and unit volume, its ability to keep expenses withinbudgets, its distribution channels and its pricing affect its grossmargins.  These factors and other risk factors describedherein may adversely affect Titan's results of operations within aperiod and cause Titan's financial results to fluctuatesignificantly on a quarterly or annual basis.  Consequently,Titan does not believe that comparison of its results of operationsfrom period to period is necessarily meaningful or predictive ofits likely future results of operations.  It is possible thatin some future quarter or quarters Titan's operating results willbe below the expectations of public market analysts orinvestors.  If so, the market price of Titan's common stockmay decline significantly.

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

    Statements contained inthis Management's Discussion and Analysis of Financial Conditionand Results of Operations which are not historical facts areforward looking statements within the meaning of Section 27Aof the Securities Act of 1933 and Section 21E of theSecurities Exchange Act of 1934.  Examples of such forwardlooking statements include our expectations regarding ourcontinuing investments in commercial businesses and start-upventures, our planned financing of these ventures and thesufficiency of our available liquidity to fund investments andworking capital, the Company's belief that its technology-basedbusinesses will continue to grow or result in profitability, thatit has built a financially sound company, that it is uniquelypositioned to grow its core operations or take advantage of newopportunities, that it will continue to focus on strengthening andgrowing its businesses, building its patent portfolio andcommercializing new innovative technologies, that it expects agreater percentage of revenues in Titan Wireless to be derived fromthe provision of services, that the remaining $3.75 million due toSakon under our agreement to acquire an additional 30% interestwill be satisfied by issuance of Titan stock, that it will be ableto spin off SureBeam to Titan stockholders, that the Company iswell positioned to capitalize on increases in defense and homelandsecurity spending by the U.S. Government, that service revenuelevels for the system in Benin will reach certain levels in 2002,and that Titan Systems will continue to provide the largestpercentage of our consolidated revenues.  Actual results maydiffer materially from those stated or implied in the forwardlooking statements.  Further, certain forward lookingstatements are based upon assumptions of future events which maynot prove to be accurate and are subject to risks and uncertaintiesthat could cause actual results to differ materially from those setforth in or implied by forward looking statements.  Theserisks and uncertainties include the risks associated with theCompany's entry into new commercial businesses and new markets thatrequire the Company to develop demand for its product, its abilityto execute its spin off strategy, dependence on continued fundingof U.S.  Department of Defense and Federal civilian agencyprograms, contract termination risks, risks associated withacquiring other companies, including integration risks, and risk ofdoing business in developing countries and international marketsincluding foreign currency risks.

**Item 7A.  Quantitative and QualitativeDisclosures About Market Risk**

*MarketRisk*

    The principal objectivesof our asset/liability management activities are to minimize debtand maximize net investment income, while maintaining acceptablelevels of interest rate risk and facilitating our fundingneeds.  Our net investment income and interest expense aresubject to the risk of interest rate fluctuations.  Tomitigate the impact of fluctuations in interest rates, we managethe structure of the maturity of debt and investments.  As ofDecember 31, 2001, we did not hold any material amounts ofmarketable securities.  The amount of marketable securities wehold fluctuates based upon our cash needs, including the use of ouravailable cash resources to fund acquisitions.  As a policymatter, we invest cash in excess of our cash needs for limitedperiods in cash equivalents and available-for-saleinvestments.

    The following tableprovides information about our financial instruments that aresensitive to changes in interest rates as of December 31,2001.  For debt obligations, the table presents principal cashflows and related weighted average interest rates by expectedmaturity dates.  For terms relating to our long-term debt, seeNote 9 of the notes to the accompanying consolidated financialstatements.

|                                                                                                                  |                                       |   | **2002** |   |   | **2003** |   |   | **2004** |   |   | **2005** |   |   | **2006** |   |   | **Beyond** |   |   | **Total** |   |   | **Fair Value** |   |
|-----------------------------------------------------------------------------------------------------------------------|---------------------------------------|---|----------|---|---|----------|---|---|----------|---|---|----------|---|---|----------|---|---|------------|---|---|-----------|---|---|----------------|---|
|                                                                                                                  |                                       |   |          |   |   |          |   |   |          |   |   |          |   |   |          |   |   |            |   |   |           |   |   |                |   |
|                                                                                                                  | **(inthousands, except percentages)** |   |
| Assets:  None Liabilities: Long-term debt including debt      due within one year: |                                  |   |
| Fixed rate                                                                                                            |                                       | $ | 1,413    |   | $ | 948      |   | $ | 963      |   | $ | 416      |   | $ | 540      |   | $ | 2,745      |   | $ | 7,025     |   | $ | 7,025          |   |
| Average interestrate                                                                                                  |                                       |   | 7.56     | % |   | 8.33     | % |   | 8.32     | % |   | 8.06     | % |   | 8.58     | % |   | 6.97       | % |   | 7.65      | % |   | 7.65           | % |
| Variable rate(1)                                                                                                      |                                       | $ | 12,813   |   | $ | 16,562   |   | $ | 20,313   |   | $ | 24,062   |   | $ | 182,500  |   | $ | 73,750     |   | $ | 330,000   |   | $ | 330,000        |   |
| Average interestrate                                                                                                  |                                       |   | 6.55     | % |   | 7.28     | % |   | 7.28     | % |   | 7.28     | % |   | 7.28     | % |   | 7.28       | % |   | 7.25      | % |   | 7.25           | % |
| HIGH TIDES (2)                                                                                                        |                                       | $ | —  |   | $ | —  |   | $ | —  |   | $ | —  |   | $ | —  |   | $ | 250,000    |   | $ | 250,000   |   | $ | 250,000        |   |
| Fixed rate                                                                                                            |                                       |   | —  | % |   | —  | % |   | —  | % |   | —  | % |   | —  | % |   | 5.75       | % |   | 5.75      | % |   | 5.75           | % |

(1)  Maturitiesassume extension of the revolving portion of the Company's seniorcredit agreement to the end of the term loan maturities.  SeeNote 9 in the notes to the accompanying consolidated financialstatements.

(2)  The HIGHTIDES has a remarketing feature beginning approximately five yearsafter the date of issuance, at which time we may elect to refinanceor retire the HIGH TIDES.  See Note 9 to the accompanyingconsolidated financial statements.

**Item 8.  Financial Statementsand Supplementary Data**

**Index to FinancialStatements and Financial Statement Schedule**

| ** **                                                                                                                 | ** ** | **Page******
**** |
|----------------------------------------------------------------------------------------------------------------------------|------------|-------------------|
| Report of Independent PublicAccountants                                                                                    |       | 52                |
| FinancialStatements:                                                                                                       |       |                   |
|    Consolidated Statements of Operations                                                                    |       | 53                |
|    Consolidated Balance Sheets                                                                              |       | 54                |
|    Consolidated Statements of Cash Flows                                                                    |       | 55                |
|    Consolidated Statements of Stockholders'Equity                                                           |       | 56                |
|    Notes to Consolidated Financial Statements                                                               |       | 57                |
| Supporting Financial Statement Schedule Covered by theForegoing    Report of Independent PublicAccountants: |       |                   |
| Schedule II — Valuation and QualifyingAccounts                                                                  |       | 103               |

****

**REPORT OF INDEPENDENT PUBLICACCOUNTANTS**

To The TitanCorporation:

    Wehave audited the accompanying consolidated balance sheets of TheTitan Corporation (a Delaware corporation) and subsidiaries as ofDecember 31, 2001 and 2000, and the related consolidatedstatements of operations, stockholders' equity and cash flows foreach of the three years in the period ended December 31,2001.  These financial statements and the schedule referred tobelow are the responsibility of the Company's management.  Ourresponsibility is to express an opinion on these financialstatements and schedule based on our audits. 

    Weconducted our audits in accordance with auditing standardsgenerally accepted in the United States.  Those standardsrequire that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free ofmaterial misstatement.  An audit includes examining, on a testbasis, evidence supporting the amounts and disclosures in thefinancial statements.  An audit also includes assessing theaccounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statementpresentation.  We believe that our audits provide a reasonablebasis for our opinion. 

    Inour opinion, the financial statements referred to above presentfairly, in all material respects, the financial position of TheTitan Corporation and subsidiaries as of December 31, 2001 and2000, and the results of their operations and their cash flows foreach of the three years in the period ended December 31, 2001in conformity with accounting principles generally accepted in theUnited States. 

    Our audits were made forthe purpose of forming an opinion on the basic financial statementstaken as a whole.  The schedule listed in the index tofinancial statements and financial statement schedules is presentedfor purposes of complying with the Securities and ExchangeCommission's rules and is not part of the basic financialstatements.  This schedule has been subjected to the auditingprocedures applied in our audit of the basic financial statementsand, in our opinion, fairly states in all material respects thefinancial data required to be set forth therein in relation to thebasic financial statements taken as a whole. 

ARTHUR ANDERSENLLP

San Diego,CaliforniaMarch 1, 2002 (except with respect to the matters discussedin       Note 15, as to which the dateis May 23, 2002)

**THE TITAN CORPORATIONCONSOLIDATED STATEMENTS OF OPERATIONS(As Restated, See Note 1)(In thousands, except per share data)**

| ** **                                                                                                              | ** ** | **For theYears Ended December 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------|------------|
|                                                                                                                         |            |                                          |            |
|                                                                                                                         |            | **2001**                                 |            | **2000** |  | **1999** |  |
|                                                                                                                         |            |                                          |            |  |  |  |  |
| Revenues                                                                                                                |       | $                                        | 1,084,407  |   | $ | 941,213 |   | $ | 768,648 |   |
|                                                                                                                         |            |                                          |            |  |  |  |  |
| Costs andexpenses:                                                                                                      |       |                                     |       |   |   |   |   |   |   |   |
|    Cost ofrevenues                                                                                       |       |                                     | 819,589    |   |   | 708,119 |   |   | 584,436 |   |
|    Selling,general and administrative expense                                                            |       |                                     | 190,969    |   |   | 167,672 |   |   | 122,425 |   |
|    Researchand development expense                                                                       |       |                                     | 11,101     |   |   | 9,624 |   |   | 6,681 |   |
|    Valuation allowance foraccounts receivable                                                            |       |                                     | —    |   |   | 10,000 |   |   | — |   |
|    Gain onsale of IPivot                                                                                 |       |                                     | —    |   |   | (2,140 | ) |   | (41,788 | ) |
|    Acquisition and integrationrelated charges and other                                                  |       |                                     | 30,371     |   |   | 28,820 |  |   | 13,102 |  |
|                                                                                                                         |            |                                          |            |  |  |  |  |
|       Total costsand expenses                                                             |       |                                     | 1,052,030  |   |   | 922,095 |   |   | 684,856 |   |
|                                                                                                                         |            |                                          |            |  |  |  |  |
| Operatingprofit                                                                                                         |       |                                     | 32,377     |   |   | 19,118 |   |   | 83,792 |   |
| Interestexpense                                                                                                         |       |                                     | (36,672    | ) |   | (35,627 | ) |   | (18,676 | ) |
| Interest income                                                                                                         |       |                                     | 1,798      |   |   | 3,568 |   |   | 1,341 |   |
|                                                                                                                         |            |                                          |            |  |  |  |  |
| Income (loss) fromcontinuing operations before income    taxes, minority interests and extraordinaryloss |       |                                     | (2,497     | ) |   | (12,941 | ) |   | 66,457 |   |
| Income tax provision(benefit)                                                                                           |       |                                     | 3,752      |  |   | (4,918 | ) |   | 25,313 |   |
|                                                                                                                         |            |                                          |            |  |  |  |  |
| Income (loss) fromcontinuing operations before minority    interests and extraordinary loss              |       |                                     | (6,249     | ) |   | (8,023 | ) |   | 41,144 |   |
| Minorityinterests                                                                                                       |       |                                     | 4,729      |   |   | 2,566 |   |   | — |   |
|                                                                                                                         |            |                                          |            |  |  |  |  |
| Income (loss) fromcontinuing operations before extraordinary loss                                                       |       |                                     | (1,520     | ) |   | (5,457 | ) |   | 41,144 |   |
| Loss from discontinuedoperations, net of tax benefit of    $10,537, $585 and $1,044                      |       |                                     | (97,094    | ) |   | (8,527 | ) |   | (3,387 | ) |
|                                                                                                                         |            |                                          |            |  |  |  |  |
| Income (loss) beforeextraordinary loss                                                                                  |       |                                     | (98,614    | ) |   | (13,984 | ) |   | 37,757 |   |
| Extraordinary loss fromearly extinguishments of debt, net    of tax benefit of $1,541                    |       |                                     | —    |  |   | (4,744 | ) |   | — |   |
|                                                                                                                         |            |                                          |            |  |  |  |  |
| Net income(loss)                                                                                                        |       |                                     | (98,614    | ) |   | (18,728 | ) |   | 37,757 |  |
| Dividend requirements onpreferred stock                                                                                 |       |                                     | (690       | ) |   | (692 | ) |   | (695 | ) |
|                                                                                                                         |            |                                          |            |  |  |  |  |
| Net income (loss)applicable to common stock                                                                             |       | $                                        | (99,304    | ) | $ | (19,420 | ) | $ | 37,062 |  |
|                                                                                                                         |            |                                          |            |  |  |  |  |
| Basic earnings (loss) pershare:                                                                                         |       |                                     |       |   |   |   |   |   |   |   |
|    Income(loss) from continuing operations                                                               |       | $                                        | (0.09      | ) | $ | (0.16 | ) | $ | 0.86 |   |
|    Lossfrom discontinued operations, net of taxes                                                        |       |                                     | (1.67      | ) |   | (0.18 | ) |   | (0.07 | ) |
|    Extraordinary loss from earlyextinguishments of debt, net of taxes                                    |       |                                     | —    |  |   | (0.09 | ) |   | — |   |
|                                                                                                                         |            |                                          |            |  |  |  |  |
|    Netincome (loss)                                                                                      |       | $                                        | (1.76      | ) | $ | (0.43 | ) | $ | 0.79 |  |
|                                                                                                                         |            |                                          |            |  |  |  |  |
|    Weightedaverage shares                                                                                |       |                                     | 58,793     |   |   | 52,717 |   |   | 47,094 |   |
|                                                                                                                         |            |                                          |            |  |  |  |  |
| Diluted earnings (loss)per share:                                                                                       |       |                                     |       |   |   |   |   |   |   |   |
|    Income(loss) from continuing operations                                                               |       | $                                        | (0.09      | ) | $ | (0.16 | ) | $ | 0.76 |   |
|    Lossfrom discontinued operations, net of taxes                                                        |       |                                     | (1.67      | ) |   | (0.19 | ) |   | (0.06 | ) |
|    Extraordinary loss from earlyextinguishments of debt, net of taxes                                    |       |                                     | —    |  |   | (0.09 | ) |   | — |   |
|                                                                                                                         |            |                                          |            |  |  |  |  |
|    Netincome (loss)                                                                                      |       | $                                        | (1.76      | ) | $ | (0.44 | ) | $ | 0.70 |  |
|                                                                                                                         |            |                                          |            |  |  |  |  |
|    Weightedaverage shares                                                                                |       |                                     | 58,793     |   |   | 52,717 |   |   | 54,136 |   |
|                                                                                                                         |            |                                          |            |  |  |  |  |

Theaccompanying notes are an integral part of these consolidatedfinancial statements.

**THE TITAN CORPORATIONCONSOLIDATED BALANCE SHEETS(As Restated, See Note 1)(In thousands, except share and per share data)**

| ** **                                                                                                                                                                             | ** ** | **As ofDecember 31,****** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                                                                                                                                             | ** ** |                                | ** ** |
| ** **                                                                                                                                                                             | ** ** | **2001**                       |            | **2000** | ** ** |
| ** **                                                                                                                                                                             | ** ** |                                | ** ** |  | ** ** |
| **Assets**                                                                                                                                                                             |       |
| Current Assets:                                                                                                                                                                        |       |                           |       |   |   |   |   |
|    Cash andcash equivalents                                                                                                                                             |       | $                              | 28,957     |   | $ | 27,291 |   |
|    Accountsreceivable — net                                                                                                                                  |       |                           | 374,728    |   |   | 258,504 |   |
|    Inventories                                                                                                                                                          |       |                           | 29,112     |   |   | 19,693 |   |
|    Prepaidexpenses and other                                                                                                                                            |       |                           | 19,168     |   |   | 25,176 |   |
|    Deferredincome taxes                                                                                                                                                 |       |                           | 53,941     |   |   | 24,741 |   |
|    Currentassets of discontinued operations                                                                                                                             |       |                           | 67,841     |   |   | 52,614 |   |
| ** **                                                                                                                                                                             | ** ** |                                | ** ** |  | ** ** |
|       Total currentassets                                                                                                                                |       |                           | 573,747    |   |   | 408,019 |   |
|                                                                                                                                                                                        |       |                           |            |   |   |  |   |
| Property andequipment — net                                                                                                                                                 |       |                           | 99,115     |   |   | 75,482 |   |
| Long-term contractreceivables                                                                                                                                                          |       |                           | 93,143     |   |   | 59,913 |   |
| Goodwill — net ofaccumulated amortization of $50,470 and $30,646                                                                                                                 |       |                           | 441,647    |   |   | 288,997 |   |
| Other assets —net                                                                                                                                                           |       |                           | 137,144    |   |   | 45,508 |   |
| Long-term assets ofdiscontinued operations                                                                                                                                             |       |                           | 115,606    |   |   | 86,152 |   |
| ** **                                                                                                                                                                             | ** ** |                                | ** ** |  | ** ** |
|       Totalassets                                                                                                                                        |       | $                              | 1,460,402  |   | $ | 964,071 |   |
| ** **                                                                                                                                                                             | ** ** |                                | ** ** |  | ** ** |
| **Liabilities and Stockholders'Equity**                                                                                                                                                |       |
| CurrentLiabilities:                                                                                                                                                                    |       |                           |       |   |   |   |   |
|    Currentportion of amounts outstanding under line of credit                                                                                                           |       | $                              | 12,813     |   | $ | 2,500 |   |
|    Accountspayable                                                                                                                                                      |       |                           | 90,073     |   |   | 66,227 |   |
|    Acquisition debt                                                                                                                                                     |       |                           | 2,000      |   |   | 4,000 |   |
|    Currentportion of long-term debt                                                                                                                                     |       |                           | 1,413      |   |   | 991 |   |
|    Accruedcompensation and benefits                                                                                                                                     |       |                           | 68,762     |   |   | 42,594 |   |
|    Otheraccrued liabilities                                                                                                                                             |       |                           | 76,478     |   |   | 51,751 |   |
|    Incometaxes payable                                                                                                                                                  |       |                           | 1,174      |   |   | 804 |   |
|    Currentliabilities of discontinued operations                                                                                                                        |       |                           | 42,422     |   |   | 31,010 |   |
| ** **                                                                                                                                                                             | ** ** |                                | ** ** |  | ** ** |
|       Total currentliabilities                                                                                                                           |       |                           | 295,135    |   |   | 199,877 |   |
| ** **                                                                                                                                                                             | ** ** |                                |            |  | ** ** |
| Long-term portion ofamounts outstanding under line of credit                                                                                                                           |       |                           | 317,187    |   |   | 260,625 |   |
| ** **                                                                                                                                                                             | ** ** |                                | ** ** |  | ** ** |
| Other long-termdebt                                                                                                                                                                    |       |                           | 5,612      |   |   | 1,585 |   |
| ** **                                                                                                                                                                             | ** ** |                                | ** ** |  | ** ** |
| Non-recoursedebt                                                                                                                                                                       |       |                           | 42,456     |   |   | 36,680 |   |
| ** **                                                                                                                                                                             | ** ** |                                | ** ** |  | ** ** |
| Other non-currentliabilities                                                                                                                                                           |       |                           | 44,861     |   |   | 36,108 |   |
| ** **                                                                                                                                                                             | ** ** |                                | ** ** |  | ** ** |
| Non-current liabilities ofdiscontinued operations                                                                                                                                      |       |                           | 8,170      |   |   | 513 |   |
| ** **                                                                                                                                                                             | ** ** |                                | ** ** |  | ** ** |
| Commitments andcontingencies                                                                                                                                                           |       |                           |       |   |   |   |   |
| Company obligatedmandatory redeemable convertible preferred securities of asubsidiary trust    whose sole assets are senior subordinatedconvertible debentures of Titan |       |                           | 250,000    |   |   | 250,000 |   |
| ** **                                                                                                                                                                             | ** ** |                                | ** ** |  | ** ** |
| Minorityinterests                                                                                                                                                                      |       |                           | 23         |   |   | 11,267 |   |
| ** **                                                                                                                                                                             | ** ** |                                | ** ** |  | ** ** |
| Stockholders'Equity:                                                                                                                                                                   |       |                           |       |   |   |   |   |
|    Preferred stock: $1 par value,authorized 5,000,000 shares:                                                                                                           |       |                           |       |   |   |   |   |
|       Cumulativeconvertible, $13,800 liquidation preference:                                                                                             |       |                           |       |   |   |   |   |
|          689,678and 689,978 shares issued and outstanding                                                                                 |       |                           | 690        |   |   | 690 |   |
|       Series Ajunior participating: designated 1,000,000 authorizedshares:  None issued                                                   |       |                           | —    |   |   | — |   |
|    Commonstock: $.01 par value, authorized 200,000,000 shares, issued       andoutstanding:  70,128,582 and 54,068,167 shares   |       |                           | 701        |   |   | 541 |   |
|    Capitalin excess of par value                                                                                                                                        |       |                           | 588,184    |   |   | 191,358 |   |
|    Deferredcompensation                                                                                                                                                 |       |                           | (34,519    | ) |   | (13,882 | ) |
|    Retainedearnings (deficit)                                                                                                                                           |       |                           | (57,239    | ) |   | (9,960 | ) |
|    Accumulated other comprehensiveincome                                                                                                                                |       |                           | 128        |   |   | 108 |  |
|    Treasurystock (372,050 and 787,885 shares), at cost                                                                                                                  |       |                           | (987       | ) |   | (1,439 | ) |
| ** **                                                                                                                                                                             | ** ** |                                | ** ** |  | ** ** |
|       Totalstockholders' equity                                                                                                                          |       |                           | 496,958    |   |   | 167,416 |   |
| ** **                                                                                                                                                                             | ** ** |                                | ** ** |  | ** ** |
| Total liabilities andstockholders' equity                                                                                                                                              |       | $                              | 1,460,402  |   | $ | 964,071 |   |
| ** **                                                                                                                                                                             | ** ** |                                | ** ** |  | ** ** |

Theaccompanying notes are an integral part of these consolidatedfinancial statements.**THE TITANCORPORATIONCONSOLIDATED STATEMENTS OF CASH FLOWS(As Restated, See Note 1)(In thousands of dollars)**
| ** **                                                                                                                                                                         | ** ** | **For theYears Ended December 31,****** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                                                                                                                                                         | ** ** |                                              | ** ** |
|                                                                                                                                                                                    |            | **2001**                                     |            | **2000** |  | **1999** |  |
|                                                                                                                                                                                    |            |                                              |            |  |  |  |  |
| **Cash Flows FromOperating Activities:**                                                                                                                                           |       |                                         |       |   |   |   |   |   |   |   |
| Income (loss) fromcontinuing operations                                                                                                                                            |       | $                                            | (1,520     | ) | $ | (5,457 | ) | $ | 41,144 |   |
| Adjustments to reconcileincome (loss) from continuing operations to net cash    provided by (used for) continuing operations,net of effects of businesses acquired: |       |                                         |       |   |   |   |   |   |   |   |
|       Depreciationand amortization                                                                                                                   |       |                                         | 30,671     |   |   | 26,743 |   |   | 19,628 |   |
|       Write-offsdue to asset impairments                                                                                                             |       |                                         | 14,640     |   |   | — |   |   | — |   |
|       Deferredincome taxes and other                                                                                                                 |       |                                         | 1,314      |  |   | (6,157 | ) |   | 6,940 |  |
|       Write-off ofcapitalized software development costs                                                                                             |       |                                         | —    |   |   | — |   |   | 3,893 |   |
|       Minorityinterests                                                                                                                              |       |                                         | (4,729     | ) |   | (2,566 | ) |   | — |   |
|       Poolings ofinterests                                                                                                                           |       |                                         | —    |   |   | 1,352 |   |   | — |  |
|       Deferredcompensation charges                                                                                                                   |       |                                         | 4,282      |   |   | 5,538 |   |   | 103 |   |
|       Changes inoperating assets and liabilities, net of effects of businessesacquired:                                                              |       |                                         |       |   |   |   |   |   |   |   |
|          Accountsreceivable                                                                                                           |       |                                         | (70,185    | ) |   | (37,887 | ) |   | (48,033 | ) |
|          Inventories                                                                                                                  |       |                                         | (6,307     | ) |   | (5,602 | ) |   | (4,644 | ) |
|          Prepaidexpenses and other assets                                                                                             |       |                                         | 7,521      |  |   | (16,087 | ) |   | (10,201 | ) |
|          Accountspayable                                                                                                              |       |                                         | 9,672      |   |   | 12,872 |   |   | 1,994 |  |
|          Incometaxes payable/refundable                                                                                               |       |                                         | (37        | ) |   | (10,505 | ) |   | 9,137 |   |
|          Accruedcompensation and benefits                                                                                             |       |                                         | 6,257      |   |   | 425 |   |   | 1,849 |   |
|          Otherliabilities                                                                                                             |       |                                         | (4,626     | ) |   | (7,870 | ) |   | 901 |  |
|                                                                                                                                                                                    |            |                                              |            |  |  |  |  |
| Net cash provided by (usedfor) continuing operations                                                                                                                               |       |                                         | (13,047    | ) |   | (45,201 | ) |   | 22,711 |   |
|                                                                                                                                                                                    |            |                                              |            |  |  |  |  |
| Loss from discontinuedoperations                                                                                                                                                   |       |                                         | (97,094    | ) |   | (8,527 | ) |   | (3,387 | ) |
| Deferred compensationcharge attributable to discontinued operations                                                                                                                |       |                                         | 54,270     |   |   | 649 |   |   | — |   |
| Issuance of stock insubsidiary                                                                                                                                                     |       |                                         | 61,327     |   |   | — |   |   | — |   |
| Minority interestattributable to discontinued operations                                                                                                                           |       |                                         | (12,262    | ) |   | (1,561 | ) |   | — |   |
| Changes in net assets andliabilities of discontinued operations                                                                                                                    |       |                                         | (25,612    | ) |   | (68,197 | ) |   | (42,658 | ) |
|                                                                                                                                                                                    |            |                                              |            |  |  |  |  |
| Net cash used fordiscontinued operations                                                                                                                                           |       |                                         | (19,371    | ) |   | (77,636 | ) |   | (46,045 | ) |
|                                                                                                                                                                                    |            |                                              |            |  |  |  |  |
| Net cash used foroperating activities                                                                                                                                              |       |                                         | (32,418    | ) |   | (122,837 | ) |   | (23,334 | ) |
|                                                                                                                                                                                    |            |                                              |            |  |  |  |  |
| **Cash Flows FromInvesting Activities:**                                                                                                                                           |       |                                         |       |   |   |   |   |   |   |   |
| Capitalexpenditures                                                                                                                                                                |       |                                         | (24,419    | ) |   | (41,756 | ) |   | (13,601 | ) |
| Payments for purchases ofbusinesses, net of cash acquired                                                                                                                          |       |                                         | (87,157    | ) |   | (95,158 | ) |   | (81,550 | ) |
| Capitalized softwaredevelopment costs                                                                                                                                              |       |                                         | (7,826     | ) |   | (1,966 | ) |   | (707 | ) |
| Proceeds from sales ofinvestments                                                                                                                                                  |       |                                         | 3,217      |   |   | — |   |   | — |   |
| Otherinvestments                                                                                                                                                                   |       |                                         | (24,105    | ) |   | (10,752 | ) |   | (5,400 | ) |
| Other                                                                                                                                                                              |       |                                         | 232        |   |   | 717 |   |   | 1,440 |   |
|                                                                                                                                                                                    |            |                                              |            |  |  |  |  |
| Net cash used forinvesting activities                                                                                                                                              |       |                                         | (140,058   | ) |   | (148,915 | ) |   | (99,818 | ) |
|                                                                                                                                                                                    |            |                                              |            |  |  |  |  |
| **Cash Flows FromFinancing Activities:**                                                                                                                                           |       |                                         |       |   |   |   |   |   |   |   |
| Issuance of redeemableconvertible preferred securities                                                                                                                             |       |                                         | —    |   |   | 250,000 |   |   | — |   |
| Additions todebt                                                                                                                                                                   |       |                                         | 66,875     |   |   | 154,085 |   |   | 163,158 |   |
| Retirements ofdebt                                                                                                                                                                 |       |                                         | (38,296    | ) |   | (109,262 | ) |   | (39,078 | ) |
| Deferred debt issuancecosts                                                                                                                                                        |       |                                         | (1,600     | ) |   | (19,351 | ) |   | (3,494 | ) |
| Proceeds from stockissuances                                                                                                                                                       |       |                                         | 147,579    |   |   | 5,413 |   |   | 3,942 |   |
| Issuance of stock bysubsidiary                                                                                                                                                     |       |                                         | 42         |   |   | 6,373 |   |   | — |   |
| Dividends paid                                                                                                                                                                     |       |                                         | (690       | ) |   | (692 | ) |   | (695 | ) |
| Purchase ofstock                                                                                                                                                                   |       |                                         | —    |  |   | (173 | ) |   | (487 | ) |
| Other                                                                                                                                                                              |       |                                         | 212        |  |   | (960 | ) |   | (560 | ) |
|                                                                                                                                                                                    |            |                                              |            |  |  |  |  |
| Net cash provided byfinancing activities                                                                                                                                           |       |                                         | 174,122    |   |   | 285,433 |   |   | 122,786 |   |
|                                                                                                                                                                                    |            |                                              |            |  |  |  |  |
| Effect of exchange ratechanges on cash                                                                                                                                             |       |                                         | 20         |   |   | 141 |  |   | (33 | ) |
|                                                                                                                                                                                    |            |                                              |            |  |  |  |  |
| Net increase (decrease) incash and cash equivalents                                                                                                                                |       |                                         | 1,666      |   |   | 13,822 |  |   | (399 | ) |
| Cash and cash equivalentsat beginning of year                                                                                                                                      |       |                                         | 27,291     |   |   | 13,469 |  |   | 13,868 |  |
|                                                                                                                                                                                    |            |                                              |            |  |  |  |  |
| Cash and cash equivalentsat end of year                                                                                                                                            |       | $                                            | 28,957     |   | $ | 27,291 |   | $ | 13,469 |   |
|                                                                                                                                                                                    |            |                                              |            |  |  |  |  |

Theaccompanying notes are an integral part of these consolidatedfinancial statements.

