UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

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FORM 10-K

|/x/ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 2001

-OR-

|/ / | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from                to

Commission File No. 1-6035

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THE TITAN CORPORATION(Exact name of registrant as specified in its charter)

|Delaware                                                       |  | 95-2588754                       
|-------------------------------------------------------------- |  | ---------------------------------
|(State or other jurisdiction of
incorporation or organization) |  | (IRS Employer
Identification No.)

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

Registrant's
telephone number, including area code: (858) 552-9500

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

Title of each class

Name of exchange on which registered$1.00 Cumulative Convertible Preferred Stock,      $1.00 par value

New York Stock ExchangeCommon Stock, $.01 par valuePreferred Stock Purchase Rights


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

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

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

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

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

Documents Incorporated By Reference:

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

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PART I

Item 1.  Business

Overview

We are a diversified technology company that creates, builds and launches technology-based businesses primarily from
technology developed for the government. We were founded in 1981 as a government information technology company. Today, Titan
Systems, our core government business, is a key provider of information technology and communications solutions, services and products in
the growing federal government information technology market. Titan Systems also serves as our engine, providing us with
government-funded research and development activities that generate technology and intellectual property that often form the
foundation for our commercial technology applications and new businesses. We have developed and continue to develop new businesses,
like our SureBeam and Titan Wireless businesses, from the broad portfolio of technologies, intellectual property and expertise that
we have created and continue to create as part of our work under government contracts and our self-funded research and development
program.  Our government contracts generally
permit us to retain intellectual property rights in commercial applications of technologies developed under those contracts. We have
also supplemented our internally developed portfolio with technologies, intellectual property and expertise through strategic
acquisitions of other government information technology companies. Our strategy is to continue to grow our government business both
internally and through acquisitions, while also leveraging  our intellectual property portfolio by creating commercial technology
applications or individual businesses that can be monetized through either an initial public offering of a subsidiary, a complete
spin-off to our stockholders, an outright sale of a business, or a technology license or sale. We were able to implement our
monetization strategy with our initial public offering of our SureBeam subsidiary, which is quoted on the Nasdaq National Market
under the symbol "SURE" and plan to spin off our remaining majority interest in SureBeam to Titan shareholders later this year.

On October 16, 2001, Titan adopted a definitive plan to spin off SureBeam in
the form of a tax-free dividend to Titan shareholders within 12 months from that
date. The plan involves filing a letter ruling request with the Internal Revenue
Service seeking approval of the tax-free distribution. Titan has filed the
letter ruling request, and intends to execute the spin off as soon as practical
following the receipt of a favorable ruling and all required third party consents. Titan has historically reported the
SureBeam business as a separate segment. In accordance with Accounting
Principles Board Opinion No. 30, "Reporting the Results of
OperationsReporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions," the
consolidated financial statements of Titan for all periods presented have been
restated to reflect SureBeam as a discontinued operation.

Operating Segments

We have organized our business into five
segments that reflect the four markets and industries in which we operate, as well as our Emerging Technologies
and Businesses segment:

|Segment                                                  |  | Segment Description                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Titan Systems                                            |  | Information technology and communications
      solutions, services and products for defense, intelligence, and other U.S.
      and allied government agencies                                                                                                                                                                                                                                                                                                       
|Titan Wireless                                           |  | Satellite-based and wireless-based
      communication services and systems which provide cost-effective voice,
      data and Internet services in developing countries                                                                                                                                                                                                                                                                                              
|Cayenta (included in our Software Systems
      segment) |  | Total services provider of information
      technology services and software product applications for its customers' business
      and governmental functions, including retailing, finance, accounting,
      customer billing and collection, contract management, supply chain
      management and equipment monitoring and maintenance primarily in four vertical markets:  
      utility/municipality, manufacturing and logistics, retail and transportation
|SureBeam
      (Discontinued)                            |  | Electronic food irradiation
      systems and services                                                                                                                                                                                                                                                                                                                                                                                                                
|Emerging Technologiesand
    Businesses                  |  | Development of commercial applications and
      businesses using technologies created by Titan. We currently have several
      new businesses in development, including businesses in which we have
      applied for patent protection for the underlying
      technology                                                                                                                                                                                         

We believe that each of our four established business segments  Titan
Systems Corporation, Titan Wireless, Inc., Cayenta and SureBeam Corporation   is well positioned in its
respective market for long-term growth. Our consolidated revenues were approximately $1.1 billion for
the year ended December 31, 2001.