**THE TITAN CORPORATIONCONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITYFOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999(As Restated, See Note 1)(In thousands of dollars, except per share data)**

|                                                                                          |   |        | **Cumulative   Convertible   Preferred Stock** |   |        | **Common Stock** |   |        | **CapitalIn Excess of Par Value** |   |        | **DeferredCompen- sation** |   |        | **Retained Earnings   (Deficit)** |   |        | **Accumulated   Other Comprehensive   Income** |   |        | **Treasury   Stock** |   |        | **Total** |   |
|-----------------------------------------------------------------------------------------------|--------|--------|----------------------------------------------------------|--------|--------|------------------|--------|--------|-----------------------------------|--------|--------|----------------------------|--------|--------|----------------------------------------|--------|--------|----------------------------------------------------------|--------|--------|---------------------------|--------|--------|-----------|--------|
|                                                                                               |        |        |                                                          |        |        |                  |        |        |                                   |        |        |                            |        |        |                                        |        |        |
| Balances at December 31, 1998                                                            |   | $      | 695                                                      |   | $      | 435              |   | $      | 131,674                           |   | $      | —                    |   | $      | (31,785                                | )      | $      | —                                                  |   | $      | (2,579                    | )      | $      | 98,440    |   |
| Conversion of subordinateddebt                                                                |   |   |                                                     |   |   | 79               |   |   | 26,191                            |   |   |                       |   |   |                                   |   |   |                                                     |   |   |                      |   |   | 26,270    |   |
| Exercise of stock optionsand other                                                            |   |   |                                                     |   |   | 11               |   |   | 3,940                             |   |   |                       |   |   |                                   |   |   |                                                     |   |   | (57                       | )      |   | 3,894     |   |
| Shares contributed toemployee benefit plans                                                   |   |   |                                                     |   |   |             |   |   | (364                              | )      |   |                       |   |   |                                   |   |   |                                                     |   |   |                      |   |   | (364      | )      |
| Deferred compensation,related to the    issuance of stock options         |   |   |                                                     |   |   |             |   |   | 841                               |   |   | (738                       | )      |   |                                   |   |   |                                                     |   |   |                      |   |   | 103       |   |
| Purchase ofstock                                                                              |   |   |                                                     |   |   |             |   |   | (487                              | )      |   |                       |   |   |                                   |   |   |                                                     |   |   |                      |   |   | (487      | )      |
| Income tax benefit fromemployee stock    transactions                          |   |   |                                                     |   |   |             |   |   | 892                               |   |   |                       |   |   |                                   |   |   |                                                     |   |   |                      |   |   | 892       |   |
| Distribution toshareholders of net liability of    discontinued operations     |   |   |                                                     |   |   |             |   |   | 565                               |   |   |                       |   |   |                                   |   |   |                                                     |   |   |                      |   |   | 565       |   |
| Dividends on preferredstock — Cumulative    Convertible, $1.00 per share |   |   |                                                     |   |   |             |   |   |                              |   |   |                       |   |   | (695                                   | )      |   |                                                     |   |   |                      |   |   | (695      | )      |
| Foreign currencytranslation adjustment                                                        |   |   |                                                     |   |   |             |   |   |                              |   |   |                       |   |   | 6                                      |   |   | (33                                                      | )      |   |                      |   |   | (27       | )      |
| Net income                                                                                    |   |   |                                                     |   |   |             |   |   |                              |   |   |                       |   |   | 37,757                                 |   |   |                                                     |   |   |                      |   |   | 37,757    |   |
|                                                                                               |        |        |                                                          |        |        |                  |        |        |                                   |        |        |                            |        |        |                                        |        |        |
| Balances at December 31, 1999                                                            |   |   | 695                                                      |   |   | 525              |   |   | 163,252                           |   |   | (738                       | )      |   | 5,283                                  |   |   | (33                                                      | )      |   | (2,636                    | )      |   | 166,348   |   |
| Poolingadjustments                                                                            |   |   |                                                     |   |   |             |   |   |                              |   |   |                       |   |   | 1,352                                  |   |   |                                                     |   |   |                      |   |   | 1,352     |   |
| Exercise of stock optionsand other                                                            |   |   |                                                     |   |   | 16               |   |   | 3,577                             |   |   |                       |   |   |                                   |   |   |                                                     |   |   |                      |   |   | 3,593     |   |
| Proceeds from stockissuances                                                                  |   |   |                                                     |   |   |             |   |   | 1,820                             |   |   |                       |   |   |                                   |   |   |                                                     |   |   |                      |   |   | 1,820     |   |
| Issuance of stock forequity interest                                                          |   |   |                                                     |   |   |             |   |   | 900                               |   |   |                       |   |   |                                   |   |   |                                                     |   |   |                      |   |   | 900       |   |
| Deferred compensation,related to the    issuance of  stock options        |   |   |                                                     |   |   |             |   |   | 19,331                            |   |   | (19,331                    | )      |   |                                   |   |   |                                                     |   |   |                      |   |   | —   |   |
| Amortization of deferredcompensation                                                          |   |   |                                                     |   |   |             |   |   |                              |   |   | 6,187                      |   |   |                                   |   |   |                                                     |   |   |                      |   |   | 6,187     |   |
| Purchase of treasurystock                                                                     |   |   |                                                     |   |   |             |   |   | (173                              | )      |   |                       |   |   |                                   |   |   |                                                     |   |   |                      |   |   | (173      | )      |
| Shares contributed toemployee benefit plans                                                   |   |   |                                                     |   |   |             |   |   | 1,167                             |   |   |                       |   |   |                                   |   |   |                                                     |   |   | 1,197                     |   |   | 2,364     |   |
| Foreign currencytranslation adjustment                                                        |   |   |                                                     |   |   |             |   |   |                              |   |   |                       |   |   |                                   |   |   | 141                                                      |   |   |                      |   |   | 141       |   |
| Conversion of preferredstock                                                                  |   |   | (5                                                       | )      |   |             |   |   | 5                                 |   |   |                       |   |   |                                   |   |   |                                                     |   |   |                      |   |   | —   |   |
| Income tax benefit fromemployee stock    transactions                          |   |   |                                                     |   |   |             |   |   | 1,479                             |   |   |                       |   |   |                                   |   |   |                                                     |   |   |                      |   |   | 1,479     |   |
| Gain related to issuanceof stock in subsidiary                                                |   |   |                                                     |   |   |             |   |   |                              |   |   |                       |   |   | 2,825                                  |   |   |                                                     |   |   |                      |   |   | 2,825     |   |
| Dividends on preferredstock — Cumulative    Convertible, $1.00 per share |   |   |                                                     |   |   |             |   |   |                              |   |   |                       |   |   | (692                                   | )      |   |                                                     |   |   |                      |   |   | (692      | )      |
| Net loss                                                                                      |   |   |                                                     |   |   |             |   |   |                              |   |   |                       |   |   | (18,728                                | )      |   |                                                     |   |   |                      |   |   | (18,728   | )      |
|                                                                                               |        |        |                                                          |        |        |                  |        |        |                                   |        |        |                            |        |        |                                        |        |        |
| Balances at December 31, 2000                                                                 |        |        | 690                                                      |        |        | 541              |        |        | 191,358                           |        |        | (13,882                    | )      |        | (9,960                                 | )      |        | 108                                                      |        |        | (1,439                    | )      |        | 167,416   |        |
| Proceeds from issuance ofstock                                                                |        |        |                                                     |        |        | 80               |        |        | 136,102                           |        |        |                       |        |        |                                        |        |        |                                                          |        |        |                      |        |        | 136,182   |        |
| Issuance of stock foracquisitions                                                             |        |        |                                                     |        |        | 40               |        |        | 144,724                           |        |        |                       |        |        |                                        |        |        |                                                          |        |        |                      |        |        | 144,764   |        |
| Exercise of stock optionsand other                                                            |        |        |                                                     |        |        | 40               |        |        | 11,749                            |        |        |                       |        |        |                                        |        |        |                                                          |        |        | (392                      | )      |        | 11,397    |        |
| Deferred compensation,related to the    issuance of stock options              |        |        |                                                     |        |        |                  |        |        | 78,725                            |        |        | (78,725                    | )      |        |                                        |        |        |                                                          |        |        |                           |        |        | —   |        |
| Amortization of deferredcompensation                                                          |        |        |                                                     |        |        |             |        |        |                                   |        |        | 58,552                     |        |        |                                        |        |        |                                                          |        |        |                           |        |        | 58,552    |        |
| Foreign currencytranslation adjustment                                                        |        |        |                                                          |        |        |                  |        |        |                                   |        |        |                            |        |        |                                        |        |        | 20                                                       |        |        |                           |        |        | 20        |        |
| Valuation of optionsassumed in acquisitions                                                   |        |        |                                                          |        |        |                  |        |        | 16,272                            |        |        | (464                       | )      |        |                                        |        |        |                                                          |        |        |                           |        |        | 15,808    |        |
| Income tax benefit fromemployee stock    transactions                          |        |        |                                                          |        |        |                  |        |        | 5,157                             |        |        |                            |        |        |                                        |        |        |                                                          |        |        |                           |        |        | 5,157     |        |
| Gain related to issuanceof stock in subsidiary                                                |        |        |                                                          |        |        |                  |        |        |                                   |        |        |                            |        |        | 52,025                                 |        |        |                                                          |        |        |                           |        |        | 52,025    |        |
| Shares contributed toemployee benefit plans                                                   |        |        |                                                          |        |        |                  |        |        | 4,097                             |        |        |                            |        |        |                                        |        |        |                                                          |        |        | 844                       |        |        | 4,941     |        |
| Dividends on preferredstock — Cumulative    Convertible, $1.00 per share |        |        |                                                          |        |        |                  |        |        |                                   |        |        |                            |        |        | (690                                   | )      |        |                                                          |        |        |                           |        |        | (690      | )      |
| Net loss                                                                                      |        |        |                                                          |        |        |                  |        |        |                                   |        |        |                            |        |        | (98,614                                | )      |        |                                                          |        |        |                           |        |        | (98,614   | )      |
|                                                                                               |        |        |                                                          |        |        |                  |        |        |                                   |        |        |                            |        |        |                                        |        |        |
| Balances at December 31,2001                                                                  |        | $      | 690                                                      |        | $      | 701              |        | $      | 588,184                           |        | $      | (34,519                    | )      | $      | (57,239                                | )      | $      | 128                                                      |        | $      | (987                      | )      | $      | 496,958   |        |
|                                                                                               |        |        |                                                          |        |        |                  |        |        |                                   |        |        |                            |        |        |                                        |        |        |

Theaccompanying notes are an integral part of these consolidatedfinancial statements.

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

**Note1.  Summary of Significant AccountingPolicies**

***    Nature ofOperations.***  The TitanCorporation (the "Company" or "Titan") is a diversified technologycompany whose business is to create, build and launchtechnology-based businesses from technologies developed for thegovernment.  The Company groups its businesses into fivebusiness segments — Titan Systems, Titan Wireless,Software Systems (Cayenta), of which major components werediscontinued on March 1, 2002, Titan Technologies and the SureBeambusiness, which was discontinued on October 16, 2001. Titan Systems, the Company's core government business, providesinformation technology and communications solutions, services andproducts for defense, intelligence, and other U.S. and alliedgovernment agencies.  Titan Wireless provides satellite-basedand wireless-based communication services and systems which providecost-effective voice, data and Internet services in developingcountries.  Software Systems (Cayenta) is a provider ("TSP")of information technology services and software productapplications for its customers' business functions, includingretailing, finance, accounting, customer billing and collection,contract management, supply chain management and equipmentmonitoring and maintenance primarily in two verticalmarkets:  manufacturing and logistics and retail. SureBeam provides electronic food irradiation systems and servicesfor the food industry.  Titan Technologies develops commercialapplications and businesses from technologies created for thegovernment by the Company.

    During the first quarterof 2002, the Company made the decision to sell certain of itscommercial information technology operations within its Cayentasegment and the AverCom business within the Titan Technologiessegment in order to allow management to focus on operations withthe most near term growth opportunities.  As a result,Cayenta’s federal government operations are being reported inTitan Systems, and Cayenta’s remaining continuing operationsare being reported in Titan Technologies, formerly Titan’sEmerging Technologies and Businesses segment.  In accordancewith Statement of Financial Accounting Standards No. 144,“Accounting for the Impairment or Disposal of Long-livedAssets and for Long-Lived Assets to be Disposed of,” allcommercial operations that are held for sale have been reflected asdiscontinued operations for all periods presented in Titan’sconsolidated financial statements.  All prior period financialinformation has been restated to reflect the newsegments.

    OnMarch 16, 2001, SureBeam Corporation, Titan's subsidiary thatprovides electronic food irradiation systems and services,completed an initial public offering ("IPO") of 6,700,000 shares ofClass A common stock at a price of $10 per share.  OnOctober 16, 2001, Titan adopted a definitive plan to spin offSureBeam in the form of a tax-free dividend to Titan shareholderswithin the next 12 months from that date.  The plan involvesfiling a letter ruling request with the Internal Revenue Service("IRS") seeking approval of the tax-free distribution.  Titanreceived a favorable ruling in May 2002 and intends to execute thespin off in the third quarter of 2002.  Titan has historicallyreported the SureBeam business as a separate segment.  Inaccordance with Accounting Principles Board Opinion No. 30,"Reporting the Results of Operations—Reporting the Effects ofDisposal of a Segment of a Business, and Extraordinary, Unusual andInfrequently Occurring Events and Transactions," the consolidatedfinancial statements of Titan have been restated to reflectSureBeam as a discontinued business.

    The Company is involvedin a number of commercial businesses that operate in new markets,including the provision of communication services in developingcountries in the Titan Wireless segment and the discontinuedelectronic food irradiation business of SureBeam.

***    Principles ofConsolidation.***  Theconsolidated financial statements include the accounts of Titan andits subsidiaries.  All significant intercompany transactionsand balances have been eliminated.  From time to time, theCompany makes investments in joint ventures which may involveinternational locations and operations.  Management evaluatesits investment in each joint venture on an individual basis forpurposes of determining whether or not consolidation isappropriate.  Investments in such ventures are generallyconsolidated in instances where the Company retains control throughdecision-making ability and generally a greater than 50% ownershipinterest.  In the absence of such factors, the Companygenerally accounts for these investments under the cost or equitymethod, depending upon management's evaluation of the Company'sability to exercise and retain control.

    OnFebruary 25, 2000, the Company consummated a merger with AdvancedCommunication Systems, Inc.  ("ACS") in a stock-for-stock,pooling of interests transaction (see Note 2).  OnJune 26, 2000, the Company consummated a merger with AverStar,Inc. ("AverStar") in a stock-for-stock, pooling of intereststransaction (see Note 2).  The accompanying consolidatedfinancial statements have been restated to reflect theseacquisitions for all periods presented.

    ***Reclassifications***.  Certainreclassifications have been made to prior year presentations toconform to the 2001 presentation.

***    Minority Interest inSubsidiaries.***  Minorityinterest in subsidiaries consists primarily of equity securitiesissued in 2000 by the Company's subsidiary, Cayenta, Inc., which isthe operations of the Software Systems business, which includescertain components which were discontinued in March 2002, as wellas certain components which are continuing businesses, and equitysecurities issued in 2000 and 2001 by the Company's SureBeamsubsidiary.  The Company owned substantially all of the votingequity of Cayenta and SureBeam both before and after thetransactions.  The Company records minority interest toreflect the portion of the earnings or losses of majority-ownedoperations which are applicable to the minority interestpartners.  The minority interest percentages of Cayenta andSureBeam are approximately 24.3% and 19.9%, respectively, as ofDecember 31, 2001.  The minority interest portion ofSureBeam's and Cayenta’s losses from the discontinuedcomponents are reflected in the loss from discontinuedoperations.  In addition, the minority interest portion of thecontinuing components of Cayenta are reflected in continuingoperations.

***    Foreign CurrencyTranslation.***  The financialstatements of certain of the Company's foreign subsidiaries aremeasured using the local functional currency.  Assets andliabilities of these subsidiaries are translated at exchange ratesin effect as of the balance sheet date.  Revenues and expensesare translated at average rates of exchange in effect during theyear.  The resulting cumulative translation adjustments havebeen recorded as a separate component of stockholders'equity.  Foreign currency transaction gains and losses areincluded in consolidated net income.

***    Use ofEstimates.***  The preparationof financial statements in conformity with generally acceptedaccounting principles in the U.S. requires management to makeestimates and assumptions that affect the reported amounts ofassets and liabilities and disclosure of contingent assets andliabilities at the date of the financial statements and thereported amounts of revenues and expenses during the reportingperiod.  Actual results could differ from thoseestimates. 

***    RevenueRecognition.***  A majority ofthe Company's revenue, both government and commercial, is derivedfrom products manufactured and services performed undercost-reimbursement, time-and-materials, and fixed-price contractswherein revenues are generally recognized as services areperformed, using the percentage-of-completion method, whichincludes revenues recognized as units are delivered.  Totalestimated costs are based on management's assessment of costs tocomplete the project based upon evaluation of the level of workachieved and costs expended to date.  Estimated contractlosses are fully charged to operations when identified.  Titancontracts with its government customers using various cost-typecontracts.  They include cost-plus fixed fee, cost-plus awardfee, cost-plus incentive fee with incentives based upon both costand/or performance, cost-with no fee, and cost sharingcontracts.  Revenues and profits are recognized in accordancewith Accounting Research Bulletin No. 45 and SOP 81‐1. For award and incentive fee type contracts, we recognize theexpected fee to be awarded by the customer at the time such fee canbe reasonably estimated, based on factors such as our prior awardexperience and communications with the customer regarding ourperformance, including any interim performance evaluations renderedby the customer.  Revenues are recognized under fixed pricecontracts based on the percentage-of-completion basis, using thecost-to-cost or units-of-delivery methods.

    Billings in excess ofcost incurred are classified in accrued liabilities in theaccompanying consolidated balance sheet.  Amounts for allyears presented were immaterial.  Deferred revenues are alsoincluded in current liabilities.

    The Company's SoftwareSystems segment also generates revenues from licensing the rightsto use its software products primarily to end users.  Thissegment further generates revenues from post-contract support(maintenance), consulting and training services performed forcustomers who license its products.

    Revenues from softwarelicense agreements are recognized currently, provided that all ofthe following conditions are met:  a noncancellablelicense agreement has been signed, the software has been delivered,there are no material uncertainties regarding customer acceptance,collection of the resulting receivable is deemed probable and therisk of concession is deemed remote, and no other significantvendor obligations exist.  Revenues from maintenance servicesare recognized ratably over the term of the maintenance period,generally one year.  Maintenance revenues which are bundledwith license agreements are unbundled using vendor specificobjective evidence.

    Asmost of the Company's revenue recognition practices are inaccordance with AICPA Statement of Position 81-1 "Accounting forPerformance of Construction-Type and Certain Production-TypeContracts ("SOP 81-1") and Statement of Position 97-2 "SoftwareRevenue Recognition" ("SOP 97-2"), the adoption of Securities andExchange Commission ("SEC") Staff Accounting Bulletin ("SAB")No. 101, "Revenue Recognition in Financial Statements" in 2000had no material impact on the Company's financialstatements.

    Insoftware agreements that include rights to multiple softwareproducts, maintenance or services, the Company allocates the totalrevenue between each deliverable using the relative fair value ofeach of the deliverables determined using vendor-specific objectiveevidence.  Vendor-specific objective evidence or fair value isdetermined using the price charged when the element is soldseparately.

    Titan’s Cayentabusinesses generate hosting revenues, usually under multiple yearagreements.  Up front setup and, if applicable, softwarelicense fees in hosted transactions are deferred and recognizedratably over the estimated hosting period in accordance with theFinancial Accounting Standards Board’s Emerging Issues TaskForce (EITF) Issue No. 00-3.  Revenues generated from hostingactivities were $0, $0.7 million, and $0.8 million for the yearsended December 31, 1999, 2000 and 2001,respectively. 

***    DeferredRevenues.***  Included inother accrued liabilities are deferred revenues which consistprincipally of customer deposits and payments for softwaremaintenance agreements with customers whereby the Company receivespayment in advance of performing the service.  Revenue fromthese contracts is recognized ratably over the contractperiod.

***    CashEquivalents.***  All highlyliquid investments purchased with an original maturity of threemonths or less are classified as cash equivalents.

***    Unbilled AccountsReceivable.***  Unbilledaccounts receivable are included in accounts receivable and includework-in-process which will be billed in accordance with contractterms and delivery schedules, as well as amounts billable uponfinal execution of contracts, contract completion, milestones orcompletion of rate negotiations.  Generally, unbilled accountsreceivable are expected to be collected within one year. Payments to the Company for performance on certain U.S. Governmentcontracts are subject to audit by the Defense Contract AuditAgency.  Revenues have been recorded at amounts expected to berealized upon final settlement.

***    Concentration ofRisk.***  As the Companyexpands its business into international markets and developingcountries, certain accounts receivable may be exposed to creditrisk due to political and/or economic instability in theseareas.  To mitigate credit risk in foreign countries, theCompany generally denominates its foreign contracts in U.S. dollarsand requires payment primarily in the form of stand-by letters ofcredit, advance deposits, or wire transfer, prior toshipment.  In addition, management believes that theappropriate insurance policies are in place to cover risk relatedto loss in certain foreign countries.

    Amajority of the Company's total revenues are from U.S. governmentcontracts.  Any cancellations or modifications of oursignificant contracts or subcontracts, or failure by the U.S.government to exercise an option period relating to those contractsor subcontracts, could adversely affect the Company's financialcondition and results of operations in the short- andlong-term.  A significant and continuing decline in U.S.defense and other federal agency budgets also may negatively impactour business.  Although we bid for and are awarded long-termU.S. government contracts and subcontracts, the U.S. governmentonly funds these contracts on an annual basis, and many of theCompany's contracts and subcontracts include option years. The U.S. government may cancel these contracts at any time withoutpenalty or may change its requirements, programs or contractbudget, and generally has the right not to exercise optionperiods.  The U.S. Congress may decline to appropriate fundsneeded to complete the contracts awarded to us or the primecontractor.  On our subcontracts, we generally do not controlthe prime contractor's allocation of resources.  We alsodepend upon the prime contractor to perform its obligations on theprimary government contract.  In addition to contractcancellations and declines in agency budgets, the Company'sfinancial condition and results of operations may be adverselyaffected by:
|        | ·       | budgetary constraintsaffecting U.S. government spending generally, and changes in fiscalpolicy or available funding; |
|--------------------------------------|----------------------------------------------|----------------------------------------------------------------------------------------------------------------------|
|        |                |                                                                                        |
|        | ·       | curtailment of the U.S.government's use of technology services providers;                                            |
|        |                |                                                                                        |
|        | ·       | the adoption of new lawsor regulations;                                                                              |
|        |                |                                                                                        |
|        | ·       | U.S. government shutdowns,such as that which occurred during the U.S. government's 1996fiscal year;                  |
|        |                |                                                                                        |
|        | ·       | competition andconsolidation in our business areas; and                                                              |
|        |                |                                                                                        |
|        | ·       | general economicconditions.                                                                                          |

    These or other factorscould cause government agencies to reduce their purchases undercontracts, to exercise their right to terminate contracts or not toexercise options to renew contracts.  Any of these actionscould have a material adverse effect on our business, financialcondition and results of operations.

***    Inventories.***  Inventories include the cost of material,labor and overhead, and are stated at the lower of cost, determinedon the first-in, first-out (FIFO) and weighted average methods, ormarket.  The Company periodically evaluates its on-hand stockand makes appropriate disposition of any stock deemed excess orobsolete. 

***    Property andEquipment.***  Property andequipment are stated at cost.  Depreciation is provided usingthe straight-line method, with estimated useful lives of 5 to 40years for buildings, 2 to 40 years for leasehold improvements and 3to 10 years for machinery and equipment and furniture andfixtures.  Certain machinery and equipment in the Company'smedical sterilization and food irradiation businesses isdepreciated based on units of production. 

***    Goodwill and OtherAcquired Intangibles.***  Theexcess of the cost over the fair value of net assets of purchasedbusinesses ("goodwill" and/or "acquired intangibles") has beenamortized on a straight-line basis over varying lives ranging from1 to 40 years.  The Company periodically re-evaluates theoriginal assumptions and rationale utilized in the establishment ofthe carrying value and estimated lives of its goodwill and acquiredintangibles.  The criteria used for these evaluations includemanagement's estimate of the asset's continuing ability to generatepositive income from operations and positive cash flow in futureperiods as well as the strategic significance of the intangibleasset to the Company's business objectives. 

***    Impairment of Investmentsin Non-marketable Securities.***  Periodically, the Companyreviews for possible impairments its non-marketable securities,which include the Company’s investments in emergingbusinesses, which are accounted for under the cost method. Whenever events or changes in circumstances indicate that thecarrying amount of an asset is other than temporarily impaired,asset values are adjusted accordingly based on a write down of costto estimated fair value.  In evaluating whether a loss in thecarrying value of the Company’s investment is other thantemporary, the Company evaluates the financial condition andnear-term prospects of the investee and the region and industry ofthe investee, including any specific events which may influence theoperations of the investee such as changes in technology, and theCompany’s overall investment intent.  The Company willgenerally deem an impairment to be other than temporary if its costbasis has exceeded its fair value for a period of six to ninemonths.  If a loss in the carrying value of theCompany’s investment is deemed to be other than temporary,the Company recognizes such loss based on a write down of cost torealizable value.

***    Impairment of Long-LivedAssets.***  Periodically, theCompany reviews for possible impairments its long-lived assets andcertain identifiable intangibles to be held and used. Included in the Company's reviews of long-lived assets are theCompany's investments in emerging businesses, which are subject torisks associated with developing and commercializing businesses,which include technology development, product and/or servicemarketability, and adequate capital funding.  Whenever eventsor changes in circumstances indicate that the carrying amount of anasset may not be fully recoverable, asset values are adjustedaccordingly.  In evaluating whether an asset impairmentexists, the Company compares the carrying value of the asset to theestimated undiscounted cash flows.  If an impairment is deemedto exist, the asset's carrying value is adjusted to the presentvalue of its estimated future cash flows.  On January 1, 2002,the Company adopted SFAS No. 142, “Goodwill and OtherIntangible Assets,” which resulted in a gross impairmentcharge of $50.1 million recorded in the first quarter of 2002,which was comprised of approximately $27.5 million in certaincomponents of our Cayenta business that are now held for sale,approximately $14.9 million in our AverCom business which is nowheld for sale, and approximately $7.7 million in our Titan Wirelessbusiness.  Approximately $32.0 million of this charge, net oftax, pertained to businesses that were discontinued by the Companyon March 1, 2002.

***    Stock-BasedCompensation.***  The Companyhas elected to adopt the disclosure only provisions of Statement ofFinancial Accounting Standards No. 123, "Accounting for Stock-BasedCompensation" ("SFAS 123").  Accordingly, the Company willcontinue to account for its stock-based compensation plans underthe provisions of APB No. 25.

***    IncomeTaxes.***  The Companyaccounts for income taxes under Statement of Financial AccountingStandards No. 109, "Accounting for Income Taxes" ("SFAS 109"),which requires the use of the liability method of accounting fordeferred income taxes.  Under this method, deferred incometaxes are recorded to reflect the tax consequences on future yearsof differences between the tax bases of assets and liabilities andtheir financial reporting amounts at each year-end.  If it ismore likely than not that some portion or all of a deferred taxasset will not be realized, a valuation allowance isrecognized.

***    CapitalizedSoftware.***  The Companycapitalizes certain software costs, in accordance with Statement ofFinancial Accounting Standards ("SFAS") No. 86, "Accounting for theCosts of Computer Software to Be Sold, Leased, or OtherwiseMarketed," after technological feasibility has beenestablished.   Capitalized costs are amortized based oncurrent and future revenue for each product with an annual minimumequal to the straight-line amortization over the remainingestimated economic life of the product, which is estimated to be 3to 5 years.  As of December 31, 2001, capitalized software,net of accumulated amortization was approximately $8.6million.  For the years ended December 31, 2001, 2000 and1999, approximately $0.6 million, $0.1 million and $0.1million, respectively, was amortized.

***    Per ShareInformation.***  The Companycomputes earnings per share based on the provisions of Statement ofFinancial Accounting Standards No. 128, "Earnings Per Share"("SFAS 128").

    The following datasummarize information relating to the per share computations forcontinuing operations before extraordinary loss:

| ** **                                                                                | ** ** | **For theYear Ended December 31, 2001****** | ** **   |
|-------------------------------------------------------------------------------------------|------------|--------------------------------------------------|--------------|
| ** **                                                                                | ** ** | ****                                             | ** **   |
| ** **                                                                                | ** ** | **Income(Loss) (Numerator)******                 | ** **   | **Shares(000's) (Denominator)****** | ** ** | **Per-Share Amounts****** | ** ** |
| ** **                                                                                | ** ** | ****                                             | ** **   | **** | ** ** | **** | ** ** |
| Loss from continuingoperations                                                            |       | $                                                | (1,520       | ) |   |   |   |   |   |
| Less preferred stockdividends                                                             |       |                                             | (690         | ) |   |   |   |   |   |
| Effect of minorityinterests                                                               |       |                                             | (3,300       | ) |   |   |   |   |   |
|                                                                                      |       |                                                  |         |   |   |   |   |   |
| Basic EPS:                                                                                |       |                                             |         |   |   |   |   |   |   |
| Loss from continuingoperations available to common stockholders                           |       | $                                                | (5,510       | ) | 58,793 |   | $ | (.09 | ) |
|                                                                                      |       |                                                  |         |  |   |  |   |
| Diluted EPS:                                                                              |       |                                             | same asbasic |   |
|                                                                                      |       |                                             |         |   |   |   |   |   |   |
| ** **                                                                                | ** ** | **For theYear Ended December 31, 2000****** | ** **   |
| ** **                                                                                | ** ** | ****                                             | ** **   |
| ** **                                                                                | ** ** | **Income(Loss) (Numerator)******                 | ** **   | **Shares(000's) (Denominator)****** | ** ** | **Per-Share Amounts****** | ** ** |
| ** **                                                                                | ** ** | ****                                             | ** **   | **** | ** ** | **** | ** ** |
| Loss from continuingoperations                                                            |       | $                                                | (5,457       | ) |   |   |   |   |   |
| Less preferred stockdividends                                                             |       |                                             | (692         | ) |   |   |   |   |   |
| Effect of minorityinterests                                                               |       |                                             | (2,175       | ) |   |   |   |   |   |
|                                                                                      |       |                                                  |         |   |   |   |   |   |
| Basic EPS:                                                                                |       |                                             |         |   |   |   |   |   |   |
| Loss from continuingoperations available to common stockholders                           |       | $                                                | (8,324       | ) | 52,717 |   | $ | (.16 | ) |
|                                                                                      |       |                                                  |         |  |   |  |   |
| Diluted EPS:                                                                              |       |                                             | same asbasic |   |
|                                                                                      |       |                                             |         |   |   |   |   |   |   |
| ** **                                                                                | ** ** | **For theYear Ended December 31, 1999****** | ** **   |
| ** **                                                                                | ** ** | ****                                             | ** **   |
| ****** **                                                                            | ** ** | **Income(Loss) (Numerator))******                | ** **   | **Shares(000's) (Denominator)****** | ** ** | **Per-Share Amounts****** | ** ** |
| ** **                                                                                |            | ****                                             |              | **** |  | **** |  |
| Income from continuingoperations                                                          |       | $                                                | 41,144       |   |   |   |   |   |   |
| Less preferred stockdividends                                                             |       |                                             | (695         | ) |   |   |   |   |   |
|                                                                                      |       |                                                  |         |   |   |   |   |   |
| Basic EPS:                                                                                |       |                                             |         |   |   |   |   |   |   |
| Income from continuingoperations available to common stockholders                         |       |                                             | 40,449       |   | 47,094 |   | $ | .86 |   |
| Effect of dilutivesecurities:                                                             |       |                                             |         |   |   |   |   |   |   |
| Stock options                                                                             |       |                                             | —      |   | 2,650 |   |   | (.05 | ) |
| Debentures                                                                                |       |                                             | 769          |   | 4,392 |   |   | (.05 | ) |
|                                                                                      |       |                                                  |         |  |   |  |   |
| Diluted EPS:                                                                              |       |                                             |         |   |   |   |   |   |   |
| Income from continuingoperations available to common stockholders plus assumedconversions |       | $                                                | 41,218       |   | 54,136 |   | $ | .76 |   |
|                                                                                      |       |                                                  |         |  |   |  |   |

    Inthe years ended December 31, 2001 and 2000, respectively, optionsto purchase approximately 2,074,600 and 3,260,000 shares of commonstock at exercise prices ranging from $1.12 to $20.04 and $.40 to$29.00 per share were not included in the computation of dilutedEPS, as the effect would have been anti-dilutive due to the lossfrom continuing operations before extraordinary item.  In theyears ended December 31, 2001 and 2000, respectively, options topurchase approximately 1,206,800 and 170,900 shares of common stockat exercise prices ranging from $20.70 to $47.50 and $32.00 to$47.50 per share were not included in the computation of dilutedEPS because the options' exercise price was greater than theaverage market price of the common shares.  In 1999, optionsto purchase approximately 85,000 shares of common stock were notincluded in the computation of diluted EPS, because the options'exercise price was greater than the average market price of thecommon shares.

    In2001, approximately 459,900 shares, and in 2000 and 1999,approximately 461,200 shares of common stock that could result fromthe conversion of cumulative convertible preferred stock and5,038,000 shares that could result from the conversion of theremarketable term income deferrable equity securities (HIGH TIDES)in 2001 and 2000, were not included in the computation of dilutedEPS, as the effect would have been anti-dilutive on the results ofcontinuing operations.  The effect of minority interestsoutstanding in 1999 did not affect the abovecomputation.

***    ComprehensiveIncome.***  The Company hasadopted Statement of Financial Accounting Standards No. 130,"Reporting Comprehensive Income" ("SFAS 130").  This statementestablishes standards for reporting and display of comprehensiveincome and its components in a full set of general purposefinancial statements.   The objective of the statement is toreport a measure of all changes in equity of an enterprise thatresult from transactions and other economic events of the periodother than transactions with owners.  Comprehensive income isthe total of net income and all other nonowner changes inequity.

    During the years endedDecember 31, 2001, 2000 and 1999, the Company's only elementof other comprehensive income resulted from foreign currencytranslation adjustments in 2001, which are reflected in theconsolidated statements of changes in stockholders' equity asforeign currency translation adjustments within accumulated othercomprehensive income.

***    BusinessSegments.***  The Companyreports its business segment information in accordance withStatement of Financial Accounting Standards No. 131, "DisclosuresAbout Segments of an Enterprise and Related Information" ("SFAS131").  In the fourth quarter of 2000, the Company formed anew business unit, Titan Scan Technologies within its TitanTechnologies segment.   The new business unit encompasses allof Titan's medical product sterilization operations, which werepreviously a part of SureBeam.  On March 1, 2002, the Companymade the decision to sell certain of its commercial informationtechnology operations within its Cayenta segment and the AverCombusiness within the Titan Technologies segment (formerlyTitan’s Emerging Technologies and Businesses segment). As a result, Cayenta’s federal government operations arebeing reported in Titan Systems, and Cayenta’s remainingcontinuing operations are being reported in TitanTechnologies.  These realignments conform to the provisions ofSFAS 131.  As a result, all prior period data have beenrestated to reflect this change in Titan's segmentreporting.

***    Gain on Issuance of Stockin Subsidiary.***  In 2000,the Company became subject to the provisions of SEC StaffAccounting Bulletin No. 51 ("SAB 51") to reflect theissuance of approximately 5% of Cayenta Class A Common Stockin connection with an acquisition.  In accordance with theprovisions of SAB 51, the transaction is reflected as anequity transaction, and the net effect of the transaction isreflected in the accompanying Consolidated Statement ofStockholders' Equity as "Gain related to issuance of stock insubsidiary." In 2001, as a result of the SureBeam initial publicoffering and in accordance with SAB 51, Titan has recorded a gainof $52.0 million related to its equity interest in SureBeamreflected in the accompanying Consolidated Statement ofStockholders' Equity as "Gain related to issuance of stock insubsidiary".

***    New AccountingStandards.***  In June 2001, the Financial AccountingStandards Board ("FASB") issued two new pronouncements: Statementof Financial Accounting Standards ("SFAS") No. 141, "BusinessCombinations," and SFAS No. 142, "Goodwill and Other IntangibleAssets." SFAS No. 141 requires that the purchase method ofaccounting be used for all business combinations initiated afterJune 30, 2001 and that the use of the pooling-of-interests methodis no longer permitted.  SFAS No. 142 requires that uponadoption, amortization of goodwill will cease and instead, thecarrying value of goodwill will be evaluated for impairment atleast annually using a fair value test.  Identifiableintangible assets will continue to be amortized over their usefullives and reviewed at least annually for impairment using a methodappropriate to the nature of the intangible asset.  TheCompany implemented the business acquisition components of SFASNo.141 on July 1, 2001 and implemented SFAS No. 142 on January1, 2002.  In February 2002, the Company obtained independentvaluations to assist management in its purchase price allocationsof the Datron Systems, Inc. ("Datron") and BTG, Inc. ("BTG")acquisitions from independent valuation specialists KPMGConsulting, (“KCI”).  The accompanying balancesheet reflects the allocation between goodwill and other intangibleassets, as determined by the independent valuation.  Theamortization expense related to the intangible assets will commencein the first quarter of 2002, on a prospective basis.  TheCompany’s adoption of SFAS No. 142 resulted in atransitional gross impairment loss of $50.1 million, recorded inthe first quarter of 2002.  The charge was comprised ofapproximately $27.5 million in certain components of our Cayentabusiness now held for sale, approximately $14.9 million in ourAverCom business now held for sale, which was reported in our TitanTechnologies segment (previously our Emerging Technologies andBusinesses segment), both attributable to lower valuation andweakened outlook in commercial IT services, and approximately $7.7million in our Titan Wireless business.  Approximately $34.0million of this charge, net of tax, pertained to businesses thatwere discontinued by the Company on March 1, 2002.  Goodwillamortization for the years ended December 31, 2001, 2000 and 1999was $15.3 million, $14.1 million and $8.0 million,respectively.  Commencing January 1, 2002, goodwill will nolonger be amortized.

    ***Gain on sale ofinvestments***.  The Company records gains in incomefrom continuing operations on sales of its interests related totechnology that it has developed internally, the costs of whichhave been reflected in operating expenses in the Company’sconsolidated financial statements.

    InAugust 2001, the FASB issued SFAS No. 144, "Accounting for theImpairment or Disposal of Long-Lived Assets." SFAS No.  144supersedes SFAS No. 121, "Accounting for the Impairment ofLong-Lived Assets and for Long-Lived Assets to Be Disposed Of," andthe accounting and reporting provisions of APB Opinion No. 30,"Reporting the Results of Operations—Reporting the Effects ofDisposal of a Segment of a Business, and Extraordinary, Unusual andInfrequently Occurring Events and Transactions," for the disposalof a segment of a business (as previously defined in thatOpinion).  The provisions of SFAS No. 144 are effective forfinancial statements issued for fiscal years beginning afterDecember 15, 2001.  The Company does not expect the adoptionof SFAS No. 144 to have a material impact on its consolidatedfinancial position or results of operations.  As discussedabove, the Company has reported the discontinuance of its SureBeamsegment under the provisions of APB Opinion No. 30, and thediscontinuance of certain components of Cayenta and AverCom inaccordance with SFAS No. 144.

    Also in August 2001, theFASB issued SFAS No. 143, "Accounting for Asset RetirementObligations".  This statement addresses financial accountingand reporting for obligations associated with the retirement oftangible long-lived assets and the associated asset retirementcosts.  It applies to (a) all entities and (b) legalobligations associated with the retirement of long-lived assetsthat result from the acquisition, construction, development and/ornormal operation of long-lived assets, except for certainobligations of lessees.  This statement amends SFAS No. 19,"Financial Accounting and Reporting by Oil and Gas ProducingCompanies," and is effective for financial statements issued forfiscal years beginning after June 15, 2002.  Management doesnot believe that the adoption of this statement will have amaterial impact on the Company's consolidated financial position orresults of operations.

**Note2.  Acquisitions and Investments**

    OnNovember 27, 2001, the Company completed its acquisition of BTG,Inc. ("BTG"), a provider of information technology solutions andservices primarily to the U.S. military and other governmentagencies, for $13.35 per BTG share.  The acquisition was tofurther Titan’s goal of acquiring government informationtechnology companies which fit strategically with TitanSystems.  Titan issued approximately 4,024,100 shares of itscommon stock at an aggregate value of $99.9 million, based on$24.814 per Titan share, the average trading price ending November19, 2001, the date on which the formula for consideration became fixed, and cash of $23.4 million for all the outstanding sharesof BTG common stock and assumed BTG stock options representingapproximately 734,200 shares of Titan common stock at an aggregatevalue of $12.2 million, based on an exchange ratio of approximately0.5380 shares of Titan stock for each share of BTG commonstock.  Titan also paid off $37.1 million of BTG's outstandingdebt as of the closing date.  The transaction was accountedfor as a purchase.  The excess of the purchase price ofapproximately $135.5 million over the estimated fair marketvalue of the net liabilities acquired of $15.0 million wasapproximately $150.5 million.  In connection with thedetermination of the fair value of assets acquired and pursuant tothe provisions of SFAS No. 141, the Company has valued contracts inprocess at contract price, minus the estimated costs to completeand an allowance for the normal industry profit on its effort tocomplete such contracts which amounted to $9.2 million. This adjustment has been reflected in the consolidated balancesheet as additional net liabilities assumed by the Company. The Company recognized approximately $0.5 million in the year endedDecember 31, 2001, as a reduction of costs, with the remaining $8.7million to be recorded as a reduction of costs in future periods aswork on certain contracts is performed, which is estimated tocontinue through fiscal 2016.

    InFebruary 2002, an independent valuation performed by KCI wascompleted to assist management in its purchase price allocation forthe BTG acquisition.  This independent valuation supported theCompany’s allocation of $141.8 million to goodwill, $8.2million to intangible assets and $0.5 million deferredcompensation related to unvested options assumed.  Theintangible assets consist of backlog, customer relationships and astrategic relationship of $1.7 million, $5.5 million and$1.0 million, respectively, which will be amortized over theestimated useful lives of 1 year, 2 to 5 years and 2 years,respectively.  The consolidated balance sheet reflects thisallocation between goodwill and intangible assets.  Theamortization expense related to the intangible assets will commencein the first quarter of 2002.

    OnSeptember 28, 2001, the Company completed the acquisition of theremaining shares of Datron Systems Incorporated ("Datron"), aprovider of radio and satellite-based communication systems andbroadband communication products for government and commercialmarkets, that were acquired through a stock for stock exchangetender offer that closed in August 2001.  The acquisition wasto further Titan’s goal of acquiring government informationtechnology companies which fit strategically with TitanSystems.  Titan issued approximately 2.3 million shares of itscommon stock for all the outstanding shares of Datron common stockat an aggregate value of $44.9 million, based on $19.544 per Titanshare, the average trading price ending July 27, 2001, the date on which the formula for consideration became fixed, andassumed Datron stock options representing approximately 437,000shares of Titan common stock at an aggregate value of $4.0 million,based on an exchange ratio of approximately .81919 shares of Titancommon stock for each share of Datron common stock.  Thetransaction was accounted for as a purchase.  The excess ofthe purchase price of approximately $48.9 million over theestimated fair market value of the net assets acquired ofapproximately $15.9 million was approximately $33.0 million. In connection with the determination of fair value of assetsacquired and pursuant to the provisions of SFAS No. 141, theCompany has valued contracts in process at contract price, minusthe estimated costs to complete and an allowance for the normalindustry profit on its effort to complete such contracts, whichamounted to $1.4 million.  This deferred profit has beenreflected in the accompanying balance sheet as additional netliabilities assumed by the Company.  The Company recognizedapproximately $0.8 million in the year ended December 31, 2001, asa reduction of costs, with the remaining $0.6 million to berecorded as a reduction of costs in future periods as work oncertain contracts is performed, which is estimated to continuethrough fiscal 2002.

    InFebruary 2002, had an independent valuation performed by KCI toassist management in its purchase price allocation for the Datronacquisition.  This independent valuation supported theCompany’s allocation of $27.4 million to goodwill and$5.6 million to intangible assets.  The intangible assetsconsist of backlog, customer relationships and trademarks andpatents of $1.0 million, $3.2 million and $1.4 million,respectively, which will be amortized over the estimated usefullives of 1 to 2 years, 10 years and 5 years, respectively. The consolidated balance sheet reflects this allocation betweengoodwill and intangible assets.  The amortization expenserelated to the intangible assets will commence in the first quarterof 2002.

    OnMarch 23, 2001, the Company's subsidiary, Titan SystemsCorporation, consummated an agreement to purchase certain assetsfrom Maxwell Technologies Systems Division, Inc., a subsidiaryof Maxwell Technologies, Inc., which specializes in research,development and technical services primarily for militaryapplications.  The purchase price was approximately$11.5 million in cash, subject to post-closing adjustments andindemnification obligations, less a $1.7 million holdback, due180 days from the date of closing.  The initial$9.8 million of the purchase price was paid on April 2,2001.  The Company received approximately $0.6 million inJuly 2001 from Maxwell Technologies, Inc. resulting from theresolution of post-closing working capital adjustments.  Underthe agreement, the Company had full recourse to the seller for allaccounts receivable not collected within 180 days of the closingdate.  In October 2001, the Company paid approximately $1.5million in full satisfaction of the $1.7 million holdback, asadjusted for uncollected accounts receivable.  The transactionwas accounted for as a purchase, and the excess of the purchaseprice over the estimated fair market value of the net assetsacquired, which had been amortized on a straight line basis over 30years, was approximately $6.8 million at December 31, 2001, and isreflected as goodwill in the Company's consolidated balancesheet.

    Following is unauditedcondensed balance sheet information for Datron and BTG at the dateof their respective acquisition (amounts in millions):

| ** **                   |  | **Datron** |      | **BTG** |   |
|------------------------------|--|------------|------|---------|---|
| ** **                   |  | ****       |      | ****    |   |
| Cash                         |  | $          | 3.7  |         | $ | 1.2 |  |
| Accountsreceivable           |  |            | 12.0 |         |   | 63.8 |  |
| Other currentassets          |  |            | 12.5 |         |   | 1.9 |  |
| Property, plant andequipment |  |            | 8.3  |         |   | 4.0 |  |
| Non-currentassets            |  |            | 3.0  |         |   | 3.4 |  |
|                              |  |            |      |         |   |
| Total assets                 |  |            | 39.5 |         |   | 74.3 |  |
| Accounts payable             |  |            | 2.0  |         |   | 11.5 |  |
| Currentliabilities           |  |            | 18.1 |         |   | 75.5 |  |
| Non-currentliabilities       |  |            | 3.5  |         |   | 2.3 |  |
|                              |  |            |      |         |   |
| Totalliabilities             |  |            | 23.6 |         |   | 89.3 |  |
| Net assets (liabilities)     |  | $          | 15.9 |         | $ | (15.0 | ) |
|                         |  |            |      |         |   |

    OnJune 28, 2000, Titan Wireless Africa, a wholly ownedsubsidiary of Titan Wireless, made an investment in Ivoire TelecomS.A. Holding (Ivoire Telecom), acquiring an 80% interest in IvoireTelecom and through such interest acquired a majority equityinterest in each of the principal subsidiaries owned by IvoireTelecom.  The initial investment consisted of$5.0 million in cash subject to certain indemnificationobligations, and an initial $5.5 million working capital note,which was funded shortly after the initial investment, which wererecorded as Other Assets in the Company's consolidated balancesheet.  In addition, Titan committed to provide up to amaximum of $35.0 million for capital expenditures and otherexpenditures necessary to build out the Ivoire Telecom network, andTitan has provided equipment with an approximate aggregate value of$4.5 million.  At December 31, 2001, this commitment hadbeen substantially funded for such expenditures.  Ouraggregate investment in Ivoire Telecom of approximately $50 millionhas been reflected in Other Assets in the Company's consolidatedbalance sheet at December 31, 2001, and has been reported onthe cost method as a result of the Company’s inability toexercise control and significant influence over Ivoire Telecom orto receive any reliable or timely financial information from IvoireTelecom.  Based upon the information available to management,the Company believes Ivoire Telecom continues to incur losses andnegative cash flows consistent with its original expectations atthe time of investment in this start-up enterprise.  To theextent Ivoire Telecom requires additional cash in the future tofund operations, Titan has no obligation nor commitment to fundsuch cash flow needs.  Titan regularly reviews it investmentin Ivoire Telecom for impairment and believes that as of December31, 2001 the fair value of this investment exceeds it costs. Hence, no write-down to realizable value of this investment wasnecessary at December 31, 2001.

    OnJune 26, 2000, the Company acquired AverStar in astock-for-stock transaction.  AverStar provides services andsoftware focused on the areas of information technology assurance,information technology development and information technologymanagement and operations for the mission-critical systems ofcivilian and defense agencies of the U.S. government. AverStar's operations are primarily included in the Titan Systemssegment.  Titan issued approximately 2,850,000 shares ofcommon stock for all the outstanding shares of AverStar commonstock, subject to a holdback of 180,045 shares held in escrow tocover certain indemnification obligations, and assumed AverStarstock options representing approximately 551,000 shares of Titancommon stock, based on an exchange ratio of approximately .41415shares of Titan common stock for each share of AverStar commonstock.  In September 2000, 171,645 shares werereleased from escrow to AverStar shareholders in fulfillment of theCompany's obligations.  The remaining 8,400 shares werereleased from escrow to AverStar shareholders in November2000.  The acquisition constituted a tax-free reorganizationand has been accounted for as a pooling of interests.

    OnJune 7, 2000, the Company completed the acquisition of all ofthe stock of SenCom Corporation (SenCom) for a purchase price ofapproximately $35 million in cash, subject to certainpost-closing adjustments and indemnification obligations, less a$5.0 million holdback, and less $1.3 million for employeerelated expenses to be paid one year from the closing date. Of the $5.0 million holdback, $3 million was paid inSeptember 2000, and the remaining $2 million holdback was paidin January 2002, plus accrued interest of $0.2 million.  Anadditional $2 million was paid in September 2000 as a resultof post-closing adjustments.  SenCom, included in the TitanSystems segment, provides information technology services togovernment customers and specializes in the engineering andanalysis of radar and electro-optical sensors, command and controlsystem development, computer and network security, and businessprocess engineering and program management.  The transactionwas accounted for as a purchase.  The excess of the purchaseprice over the estimated fair market value of the net assetsacquired, which has been amortized on a straight line basis over30 years, was approximately $31.7 million at December 31,2001, and is reflected as goodwill in the Company's consolidatedbalance sheet.

    InJune 2000, e-tenna Corporation was formed to facilitate thetransfer of an antenna technology originally designed forgovernment and military customers to the commercial wirelessmarket.  Titan's initial investment of approximately $0.6million in e-tenna in 2000 consisted of its contribution of certainintellectual property and patents.  As of December 31, 2001,Archery Capital and other investors invested a total of $9.9million for common and voting preferred stock, and Titan invested$5.8 million in non-voting preferred stock and $0.4 million incommon stock.  Through February 28, 2002, Titan paid $1.9million in satisfaction of its commitment to acquire additionalnon-voting preferred stock.  As of December 31, 2001, Titan'sinvestment of approximately $6.8 million is included in theaccompanying consolidated balance sheet in Other Assets, and isreflected under the cost method.  As of February 28, 2002,Titan's investment in e-tenna represented approximately 58.7% ofthe total equity of e-tenna and approximately 29.1% of the votingpower of e-tenna.

    OnMarch 30, 2000, the Company completed the acquisition of allof the stock of LinCom Corporation (LinCom) for a purchase price ofapproximately $23 million in cash, subject to certainpost-closing adjustments and indemnification obligations, less a$1 million holdback and a $2 million promissorynote.  The $1 million holdback was due approximately60 days after the closing date, and approximately $1.0 millionwas paid in fulfillment of the Company's obligations, and the$2 million note due one year after the closing date withaccrued interest at 7% was paid in March 2001.  LinCom is adeveloper of wireless communications and information systems forboth commercial and government customers.  The operations ofLinCom are primarily reported in the Titan Systems segment. The commercial applications within LinCom are reported in the TitanTechnologies segment.  The transaction was accounted for as apurchase.  The excess of the purchase price over the estimatedfair market value of the net assets acquired, which has beenamortized on a straight line basis over 30 years, wasapproximately $20.2 million at December 31, 2001, and isreflected as goodwill in the Company's consolidated balancesheet. 

    OnMarch 24, 2000, the Company completed the acquisition of allthe outstanding stock of Pulse Engineering (Pulse) for a purchaseprice of approximately $27.4 million in cash, subject tocertain post-closing adjustments and indemnification obligations,less a $1 million holdback placed in escrow and a$2 million deferred payment due in March 2001.  Theholdback was paid to Pulse shareholders in October 2000 infulfillment of the Company's obligations, and the $2 milliondeferred payment, plus interest of 8%, was paid by March 31,2001.  Pulse provides specialized information security andsignal intelligence systems and services to the intelligencecommunity and is included in the Titan Systems segment.  Thetransaction was accounted for as a purchase.  The excess ofthe purchase price over the estimated fair market value of the netassets acquired, which has been amortized on a straight line basisover 30 years, was approximately $23.2 million atDecember 31, 2001, and is reflected as goodwill in theCompany's consolidated balance sheet. 

    OnFebruary 25, 2000, the Company acquired Advanced CommunicationSystems, Inc. (ACS), a government information technologyservices company, in a stock-for-stock transaction.  ACS'operations are included in the Titan Systems segment.  Titanissued approximately 5,082,000 shares of common stock for all theoutstanding shares of ACS common stock and assumed ACS stockoptions representing approximately 263,000 shares of Titan commonstock, based on an exchange ratio of approximately .57 sharesof Titan common stock for each share of ACS common stock.  Theacquisition constituted a tax-free reorganization and has beenaccounted for as a pooling of interests. 

    Effective January 1,2000, ACS' September 30 fiscal year-end was changed to coincidewith the Company's year-end.  The 1999 financial statementspresented were restated to include the combined results ofoperations, financial position and cash flows as if the merger hadoccurred at the beginning of the periods presented.  A poolingof interests adjustment has been made in the consolidated statementof cash flows and consolidated statement of stockholders' equityfor the year ended December 31, 2000, to reflect the activityfor ACS in the quarter ended December 31, 1999, as reported inACS' Form 10-Q for the fiscal quarter ended December 31,1999.  For the quarter ended December 31, 1999, ACS'revenues were $46.3 million and net income was $1.4million.

    The separate and combinedresults of Titan, ACS and AverStar in 2000 and 1999 are asfollows:

| ** ** | ** ** | **YearEnded December 31, 2000****** | ** ** |
|------------|------------|------------------------------------------|------------|
| ** ** | ** ** | ****                                     | ** ** |
| ** ** | ** ** | **Revenues******                         | ** ** | **Income(Loss) from   Continuing Operations****** | ** ** | **NetIncome (Loss)****** | ** ** |
| ** ** | ** ** | ****                                     | ** ** | **** | ** ** | **** | ** ** |
| Titan      |       | $                                        | 585,250    |   | $ | 7,878 |   | $ | (1,499 | ) |
| ACS        |       |                                     | 192,841    |   |   | (21,230 | ) |   | (17,249 | ) |
| AverStar   |       |                                     | 163,122    |   |   | 3,151 |   |   | 20 |  |
|       |       |                                          |       |  |   |  |   |
|       |       | $                                        | 941,213    |   | $ | (10,201 | ) | $ | (18,728 | ) |
|       |       |                                          |       |  |   |  |   |
|            |            |                                          |            |  |  |  |  |

| ** ** | ** ** | **YearEnded December 31, 1999****** |
|------------|------------|------------------------------------------|
| ** ** | ** ** | ****                                     |
| ** ** | ** ** | **Revenues******                         | ** ** | **Incomefrom Continuing Operations****** | ** ** | **NetIncome****** |
| ** ** | ** ** | ****                                     | ** ** | **** | ** ** | **** |
| Titan      |       | $                                        | 387,835 |   | $ | 35,859 |   | $ | 32,472 |
| ACS        |       |                                     | 218,252 |   |   | 3,581 |   |   | 3,581 |
| AverStar   |       |                                     | 162,561 |   |   | 1,704 |   |   | 1,704 |
|       |       |                                          |   |  |   |  |
|       |       | $                                        | 768,648 |   | $ | 41,144 |   | $ | 37,757 |
|       |       |                                          |   |  |   |  |

    In1999, the Company or its subsidiaries acquired Atlantic AerospaceCorporation ("AAEC"), Systems Resources Corporation ("SRC") ProgramSupport Associates Inc. ("PSA"), and SFG Technologies Inc.(“SFG”), all reporting in the Company's Titan Systemssegment, with the exception of SFG which is reported in the TitanTechnologies segment.  Related to the acquisition of SRC, a$2 million promissory note, subject to post-closing workingcapital adjustments and indemnification obligations, was due onJune 9, 2000.  The post-closing working capital adjustmentsand indemnification obligations are currently in dispute with thestockholders of SRC.  Accordingly, the promissory note has notbeen paid.  Related to the AAEC acquisition, up to anadditional $3 million in contingent consideration was payable basedupon the award of future contracts.  During 2001,approximately $1.2 million of contingent consideration was paidupon the award of certain contracts.  An additional potential$2.2 million including interest, may be paid in 2002 based uponpotential contract awards in 2002. 

    For all acquisitionsaccounted for as purchases, the acquired company's results ofoperations are consolidated with the Company's results ofoperations immediately subsequent to the acquisition date. Unaudited pro forma data giving effect to the purchase of BTG,Datron, Pulse, LinCom and SenCom as if they had been acquired atthe beginning of 2000 are shown below. 

| ** **                                                                         | ** ** | **Twelvemonths ended December 31,****** |       |
|------------------------------------------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                                                         | ** ** | ****                                         |       |
| ** **                                                                         | ** ** | **2001******                                 | ** ** | **2000****** |   |
| ** **                                                                         | ** ** | ****                                         | ** ** | **** |   |
|                                                                                    |            | **(unaudited)**                              |       |
| Revenues                                                                           |       | $                                            | 1,350,750  |   | $ | 1,263,604 |   |
| Income (loss) fromcontinuing operations before extraordinary loss                  |       |                                         | (22,794    | ) |   | (2,423 | ) |
| Net income(loss)                                                                   |       |                                         | (119,888   | ) |   | (15,694 | ) |
| Basic earnings (loss) per share:                                                   |       |                                         |       |   |   |   |   |
|    Income(loss) from continuing operations before extraordinaryloss |       | $                                            | (0.46      | ) | $ | (0.10 | ) |
|    Netincome (loss)                                                 |       |                                         | (2.13      | ) |   | (0.37 | ) |
| Diluted earnings (loss) per share:                                                 |       |                                         |       |   |   |   |   |
|    Income(loss) from continuing operations before extraordinaryloss |       | $                                            | (0.46      | ) | $ | (0.10 | ) |
|    Netincome (loss)                                                 |       |                                         | (2.13      | ) |   | (0.38 | ) |

    Included in BTG'soperating results for the eleven months ended November 30, 2001 isa charge of approximately $20.8 million consisting of employeetermination costs of approximately $9.0 million, lease terminationcosts and excess facilities costs of approximately$2.7 million, impairments for certain assets of$4.4 million, primarily comprised of costs of BTG's abandonedaccounting system, impairments for investments of approximately$1.1 million, an accrual for loss contracts of$1.2 million, acquisition costs of $0.6 million and othercosts of $1.8 million.  Revenues in 2001 for Datron wereimpacted unfavorably by the events that occurred onSeptember 11, 2001, which negatively impacted demand forDatron's antenna products for airborne applications, as well as byreduced demand for certain of their products, resulting in reducedrevenues of approximately $12 million.

    The revenues of ACS wereimpacted in 2000 by a contract termination that occurred in late1999, prior to Titan's acquisition, which resulted in reducedrevenues of approximately $31.6 million.  AverStar'srevenues in 2000 were impacted by the wind-down of its Year 2000business in early 2000, which resulted in reduced revenues ofapproximately $25.7 million. 

    Included in the 2000results from continuing operations are merger related expenses of$20.5 million, a $10 million valuation allowance forcertain unbilled receivables, and $8.3 million related to theacquisitions of ACS and AverStar, respectively.  In addition,net income (loss) reflects an extraordinary loss, net of taxes, of$3.4 million and $1.3 million related to the early debtextinguishment of Titan and AverStar's credit facilities,respectively.  AverStar's net loss reflects a loss fromdiscontinued operations of $1.5 million.  Included inACS' 1999 operating results is a write-off of $3.9 million ofcapitalized software costs and a $1.8 million write-off of anuncollected receivable.  Interest expense for Titan combinedwith ACS and AverStar is reflected in the Titan operating resultsfrom the date of acquisition. 

    InJanuary 1999, the Company invested approximately$0.5 million for a 19.9% ownership interest in a joint venturewith Sakon.  In July 2000, Titan loaned Sakon$15 million pursuant to a loan agreement.  InOctober 2000, Titan exercised its option pursuant to the loanagreement to convert amounts owed under the loan into additionalequity interest of 30.0% of Sakon, bringing the total equityinterest in Sakon to 49.9%.  At such time, the amountoutstanding of $15 million under the loan was converted topurchase consideration as the initial payment due under the termsof the agreement and recorded as goodwill.  Under the terms ofthe agreement, an additional $12.5 million of considerationwas due and payable upon certain revenue targets beingattained.  These targets were met in January 2001, and a $5.0million installment was made in the second quarter of 2001, a $3.75million installment was made in the first quarter of 2002, and theremainder is expected to be satisfied by issuance of Titan commonstock.  The excess of the purchase price over the estimatedfair market value of the net assets acquired, which has beenamortized over 20 years, was approximately $26.8 million atDecember 31, 2001.  Titan consolidates the operating resultsof Sakon in accordance with the joint venture agreement whichassigns 100% of the joint venture revenues and operating results toTitan.  Titan will continue to consolidate the operatingresults of Sakon until a liquidity event, defined as an initialpublic offering or the sale of Sakon. 

    Inconnection with the determination of the fair value of assetsacquired in connection with acquisitions in 2000 and 1999, andpursuant to the provisions of SFAS No. 141, the Company has valuedacquired contracts in process at contract price, minus theestimated costs to complete and an allowance for the normalindustry profit on its effort to complete such contracts, whichamounted to $10.9 million.  This adjustment has been reflectedin the accompanying balance sheet as an increase to goodwill and acorresponding increase to deferred profit.  The Companyrecognized approximately $1.4 million, $6.9 million and $2.6million as a reduction of costs in 2001, 2000 and 1999,respectively. 

**Note3.  Acquisition and Integration Related Charges andOther**

    Acquisition andintegration related charges and other for the years ended 2001,2000 and 1999 are described in more detail below (amounts inmillions):

| ** **                                    | ** ** | **December 31,****** | ** ** |
|-----------------------------------------------|------------|---------------------------|------------|
| ** **                                    | ** ** | ****                      | ** ** |
| ** **                                    | ** ** | **2001******              | ** ** | **2000****** | ** ** | **1999****** | ** ** |
| ** **                                    | ** ** | ****                      | ** ** | **** | ** ** | **** | ** ** |
| Employee terminationcosts                     |       | $                         | 6.4        |   | $ | 7.6 |   | $ | 3.1 |   |
| Elimination of duplicatefacilities and assets |       |                      | 4.4        |   |   | 4.1 |   |   | 3.4 |   |
| Acquisition relatedtransaction costs          |       |                      | —    |   |   | 11.6 |   |   | — |   |
| Other costs                                   |       |                      | 2.0        |   |   | — |   |   | — |   |
| Non-cash assetimpairments                     |       |                      | 14.6       |  |   | 5.5 |  |   | 2.1 |  |
| Pre-acquisitioncontingencies                  |       |                      | 3.0        |   |   | — |   |   | 4.5 |   |
|                                          |       |                           |       |  |   |  |   |
|                                               |       | $                         | 30.4       |  | $ | 28.8 |  | $ | 13.1 |  |
|                                          |       |                           |       |  |   |  |   |

    AtDecember 31, 2001, a total of $1.3 million of liabilities remainedon the consolidated balance sheet in Other Accrued Liabilities,related primarily to restructuring activities initiated in 2000 and2001.  We anticipate that the remaining liabilities will bepaid in 2002.

*Fiscal 2001Charges*

    Acquisition andintegration related charges and other of $30.4 million in 2001included $2.5 million for employee termination costs andrestructuring costs in Titan Wireless, $12.2 million related to theintegration of ACS and AverStar and other restructuring andrealignment activities in Titan Systems, a $5.5 million impairmentcharge for fixed assets associated with Cayenta’s networkoperations center and $10.0 million related to other assetimpairments and restructuring activities associated withCayenta’s headquarters office, and $0.2 million relatedto personnel reductions in Cayenta’s federal governmentbusiness, which is now a part of Titan Systems.

    The $2.5 million chargein the Company's Titan Wireless segment was comprised of $0.5million related to a reduction in employee workforce ofapproximately 35 employees resulting from the elimination ofWireless's internal product development group and $2.0 million ofrestructuring costs, including $1.3 million of employee terminationcosts.  The segment's long-term strategy is now centered onthe service and systems integration business, not the developmentand sale of equipment.

    The $12.2 million chargein Titan Systems is primarily related to the integration of ACS andAverStar, and a realignment of the business around the majorcategories of customers of Titan Systems, which together resultedin a reduction in employee workforce of approximately 50 employeesand the closing of several facilities.  Included in thesecosts is approximately $3.1 million of employee termination costs,$3.5 million of costs to eliminate duplicate and excess facilitiesand assets, $1.1 million of duplicate personnel costs to transitionprocesses and functions, and $1.5 million of asset impairment costsof certain asset balances.  The recoverability of suchbalances was impaired due to our exit from a satellite servicesbusiness within the Titan Systems segment.  Approximately $3.0million of the charge was related to another subsidiary acquired ina prior year for contingencies arising from matters pre-existing toTitan's acquisition of the business.  That acquisition wasaccounted for as a purchase, and the matters pre-existing Titan'sacquisition were resolved in 2001.  Unpaid amounts ofapproximately $1.3 million as of December 31, 2001 related toexcess facilities and personnel costs which are expected to be paidin 2002.

    Included in Cayenta'sheadquarters office operating results is a charge for$15.5 million related to the restructuring of Cayenta’sheadquarters office.  As a result of reduced corporatespending on commercial information technology services ande-business software applications, the Company developed andapproved a plan to restructure the Cayenta headquarters and networkoperations center, which included a reduction in workforce ofapproximately 40 personnel, resulting in a charge of$1.7 million, and the elimination of duplicate and excessfacilities, resulting in a charge of approximately$0.8 million.  As a result of management's evaluation ofthe recoverability of all the assets of Cayenta, in accordance withStatement of Financial Accounting Standards No. 121, "Accountingfor the Impairment of Long-Lived Assets and for Long-Lived Assetsto be Disposed Of", management concluded from this evaluation thata significant impairment of intangible as well as long-lived assetshad occurred.  An impairment charge was required because theestimated fair value was less than the carrying value of theassets.  The impairment charge of $13.0 million wascomprised of the following: $5.5 million for fixed assetsassociated with Cayenta's network operations center, $2.0 millionfor prepaid advertising costs and $5.3 million for Cayenta'sinvestment in Soliance, LLC, a joint venture that markets anddelivers information technology systems and solutions to theutility industry, and $0.2 million for certain otherassets.

*Fiscal 2000Charges*

    Acquisition relatedcharges of $28.8** ** million in 2000 include costs of$20.5 million related to the ACS merger including directtransaction costs of approximately $9.1 million comprised ofaccounting, legal, investment banking, financial printing and otherdirect costs.  Also included in the ACS merger costs was awrite-down of approximately $5.5 million related to theimpairment of certain receivables, for which the realizability ofsuch assets was impaired as a result of the merger with Titan,which impacted the recoverability of certain contract costs,employee termination costs of approximately $2.1 million, and$3.8 million of costs to eliminate duplicate facilities andassets.  In addition, the Company recorded a valuationallowance of $10.0 million provided in connection with certainof the Company's integration activities, particularly as theyrelate to conforming ACS to Titan's accounting policies andprocedures, and in determining appropriate valuation allowancesagainst unbilled receivables which may not be realizable undernormal contract reimbursement cycles.  Unpaid amounts atDecember 31, 2000 of $3.8 million representing primarilycosts for excess facilities and personnel costs were paid byDecember 31, 2001. 

    Included in acquisitionrelated charges in 2000 is $8.3 million related to the mergerwith AverStar.  These costs consisted of approximately$2.5 million of direct transaction costs, approximately$5.5 million of employee termination costs, and costs toeliminate duplicate facilities of approximately$0.3 million. 

*Fiscal 1999Charges*

    During the year endedDecember 31, 1999, the Company recorded acquisition andrelated charges of $13.1 million, which include approximately$4.5 million of legal costs and approximately$8.6 million of integration and restructuring expenses,including $2.1 million related to the wind-down of our Year2000 business, consisting primarily of employee termination costsand lease termination costs, a $2.1 million write-off of intangiblecosts to estimated realizable value, approximately $1.0 million forseverance, outplacement and relocation costs related toapproximately 31 employees across the Company, and$3.4 million related to the closure and elimination of leasedfacilities, primarily duplicate field offices.  These chargeswere all cash charges, with the exception of the write-off ofintangible costs.  Unpaid amounts of $5.9 millionrepresenting primarily excess facilities and personnel costs werepaid by December 31, 2000. 

*Gain on sale ofIPivot*

    OnOctober 26, 1999, the Company received approximately $41.8million in cash as a result of the acquisition by Intel Corporationof IPivot, Inc. ("IPivot"), a technology spin-off fromTitan.  The cash payment to the Company was for its ownershipinterest in IPivot of approximately 8% after the dilutive impact ofIPivot stock options, warrants and other equity investments. In addition, approximately $3 million was received in October2000 as final consideration, and net of expenses, resulting in anet gain of approximately $2.1 million.  A gain of$41.8 million and $2.1 million is reflected in the gainon sale of Titan’s interest in IPivot for the years endedDecember 31, 1999 and 2000, respectively.

**Note4.  Discontinued Operations**

*2002 DiscontinuedOperations*

    OnMarch 1, 2002, the Company made the decision to sell certain of itscommercial information technology operations within its Cayentasegment and the AverCom business within the Titan Technologiessegment in order to allow management to focus on operations withthe most near term growth opportunities.  As a result,Cayenta’s federal government operations have become a part ofTitan Systems, and Cayenta’s remaining continuing operationsare being reported in Titan Technologies, formerly Titan’sEmerging Technologies and Businesses segment.  In accordancewith Statement of Financial Accounting Standards No. 144,“Accounting for the Impairment or Disposal of Long-livedAssets and for Long-Lived Assets to be Disposed of,” allcommercial operations that are held for sale have been reflected asdiscontinued operations for all periods presented in Titan’sconsolidated financial statements.  All prior period financialinformation has been restated to reflect the newsegments.

    Revenues and net lossgenerated by Cayenta’s discontinued operations and AverComfor the year ended December 31, 2001 were $47.6 million and $18.3million, respectively. 

    Included inCayenta’s net loss for the year ended December 31, 2001 arecharges of $5.0 million related to the restructuring of Cayenta(which was included in our Software Systems segment), consistingprimarily of a write-off of $1.3 million of capitalizedsoftware designed for B2B exchanges, a write-off of$2.0 million of accounts receivable and employee terminationand lease termination costs of approximately$1.7 million.

    Employee terminationcosts of $0.8 million were recorded during the year ended December31, 2001 related to a reduction in workforce in AverCom resultingfrom the same economic conditions which impacted demand forcorporate information technology services at Cayenta.

*2001 DiscontinuedOperations*

    OnMarch 16, 2001, SureBeam Corporation, Titan's subsidiary thatprovides electronic irradiation systems and services, completed aninitial public offering ("IPO") of 6,700,000 shares of Class Acommon stock at a price of $10 per share.  On October 16,2001, Titan adopted a definitive plan to spin off SureBeam in theform of a tax-free dividend to Titan shareholders within the next12 months from that date.  The plan involves filing a letterruling request with the IRS seeking approval of the tax-freedistribution.  Titan received a favorable ruling in May 2002and intends to execute the spin off in the third quarter of2002.  Titan has historically reported the SureBeam businessas a separate segment.  In accordance with AccountingPrinciples Board Opinion No. 30, "Reporting the Results ofOperations—Reporting the Effects of Disposal of a Segment ofa Business, and Extraordinary, Unusual and Infrequently OccurringEvents and Transactions," the consolidated financial statements ofTitan for all periods presented have been restated to reflectSureBeam as a discontinued business.  At the time Titanadopted its plan to spin off SureBeam, in accordance with APB No.30, the Company estimated that there would be an estimated loss of$35.4 million through the estimated disposal date, primarilycomprised of estimated operating losses to be incurred by SureBeamfrom the date the plan was adopted through the estimated disposaldate as well as estimated spin off costs.  As of December 31,2001, the remaining accrual for estimated losses was $17.0 million,which is included in current liabilities of discontinuedoperations.  Management will review this estimate on aperiodic basis and revise estimates when determined necessary, andreflect the effect of those revisions in the consolidated financialstatements. 

    Revenues and net lossgenerated by SureBeam for the year ended December 31, 2001 were$24.2 million and $76.1 million, respectively.  Revenuesand net income generated by SureBeam for the year ended December31, 2000 were $25.2 million and $0.4 million,respectively.  Included in SureBeam’s net losses isinterest expense of $7.0 million and $3.8 million for theyears ended December 31, 2001 and 2000, respectively, related tothe promissory note SureBeam had payable to us.

*2000 DiscontinuedOperations*

    InNovember 2000, the Company's Board of Directors adopted a plan todispose of the Company's commercial information assurance andnetwork monitoring businesses.  In 1998 and 1997, theCompany's Board of Directors adopted a plan to wind down theCompany's access control systems business and broadbandcommunications business, respectively.  Accordingly, theresults of these businesses have been accounted for as discontinuedoperations.  In addition, the accompanying consolidatedfinancial statements reflect operations discontinued by certain ofthe companies acquired by Titan during 1998 and 2000.  Allperiods presented reflect these specific operations as discontinuedoperations.  Net current liabilities of discontinuedoperations related to these businesses of approximately $8.0million at December 31, 2001 consist primarily of accruedliabilities of approximately $2.5 million and current assets(primarily deferred losses) of approximately $1.7 million.  Inaccordance with EITF 85-36, "Discontinued Operations with expectedGain and Interim Operating Losses", all operating losses incurredin the commercial information assurance and network monitoringbusinesses from the measurement date are being deferred until thedate of disposal.  The liabilities consist of accruals forcontract losses, estimated wind-down costs and costs related to theclosure and elimination of certain leased facilities.  Chargesof approximately $1.6 million were made against the accruedliabilities in 2001.  The liabilities were increased by a $5.6million charge in 1999 based on management's review of estimatedfuture wind-down costs.  Management continues to assess theestimated wind-down and and/or disposal costs associated with thebusinesses, and may from time to time adjust the allowance for suchcosts accordingly.  As of December 31, 2001, managementbelieves that the current accrual for estimated wind-down costs isadequate. 

    Following is a table ofall related balance sheet categories for each discontinuedoperation as of December 31, 2001:

|                        | ** ** | **SureBeam** | ** ** | **Cayenta** | ** ** | **AllOther** | ** ** | **Total** |
|------------------------|------------|--------------|------------|-------------|------------|--------------|------------|-----------|
|                        | ** ** | ****         | ** ** | ****        | ** ** | ****         | ** ** | ****      |
| Current assets         |       | $            | 44,940     |        | $          | 21,209       |       | $         | 1,692 |   | $ | 67,841 |
| Long-termassets        |       |         | 65,704     |        |       | 49,902       |       |      | — |   |   | 115,606 |
| Currentliabilities     |       |         | 33,470     |        |       | 8,952        |       |      | — |   |   | 42,422 |
| Non-currentliabilities |       |         | 7,608      |        |       | 562          |       |      | — |   |   | 8,170 |

**Note5.  Other Financial Data**

    Following are detailsconcerning certain balance sheet accounts:

| ** **                                    | ** ** | **AtDecember 31,****** | ** ** |
|-----------------------------------------------|------------|------------------------|------------|
| ** **                                    | ** ** | ****                   | ** ** |
| ** **                                    | ** ** | **2001******           | ** ** | **2000****** | ** ** |
| ** **                                    | ** ** | ****                   | ** ** | **** | ** ** |
| AccountsReceivable:                           |       |                   |       |   |   |   |   |
| U.S.Government — billed            |       | $                      | 263,826    |   | $ | 205,598 |   |
| U.S.Government — unbilled          |       |                   | 45,720     |   |   | 31,818 |   |
| Trade                                         |       |                   | 73,091     |   |   | 24,807 |   |
| Less allowance fordoubtful accounts           |       |                   | (7,909     | ) |   | (3,719 | ) |
|                                          |       |                        |       |  |   |
|                                          |       | $                      | 374,728    |   | $ | 258,504 |   |
|                                          |       |                        |       |  |   |
| Inventories:                                  |       |                   |       |   |   |   |   |
| Materials                                     |       | $                      | 15,720     |   | $ | 7,120 |   |
| Work-in-process                               |       |                   | 9,466      |   |   | 8,651 |   |
| Finished goods                                |       |                   | 3,926      |   |   | 3,922 |   |
|                                          |       |                        |       |  |   |
|                                          |       | $                      | 29,112     |   | $ | 19,693 |   |
|                                          |       |                        |       |  |   |
| Property andEquipment:                        |       |                   |       |   |   |   |   |
| Machinery andequipment                        |       | $                      | 122,014    |   | $ | 105,974 |   |
| Furniture andfixtures                         |       |                   | 29,494     |   |   | 21,257 |   |
| Land, buildings andleasehold improvements     |       |                   | 38,776     |   |   | 22,749 |   |
| Construction inprogress                       |       |                   | 20,009     |   |   | 10,259 |   |
|                                          |       |                        |       |  |   |
|                                          |       |                   | 210,293    |   |   | 160,239 |   |
| Less accumulateddepreciation and amortization |       |                   | (111,178   | ) |   | (84,757 | ) |
|                                          |       |                        |       |  |   |
|                                          |       | $                      | 99,115     |   | $ | 75,482 |   |
|                                          |       |                        |       |  |   |

    Supplemental disclosuresof cash flow information:

| ** **                                                           | ** ** | **2001****** | ** ** | **2000****** | ** ** | **1999****** |
|----------------------------------------------------------------------|------------|--------------|------------|--------------|------------|--------------|
| ** **                                                           | ** ** | ****         | ** ** | ****         | ** ** | ****         |
| Noncash investing andfinancing activities:                           |       |         |       |         |       |         |   |   |   |
| Stock issued for acquisitions                                        |       | $            | 144,764    |         | $          | —      |   | $ | — |
| Gain related to issuanceof stock in subsidiary                       |       |         | 52,025     |         |       | 2,825        |   |   | — |
| Income tax benefit fromemployee stock    transactions |       |         | 5,157      |         |       | 1,479        |   |   | 892 |
| Shares contributed toemployee benefit plans                          |       |         | 4,941      |         |       | 2,364        |   |   | 3,594 |
| Extraordinary loss onearly    extinguishments of debt |       |              | —    |         |            | 4,744        |   |  | — |
| Issuance of stock forequity interest                                 |       |         | —    |         |       | 900          |   |   | — |
| Conversion of subordinateddebt                                       |       |         | —    |         |       | —      |   |   | 26,270 |
| Stock used for optionexercise                                        |       |         | 292        |         |       | —      |   |   | — |
| Equity issued in exchangefor services                                |       |         | —    |         |       | 2,000        |   |   | — |
| Cash paid for interest                                               |       | $            | 38,024     |         | $          | 34,775       |   | $ | 18,281 |
| Cash paid fortaxes                                                   |       |         | 3,612      |         |       | 11,942       |   |   | 6,119 |

    The Company’sinvestments in non-marketable securities as of December 31, 2001,are primarily $50.0 million in Ivoire Telecom and $6.8 million ine-tenna.  All other investments in non-marketable securitiestotaled $3.1 million at December 31, 2001.

**Note6.  Segment Information**

    Management evaluates theperformance of its operating segments separately to individuallymonitor the different factors affecting financialperformance.  Segment profit or loss includes substantiallyall of the segment's direct costs of operations andadministration.  The Company manages income taxes on acorporate-wide basis.  Thus, the Company evaluates segmentperformance based on profit or loss before interest expense, incometaxes and before allocated costs of corporate overhead. Corporate overhead may include, among other things, costs forfinancial, accounting, marketing, administrative and legalactivities.  The Company typically manages and evaluatesequity investments and related income on a segment level. However, certain significant investments are managed at thecorporate level.  Financial costs, such as gains and lossesand interest income and expense, are managed at the Corporatesegment.  Consequently, the results of operations of thesegments may not be indicative of the actual results that would beshown in the financial statements of these segments if prepared ona stand-alone basis. 

    During the first quarterof 2002, the Company made the decision to sell certain of itscommercial information technology operations within it Cayentasegment and the AverCom business within the Titan Technologiessegment in order to allow management to focus on operations withthe most near term growth opportunities.  As a result,Cayenta’s federal government operations are being reported inTitan Systems, and Cayenta’s remaining continuing operationsare being reported in Titan Technologies, formerly Titan’sEmerging Technologies and Businesses segment.  In accordancewith Statement of Financial Accounting Standards No. 144,“Accounting for the Impairment or Disposal of Long-livedAssets and for Long-Lived Assets to be Disposed of,” allcommercial operations that are held for sale have been reflected asdiscontinued operations for all periods presented in Titan’sconsolidated financial statements.  All prior period financialinformation has been restated to reflect the newsegments.

    The Company hashistorically reported SureBeam as a separate operatingsegment.  On October 16, 2001, the Company adopted adefinitive plan to spin off SureBeam in the form of a tax-freedividend to Titan shareholders.  In accordance with AccountingPrinciples Board Opinion No. 30, "Reporting the Results ofOperations—Reporting the Effects of Disposal of a Segment ofa Business, and Extraordinary, Unusual and Infrequently OccurringEvents and Transactions," all current and prior year data have beenrestated to reflect SureBeam as a discontinued business, and it isno longer reported as a separate segment. 

    Inthe fourth quarter of 2000, the Company formed a new business unit,Titan Scan Technologies within its Titan Technologiessegment.  The new business unit encompasses all of Titan'smedical product sterilization operations, which were previously apart of SureBeam, which prior to the initial public offering ofSureBeam, were reported as part of the results of operations of theSureBeam segment.  As a result, all prior period data havebeen restated to reflect this change in Titan's segmentreporting. 

    The Titan Systems segmentprovides comprehensive information systems solutions and servicesto U.S. and allied government defense and intelligence agencies andto civil government agencies with sophisticated data management,information processing, information fusion and knowledge-basedsystems and communications requirements.  The Titan Systemssegment also develops and manufactures digital imaging products,electro-optical systems, threat simulation/training systems,intelligence electronic hardware and defense communicationssystems.  The Titan Systems segment also installs, tests andmaintains government information systems. 

    The Titan Wirelesssegment provides satellite-based and wireless-based communicationsystems and services which provide cost-effective voice, data andInternet services in developing countries, primarily Asia, Africa,the Middle East and Latin America. 

    The Titan Technologiessegment includes several businesses which apply the Company'sproprietary knowledge and core competencies to create commercialtechnology applications or individual businesses, including theCompany's investment in an antenna business, e-tenna, its wirelessnetworking chip business, LinCom Wireless, the Cayenta revenuecycle management business for municipalities and utilities thatpreviously was reported in the Cayenta (Software Systems) segment,and its medical products sterilization systems and servicesbusiness, Titan Scan Technologies. 

    Substantially all of theCompany's operations are located in the United States.  Exportand foreign revenues amounted to approximately $73.5 million, $65.6million and $33.3 million in 2001, 2000 and 1999, respectively,primarily to countries in Africa, Asia, Europe and SouthAmerica.  Substantially all international sales aredenominated in U.S. dollars. 

    The following tablessummarize industry segment data for 2001, 2000 and1999. 

| ** **                          | ** ** | **2001****** | ** ** | **2000****** | ** ** | **1999****** |
|-------------------------------------|------------|--------------|------------|--------------|------------|--------------|
| ** **                          | ** ** | ****         | ** ** | ****         | ** ** | ****         |
| Revenues:                           |       |         |       |         |       |         |   |   |   |
|    TitanSystems      |       | $            | 940,338    |         | $          | 826,110      |   | $ | 715,351 |
|    TitanWireless     |       |         | 92,748     |         |       | 81,450       |   |   | 27,325 |
|    TitanTechnologies |       |         | 51,321     |         |       | 33,653       |   |   | 25,972 |
|                                |       |              |       |              |       |              |
|                                |       | $            | 1,084,407  |         | $          | 941,213      |   | $ | 768,648 |
|                                |       |              |       |              |       |              |

    Sales to the UnitedStates Government, including both defense and non-defense agencies,and sales as a subcontractor as well as direct sales, aggregatedapproximately $905.9 million in 2001, $763.6 million in 2000 and$677.5 million in 1999.  Inter-segment sales were notsignificant in any year. 

| ** **                                  | ** ** | **2001****** | ** ** | **2000****** | ** ** | **1999****** | ** ** |
|---------------------------------------------|------------|--------------|------------|--------------|------------|--------------|------------|
| ** **                                  | ** ** | ****         | ** ** | ****         | ** ** | ****         | ** ** |
| Operating Profit(Loss):                     |       |         |       |         |       |         |       |   |   |   |
|    TitanSystems              |       | $            | 67,602     |         | $          | 35,749       |       | $ | 49,954 |   |
|    TitanWireless             |       |         | 5,219      |         |       | 11,644       |       |   | 5,063 |  |
|    TitanTechnologies         |       |         | 3,211      |         |       | 1,790        |       |   | 43,986 |   |
|    Cayentaheadquarters costs |       |         | (24,701    | )            |       | (11,097      | )          |   | (794 | ) |
|    Corporate                 |       |         | (18,954    | )            |       | (18,968      | )          |   | (14,417 | ) |
|                                        |       |              |       |              |       |              |       |
|                                        |       | $            | 32,377     |         | $          | 19,118       |       | $ | 83,792 |   |
|                                        |       |              |       |              |       |              |       |

    Operating results for theTitan Systems and Titan Wireless segments for the year endedDecember 31, 2001 include acquisition and integration relatedcharges and other of $12.4 million and $2.5 million,respectively.  Operating results for the Titan Systems segmentfor the year ended December 31, 2000, include acquisition andother charges of $28.8 million and a valuation allowance foraccounts receivable balances of $10.0 million.  Operatingprofit in 2000 for the Titan Technologies segment includes thefinal $2.1 million gain from the IPivot stock sale as discussed inNote 3, net of expenses. 

    Operating profit for theTitan Systems segment for the year ended December 31, 1999,included acquisition and other charges of $5.5 million.  Inaddition, 1999 operating results in the Titan Systems segmentincluded a $3.9 million charge related to previouslycapitalized software development costs as well as a $1.8 millioncharge for an uncollected receivable, both resulting from ACStransactions prior to Titan's acquisition of ACS in 2000. Operating profit for Titan Technologies for the year ended December31, 1999, includes the $41.8 million gain on IPivot stock sale asdiscussed in Note 3, net of acquisition related charges and otherof $2.3 million related to other business in the Titan Technologiessegment. 

    Corporate includescorporate general and administrative expenses, certain corporate,integration, legal and restructuring charges ($5.3 million in1999), and gains or losses from the sale of businesses.  In2000, Corporate includes $2.7 million of transaction costs relatedto the filing of a registration statement with the Securities andExchange Commission for the initial public offering of Cayenta,which was subsequently withdrawn by the Company in February2001.  Corporate general and administrative expenses aregenerally recoverable from contract revenues by allocation tooperations. 

    Cayenta headquarterscosts include sales, general and administrative costs incurred tooperate the Cayenta corporate headquarters and network operationscenter.  As this office has been eliminated as of March 1,2002 when certain of the components of Cayenta were discontinued,and these costs were incurred to operate the previous integratedoperations of Cayenta, of which certain operations have beendiscontinued, and the continuing operations are now reported inTitan Systems and Titan Technologies segments, these costs havebeen separately disclosed above.  Approximately$15.5 million of the operating results for 2001 are related toacquisition and integration related charges.

| ** **                                    | ** ** | **As ofDecember 31,****** |       |
|-----------------------------------------------|------------|--------------------------------|------------|
| ** **                                    | ** ** | ****                           |       |
| ** **                                    | ** ** | **2001******                   | ** ** | **2000****** |   |
| ** **                                    | ** ** | ****                           | ** ** | **** |   |
| IdentifiableAssets:                           |       |                           |       |   |   |   |   |
|    TitanSystems                |       | $                              | 839,326    |   | $ | 538,630 |   |
|    TitanWireless               |       |                           | 233,017    |   |   | 128,579 |   |
|    TitanTechnologies           |       |                           | 66,714     |   |   | 49,217 |   |
|    Discontinued Operations,net |       |                           | 183,447    |   |   | 138,766 |   |
|    Cayentaheadquarters         |       |                           | 4,072      |   |   | 17,603 |   |
|    Generalcorporate assets     |       |                           | 133,826    |   |   | 91,276 |   |
|                                          |       |                                |       |  |  |
|                                          |       | $                              | 1,460,402  |   | $ | 964,071 |   |
|                                          |       |                                |       |  |  |

    General corporate assetsare principally cash and cash equivalents, accounts receivable,prepaid expenses, property and equipment, deferred income taxes andother assets. 

| ** **                                                                                           | ** ** | **2001******
**** | ** ** | **2000******
**** | ** ** | **1999******
**** |
|------------------------------------------------------------------------------------------------------|------------|-------------------|------------|-------------------|------------|-------------------|
| Depreciation andAmortization of Property and    Equipment, Goodwill, and OtherAssets: |       |              |            |              |       |              |   |   |   |
|       TitanSystems                                                     |       | $                 | 18,987     |              | $          | 18,140            |   | $ | 17,021 |
|       TitanWireless                                                    |       |              | 4,240      |              |       | 1,540             |   |   | 607 |
|       TitanTechnologies                                                |       |              | 5,664      |              |       | 5,372             |   |   | 830 |
|       Cayenta**headquarters                                            |       |              | 720        |              |       | 954               |   |   | 41 |
|       Corporate                                                        |       |              | 1,060      |              |       | 737               |   |   | 1,129 |
|                                                                                                 |       |                   |       |                   |       |                   |
|                                                                                                 |       | $                 | 30,671     |              | $          | 26,743            |   | $ | 19,628 |
|                                                                                                 |       |                   |       |                   |       |                   |
| CapitalExpenditures:                                                                                 |       |              |       |              |       |              |   |   |   |
|    TitanSystems                                                                       |       | $                 | 11,140     |              | $          | 10,398            |   | $ | 8,263 |
|    TitanWireless                                                                      |       |              | 8,839      |              |       | 14,263            |   |   | 3,839 |
|    TitanTechnologies                                                                  |       |              | 2,690      |              |       | 5,686             |   |   | 125 |
|    Cayenta**headquarters                                                              |       |              | 455        |              |       | 9,737             |   |   | 542 |
|    Corporate                                                                          |       |              | 1,295      |              |       | 1,672             |   |   | 832 |
|                                                                                                 |       |                   |       |                   |       |                   |
|                                                                                                 |       | $                 | 24,419     |              | $          | 41,756            |   | $ | 13,601 |
|                                                                                                 |       |                   |       |                   |       |                   |

**Note7.  Income Taxes**

    The components of theincome tax provision (benefit) from continuing operations are asfollows:

| ** **                 | ** ** | **2001****** | ** ** | **2000****** | ** ** | **1999****** |   |
|----------------------------|------------|--------------|------------|--------------|------------|--------------|--------|
| ** **                 | ** ** | ****         | ** ** | ****         | ** ** | ****         |   |
| Current:                   |       |         |       |         |       |         |   |   |   |   |
|    Federal  |       | $            | (2,732     | )            | $          | 368          |        | $ | 20,736 |  |
|    Foreign  |       |              | 1,415      |              |            | —      |        |  | — |  |
|    State    |       |         | 1,944      |         |       | 1,654        |   |   | 4,663 |  |
|                       |       |              |       |              |       |              |        |
|                       |       |         | 627        |              |       | 2,022        |   |   | 25,399 |  |
|    Deferred |       |         | 3,125      |              |       | (6,940       | )      |   | (86 | ) |
|                       |       |              |       |              |       |              |        |
|                       |       | $            | 3,752      |              | $          | (4,918       | )      | $ | 25,313 |  |
|                       |       |              |       |              |       |              |        |

    Following is areconciliation of the income tax provision from continuingoperations expected (based on the United States federal income taxrate applicable in each year) to the actual tax provision onincome:

| ** **                                                               | ** ** | **2001****** | ** ** | **2000****** | ** ** | **1999****** | ** ** |
|--------------------------------------------------------------------------|------------|--------------|------------|--------------|------------|--------------|------------|
| ** **                                                               | ** ** | ****         | ** ** | ****         | ** ** | ****         | ** ** |
| Expected Federal taxprovision on continuing    operations |       | $            | (848       | )            | $          | (4,400       | )          | $ | 23,260 |   |
| State income taxes, net ofFederal income tax    benefit   |       |         | 1,469      |              |       | (173         | )          |   | 3,987 |   |
| Goodwillamortization                                                     |       |         | 1,347      |         |       | 2,890        |       |   | 320 |   |
| Change in valuationallowance                                             |       |         | —    |              |       | (8,100       | )          |   | — |   |
| Acquisition charges andother                                             |       |         | 740        |         |       | 3,829        |            |   | (669 | ) |
| Utilization of NOL notrealized in prior periods                          |       |         | —    |         |       | —      |            |   | (2,000 | ) |
| Foreign losses notbenefited                                              |       |         | 731        |         |       | 642          |       |   | — |   |
| Foreign tax ratedifferential                                             |       |         | 120        |         |       | —      |       |   | — |   |
| Meals andentertainment                                                   |       |         | 191        |         |       | 398          |       |   | — |   |
| Other                                                                    |       |         | 2          |         |       | (4           | )          |   | 415 |   |
|                                                                     |       |              |       |              |       |              |       |
| Actual tax provision(benefit) on continuing    operations |       | $            | 3,752      |              | $          | (4,918       | )          | $ | 25,313 |   |
|                                                                     |       |              |       |              |       |              |       |

    The net deferred taxasset as of December 31, 2001 and 2000, results from thefollowing temporary differences:

| ** **                                 | ** ** | **2001****** | ** ** | **2000****** | ** ** |
|--------------------------------------------|------------|--------------|------------|--------------|------------|
| ** **                                 | ** ** | ****         | ** ** | ****         | ** ** |
| Losscarryforward                           |       | $            | 11,276     |         | $          | 8,016 |   |
| Employeebenefits                           |       |         | 21,595     |         |       | 11,713 |   |
| Purchased otherintangibles                 |       |         | (5,638     | )            |       | — |   |
| Tax creditcarryforwards                    |       |         | 1,075      |         |       | 1,075 |   |
| Inventory, contract lossand other reserves |       |         | 21,300     |         |       | 14,635 |   |
| Accounts and unbilledreceivables           |       |         | (5,255     | )            |       | (9,558 | ) |
| Accruedliabilities                         |       |         | 5,366      |         |       | 824 |   |
| Depreciation andamortization               |       |         | (6,857     | )            |       | (1,552 | ) |
| Other                                      |       |         | 14         |         |       | 796 |  |
|                                       |       |              |       |              |       |
|                                       |       |         | 42,876     |         |       | 25,949 |   |
| Valuationallowance                         |       |         | (3,100     | )            |       | (3,100 | ) |
|                                       |       |              |       |              |       |
| Deferred tax asset,net                     |       | $            | 39,776     |         | $          | 22,849 |   |
|                                       |       |              |       |              |       |

    Realization of certaincomponents of the net deferred tax asset is dependent upon theCompany generating sufficient taxable income prior to expiration ofloss and credit carryforwards.  Although realization is notassured, management believes it is more likely than not that thenet deferred tax asset will be realized.  The amount of thenet deferred tax asset considered realizable, however, could bereduced in the near term if estimates of future taxable incomeduring the carryforward period are changed.  Also, underFederal tax law, certain potential changes in ownership of theCompany may limit annual future utilization of thesecarryforwards.  As such, the valuation allowance recorded isprovided against certain carryforwards which may not be utilized aswell as for certain preacquisition net operating losses which maynot be utilized due to annual limitations.  Other accruedliabilities at December 31, 2001 include a deferred tax liabilityof $2.1 million.  Other non-current liabilities atDecember 31, 2001 and 2000 include a deferred tax liability of$12.1 million and $1.9 million, respectively. 

**Note8.  Debt (See also Note 15)**

    OnFebruary 9, 2000, the Company and Titan Capital Trust (theTrust), our wholly owned subsidiary, issued 4 millionconvertible preferred securities (Remarketable Term IncomeDeferrable Equity Securities, or HIGH TIDES) at $50 per security,for a total of $200 million, with an over-allotment exercisedon February 16, 2000 for an additional 1 millionsecurities, for an additional $50 million.  The trustused the proceeds from the sale of the HIGH TIDES to purchase fromthe Company 53/4% Convertible Senior Subordinated Debentures, dueFebruary 15, 2030.  The debentures have the samefinancial terms as the HIGH TIDES.  The HIGH TIDES will accruedistributions of 53/4% per annum, with quarterly distributions to be paid inarrears on February 15, May 15, August 15 andNovember 15, commencing May 15, 2000.  The trust'sability to pay distributions on the HIGH TIDES is solely dependenton its receipt of interest payments from the Company on thedebentures.  Approximately five years after issuance of theHIGH TIDES, the HIGH TIDES may be remarketed, which means that aremarketing agent will attempt to establish an annual distributionrate, conversion price and redemption features for the HIGH TIDESthat are consistent with a price per HIGH TIDES equal to 101% ofits liquidation preference and also are most favorable to theCompany.  The 53/4% per annum rate will be applicable fromthe date of original issuance to, but excluding the resetdate.  The reset date is any date (a) not later thanFebruary 15, 2005, or the final reset date, or, if the day isnot a business day, the next succeeding day, and (b) notearlier than 70 business days prior to February 15, 2005, asmay be determined by the remarketing agent, in its solediscretion.  On or after the reset date, the applicable ratewill be the term rate established by the remarketing agent based onthe outcome of the remarketing.  The Company can, on one ormore occasions, defer the interest payments due on the debenturesfor up to 20 consecutive quarters unless an event of default underthe debentures has occurred and is continuing.  The holders ofthe HIGH TIDES may convert each security into shares of commonstock of Titan at the initial rate of 1.0076 shares of common stockfor each HIGH TIDES (equivalent to an initial conversion price of$49.625 per share of common stock).  The Company may redeemthe debentures in whole or in part, at any time on or afterFebruary 20, 2003 until but excluding the tender notificationdate, at a redemption price equal to 101.44% of the principalamount of the debentures, declining to 100% of the principal amountof the debentures on or after February 20, 2004, plus anyaccrued and unpaid interest; and after the reset date, inaccordance with the term call projections, if any, established inthe remarketing or, upon a failed final remarketing, on or afterthe third anniversary of the reset date at a redemption price equalto 100% of the principal amount of debentures, plus any accrued andunpaid interest. 

    OnFebruary 23, 2000, the Company entered into a credit agreementfor $275 million of financing from a syndicate of commercialbanks including Credit Suisse First Boston acting as Lead Arrangerand Administrative Agent, First Union Securities, Inc. actingas Co-Arranger and Syndication Agent and the Bank of Nova Scotiaserving as Documentation Agent.  The credit facility alsoallowed the Company to increase total availability by an additional$100 million, if needed, for an aggregate of$375 million.  The credit facility was subsequentlyamended on June 1, 2000 to provide for an increase in totalavailability for an additional $50 million, for an aggregatetotal of $425 million.  The proceeds of the loan wereused in part to refinance outstanding indebtedness on the Company's$190 million credit facility arranged by Bank of Nova Scotiain June 1999.  The senior credit facility is secured bysubstantially all of our and our subsidiaries' assets (other thanthe assets of SureBeam and our foreign operations) and guaranteedby substantially all of our subsidiaries.  The$425 million facility is comprised of a six-year seniorsecured multi-draw term loan facility in an aggregate principalamount of up to $75 million, two seven-year senior securedterm loan facilities in an aggregate principal amount of$250 million, and a five-year senior secured revolving creditfacility in an aggregate principal amount of up to$100 million.  Loans made under the multi-draw term loanfacility mature on the sixth anniversary of the closing date of thecredit facility, and amortize beginning in the credit facility'ssecond year, which began with the quarter ended June 30, 2001and ends with the quarter ending March 31, 2002, asfollows:  2.5% quarterly in the third and fourth quartersof year two of the credit facility, 3.75% quarterly in year threeof the credit facility, 5% quarterly in year four of the creditfacility, 6.25% quarterly in year five of the credit facility, 7.5%quarterly in the first and second quarters of year six of thecredit facility and 10% in the third quarter of year six of thecredit facility and on the sixth anniversary of the closing date ofthe credit facility.  Loans made under the term loanfacilities mature on the seventh anniversary of the closing date ofthe credit facility, and began amortizing in the credit facility'sfirst year, which began with the quarter ended June 30, 2000and ended with the quarter ended March 31, 2001, with thefollowing amortization schedule:  0.25% quarterly foryears one through six of the credit facility and 23.5% quarterlyfor the first three quarters of year seven of the credit facilityand on the seventh anniversary of the closing date of the creditfacility.  Under each of the term loan facilities and therevolving facility, the Company has the option to borrow at thebank's base rate or at adjusted LIBOR plus, in each case, anapplicable ratio based on the ratio of our total debt to EBITDA(earnings before interest and taxes and depreciation andamortization).  The agreement contains financial covenants,which were comprised of the following at December 31,2001:  a maximum debt to EBITDA limit of 3.50 to 1, aminimum interest coverage ratio of 3.75 to 1, a minimum fixedcharge coverage ratio of 1.0 to 1 and a minimum net worth of $256.8million.  At December 31, 2001, the Company was in compliancewith all financial covenants. 

    AtDecember 31, 2001, deferred financing costs included in OtherAssets related primarily to this facility were approximately$9.1 million and are being amortized over the term of theagreement.  Upon consummation of the agreement inFebruary 2000, the Company expensed the deferred financingcosts related to the previous agreement as an extraordinary item inthe first quarter of 2000. 

    AtDecember 31, 2001, total borrowings outstanding under ourcredit facility were $330.0 million at a weighted averageinterest rate of 5.0%.  Commitments under letters of creditwere $13.9 million at December 31, 2001, $9.1 million of whichreduces availability of the working capital line, resulting in$75.9 million of availability on our working capital line atDecember 31, 2001.  Of the total borrowings, $12.8 million wasshort-term. 

    InNovember 1996, Titan issued $34.5 million of81/4%convertible subordinated debentures due 2003.  OnSeptember 7, 1999, the Company announced a call for redemptionon November 2, 1999, of the debentures stilloutstanding.  At the time of the call, the Company hadoutstanding debentures in the aggregate principal amount ofapproximately $11.6 million.  All except $1 of the debentureswere converted prior to the redemption date.   Accordingly,the remaining $1 was redeemed on November 2, 1999.  Theconversion of the debentures was a non-cashtransaction. 

    OnDecember 10, 1999, the Company's wholly owned subsidiary,Titan Africa, Inc. ("Titan Africa"), in connection with itscontract to build a satellite-based telephone system for thenational telephone company of Benin, Africa, the OPT, entered intoa Loan Facility Agreement for up to 30.0 billion Francs CFA (thecurrency of the African Financial Community), equivalent toapproximately $45.0 million U.S. dollars, with a syndicate of fivebanks, with Africa Merchant Bank as the Arranger.  Thismedium-term financing is a non-recourse loan to Titan Africa whichis guaranteed by the national telephone company of Benin, Africaand secured by the national telephone company's equipment andrevenues related to the project.  The facility has a fixedinterest rate of 9.5% and will be repaid in seven equal semi-annualpayments from the net receipts of this project, or by the OPT inthe event that such receipts are not adequate to make thesepayments, which commenced on December 31, 2000, and werescheduled to end on December 31, 2003.  The AfricaMerchant Bank and Titan Africa have collectively agreed to extendthe principal payments until service revenues reach certain levels,which is anticipated in mid to late 2002.  Approximately $42.5million was drawn on this facility at December 31,2001. 

    AtDecember 31, 2001, Titan had other secured and unsecured debtoutstanding under various agreements totaling $1.4 millionshort-term and $5.6 million long-term, with interest rates rangingfrom 6.8% to 9.3%.  These agreements mature by2015.

    Details of long-term debtare as follows:

| ** **                                                                                                                                                                                                                                                  | ** ** | **December 31,****** |       |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------|------------|
| ** **                                                                                                                                                                                                                                                  | ** ** | ****                      |       |
| ** **                                                                                                                                                                                                                                                  | ** ** | **2001******              | ** ** | **2000****** |   |
| ** **                                                                                                                                                                                                                                                  | ** ** | ****                      | ** ** | **** |   |
| Senior creditfacility                                                                                                                                                                                                                                       |       | $                         | 330,000    |   | $ | 263,125 |   |
| Non-recourse equipmentfinancing                                                                                                                                                                                                                             |       |                      | 42,456     |   |   | 36,680 |  |
| Note payable to bank,interest at 9.30%, due February 2006, secured    by a First Deed of Trust on an officebuilding                                                                                                                          |       |                      | 457        |   |   | 539 |  |
| Note payable to UrbanBusiness Development Corporation, interest    at 8.58%, due January 2015, guaranteed by theSmall Business    Administration and secured by a Second Deed ofTrust on an office    building |       |                      | 644        |   |   | 638 |   |
| Note payable, interest at6.76%, paid in 2002                                                                                                                                                                                                                |       |                           | 3,008      |  |  | — |  |
| Acquisition related notespayable of acquired companies, interest    at 8.5%, due March 2005                                                                                                                                                  |       |                      | 2,626      |  |   | — |  |
| Promissory note, securedby equipment, interest at 8.5%, due    April 2002                                                                                                                                                                    |       |                      | 152        |   |   | 896 |   |
| All other long-termdebt                                                                                                                                                                                                                                     |       |                           | 138        |  |  | 503 |  |
|                                                                                                                                                                                                                                                             |       |                      |            |  |   |  |  |
|                                                                                                                                                                                                                                                             |       |                           | 379,481    |  |  | 302,381 |  |
| Less:  Currentportion                                                                                                                                                                                                                             |       |                      | (14,226    | ) |   | (3,491 | ) |
|                                                                                                                                                                                                                                                             |       |                      |            |  |   |  |  |
|                                                                                                                                                                                                                                                             |       | $                         | 356,255    |  | $ | 298,890 |  |
|                                                                                                                                                                                                                                                             |       |                      |            |  |   |  |  |

**Titan DebtMaturities**

    Maturities of long-termdebt, excluding non-recourse debt, are as follows:

| 2002       |   | $      | 14,226  |
|------------|--------|--------|---------|
| 2003       |   |   | 17,510  |
| 2004       |   |   | 21,276  |
| 2005       |   |   | 280,728 |
| 2006       |   |   | 540     |
| Thereafter |   |   | 2,745   |
|       |   |        |
|       |   | $      | 337,025 |
|       |   |        |

**Note9.  Commitments and Contingencies**

    The Company leasescertain buildings and equipment under non-cancelable operatinglease agreements.  These leases generally require the Companyto pay all executory costs such as taxes, insurance and maintenancerelated to the leased assets.  Certain of the leases containprovisions for periodic rate accelerations to reflectcost-of-living increases.  Rental expense under these leaseswas $26.8 million in 2001, $21.7 million in 2000 and $18.5 millionin 1999.  Through August 1999, the Company was obligated undera long-term lease agreement for facilities which are owned by anentity in which Titan had a minority ownership interest.  InFebruary 2000, Cayenta entered into a new long-term leaseagreement with this entity which requires future minimum leasepayments of approximately $6.6 million over 7 years. There is additional space in the facilities which, if vacant ordesired by Cayenta, could obligate Cayenta for additional futureminimum lease payments of approximately $0.7 million over the 7years.  The Company is a guarantor on the lease.  Rentalexpense in 2001, 2000 and 1999 includes $0.8 million, $0.8 millionand $0.6 million, respectively, paid related to this space. Also included in rent expense is $280 for 1999 incurred by ACS on alease for office space with a related party which includes theprincipal stockholders of ACS.   In 1999, this facility wassold to a non-affiliated third party from whom ACS currently leasesthe office space. 

    Future minimum leasepayments under noncancellable operating leases at December 31,2001, are as follows:

| 2002                        |   | $      | 36,161  |
|-----------------------------|--------|--------|---------|
| 2003                        |   |   | 28,073  |
| 2004                        |   |   | 20,523  |
| 2005                        |   |   | 17,820  |
| 2006                        |   |   | 15,844  |
| Thereafter                  |   |   | 38,830  |
|                        |   |        |
| Total minimum leasepayments |   | $      | 157,251 |
|                        |   |        |

    Obligations under capitalleases were $1.3 million, $0.3 million short-term included in Otheraccrued liabilities and $1.0 million long-term included in Othernon-current liabilities in the consolidated balance sheet atDecember 31, 2001.

    Inthe ordinary course of business, Titan will guarantee theobligations (primarily lease commitments) entered into by itsconsolidated subsidiaries.  Specifically, Titan has guaranteedcertain facility leases for SureBeam, aggregating approximately$15.1 million for lease terms through 2020.

    In1997, DBA recorded a $3.0 million charge in recognition of certainenvironmental matters at its Kissimmee facility including, but notlimited to, soil contamination and potential asbestos andlead-based paint contamination.  These matters became known toDBA as a result of an environmental study performed as part ofTitan's due diligence process related to the merger with DBA. The accrual was recorded in accordance with SFAS No. 5 and SOP 96-1and represented an initial estimate for the cost of clean-upactivities.  These activities were completed, and the propertywas sold in 2001.  Based on the completion of the clean-upactivities as well as the pending sale of the land and building,the Company determined that the unused portion of the associatedliability was not required as of December 31,2000. 

    OnJanuary 6, 2000, Ion Beam Applications s.a., a Belgian corporation,and some of its U.S. subsidiaries ("IBA") filed an action fordeclaratory judgment in a federal court in Virginia against Titanand the SureBeam Corporation ("SureBeam") relating to SureBeam'spatents for SureBeam systems.  The action attacked thevalidity of SureBeam's core patent, sought a declaration that IBAand its customers had not infringed any of the 62 claims inSureBeam's patent, and alleged that Titan and SureBeam engaged inunfair competition and that Titan and SureBeam's conductconstituted patent misuse.  The case was moved to the federalcourt in San Diego.  On November 22, 2000, IBA filed anamended complaint alleging, in addition to the original claims,that Titan and SureBeam engaged in false advertising,monopolization, restraint on trade and unfair businesspractices.

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

    Weare involved in legal actions in the normal course of our business,including audits and investigations by various governmentalagencies that result from our work as a defense contractor. We and our subsidiaries are named as defendants in legalproceedings from time to time and we or our subsidiaries may assertclaims from time to time.  In addition, we acquire companiesfrom time to time that have legal actions pending against them atthe time of acquisition.  Based upon current information andreview, we believe the ultimate liability or recovery with respectto pending actions would not materially affect our consolidatedfinancial position or our results of operations.  However, ourevaluation of the likely impact of these actions could change inthe future and an unfavorable outcome, depending upon the amountand timing, could have a material adverse effect on our results ofoperations or our cash flows in a future period.

**Note10.  Cumulative Convertible PreferredStock**

    Each share of $1.00cumulative convertible preferred stock is entitled to1/3vote,annual dividends of $1 per share and is convertible at any timeinto 2/3share of the Company's common stock (subject to customaryanti-dilution adjustments).  Common stock of 459,785 shareshas been reserved for this purpose.  The $1.00 cumulativeconvertible preferred stock is redeemable at the Company's optionat a redemption price of $20 per share, plus cumulative dividendsin arrears.   Upon liquidation, the $1.00 cumulativeconvertible preferred stockholders are entitled to receive $20 pershare, plus cumulative dividends in arrears, before anydistribution is made to the common stockholders. 

**Note11.  Common Stock**

    AtDecember 31, 2001, approximately 20,080,100 common shares werereserved for future issuance for conversion of preferred stock andsecurities, employee benefit and stock incentive plans andacquisition-related obligations. 

    OnJuly 26, 2001, the Company sold 8,048,685 shares of its commonstock in a public offering, which included an over-allotment of1,125,000 shares, at a price of $18.00 per share.  The Companyreceived approximate aggregate proceeds from the offering of $137.6million in July 2001, net of underwriters' commissions. Transaction expenses related to the offering were approximately$1.4 million.  In addition, certain Titan stockholders sold576,315 shares, including 489,972 shares from the exercise ofoptions, from which Titan received proceeds of $3.0million.

    OnAugust 17, 1995, the Board of Directors adopted a ShareholderRights Agreement and subsequently distributed one preferred stockpurchase right ("Right") for each outstanding share of theCompany's common stock.  Each Right entitles the registeredholder to purchase from the Company one one-hundredth of a share ofSeries A Junior Participating Preferred Stock, par value $1.00per share (the "Preferred Shares") at a price of $42.00 per oneone-hundredth of a Preferred Share, subject to adjustment. The Rights become exercisable if a person or group acquires, in atransaction not approved by the Company's Board of Directors("Board"), 15% or more of the Company's common stock or announces atender offer for 15% or more of the stock. 

    Ifa person or group acquires 15% or more of the Company's commonstock, each Right (other than Rights held by the acquiring personor group which become void) will entitle the holder to receive uponexercise a number of shares of the Company's common stock having amarket value of twice the Right's exercise price.  If theCompany is acquired in a transaction not approved by the Board,each Right may be exercised for common shares of the acquiringcompany having a market value of twice the Right's exerciseprice.  Titan may redeem the Rights at $.01 per Right,subject to certain conditions.  The Rights expire on August17, 2005. 

**Note12.  Stock-Based Compensation Plans**

    The Company providesstock-based compensation to officers, directors and key employeesthrough various fixed stock option plans and to all non-executiveemployees through an employee stock purchase plan.  TheCompany has adopted the disclosure only provisions of Statement ofFinancial Accounting Standards No. 123, "Accounting for Stock-BasedCompensation." Compensation cost if any, is measured as the excessof the quoted market price of the Company's stock on the date ofgrant over the exercise price of the grant.  No compensationhas been recognized for the Company's stock purchase plan.  Had compensation cost for the Company's stock-based compensationplans been determined based on the fair value at the grant datesfor awards under those plans consistent with the method of SFAS123, the Company's results of operations would have been reduced tothe pro forma amounts indicated below:

| ** **                           | ** ** | ** **  | ** ** | **2001** | ** ** | **2000** | ** ** | **1999** | ** ** |
|--------------------------------------|------------|-------------|------------|----------|------------|----------|------------|----------|------------|
| ** **                           | ** ** | ** **  | ** ** | ****     | ** ** | ****     | ** ** | ****     | ** ** |
| Net income(loss)                     |       | As reported |       | $        | (98,614    | )        | $          | (18,728  | )          | $ | 37,757 |  |
|                                 |       | Pro forma   |       |     | (107,737   | )        |       | (22,348  | )          |   | 34,337 |  |
| Net income (loss) per share, basic   |       | As reported |       |     | (1.76      | )        |       | (.43     | )          |   | .79 |  |
|                                 |       | Pro forma   |       |     | (1.92      | )        |       | (.51     | )          |   | .71 |  |
| Net income (loss) per share, diluted |       | As reported |       |     | (1.76      | )        |       | (.44     | )          |   | .70 |  |
|                                 |       | Pro forma   |       |     | (1.92      | )        |       | (.51     | )          |   | .64 |  |

    Options authorized forgrant under the Stock Option Plans of 1994 and 1997 and The 1996Directors' Stock Option and Equity Participation Plan (the "1996Directors' Plan") are 2,000,000 and 125,000, respectively. Grants in 1999 and the beginning of 2000 exceeded the remainingshares available under these plans.  The 2000 Employee andDirector Stock Option and Incentive Plan (the "2000 Plan") wasapproved by the Company's shareholders on May 30, 2000,authorizing 4,000,000 shares available for grant.  Underall plans, the options outstanding have been granted at prices thatare equal to the market price of the Company's stock on the date ofgrant.  Under the intrinsic value method prescribed byAPB 25, no compensation cost is recorded.  However, thegrants in 1999 that exceeded the shares available at that time wereplaced under the 2000 Plan after its approval by theshareholders.  Under the provisions of Financial AccountingStandards Board Interpretation No. 44 "Accounting for CertainTransactions Involving Stock Compensation" (an Interpretation ofAPB 25), the plan approval date becomes the grant date forpurposes of comparison of market value to exercise price. This resulted in deferred compensation related to these options of$15.6 million in 2000 based on the difference in market value atMay 30, 2000, and the grant price.  This deferredcompensation will be amortized to expense over the four yearvesting period of these options, including $3.9 million in 2001,and $4.9 million expensed in 2000, respectively.  Unamortizeddeferred compensation related to these options at December 31,2001 was $6.3 million. 

    Under the employee plans,an option's maximum term is ten years.  Under the 1996Directors' Plan, options expire 90 days after the option holderceases to be a director.  Under the applicable plans,directors may elect to receive stock in lieu of fees, such stock tohave a fair market value equal to the fees.  Employee optionsmay be granted throughout the year; directors' options are grantedannually.  Under the 2000 Plan, vesting for directors andfirst-time option grantees is over four years, with 25% exercisableat the completion of one year, and monthly vestingthereafter.  For option grants prior to the 2000 Plan, vestingis monthly over 4 years.  Options in the Stock OptionPlans of 1994 and 1997 and the 1996 Directors' Plan vest in 25%increments beginning one year after the grant date.  Stockoptions assumed by the Company as a result of the mergers discussedin Note 2 generally retain the terms under which they weregranted. 

    The fair value of eachoption grant is estimated on the date of grant using theBlack-Scholes option-pricing model using the followingweighted-average assumptions: zero dividend yield and an expectedlife of 5 years in all years; expected volatility of 76% in 2001,72% in 2000 and 67% in 1999; and a risk free interest rate of 4.38%in 2001, 5.05% in 2000 and 6.55% in 1999.

    Asummary of the status of the Company's fixed stock option plans asof December 31, 2001, 2000 and 1999, and changes during the yearsending on those dates is presented below:

| ** **                                                                      | ** ** | **2001******    | ** ** | **2000******                         | ** ** | **1999******       |
|---------------------------------------------------------------------------------|------------|-----------------|------------|--------------------------------------|------------|--------------------|
| ** **                                                                      | ** ** | ****            | ** ** | ****                                 | ** ** | ****               |
| ** **                                                                      | ** ** | **Shares(000)** | ** ** | **Weighted- Average Exercise Price** | ** ** | **Shares(000)**    | ** ** | **Weighted- Average Exercise Price** | ** ** | **Shares(000)** | ** ** | **Weighted- Average Exercise Price** |
| ** **                                                                      | ** ** | ****            | ** ** | ****                                 | ** ** | ****               | ** ** | **** | ** ** | **** | ** ** | **** |
| Outstanding at beginningof year                                                 |       |                 | 4,972      |                                 |            | $  11.84 |   |   | 4,813 |   |  | $    4.99 |   |   | 4,568 |   |  | $    3.69 |
| Granted                                                                         |       |            | 953        |                                 |       | 17.16              |   |   | 1,148 |   |   | 26.34 |   |   | 1,313 |   |   | 9.17 |
| Exchanged                                                                       |       |            | 1,169      |                                 |       | 12.68              |   |   | — |   |   | — |   |   | — |   |   | — |
| Exercised                                                                       |       |            | (1,735     | )                                    |       | 7.07               |   |   | (718 | ) |   | 28.11 |   |   | (779 | ) |   | 3.35 |
| Canceled                                                                        |       |            | (231       | )                                    |       | 15.36              |   |   | (271 | ) |   | 11.33 |   |   | (289 | ) |   | 6.11 |
|                                                                            |       |                 |       |                                 |       |               |  |   |   |   |   |  |   |   |   |
| Outstanding at end ofyear                                                       |       |            | 5,128      |                                 |       | 14.45              |   |   | 4,972 |   |   | 11.42 |   |   | 4,813 |   |   | 4.99 |
|                                                                            |       |                 |       |                                 |       |               |  |   |   |   |   |  |   |   |   |
| Options exercisable atyear-end                                                  |       |            | 2,863      |                                 |       |                    |   |   | 2,578 |   |   |   |   |   | 2,310 |   |   |   |
| Weighted-average fairvalue of    options granted during the year |       | $               | 12.15      |                                 |       |                    |   | $ | 17.51 |   |   |   |   | $ | 7.74 |   |   |   |

    The following tablesummarizes information about fixed stock options outstanding atDecember 31, 2001:

|                        |   | **OptionsOutstanding**            |   | **OptionsExercisable**                         |
|-----------------------------|--------|-----------------------------------|--------|------------------------------------------------|
|                        |   |                                   |   |                                                |
| **Range ofExercise Prices** |   | **NumberOutstanding at 12/31/01** |   | **Weighted-Average Remaining ContractualLife** |   | **Weighted-Average Exercise Price** |   | **NumberExercisable at 12/31/01** |   | **Weighted-Average Exercise Price** |
|                             |   |                                   |   |                                                |   |  |   |  |   |  |
| $                           | 1.39   | –                           | $      | 9.14                                           |   | 1,325,972 |  | 5.07years |   |  | $      4.21 |   | 1,102,277 |   |  | $      4.11 |
|                             | 9.25   | –                           |        | 16.01                                          |   | 1,332,192 |   | 7.45years |   |   | 10.72 |   | 930,270 |   |   | 11.02 |
|                             | 16.04  | –                           |        | 20.94                                          |   | 1,282,691 |   | 8.22years |   |   | 18.31 |   | 435,343 |   |   | 18.33 |
|                             | 21.35  | –                           |        | 47.50                                          |   | 1,186,849 |   | 8.53years |   |   | 25.92 |   | 394,665 |   |   | 27.39 |
|                        |   |                                   |   |                                           |   |   |   |   |  |   |   |   |
|                        |   | 5,127,704                         |   | 7.28years                                      |   |   | 14.45 |   | 2,862,555 |   |   | 11.74 |
|                        |   |                                   |   |                                           |   |   |   |   |  |   |   |   |

    Under the 2000 EmployeeStock Purchase Plan, the Company is authorized to issue up to1,500,000 shares of common stock to its full-time employees. This plan replaced the Company's 1995 Employee Stock Purchase Plan,which was authorized to issue 500,000 shares.  Electedofficers of the Company are not eligible to participate. Under the terms of the plan, employees may elect to have between 1and 15 percent of their regular earnings, as defined in the plan,withheld to purchase the Company's common stock.  The purchaseprice of the stock is 85 percent of the lower of its market priceat the beginning or at the end of each offering period.  Anoffering period is six months, beginning January 1 andJuly 1 of each year.  Approximately 24%, 27% and 10% ofeligible employees participated in the Plan and purchasedapproximately 476,100, 559,000 and 216,000 shares of the Company'scommon stock in 2001, 2000 and 1999, respectively.  Theweighted-average fair value of the purchase rights granted in 2001,2000 and 1999 was $5.09, $3.33 and $5.60, respectively, whichrepresents the approximate intrinsic value to the participantsrelated to the benefits of participation in the plan as determinedin accordance with SFAS 123. 

    AtDecember 31, 2001, the Company also had warrants outstanding for5,000 shares of the Company's common stock at a price of $21.35 pershare.

    Each of Titan Systems,SureBeam and Titan Wireless is a subsidiary of Titan and has itsown key employee stock option plan.  LinCom Wireless, AverCom(discontinued) and Scan Technologies, subsidiaries of Titan in theTitan Technologies  segment, also have key employee stockoption plans.  As of December 31, 2001, Titan Systems andTitan Wireless each had approximately 20% of its fully dilutedcommon stock that had been reserved for issuance under its plan,and SureBeam had approximately 11.7% of their fully diluted commonstock that had been reserved for issuance under its respectiveplans.  As of December 31, 2001, LinCom Wireless, AverCom andScan Technologies had approximately 17%, 14% and 14%, respectively,of their fully diluted common stock that had been reserved forissuance under their plans. 

    AtDecember 31, 2001, Titan Systems and Titan Wireless had optionsoutstanding of approximately 5,564,225 and 780,250,respectively.  LinCom Wireless, AverCom and Scan Technologieshad options outstanding of approximately 1,442,250, 1,192,500 and634,000, respectively, at December 31, 2001.  SureBeamhad options outstanding of approximately 6,335,200 at December 31,2001.

    During 1999, SureBeamgranted 3,237,578 options to purchase shares of its Class Acommon stock with a weighted average exercise price of $0.1438 pershare.  These option grants resulted in deferred compensationto SureBeam calculated as the difference between the fair marketvalue of the shares of common stock underlying the option at thedate of grant and the option exercise price.  The deferredcompensation is amortized over the vesting period of the underlyingoptions which is four years.  Accordingly, SureBeam recordeddeferred compensation of approximately $17 which resulted in aninsignificant non-cash compensation amortization expense for theyear ended December 31, 1999.  During 2000, SureBeamrecorded deferred compensation of approximately $3.2 millionwhich resulted in a non-cash compensation amortization expense ofapproximately $0.6 million.  SureBeam also recorded$78.6 million as deferred compensation at the time itsrecently completed initial public offering closed.  Thisamount was recognized as a non-cash charge to SureBeam's earningsof approximately $38.9 million in March 2001 at the timethe initial public offering closed, with the balance beingrecognized over the remaining four-year vesting period of theoptions.  The amortization of deferred compensation expense isreflected in the loss from discontinued operations in allyears.

    Under its variable stockoption plan, Cayenta (discontinued) has granted options to certainemployees who have agreed to resell shares purchased with thoseoptions to Cayenta.  Cayenta recorded a deferred compensationcharge related to these option grants of approximately$0.6 million in the year ended December 31, 2000. Cayenta also issued options to employees not covered by thisbuyback option at exercise prices that were less than the deemedfair market value of the underlying common shares on the date ofgrant.  Cayenta has recognized deferred compensation relatingto these grants of approximately $1.2 million and is amortizingthis deferred charge to expense over the four-year vesting periodof these options. 

**Note13.  Benefit Plans**

    The Company has variousdefined contribution benefit plans covering certainemployees.  The Company's contributions to these plans were$13.4 million, $10.8 million and $9.8 million in 2001, 2000 and1999, respectively.  The Company's combined discretionarycontributions to employee stock ownership plans, including those ofacquired companies, were $1.0 million in 1999.  Nocontribution was made in 2000 or 2001.  Discretionarycontributions to a profit sharing plan covering certain employeeswere $0.2 million in 1999. 

    The Company has anon-qualified executive deferred compensation plan for certainofficers and key employees.  The Company's expense for thisplan, including interest, was $0.8 million, $0.6 million and $1.0million in 2001, 2000 and 1999, respectively.  Interestexpense for the years ended December 31, 2001, 2000 and 1999includes $0.5 million, $0.3 million and $0.8 million, respectively,related to the plan.  Included in other non-currentliabilities is $6.2 million and $5.7 million related to this planat December 31, 2001 and 2000, respectively.  Cash surrendervalue of the life insurance related to this plan was $7.3 millionand $9.8 million included in Other Assets at December 31, 2001and 2000, respectively.  The Company also has performancebonus plans for certain of its employees.  Related expenseamounted to approximately $11.6 million, $11.1 million and $6.2million in 2001, 2000 and 1999, respectively. 

    The Company haspreviously provided for postretirement benefit obligations ofoperations discontinued in prior years.  The Company alsoimplemented a post retirement medical benefit plan for seniorexecutives in 2000.  All values related to this plan areimmaterial.  The Company has no other postretirement benefitobligations for any of its continuing operations nor for itsrecently discontinued businesses. 

**Note14.  Related Party Transactions**

    Inconnection with our SureBeam business, we have entered into anumber of agreements with SureBeam, including a Corporate servicesagreement pursuant to which we provide general corporateadministrative support, facility space and related maintenance andoccupancy services through a facilities allocation and a taxallocation agreement whereby in the event Titan offsets its taxablegains with SureBeam losses, Titan will compensate SureBeam in cashfor the benefit it receives for use of SureBeam losses, whenSureBeam demonstrates that it is able to utilize those losses orthe losses would have otherwise expired. 

    InSeptember 2001, Titan purchased a world-wide perpetual andexclusive, non-royalty bearing license to use SureBeam'sintellectual property for all applications and fields other thanthe food, animal hide and flower markets, for the followingconsideration: 1) a $50 million senior secured line of credit, withcustomary financial, affirmative and negative covenants, 2) theexchange of the $75 million debt owed by SureBeam to Titan foradditional shares of Class B and Class A common stock of SureBeam,and 3) a cash payment of $8 million, with $4 million paid atSeptember 30, 2001 and four installments of $1 million each payableon March 31, 2002, June 30, 2002, September 30, 2002 and December31, 2002.  The company has obtained approval from its seniorlenders under its new credit facility entered into in May 2002 toextend an aggregate $50 million credit facility.  Inaddition, Titan and SureBeam are currently negotiating revisions tothe currently in place tax sharing agreements and corporateservices agreement as well as sublease arrangements with respect tothree SureBeam service centers and a reimbursement agreement withrespect to guarantees of SureBeam obligations provided byTitan.  Titan and SureBeam have entered into an exclusivecontract for the purchase and sale of electronic beam acceleratorsthrough December 31, 2003 and related integration services throughDecember 31, 2002 unless SureBeam does not offer competitivepricing.

    Related to the exchangeof the $75 million debt owed by SureBeam to us, we exchanged $2million of the balance on December 31, 2001 for 190,385 Class Bcommon shares of SureBeam, and exchanged the remaining $73 millionof the balance on February 13, 2002 for 4,441,496 Class A and3,225,765 Class B common shares of SureBeam.

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

    Titan has also committedto utilize SureBeam as its exclusive supplier, provided SureBeamoffers competitive terms, for all e-beam and x-ray acceleratorsystems owned and operated by Titan or sold to a third partythrough at least December 31, 2003.  In addition, Titan hasalso committed to utilize SureBeam exclusively for all integrationservices related to accelerator systems until at least December 31,2002.

    Titan has guaranteedcertain facility leases for SureBeam, aggregating approximately$15.1 million for lease terms through 2020.

    Inrelation to SureBeam's strategic alliance with Hawaii Pride, Titanhas guaranteed up to the greater of SureBeam's equity interest inHawaii Pride or 19.9% of Hawaii Pride's $6.8 million, 15-year loanfrom its lender, Web Bank.  As of December 31, 2001, Titan hasguaranteed approximately $1.3 million, or 19.9% of the loanbalance.

    AtDecember 31, 2001, the Company had loans receivable from threeofficers of two of the Company's subsidiaries totaling $0.3million.

**Note15.  Subsequent Events**

    OnFebruary 13, 2002, Titan exchanged $73.0 million of SureBeam'soutstanding balance of its promissory note to Titan for equity inSureBeam, at $9.521 per share, the twenty day trading average ofSureBeam as of February 12, 2002, which resulted in the exchangefor 4,441,496 shares of Class A common stock and 3,225,765 sharesof Class B common stock of SureBeam.

    OnFebruary 22, 2002, Titan completed the acquisition of InternationalSystems, LLC, which designs and builds low-cost combat systems forthe Department of Defense (DoD) and agencies of the DoD, to furtherTitan’s goal of acquiring government information technologycompanies which fit strategically with Titan Systems.  Thepurchase price was comprised of approximately 100,000 shares ofTitan common stock, subject to post-closing adjustments andindemnification obligations.  Also, additional considerationmay be paid based on the receipt of certain potential futurecontract awards and the achievement of defined earnings levels oncertain contracts, which consideration may be satisfied with cashor Titan common stock.  The operations of InternationalSystems will reported in our Titan Systems segment.  Thetransaction was accounted for as a purchase, and goodwill of $2.4million was recorded.

    OnFebruary 25, 2002, Titan entered into a definitive agreement toacquire Science and Engineering Associates, Inc. ("SEA"), a NewMexico based privately held provider of engineering and informationtechnology services and specialized laser, sensor, and imagingproducts for approximately $72.0 million in Titan common stock lessa $3.8 million holdback, which is subject to the satisfaction ofcertain indemnification obligations for a one year period followingthe close date.  In addition, a potential $3.8 million earnoutmay be paid upon the attainment of certain operating performancetargets.  The exchange ratio and the number of shares of Titanstock will be determined based upon the average closing sale pricesof Titan common stock over the 20 consecutive trading days endingon the day prior to the date of the SEA special meeting ofshareholders called to approve the merger agreement.  Thespecial meeting has not yet been scheduled, but is expected to beheld in the second or third quarter of 2002, and the transaction isexpected to close shortly thereafter.

    OnMarch 1, 2002, the Company made the decision to sell certain of itscommercial information technology operations within its Cayentasegment and the AverCom business within the Titan Technologiessegment in order to allow management to focus on operations withthe most near term growth opportunities.  As a result,Cayenta’s federal government operations have become a part ofTitan Systems, and Cayenta’s remaining continuing operationsare being reported in Titan Technologies, formerly Titan’sEmerging Technologies and Businesses segment. In accordance withStatement of Financial Accounting Standard No. 144,“Accounting for the Impairment or Disposal of Long-livedAssets and for Long-Lived Assets to be Disposed of,” allcommercial operations that are held for sale have been reflected asdiscontinued operations for all periods presented in Titan’sconsolidated financial statements.  All prior period financialinformation has been restated to reflect the newsegments.

    OnMarch 21, 2002, Titan completed the acquisition of GlobalNet, Inc.("GlobalNet"), a provider of international voice, data, andinternet services to further Titan’s goal of building aglobal telecommunications network.  Titan issued approximately1,452,800 shares of common stock for all the common stock ofGlobalNet at an aggregate value of $28.1 million, based on $19.37per Titan share, the closing price as of March 14, 2002, the date on which the formula for consideration became fixed, andassumed stock options and warrants representing approximately77,900 shares of Titan common stock at an aggregate value of $0.8million, based on an exchange ratio of 0.3853 shares of Titancommon stock for each share of GlobalNet common stock. GlobalNet's operations are reported in our Titan Wireless segmentfrom March 22, 2002.  The transaction was accounted for as apurchase.  The excess of the purchase price of $28.9 millionover the estimated fair market value of the net liabilitiesacquired of approximately $18.9 million was approximately $47.8million.  In April 2002, the Company had an independentvaluation by completed by KCI to assist management in its purchaseprice allocation of the GlobalNet acquisition.  Theindependent valuation supported the Company’s allocation inwhich the determination was made to allocate $47.8 million togoodwill and $0 to intangible assets. 

    OnMarch 21, 2002, Titan completed the acquisition of Jaycor, Inc.("Jaycor"), a San Diego, California, based provider of informationtechnology services and specialized communications and sensorproducts to further Titan’s goal of acquiring governmentinformation technology companies which fit strategically with TitanSystems.  Titan issued approximately 4,919,500 shares ofcommon stock for all the common stock of Jaycor, based on anexchange ratio of 0.50160 shares of Titan common stock for eachshare of Jaycor common stock at an aggregate value of $99.6million, based on $20.24 per Titan share, the average trading price ending March 20, 2002, the date on which the formula for consideration became fixed.  Jaycor's operations arereported in our Titan Systems segment from March 22, 2002. The excess of the purchase price of $99.6 million over theestimated fair market value of the net assets acquired ofapproximately $56.8 million was approximately $42.8 million. The transaction was accounted for as a purchase.  In April2002, the Company had an independent valuation completed by KCI toassist management in its purchase price allocation of the Jaycoracquisition.  The independent valuation supported theCompany’s allocation of $38.9 million to goodwill and $3.9million to intangible assets.  The intangible assets consistof backlog, customer relationships and trade name of $0.7 million,$1.3 million, and $1.9 million, respectively, which will beamortized over the estimated useful lives of 1 year, 1 to 3 yearsand 5 years, respectively.   The transaction value couldbe adjusted upwards upon final resolution of the Jaycor workingcapital audit and Titan may be required to issue additionalshares.

    Following is unauditedcondensed balance sheet information for GlobalNet and Jaycor at thedate of their respective acquisition (amounts inmillions):

|                              |  | **GlobalNet** |       | **Jaycor** |   |
|------------------------------|--|---------------|-------|------------|---|
| ** **                   |  | ****          |       | ****       |   |
| Cash                         |  | $             | 0.1   |            | $ | 35.6 |  |
| Accountsreceivable           |  |               | 4.8   |            |   | 16.6 |  |
| Other currentassets          |  |               | 0.6   |            |   | 12.5 |  |
| Property, plant andequipment |  |               | 9.5   |            |   | 3.9 |  |
| Non-currentassets            |  |               | 1.2   |            |   | 1.1 |  |
|                              |  |               |       |            |   |
| Total assets                 |  |               | 16.2  |            |   | 69.7 |  |
| Accounts payable             |  |               | 4.8   |            |   | 8.9 |  |
| Currentliabilities           |  |               | 20.5  |            |   | 3.7 |  |
| Non-currentliabilities       |  |               | 9.8   |            |   | 0.3 |  |
|                              |  |               |       |            |   |
| Totalliabilities             |  |               | 35.1  |            |   | 12.9 |  |
|                              |  |               |       |            |   |
| Net assets(liabilities)      |  | $             | (18.9 | )          | $ | 56.8 |  |
|                         |  |               |       |            |   |

    InMay 2002, Titan received a favorable ruling request from the IRSfor the tax free distribution of SureBeam.

    OnMay 23, 2002, the Company entered into an agreement with WachoviaBank, National Association and Wachovia Securities for a $485million credit facility from a syndicate of commercial banksincluding Wachovia Securities acting as Sole Lead Arranger andWachovia Bank, National Association, as Administrative Agent, TheBank of Nova Scotia and Comerica Bank as Co-Syndication Agents andBranch Banking Trust Company and Toronto Dominion Bank asCo-Documentation Agents and other financial institutions.  Thenew credit facility replaces the Company’s existing $425million credit facility and is comprised of a $135 millionrevolving credit facility and a $350 million term loan, whichmature in six and seven years, respectively.  No funds weredrawn initially on the revolver, which will be available to theCompany for general corporate needs, including strategicacquisitions.  Additionally, the new facility excludesTitan’s ownership of SureBeam stock as collateral, enablingTitan to spin-off SureBeam in accordance with Titan’s plansto do so.  

***    ***Loans made under the term loan facility would mature onthe seventh anniversary of the closing date of the new creditfacility, and amortize as follows: 1.0% per year in years onethrough six of the credit facility and 94% in year seven of thecredit facility.  Under each of the term loan facility and therevolving facility, we would have the option to borrow at thebank’s base rate or at adjusted LIBOR plus, in each case, anapplicable margin based upon our ratio of our total debt to EBITDA(earnings before interest and taxes and depreciation andamortization).  The agreement contains financial covenantsthat set maximum debt to EBITDA limits and require us to maintainminimum interest and fixed charge coverages and levels of networth.  The new agreement contains financial covenants, whichare comprised of the following at March 31, 2002, on a pro formabasis for the new bank facility:  a maximum debt toEBITDA limit of 3.1 to 1, a minimum interest coverage ratio of 2.75to 1, a minimum fixed coverage ratio of 1.2 to 1 and a minimum networth of $475 million.  As of March 31, 2002, on a proforma basis, taking into effect the new bank facility, Titan was incompliance with all financial covenants.

**Adoption of SFAS No.142, “Goodwill and Other IntangibleAssets”**

    Effective January 1,2002, the Company adopted SFAS No. 142, "Goodwill and OtherIntangible Assets," which establishes financial accounting andreporting for acquired goodwill and other intangible assetsandsupersedes Accounting Principles BoardOpinion No. 17, "Intangible Assets". Under SFAS No. 142, goodwilland indefinite-lived intangible assets are no longer amortized butare reviewed at least annually for impairment. Separable intangibleassets that have finite useful lives will continue to be amortizedover their useful lives.

    SFAS No. 142 requiresthat goodwill be tested for impairment at the reporting unit levelat adoption and at least annually thereafter, utilizing a two stepmethodology. The initial step requires the Company to determine thefair value of each reporting unit and compare it to the carryingvalue, including goodwill, of such unit. If the fair value exceedsthe carrying value, no impairment loss would be recognized.However,if the carrying value of thereporting unit exceeds its fair value, the goodwill of this unitmay be impaired. The amount, if any, of the impairment would thenbe measured in the second step.

    Inconnection with adopting this standard as ofJanuary 1, 2002, during the first quarterthe Company’s independent valuation consultant, KCI completedstep one of the test for impairment, which indicated that thecarrying values of certain reporting units exceeded their estimatedfair values, as determined utilizing various evaluation techniquesincluding discounted cash flow and comparative market analysis.Thereafter, given the indication of a potential impairment, KCI hassubstantially completed step two of the test. Based on thatanalysis, a transitional impairment loss of $40.1 million, whichwas net of a $10.0 million tax benefit, or $0.57 basic earnings pershare and $0.55 diluted earnings per share, was recognized as thecumulative effect of an accounting change. The impairment chargeresulted from a change in the criteria for themeasurement of the impairment loss from an undiscounted cashflow method, as required by SFAS No. 121, "Accounting for theImpairment of Long-Lived Assets and for Long-Lived Assets to beDisposed Of," to a discounted cash flow method and comparativemarket analysis as required by SFAS No. 142.  The gross $50.1 million impairment charge recorded inthe first quarter of 2002 was comprised of approximately $27.5million in certain components of our Cayenta business,approximately $14.9 million in our AverCom business, which wasreported in our Titan Technologies segment (previously our EmergingTechnologies and Businesses segment), both attributable to lowervaluations and weakened outlook in commercial IT services, andapproximately $7.7 million in our Titan Wireless business. Approximately $34.0 million of this charge, net of tax, pertainedto businesses that were discontinued by the Company on March 1,2002.

    The adjustment ofpreviously reported net income (loss) and earnings (loss) per sharebelow represents the recorded amortization of goodwill and otherpurchased intangibles. The impact on net income (loss), and basicand diluted net earnings (loss) per share for the years endedDecember 31, 2001, 2000 and 1999 is set forth below:

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

| ** **                                                                                              | ** ** | **YearsEnded December 31,****** | ** ** |
|---------------------------------------------------------------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                                                                              | ** ** |                                      | ** ** |
|                                                                                                         |            | **2001**                             |            | **2000** |  | **1999** |  |
|                                                                                                         |            |                                      |            |  |  |  |  |
| Income (loss) fromcontinuing operations before extraordinary item                                       |       | $                                    | (1,520     | ) | $ | (5,457 | ) | $ | 41,144 |   |
| Add Back Amortization ofGoodwill, net of tax                                                            |       |                                 | 38,215     |   |   | 8,743 |   |   | 4,950 |   |
|                                                                                                         |            |                                      |            |  |  |  |  |
| Adjusted income (loss)from continuing operations before extraordinary item                              |       |                                 | 36,695     |   |   | 3,286 |   |   | 46,094 |   |
|                                                                                                         |            |                                      |            |  |  |  |  |  |  |  |
| Loss from discontinuedoperations, net of tax benefit                                                    |       |                                 | (97,094    | ) |   | (8,527 | ) |   | (3,387 | ) |
|       Add BackAmortization of Goodwill, net of tax                        |       |                                 | 11,549     |  |   | 13,972 |  |   | 352 |  |
|                                                                                                         |            |                                      |            |  |  |  |  |
| Adjusted income (loss)from discontinued operations                                                      |       |                                 | (85,545    | ) |   | 5,445 |  |   | (3,035 | ) |
|                                                                                                         |            |                                      |            |  |  |  |  |  |  |  |
| Extraordinary loss fromearly extinguishments of debt, net of taxes                                      |       |                                 | —    |  |   | (4,744 | ) |   | — |   |
|                                                                                                         |            |                                      |            |  |  |  |  |
|                                                                                                         |            |                                      |            |  |  |  |  |  |  |  |
| Net income(loss)                                                                                        |       |                                 | (48,850    | ) |   | 3,987 |  |   | 43,059 |  |
| Dividend requirements onpreferred stock                                                                 |       |                                 | (690       | ) |   | (692 | ) |   | (695 | ) |
|                                                                                                         |            |                                      |            |  |  |  |  |
| Net income (loss)applicable to common stock                                                             |       | $                                    | (49,540    | ) | $ | 3,295 |  | $ | 42,364 |   |
|                                                                                                         |            |                                      |            |  |  |  |  |
|                                                                                                         |            |                                      |            |  |  |  |  |  |  |  |
| Basic earnings (loss) pershare:                                                                         |       |                                 |            |  |   |  |  |   |  |  |
|       Income (loss)from continuing operations before extraordinary item   |       | $                                    | (0.09      | ) | $ | (0.16 | ) | $ | 0.86 |  |
|       Add backamortization of goodwill, net of tax                        |       |                                      | 0.65       |  |  | 0.17 |  |  | 0.10 |  |
|                                                                                                         |            |                                      |            |  |  |  |  |
|       Adjustedincome from continuing ops before extraordinary item        |       | $                                    | 0.56       |   | $ | 0.01 |  | $ | 0.96 |  |
|                                                                                                         |            |                                      |            |  |  |  |  |  |  |  |
|       Loss fromdiscontinued operations, net of tax benefit                |       | $                                    | (1.67      | ) | $ | (0.18 | ) | $ | (0.07 | ) |
|       Add backamortization of goodwill, net of tax                        |       |                                 | 0.20       |   |   | 0.27 |   |   | 0.01 |   |
|                                                                                                         |            |                                      |            |  |  |  |  |
|       Adjustedincome (loss) from discontinued ops                         |       | $                                    | (1.47      | ) | $ | 0.09 |  | $ | (0.06 | ) |
|                                                                                                         |            |                                      |            |  |  |  |  |  |  |  |
|       Extraordinaryloss from early extinguishments of debt, net of taxes  |       |                                 | —    |  |   | (0.09 | ) |   | — |   |
|                                                                                                         |            |                                      |            |  |  |  |  |  |  |  |
|       Net income (loss)                                                   |       | $                                    | (0.91      | ) | $ | (0.01 | ) | $ | 0.90 |  |
|                                                                                                         |            |                                      |            |  |  |  |  |
|                                                                                                         |            |                                      |            |  |  |  |  |  |  |  |
|       Weighted average shares                                             |       |                                 | 58,793     |   |   | 52,717 |   |   | 47,094 |   |
|                                                                                                         |            |                                      |            |  |  |  |  |
| Diluted earnings (loss)per share:                                                                       |            |                                      |            |  |  |  |  |  |  |  |
|       Income (loss) from continuing operations beforeextraordinary item   |            | $                                    | (0.09      | ) | $ | (0.16 | ) | $ | 0.76 |  |
|       Add back amortization of goodwill, net of tax                       |            |                                      | 0.65       |  |  | 0.17 |  |  | 0.09 |  |
|                                                                                                         |            |                                      |            |  |  |  |  |
|       Adjusted income (loss) from continuing ops beforeextraordinary item |            | $                                    | 0.56       |  | $ | 0.01 |  | $ | 0.85 |  |
|                                                                                                         |            |                                      |            |  |  |  |  |  |  |  |
|       Loss from discontinued operations, net of taxbenefit                |            | $                                    | (1.67      | ) | $ | (0.19 | ) | $ | (0.06 | ) |
|       Add back amortization of goodwill, net of tax                       |            |                                      | 0.20       |  |  | 0.27 |  |  | 0.01 |  |
|                                                                                                         |            |                                      |            |  |  |  |  |
|       Adjusted loss from discontinued ops                                 |            | $                                    | (1.47      | ) | $ | 0.08 |  | $ | (0.05 | ) |
|                                                                                                         |            |                                      |            |  |  |  |  |  |  |  |
|       Extraordinary loss from early extinguishments of debt, netof taxes  |            |                                      | —    |  |  | (0.09 | ) |  | — |  |
|                                                                                                         |            |                                      |            |  |  |  |  |  |  |  |
|       Net income (loss)                                                   |            | $                                    | (0.91      | ) | $ | (0.00 | ) | $ | 0.80 |  |
|                                                                                                         |            |                                      |            |  |  |  |  |
|       Weighted average shares                                             |            |                                      | 58,793     |  |  | 52,717 |  |  | 54,136 |  |
|                                                                                                         |            |                                      |            |  |  |  |  |

**Note16.  Unaudited Quarterly Financial Data (in thousands,except per share data)**

| **2001**                                                                                      | ****   | **First Quarter** | ****    | **Second Quarter** | ****   | **Third Quarter** | ****   | **Fourth   Quarter** | ****    | **Total Year** | ****   |
|-----------------------------------------------------------------------------------------------|--------|-------------------|---------|--------------------|--------|-------------------|--------|---------------------------|---------|----------------|--------|
| ****                                                                                          |        | ****              |         | ****               |        | ****              |        | ****                      |         | ****           |        |
| Revenues                                                                                      |   | $                 | 239,312 |               | $      | 257,664           |   | $                         | 263,478 |           | $      | 323,953 |   | $ | 1,084,407 |   |
| Gross profit                                                                                  |   |              | 59,629  |                    |        | 60,651            |        |                           | 64,209  |                |        | 80,329 |  |  | 264,818 |  |
| Income (loss) fromcontinuing    operations                                     |   |              | (14,706 | )                  |        | 2,621             |        |                           | 3,519   |                |        | 7,046 |  |  | (1,520 | ) |
|                                                                                |   |              |    |               |   |              |   |                      |    |           |   |   |   |   |   |   |
| Net income(loss)                                                                              |   |              | (59,870 | )                  |   | (7,805            | )      |                      | (38,791 | )              |   | 7,852 |   |   | (98,614 | ) |
| Basic earnings pershare:                                                                      |   |              |    |               |   |              |   |                      |    |           |   |   |   |   |   |   |
|    Income(loss) from continuing       operations |   | $                 | (.34    | )                  | $      | .04               |        | $                         | .05     |                | $      | .10 |  | $ | (.09 | ) |
|    Netincome (loss)                                                            |   |              | (1.29   | )                  |   | (.16              | )      |                      | (.63    | )              |   | .12 |   |   | (1.76 | ) |
|                                                                                |   |              |    |               |   |              |   |                      |    |           |   |   |   |   |   |   |
| Diluted earnings pershare:                                                                    |   |              |    |               |   |              |   |                      |    |           |   |   |   |   |   |   |
|    Income(loss) from continuing       operations |   |              | (.34    | )                  |        | .04               |        |                           | .05     |                |        | .10 |  |  | (.09 | ) |
|    Netincome (loss)                                                            |   |              | (1.29   | )                  |   | (.16              | )      |                      | (.61    | )              |   | .12 |   |   | (1.76 | ) |

| **2000**                                                                                                               | ****   | **First Quarter** | ****    | **Second Quarter** | ****   | **Third Quarter** | ****   | **Fourth Quarter** | ****    | **Total Year** | ****   |
|------------------------------------------------------------------------------------------------------------------------|--------|-------------------|---------|--------------------|--------|-------------------|--------|--------------------|---------|----------------|--------|
| ****                                                                                                                   |        | ****              |         | ****               |        | ****              |        | ****               |         | ****           |        |
| Revenues                                                                                                               |   | $                 | 202,313 |               | $      | 229,724           |   | $                  | 250,680 |           | $      | 258,496 |   | $ | 941,213 |   |
| Gross profit                                                                                                           |   |              | 45,479  |                    |        | 52,095            |        |                    | 60,696  |                |        | 74,824 |  |  | 233,094 |  |
| Income (loss) fromcontinuing    operations before extraordinary loss                                    |   |              | (6,625  | )                  |        | (9,573            | )      |                    | 18,787  |                |        | 16,529 |  |  | 19,118 |  |
| Net income(loss)                                                                                                       |   |              | (15,236 | )                  |   | (12,485           | )      |               | 5,691   |           |   | 3,302 |   |   | (18,728 | ) |
|                                                                                                         |   |              |    |               |   |              |   |               |    |           |   |   |   |   |   |   |
| Basic earnings pershare:                                                                                               |   |              |    |               |   |              |   |               |    |           |   |   |   |   |   |   |
|    Income(loss) from continuing       operations beforeextraordinary loss |   | $                 | (.15    | )                  | $      | (.20              | )      | $                  | .11     |                | $      | .08 |  | $ | (.16 | ) |
|    Netincome (loss)                                                                                     |   |              | (.32    | )                  |   | (.24              | )      |               | .09     |           |   | .04 |   |   | (.43 | ) |
|                                                                                                         |   |              |    |               |   |              |   |               |    |           |   |   |   |   |   |   |
| Diluted earnings pershare:                                                                                             |   |              |    |               |   |              |   |               |    |           |   |   |   |   |   |   |
|    Income(loss) from continuing       operations beforeextraordinary loss |   |              | (.15    | )                  |        | (.20              | )      |                    | .10     |                |        | .08 |  |  | (.16 | ) |
|    Netincome (loss)                                                                                     |   |              | (.32    | )                  |   | (.24              | )      |               | .09     |           |   | .04 |   |   | (.44 | ) |

    The above financialinformation for each quarter reflects all normal and recurringadjustments.

    Income from continuingoperations and net loss for 2001 include acquisition andintegration related charges and other of $30.4 million. Net loss for 2001 includes a loss from discontinued operations of$97.1 million.  The loss from continuing operationsincludes all costs previously related to the Cayenta headquartersand network operations center, which supported sales, marketing,administrative and operational functions of all previouslyintegrated Cayenta operations.  The headquarters and networkoperations center were eliminated on March 1, 2002 when certain ofthe components of Cayenta were discontinued.  Certain of thesecosts were previously included in the loss from discontinuedoperation for the interim period for the first quarter of 2001, asfiled in  the  Company’s  Form 10-Q for thequarter ended March 31, 2002, filed with the Commission on May 15,2002.  These headquarters and network operations costs ofapproximately $17.1 million, which includes an impairmentcharge of $14.9 million for certain assets of the networkoperations center and corporate headquarters of Cayenta, have nowbeen reclassified to continuing operations in the presentationabove.

    Loss from continuingoperations and net loss for 2000 include acquisition relatedcharges of $28.8 million and a gain on sale of$2.1 million.  Net loss for 2000 includes a loss fromdiscontinued operations of $8.5 million.

**PART****III**

**Item9.  Changes In and Disagreements with Accountants onAccounting and Financial Disclosure**

    The information requiredby Item 9 with respect to changes in accountants is incorporatedhere in by this reference to such information filed under Form 8-Kdated April 15, 2002.  The Company changed its publicaccountants from Arthur Andersen LLP to KPMG LLP for the fiscalyear 2002.

**Item10.  Directors and Executive Officers of theCompany**

    The information requiredby Item 10 with respect to the directors and the executive officersof the Company is incorporated herein by this reference to suchinformation under "Election of Directors - Information ConcerningNominees," "Management - Executive Officers" and "Section 16(A)Beneficial Ownership Reporting Compliance" in the Company'sdefinitive proxy statement for the 2002 Annual Meeting ofStockholders.

**Item11.  Executive Compensation**

    The information requiredby Item 11 is incorporated herein by this reference to suchinformation under "Report of the Compensation, Stock Option andPension Committee of the Board of Directors on ExecutiveCompensation" and "Executive Compensation and Other Information" inthe Company's definitive proxy statement for the 2002 AnnualMeeting of Stockholders.

**Item12.  Security Ownership of Certain Beneficial Owners andManagement**

    The information requiredby Item 12 is incorporated herein by this reference to suchinformation under "Ownership of the Common Stock of the TitanCorporation" in the Company's definitive proxy statement for the2002 Annual Meeting of Stockholders.

**Item13.  Certain Relationships and RelatedTransactions**

    The information requiredby Item 13 is incorporated herein by this reference to suchinformation under "Agreements with Executive Officers andDirectors" in the Company's definitive proxy statement for the 2002Annual Meeting of Stockholders.

**PART IV**

**Item14.  Exhibits, Financial Statement Schedules, and Reportson Form 8-K**
| (a)      | 1 and 2.  FinancialStatements being filed as part of this report are listed in theindex in Item 8, on page51. |
|-----------------------------------|--------------------------------------------------------------------------------------------------------------------|
|                              |                                                                                                               |
| (b)      | During the three monthsended December 31, 2001, the Registrant filed thefollowing:                                 |
|                              |                                                                                                               |
|                                   | (1)                                                                                       | Current Report on Form8-K/A dated August 4, 2001, to report the completion on September28, 2001, of the Registrant's acquisition of all the outstandingshares of common stock of Datron Systems Incorporated ("Datron")pursuant to an agreement and Plan of Merger and Reorganization,dated as of June 24, 2001, by and among Titan, Datron and GemAcquisition Corp., a wholly-owned subsidiary of Titan.  Thefiling contained the required financial statements of Datron andpro forma information, incorporated by reference to previousfilings. |
|                              |                                                                                                               |
|                                   | (2)                                                                                       | Current Report on Form 8-Kdated October 25, 2001, filed for purposes of updating theRegistrant's publicly available disclosure, included theRegistrant's financial statements for the three years in the periodended December 31, 2001, and Management's Discussion and Analysisof Financial Condition and Results of Operations, restated for thediscontinuance of the Registrant's SureBeam segment. |
|                              |                                                                                                               |
|                                   | (3)                                                                                       | Current Report on Form 8-Kdated November 27, 2001, to report the completion of theRegistrant's acquisition of all of the outstanding shares of commonstock of BTG, Inc. ("BTG"), following a vote by BTG shareholdersapproving the transaction pursuant to an Agreement and Plan ofMerger and Reorganization, dated as of September 19, 2001, by andamong Titan, BTG and T T Acquisition Corp., a wholly-ownedsubsidiary of Titan, on November 27, 2001.  The filingcontained the financial statements required for BTG and therequired pro forma financial information. |
|                              |                                                                                                               |   |
|                                   | (4)                                                                                       | Current Report on Form 8-Kdated April 15, 2002, filed to report the Company’s change inpublic accountants from Arthur Andersen LLP to KPMG LLP to serve asthe Company’s public accountants for the fiscal Year2002.  The filing contained a copy of Arthur Andersen’sletter, dated April 15, 2002, stating its agreement with suchstatements. |
|                              |                                                                                                               |   |
| (c)      | Listing ofExhibits                                                                                                 |

**ExhibitIndex**
| **Exhibit No.**    | **   ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | **   ** | **Page No.** |
|--------------------|------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------|--------------|
| ****               | ** **             | ****                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | ** **             | ****         |
| 1.1                |                   | Form of Purchase Agreementamong The Titan Corporation, the selling stockholders namedtherein, and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner& Smith Incorporated and Credit Suisse First Boston Corporationas representatives of the underwriters, which was Exhibit 1.1 toRegistrant's Amendment No. 1 to Form S-3 (No. 333-63274), datedJuly 6, 2001, is incorporated herein by this reference.                                                                                                                                                                                                                                                                                                                       |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 3.1                |                   | Registrant's Certificateof Amendment of Restated Certificate of Incorporation dated as ofOctober 21, 1998, which was Exhibit No. 3.1 toRegistrant's Quarterly Report on Form 10-Q datedNovember 16, 1998,is incorporated herein by thisreference.  Registrant's Restated Certificate of Incorporationdated as of November 6, 1986, which was Exhibit No. 3.1to Registrant's 1987 Annual Report on Form 10-K isincorporated herein by this reference.  Registrant'sCertificate of Amendment of Restated Certificate of Incorporationdated as of June 30, 1987, which was Exhibit 3.2 toRegistrant's 1987 Annual Report on Form 10-K is incorporatedherein by this reference. |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 3.2                |                   | Registrant's By-laws, asamended, which was filed with the Registrant's Quarterly Report onForm 10-Q dated November 13, 1995, asExhibit 6(a)(3) is incorporated herein by thisreference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 3.3                |                   | Registrant's By-laws,which was Exhibit 3.3 to Registrant's 1999 Annual Report onForm 10-K, is incorporated herein by thisreference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 3.4                |                   | Amendments to Bylaws ofRegistrant, dated March 22, 2000 and August 16, 2000, which wasExhibit 3.4 to Registrant’s 2001 Annual Report on Form 10-K,is incorporated herein by this reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 4.1                |                   | Rights Amendment, dated asof August 21, 1995, between The Titan Corporation and AmericanStock Transfer and Trust Company, which was Exhibit 1 toRegistrant's Form 8-A dated September 5, 1995, isincorporated herein by this reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 4.2                |                   | Letter Agreement datedFebruary 4, 1998 between the Registrant and DBA Systems,Inc.  ("DBA") regarding certain registration rights granted inconnection with the acquisition of DBA, which wasExhibit 10.38 to Registration Statement on Form S-4 (No.333-45719), is incorporated herein by this reference.                                                                                                                                                                                                                                                                                                                                                                                                               |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.1               |                   | Stock Option Plan of 1990,which was filed in the 1990 definitive proxy statement and wasExhibit 10.11 to Registrant's 1989 Annual Report on 10-K, isincorporated herein by this reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.2               |                   | Stock Option Plan of 1994,which was filed in the 1994 definitive proxy statement and wasExhibit 10.17 to Registrant's 1993 Annual Report onForm 10-K, is incorporated herein by thisreference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.3               |                   | Amendment to Stock OptionPlan Of 1994, which was Exhibit 10.3 to Registrant's 1999Annual Report on Form 10-K, is incorporated herein by thisreference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.4               |                   | Stock Option Plan of 1997,which was filed in the Registrant's 1997 Definitive Proxy Statementas Appendix A, is incorporated herein by thisreference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.5               |                   | Amendment to Stock OptionPlan of 1997, which was Exhibit 10.5 to Registrant's 1999Annual Report on Form 10-K, is incorporated herein by thisreference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.6               |                   | 1992 Directors' StockOption Plan which was filed in the 1993 definitive proxy statementand was Exhibit 10.14 to Registrant's 1992 Annual Report onForm 10-K, is incorporated herein by thisreference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.7               |                   | 1996 Directors' StockOption and Equity Participation Plan, which was filed in the 1996definitive proxy statement and was Exhibit 10.7 toRegistrant's 1995 Annual Report on Form 10-K, is incorporatedherein by this reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.8               |                   | 1995 Employee StockPurchase Plan, which was Exhibit 4 to Registrant'sForm S-8 dated December 18, 1995, is incorporated hereinby this reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.9               |                   | Lease Agreement dated asof July 9, 1991, by and between Torrey Pines LimitedPartnership, a California limited partnership, as landlord, andRegistrant, as tenant, which was Exhibit 10.1 to Registrant'sForm 8-K dated July 11, 1991, is incorporated herein bythis reference.                                                                                                                                                                                                                                                                                                                                                                                                                                      |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.10              |                   | Executive Severance Planentered into by the Registrant with Ronald B. Gorda, which wasExhibit 6(a)(10) to Registrant's Quarterly Report onForm 10-Q dated November 13, 1995, is incorporated hereinby this reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.11              |                   | Executive Severance Planentered into by the Company with Gene W. Ray, Eric M. DeMarco andNicholas J. Costanza, which was Exhibit 10.15 to Registrant's1999 Annual Report on Form 10-K, is incorporated herein bythis reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.12              |                   | Loan and SecurityAgreement, dated December 29, 1995, by and between Registrantand Capital Associates International, Inc., which wasExhibit 10.17 to Registrant's 1995 Annual Report onForm 10-K, is incorporated herein by thisreference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.13              |                   | Rider datedAugust 13, 1996, to Loan and Security Agreement datedDecember 29, 1995 by and between Registrant and CapitalAssociates International, Inc. which was Exhibit 10.28 toRegistrant's 1996 Annual Report on Form 10-K, is incorporatedherein by this reference.                                                                                                                                                                                                                                                                                                                                                                                                                                         |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.14              |                   | Agreement and Plan ofMerger and Reorganization dated January 6, 1998 among TheTitan Corporation, Titan Acquisition Sub, Inc. and DBASystems, Inc. which was filed as Exhibit 2.1 to theRegistrant's Registration Statement on Form S-4 (No.333-45719), is incorporated herein by this reference.                                                                                                                                                                                                                                                                                                                                                                                                               |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.15              |                   | Agreement and Plan ofMerger and Reorganization dated February 26, 1998, among TheTitan Corporation, Sunrise Acquisition Sub, Inc., HorizonsTechnology, Inc. ("Horizons") and certain stockholders ofHorizons, which was filed as Appendix A to the Registrant'sRegistration Statement on Form S-4 (No. 333-47633), isincorporated herein by this reference.                                                                                                                                                                                                                                                                                                                                                         |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.16              |                   | Stock Purchase Agreementdated as of March 24, 1998 between Titan Technologies andInformation Systems Corporation, Validity Corporation and theShareholders of Validity Corporation, which was Exhibit 10.21to Registrant's 1999 Annual Report on Form 10-K, isincorporated herein by this reference.                                                                                                                                                                                                                                                                                                                                                                                                                     |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.17              |                   | Agreement and Plan ofReorganization dated as of June 30, 1998 by and among TheTitan Corporation, Delsys Merger Corp., and Delfin Systems, whichwas filed as Exhibit 2.1 to the Registrant's RegistrationStatement on Form S-4 (No. 333-60127), is incorporated hereinby this reference.                                                                                                                                                                                                                                                                                                                                                                                                                                  |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.18              |                   | Agreement and Plan ofMerger and Reorganization dated as of August 7, 1998 among TheTitan Corporation, Merger Sub Acquisition Corp., VisiComLaboratories, Inc., and Certain Shareholders of VisiComLaboratories, Inc., which was Exhibit 10.23 toRegistrant's 1999 Annual Report on Form 10-K, is incorporatedherein by this reference.                                                                                                                                                                                                                                                                                                                                                                         |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.19              |                   | Stock Purchase Agreementdated as of June 9, 1999 among Titan Technologies andInformation Systems Corporation, System Resources Corporation andthe Stockholders of System Resources Corporation, which was filedas Exhibit 2.1 to the Registrant's Current Report onForm 8-K dated June 9, 1999, is incorporated herein bythis reference.                                                                                                                                                                                                                                                                                                                                                                            |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.20              |                   | Agreement and Plan ofMerger and Reorganization dated as of July 1, 1999 among TitanTechnologies and Information Systems Corporation, TTISMergerCo, Inc., Atlantic Aerospace Electronics Corporation,and the Designated Stockholders, which was Exhibit 10.25 toRegistrant's 1999 Annual Report on Form 10-K, is incorporatedherein by this reference.                                                                                                                                                                                                                                                                                                                                                               |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.21              |                   | Limited Liability CompanyAgreement of Soliance Networks, LLC dated as of August 25, 1999among Sempra Energy Information Solutions, modis, Inc., andCayenta.com, Inc., which was Exhibit 10.26 toRegistrant's 1999 Annual Report on Form 10-K, is incorporatedherein by this reference.                                                                                                                                                                                                                                                                                                                                                                                                                              |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.22              |                   | Agreement and Plan ofMerger, as amended, dated as of October 4, 1999 amongIPIVOT, Inc., Intel Corporation, WCXT Acquisition Corporationand Brett Helm and William Strensrud as the representatives of theEscrow Securityholders, which was Exhibit 10.27 toRegistrant's 1999 Annual Report on Form 10-K, is incorporatedherein by this reference.                                                                                                                                                                                                                                                                                                                                                                   |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.23              |                   | Stock Purchase Agreementdated as of November 2, 1999 among Cayenta.com, Inc., J BSystems, Inc, d.b.a. Mainsaver Corporation and Mainsaver, JKSSeparate Property Trust, The Gehl Living Trust, JBS AcquisitionCompany, LLC, Epicor Software Corporation, Mark Stevens and TheTitan Corporation, which was filed as Exhibit 2.1 to theRegistrant's Current Report on Form 8-K dated November 2,1999, is incorporated herein by this reference.                                                                                                                                                                                                                                                                   |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.24              |                   | Stock Exchange and StockPurchase Agreement dated as of December 7, 1999 among CayentaiInc., Cayenta Operating Company, The Titan Corporation, AssistCornerstone Technologies, Inc. and the Selling Shareholders,which was Exhibit 10.29 to Registrant's 1999 Annual Report onForm 10-K, is incorporated herein by this reference.  Wehave not filed Schedules and similar attachments to thisExhibit.  Upon request, the Registrant will furnishsupplementally to the Commission a copy of any omittedschedule.                                                                                                                                                                                           |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.25              |                   | Agreement and Plan ofMerger dated as of December 9, 1999 among The TitanCorporation, Advanced Communication Systems, Inc., and ATAcquisition Corp, which was filed as Exhibit 2.1 to theRegistrant's Current Report on Form 8-K dated December 9,1999, is incorporated herein by this reference.                                                                                                                                                                                                                                                                                                                                                                                                               |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.26              |                   | Agreement and Plan ofMerger, dated as of December 9, 1999 and amended as of January20, 2000, among the Registrant, Merger Sub and ACS, which was filedas Exhibit 2.1 to the Registrant's Registration Statement onForm S-4 (No. 333-95245), is incorporated herein by thisreference.                                                                                                                                                                                                                                                                                                                                                                                                                                     |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.27              |                   | Loan Facility Agreementdated as of December 10, 1999 among Titan Africa, Inc.,Office des Postes et Telecommunications of the State of Benin,Banque Belgolaise, Eco Bank Benin, Banque Ouest Africain pour leDeveloppement, Banque Internationale du Benin, Continental BankBenin and Bank of Africa Benin, which was Exhibit 10.32 toRegistrant's 1999 Annual Report on Form 10-K, is incorporatedherein by this reference.                                                                                                                                                                                                                                                                                                   |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.28              |                   | Stock Purchase Agreementdated as of December 23, 1999 among Cayenta, Inc., SFGTechnologies, Inc., the Common Selling Shareholders, thePreferred Selling Shareholders and the Option Holders, which wasfiled as Exhibit 2.1 to the Registrant's Current Report onForm 8-K dated December 22, 1999, is incorporated hereinby this reference.                                                                                                                                                                                                                                                                                                                                                                     |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.29              |                   | Agreement and Plan ofReorganization dated as of January 28, 2000 among The TitanCorporation, MT Acquisition Corp., William C. Lindsey, Inc. (DBALinCom Corporation) and the Principal Shareholder of William C.Lindsey, Inc., which was Exhibit 10.34 to Registrant's 1999 AnnualReport on Form 10-K, is incorporated herein by thisreference.  We have not filed Schedules and similarattachments to this Exhibit.  Upon request, the Company willfurnish supplementally to the Commission a copy of any omittedschedule.                                                                                                                                                                                               |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.30              |                   | 53/4% Convertible Preferred SecuritiesRemarketable Term Income Deferrable Equity Securities (High Tides)dated as of February 3, 2000, which was Exhibit 10.35 toRegistrant's 1999 Annual Report on Form 10-K, is incorporatedherein by this reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.31              |                   | Senior Secured CreditAgreement, dated as of February 23, 2000 among the Company,Various financial institutions from time to time parties thereto(the "Lenders"), Credit Suisse First Boston, as the Lead Arrangerand as the Administrative Agent for the Lenders, First UnionSecurities, Inc. as Co-Arranger and as Syndication Agent andThe Bank of Nova Scotia as the Documentation Agent, which wasExhibit 10.36 to Registrant's 1999 Annual Report on Form 10-K, isincorporated herein by this reference.                                                                                                                                                                                                                 |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.32              |                   | Agreement and Plan ofMerger dated as of March 10, 2000 among The Titan Corporation,Titan Acquisition Corporation and Pulse Engineering, Inc.,which was Exhibit 10.37 to Registrant's 1999 Annual Report onForm 10-K, is incorporated herein by this reference.  Wehave not filed Schedules and similar attachments to thisExhibit.  Upon request, the Registrant will furnishsupplementally to the Commission a copy of any omittedschedule.                                                                                                                                                                                                                                                              |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.33              |                   | Agreement and Plan ofMerger, dated as of March 24, 2000, by and among The TitanCorporation, V T Acquisition Corp. and AverStar, Inc., whichwas Exhibit 2.1 to Registrant's Form S-4 (No. 333-35188)dated April 20, 2000, is incorporated herein by thisreference.                                                                                                                                                                                                                                                                                                                                                                                                                                              |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.34              |                   | Stock Purchase Agreement,dated as of May 31, 2000, by and among The Titan Corporation,Sencom Corp. and The Stockholders of Sencom Corp, which was Exhibit10.39 to the Registrant's 2000 Annual Report on Form 10-K, isincorporated herein by this reference.  We have not filedSchedules and similar attachments to this Exhibit.  Uponrequest, the Registrant will furnish supplementally to theCommission a copy of any omitted schedule.                                                                                                                                                                                                                                                                              |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.35              |                   | First Amendment to SeniorSecured Credit Agreement, dated June 1, 2000, by and among TheTitan Corporation, various financial institutions from time to timeparties thereto (the "Lenders"), Credit Suisse First Boston, as theLead Arranger and as the Administrative Agent for the Lenders,First Union Securities, Inc., as Co-Arranger and asSyndication Agent and The Bank of Nova Scotia as the DocumentationAgent, which was Exhibit 10.40 to the Registrant's 2000 AnnualReport on Form 10-K, is incorporated herein by thisreference.                                                                                                                                                                              |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.36              |                   | Second Amendment to SeniorSecured Credit Agreement, dated June 22, 2000, by and amongThe Titan Corporation, various financial institutions from time totime parties thereto (the "Lenders"), Credit Suisse First Boston,as the Lead Arranger and as the Administrative Agent for theLenders, First Union Securities, Inc., as Co-Arranger and asSyndication Agent and The Bank of Nova Scotia as the DocumentationAgent, which was Exhibit 10.41 to the Registrant's 2000 AnnualReport on Form 10-K, is incorporated herein by thisreference.                                                                                                                                                                            |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.37              |                   | Stock Purchase Agreement,dated June 28, 2000, by and among Titan Wireless, Inc.,Titan Wireless Afripa Holding, Inc., Ivoire Telecom S.A.Holding and M. Louis N'Ki Diakite, which was Exhibit 10.42 to theRegistrant's 2000 Annual Report on Form 10-K, is incorporatedherein by this reference.  We have not filed Schedules andsimilar attachments to this Exhibit.  Upon request, theRegistrant will furnish supplementally to the Commission a copy ofany omitted schedule.                                                                                                                                                                                                                                 |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.38              |                   | The Titan Corporation 2000Employee Stock Purchase Plan, which was Exhibit 4.1 toRegistrant's Form S-8 dated July 11, 2000, isincorporated herein by this reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.39              |                   | The Titan Corporation 2000Employee and Director Stock Option and Incentive Plan, which wasExhibit 4.2 to Registrant's Form S-8 (No. 333-41140)dated July 11, 2000, is incorporated herein by thisreference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.40              |                   | Third Amendment to SeniorSecured Credit Agreement, dated August 22, 2000, by and among TheTitan Corporation, various financial institutions from time to timeparties thereto (the "Lenders"), Credit Suisse First Boston, as theLead Arranger and as the Administrative Agent for the Lenders,First Union Securities, Inc., as Co-Arranger and asSyndication Agent and The Bank of Nova Scotia as the DocumentationAgent, which was Exhibit 10.45 to the Registrant's 2000 AnnualReport on Form 10-K, is incorporated herein by thisreference.                                                                                                                                                                                |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.41              |                   | Fourth Amendment to SeniorSecured Credit Agreement, dated November 20, 2000, by andamong The Titan Corporation, various financial institutions fromtime to time parties thereto (the "Lenders"), Credit Suisse FirstBoston, as the Lead Arranger and as the Administrative Agent forthe Lenders, First Union Securities, Inc., as Co-Arranger andas Syndication Agent and The Bank of Nova Scotia as theDocumentation Agent, which was Exhibit 10.46 to the Registrant's2000 Annual Report on Form 10-K, is incorporated herein by thisreference.                                                                                                                                                                        |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.42              |                   | Asset Purchase Agreementdated March 23, 2001 by and among Maxwell Technologies SystemsDivision, Inc., Maxwell Technologies, Inc., and Titan SystemsCorporation, which was Exhibit 10.1 to the Registrant's QuarterlyReport on Form 10-Q dated May 15, 2001, is incorporated herein bythis reference.  We did not file Schedules and similarattachments to this Exhibit.  Upon request, the Registrantwill furnish supplementally to the Commission a copy of any omittedschedule.                                                                                                                                                                                                                                             |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.43              |                   | Fifth Amendment to SeniorSecured Credit Agreement, dated June 11, 2001, by and among TheTitan Corporation, various financial institutions from time to timeparties thereto (the "Lenders"), Credit Suisse First Boston, as theLead Arranger and as the Administrative Agent for the Lenders,First Union Securities, Inc., as Co-Arranger and as SyndicationAgent and The Bank of Nova Scotia as the Documentation Agent, whichwas Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Qdated August 14, 2001, in incorporated herein by thisreference.                                                                                                                                                                         |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.44              |                   | Sixth Amendment to SeniorSecured Credit Agreement, dated July 11, 2001, by and among TheTitan Corporation, various financial institutions from time to timeparties thereto (the "Lenders"), Credit Suisse First Boston, as theLead Arranger and as the Administrative Agent for the Lenders,First Union Securities, Inc., as Co-Arranger and as SyndicationAgent and The Bank of Nova Scotia as the Documentation Agent, whichwas Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Qdated August 14, 2001, in incorporated herein by thisreference.                                                                                                                                                                         |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.45              |                   | Agreement and Plan ofReorganization, dated September 19, 2001, among The TitanCorporation, T T Acquisition Corp., and BTG, Inc., which was filedas Exhibit 2.1 to the Registrant's Current Report on Form 8-K datedSeptember 19, 2001, is incorporated herein by thisreference.                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.46              |                   | Agreement and Plan ofMerger and Reorganization, dated as of June 24, 2001, by and amongThe Titan Corporation, Gem Acquisition Corp. and Datron SystemsIncorporated, which was Exhibit 2.1 to Registrant's Form S-4 datedJuly 9, 2001 (No. 333-64768) is incorporated herein by thisreference.                                                                                                                                                                                                                                                                                                                                                                                                                                           |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.47              |                   | Agreement and Plan ofMerger, dated January 6, 2002, among The Titan Corporation, T T IIIAcquisition Corp., and GlobalNet, Inc., which was Exhibit 2.1 tothe Registrant's Current Report on Form 8-K dated January 6, 2002,is incorporated herein by this reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.48              |                   | Agreement and Plan ofMerger and Reorganization, dated as of January 21, 2002, by andamong The Titan Corporation, Thunderbird Acquisition Corp. andJaycor, Inc., which was Exhibit 2.1 to the Registrant's CurrentReport on Form 8-K dated January 21, 2002, is incorporated hereinby this reference.                                                                                                                                                                                                                                                                                                                                                                                                                                    |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.49              |                   | Agreement and Plan ofMerger and Reorganization, dated as of February 23, 2002, by andamong The Titan Corporation, Thunderbird Acquisition, Inc. andScience and Engineering Associates, Inc., which was Exhibit 2.1 tothe Registrant's Current Report on Form 8-K dated February 23,2002, is incorporated herein by this reference.                                                                                                                                                                                                                                                                                                                                                                                                      |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.50              |                   | Amended and RestatedSenior Secured Credit Agreement, dated as of February 13, 2002,among The Titan Corporation, as the Borrower, various financialinstitutions as the Lenders, Credit Suisse First Boston, as LeadArranger and Administrative Agent for the Lenders, First UnionSecurities, Inc., as Co-Arranger and as Syndication Agent and TheBank of Nova Scotia as Documentation Agent, which was Exhibit 10.1to the Registrant's Current Report on Form 8-K dated March 22,2002, is incorporated herein by this reference.                                                                                                                                                                                                        |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.51              |                   | Exchange Agreement datedDecember 31, 2001, between SureBeam Corporation and The TitanCorporation, which was Exhibit 10.2 to the Registrant's CurrentReport on Form 8-K dated March 22, 2002, is incorporated herein bythis reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.52              |                   | Exchange Agreement datedFebruary 11, 2002, between SureBeam Corporation and The TitanCorporation, which was Exhibit 10.3 to the Registrant's CurrentReport on Form 8-K dated March 22, 2002, is incorporated herein bythis reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.53              |                   | License Agreement datedOctober 17, 2001, between SB OperatingCo, Inc. and The TitanCorporation, which was Exhibit 10.4 to the Registrant's CurrentReport on Form 8-K dated March 22, 2002, is incorporated herein bythis reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.54              |                   | The Titan CorporationDeferred Compensation Plan, Master Plan Document effective January1, 2002, which was Exhibit 10.54 to Registrant’s 2001 AnnualReport on Form 10-K, is incorporated herein by thisreference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.55              |                   | Contract for Purchase andSale of Equipment and services made and entered into as of February11, 2002, by and between The Titan Corporation and SureBeamCorporation, which was Exhibit 10.55 to Registrant’s 2001Annual Report on Form 10-K, is incorporated herein by thisreference.                                                                                                                                                                                                                                                                                                                                                                                                                                              |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.56              |                   | Letter Agreement datedMarch 29, 2002, between The Titan Corporation and SureBeamCorporation, which was Exhibit 10.56 to Registrant’s 2001Annual Report on Form 10-K, is incorporated herein by thisreference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 10.57              |                   | Senior Secured CreditAgreement dated as of May 23, 2002, among The Titan Corporation, asthe Borrower, various financial institutions from time to time, asthe Lenders, Wachovia Bank, National Association as AdministrativeAgent, The Bank of Nova Scotia and Comerica Bank – Californiaas Syndication Agents, and Branch Banking and Trust Company andToronto Dominion (New York), Inc., as Documentation Agents, whichwas Exhibit 10.1 to the Registrant's Current Report on Form 8-Kdated May 23, 2002, is incorporated herein by thisreference.                                                                                                                                                                              |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 13                 |                   | The Titan Corporation 2001Annual Report to Shareholders, which was Exhibit 13 toRegistrant’s Quarterly Report on Form 10-Q for the quarterlyperiod ended March 31, 2002, is incorporated herein by thisreference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 21                 |                   | Subsidiaries of Registrantas of March 26, 2002, which was Exhibit 21 to Registrant’s2001 Annual Report on Form 10-K, is incorporated herein by thisreference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                   | *            |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 23                 |                   | Consent of Arthur AndersenLLP, Independent Public Accountants.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |         |
|     |                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |                   |    |
| 99                 |                   | Letter to United StatesSecurities and Exchange Commission.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                   |         |

----

*          Previouslyfiled as indicated and incorporated herein by reference fromfilings previously made by the Company.

**SIGNATURES**

    Pursuant to therequirements of Section 13 or 15(d) of the Securities ExchangeAct of 1934, the Registrant has duly caused this report to besigned on its behalf by the undersigned, thereunto dulyauthorized.

|                                                           |        | THE TITANCORPORATION |
|----------------------------------------------------------------|--------|----------------------|
| June 07, 2002                                                  |   | By:                  | /s/ GENE W. RAY |
|                                                                |
| Gene W.Ray,*Chief Executive Officer and Chairman of the Board* |

    Pursuant to therequirements of the Securities Exchange Act of 1934, this reporthas been signed below by the following persons on behalf of theRegistrant and in the capacities and on the datesindicated.
| **Signature**                     | ** ** | **Title**                                                                      | ** ** | **Date**     |
|-----------------------------------|------------|--------------------------------------------------------------------------------|------------|--------------|
| ****                              | ** ** | ****                                                                           | ** ** | ****         |
|                              |            |                                                                                |            |              |
| /s/ GENE W. RAY              |       | Chief Executive Officerand Chairman of the Board                               |       | June 07,2002 |
|                                   |
| Gene W.Ray                        |
|                              |            |                                                                                |            |              |
| /s/ ERIC M. DEMARCO          |       | President and Chief Operating Officer                                          |       | June 07,2002 |
|                                   |
| Eric M.DeMarco                    |
|                              |            |                                                                                |            |              |
| /s/ MARK W. SOPP             |       | Senior Vice Presidentand Chief Financial Officer (Principal Financial Officer) |       | June 07,2002 |
|                                   |
| Mark W.Sopp                       |
|                              |            |                                                                                |            |              |
| /s/ DEANNA J. HOM            |       | Vice President, CorporateController (Principal Accounting Officer)             |       | June 07,2002 |
|                                   |
| Deanna J.Hom                      |
|                              |            |                                                                                |            |              |
| /s/ MICHAEL B. ALEXANDER     |       | Director                                                                       |       | June 07,2002 |
|                                   |
| Michael B.Alexander               |
|                              |            |                                                                                |            |              |
| /s/ EDWARD H. BERSOFF, Ph.D. |       | Director                                                                       |       | June 07,2002 |
|                                   |
| Edward H.Bersoff, Ph.D.           |
|                              |            |                                                                                |            |              |
| /s/ JOSEPH F. CALIGIURI      |       | Director                                                                       |       | June 07,2002 |
|                                   |
| Joseph F.Caligiuri                |
|                              |            |                                                                                |            |              |
| /s/ PETER A. COHEN           |       | Director                                                                       |       | June 07,2002 |
|                                   |
| Peter A.Cohen                     |
|                              |            |                                                                                |            |              |
| /s/ DANIEL J. FINK           |       | Director                                                                       |       | June 07,2002 |
|                                   |
| Daniel J.Fink                     |
|                              |            |                                                                                |            |              |
|                                   |       | Director                                                                       |       |              |
|                                   |
| SusanGolding                      |
|                              |            |                                                                                |            |              |
| /s/ ROBERT M. HANISEE        |       | Director                                                                       |       | June 07,2002 |
|                                   |
| Robert M.Hanisee                  |
|                              |            |                                                                                |            |              |
| /s/ ROBERT E. LA BLANC       |       | Director                                                                       |       | June 07,2002 |
|                                   |
| Robert E.La Blanc                 |
|                              |            |                                                                                |            |              |
| /s/ JAMES ROTH               |       | Director                                                                       |       | June 07,2002 |
|                                   |
| JamesRoth                         |
|                              |            |                                                                                |            |              |
| /s/ JOSEPH R. WRIGHT, JR.    |       | Director                                                                       |       | June 07,2002 |
|                                   |
| Joseph R.Wright, Jr.              |

**THE TITAN CORPORATION**

**SCHEDULE II—VALUATION AND QUALIFYINGACCOUNTS**

**(AsRestated—see Note 1 of the Notes to ConsolidatedFinancial Statements)**

**For theyears ended December 31, 2001, 2000, and 1999**

**(inthousands of dollars)**
| ** **                                              | ** ** | **Balanceat beginning of year****** | ** ** | **Additions (charges to expense)(a)****** | ** ** | **Chargedto Other Accounts** | ** ** | **Deductions****** | ** ** | **Balanceat end of year****** |   |
|---------------------------------------------------------|------------|-------------------------------------|------------|-------------------------------------------|------------|------------------------------|------------|--------------------|------------|-------------------------------|--------|
| ** **                                              | ** ** | ****                                | ** ** | ****                                      | ** ** | ****                         | ** ** | ****               | ** ** | ****                          |   |
| 2001:                                                   |       |                                |       |                                      |       |                         |       |               |       |                          |   |   |   |   |   |
| Accrued merger andintegration costs                     |       | $                                   | 3,846      |                                      | $          | 30,400                       |       | $                  | —    |                          | $      | 32,948 |   | $ | 1,298 |
| Allowance for doubtfulaccounts                          |       |                                | 3,719      |                                      |       | 7,690                        |       |               | —    |                          |   | 3,500 |   |   | 7,909 |
| Accrual for estimatedlosses for discontinued operations |       |                                     | —    |                                      |       | 35,413                       |       |               | —    |                          |   | 18,409 |   |   | 17,004 |
| 2000:                                                   |       |                                |       |                                      |       |                         |       |               |       |                          |   |   |   |   |   |
| Accrued merger andintegration costs                     |       |                                     | 5,880      |                                      |            | 38,820                       |       |               | 10,000     | (b)                           |        | 30,854 |   |  | 3,846 |
| Allowance for doubtfulaccounts                          |       |                                | 3,375      |                                      |       | 874                          |       |               | —    |                          |   | 530 |   |   | 3,719 |
| 1999:                                                   |       |                                |       |                                      |       |                         |       |               |       |                          |   |   |   |   |   |
| Accrued merger andintegration costs                     |       |                                | 3,035      |                                      |       | 13,100                       |       |               | —    |                          |   | 10,255 |   |   | 5,880 |
| Allowance for doubtfulaccounts                          |       |                                | 2,413      |                                      |       | 3,963                        |       |               | —    |                          |   | 3,001 |   |   | 3,375 |

(a)         Includes $4,334, $(1,037) and $1,162 added throughacquisitions in 2001, 2000 and 1999, respectively.

(b)         Valuationallowance for unbilled receivables not in accrued merger andintegration costs.

    Following is adescription of all acquisition and integration charges:

*Fiscal 2001Charges*

    Acquisition andintegration related charges and other of $30.4 million in 2001included $2.5 million for employee termination costs andrestructuring costs in Titan Wireless, $12.2 million related to theintegration of ACS and AverStar and other restructuring andrealignment activities in Titan Systems, a $5.5 million impairmentcharge for fixed assets associated with Cayenta’s networkoperations center and $10.0 million related to other assetimpairments and restructuring activities associated withCayenta’s headquarters office, and $0.2 million relatedto personnel reductions in Cayenta’s federal governmentbusiness, which is now a part of Titan Systems.

    The $2.5 million chargein the Company's Titan Wireless segment was comprised of $0.5million related to a reduction in employee workforce ofapproximately 35 employees resulting from the elimination ofWireless's internal product development group and $2.0 million ofrestructuring costs, including $1.3 million of employee terminationcosts.  The segment's long-term strategy is now centered onthe service and systems integration business, not the developmentand sale of equipment.

    The $12.2 million chargein Titan Systems is primarily related to the integration of ACS andAverStar, and a realignment of the business around the majorcategories of customers of Titan Systems, which together resultedin a reduction in employee workforce of approximately 50 employeesand the closing of several facilities.  Included in thesecosts is approximately $3.1 million of employee termination costs,$3.5 million of costs to eliminate duplicate and excess facilitiesand assets, $1.1 million of duplicate personnel costs to transitionprocesses and functions, and $1.5 million of asset impairment costsof certain asset balances.  The recoverability of suchbalances was impaired due to our exit from a satellite servicesbusiness within the Titan Systems segment.  Approximately $3.0million of the charge was related to another subsidiary acquired ina prior year for contingencies arising from matters pre-existing toTitan's acquisition of the business.  That acquisition wasaccounted for as a purchase, and the matters pre-existing Titan'sacquisition were resolved in 2001. 

    Included in Cayenta'sheadquarters office operating results is a charge for$15.5 million related to the restructuring of Cayenta’sheadquarters office.  As a result of reduced corporatespending on commercial information technology services ande-business software applications, the Company developed andapproved a plan to restructure the Cayenta headquarters and networkoperations center, which included a reduction in workforce ofapproximately 40 personnel, resulting in a charge of$1.7 million, and the elimination of duplicate and excessfacilities, resulting in a charge of approximately$0.8 million.  As a result of management's evaluation ofthe recoverability of all the assets of Cayenta, in accordance withStatement of Financial Accounting Standards No. 121, "Accountingfor the Impairment of Long-Lived Assets and for Long-Lived Assetsto be Disposed Of", management concluded from this evaluation thata significant impairment of intangible as well as long-lived assetshad occurred.  An impairment charge was required because theestimated fair value was less than the carrying value of theassets.  The impairment charge of $13.0 million wascomprised of the following: $5.5 million for fixed assetsassociated with Cayenta's network operations center, $2.0 millionfor prepaid advertising costs and $5.3 million for Cayenta'sinvestment in Soliance, LLC, a joint venture that markets anddelivers information technology systems and solutions to theutility industry, and $0.2 million for certain otherassets.

*Fiscal 2000Charges*

    Acquisition relatedcharges of $28.8 million in 2000 include costs of $20.5 millionrelated to the ACS merger including direct transaction costs ofapproximately $9.1 million comprised of accounting, legal,investing banking, financial printing and other direct costs. Also included in the ACS merger costs was a write-down ofapproximately $5.5 million related to the impairment of certainreceivables, for which the realizability of such assets wasimpaired as a result of the merger with Titan, which impacted therecoverability of certain contract costs, employee terminationcosts of approximately $2.1 million, and $3.8 million of costs toeliminate duplicate facilities and assets.  In addition, theCompany recorded a valuation allowance of $10.0 million inconnection with certain of the Company's integration activities,particularly as they relate to conforming ACS to Titan's accountingpolicies and procedures, and in determining appropriate valuationallowances against unbilled receivables which may not be realizableunder normal contract reimbursement cycles.

    Included in acquisitionrelated charges is $8.3 million related to the merger withAverStar.  These costs consisted of approximately $2.5 millionof direct transaction costs, approximately $5.5 million of employeetermination costs, and costs to eliminate duplicate facilities ofapproximately $0.3 million. 

*Fiscal 1999Charges*

    Acquisition and relatedcharges in 1999 were $13.1 million, which included approximately$4.5 million of legal costs and approximately $8.6 million ofintegration and restructuring expenses.  The integration andrestructuring expenses include $2.1 million related to thewind-down of our Year 2000 business, consisting primarily ofemployee termination costs and lease termination costs, a $2.1million write-off of intangible costs to estimated realizablevalue, approximately $1.0 million for severance, outplacement andrelocation costs related to approximately 31 employees across theCompany, and $3.4 million related to the closure and elimination ofleased facilities, primarily duplicate field offices.

QuickLinks

PARTI

          Item. 1  Business           Item. 2  Properties           Item. 3  Legal Proceedings

PARTII

          Item. 5  Market for the Company'sCommon Equity and Related Skockholder Matters           Item. 6  Selected FinancialData           Item. 7  Management's Discussion andAnalysis Of Financial Condition and Results Of Operations           Item. 7A.  Quantitative and QualitativeDisclosures About Market Risk           Item. 8  Financial Statements andSupplementary Data

          Report Of Independent PublicAccountants

          Consolidated Statements OfOperations           Consolidated Balance Sheets           Consolidated Statements Of Cash Flows           Consolidated Statements Of Stockholders'Equity

          Notes To Consolidated FinancialStatements

PartIII

PartIV

          Item 14.  Exhibits, FinancialStatement Schedules, and Reports on Form 8-K

SIGNATURES