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Our Core Government Segment  Titan Systems

Overview.  Titan
Systems provides comprehensive information systems solutions and services
including design, architecture, installation, integration, test, logistics support,
maintenance, training and complete system upgrades to U.S. and allied government national security and intelligence
organizations. In addition, Titan Systems provides services and solutions to civil government agencies with sophisticated information system,
information processing, information fusion, data management, and communication
system requirements. Titan Systems also develops and manufactures digital
imaging products, sensors, lasers, electro-optical systems, threat
simulation/training systems, intelligence electronic hardware, signal intercept
systems, and communications systems. For the year ended December 31, 2001, Titan
Systems had revenues of approximately $919 million, which represented 81% of our
consolidated revenues.

Industry
Overview.  The U.S. government is among the largest buyers of information
technology systems and services in the world. According to INPUT, the U.S. government's information technology budget for its
fiscal year 2003 is projected to be approximately $50 billion, an increase of 11% from 2002.  Current forecasts are for a
compound annual growth rate of approximately 10% over the next three to five years.

While already growing at a
steady rate over the past decade, the government information technology budget
is now expected to increase even more significantly than in the past as a result
of several factors. First, in outlining the priorities of the Bush
Administration, Secretary of Defense Donald Rumsfeld has stated that 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 modernization through
increased spending on information technology reflects the critical role that
this capability plays both in national security and in improving government
efficiency. The U.S. military is placing greater emphasis on interoperability
and increasing productivity while using fewer resources by employing systems
that act as force multipliers and increase operating capabilities under
differing conditions. To further this strategy, military agencies are relying on
communications products and systems that provide secure, reliable and efficient
transmission of voice and data in demanding environments.

In addition, heightened
government concern over national security and changing government priorities
have resulted in proposed defense budgets that are significantly higher than in
prior years, especially in areas related to intelligence, surveillance, and
reconnaissance and homeland security which have significant information
technology components. Finally, the U.S. government is increasingly using open
systems that incorporate commercial off-the-shelf products to increase the
adaptability and operability of its information technology systems architectures, creating
greater contracting opportunities for systems and software integration work. The
U.S. government is also increasingly using the Internet and web-based systems to improve its
efficiency, providing contracting opportunities for Internet-based integration
work.

Competitive Strengths.  
Titan Systems attributes its growth and performance to several factors:

| | Long     Standing    Customer
     Relationships and Experienced  Management.  Founded  in 1981,
     Titan Systems has an extensive history of providing information  technology
     and  communications  solutions  to U.S.  defense,  intelligence,  and civil
     government  agencies.  Collectively,  Titan Systems' executives and general
     managers have on average  approximately 20 years of industry experience and
     have developed long-standing,  key customer relationships across all of the
     U.S.  military   services  and  several  allied  countries.   The  industry
     experience  of Titan  Systems'  executives  and general  managers  has also
     helped Titan Systems to develop a  significant  presence with many civilian
     government  agencies,  which has  contributed to Titan Systems'  success in
     securing new contracts.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Broad
Solution Capabilities.  Titan Systems has extensive industry expertise in the
development of information technology and communications solutions for
government customers. Titan Systems' scientists and engineers provide
solutions in areas such as signal processing, antenna design, low detection
waveforms, computer aided target and image recognition, satellite communications
hardware and software, radio direction finding systems, and real time object
tracking and targeting. In addition, Titan Systems has significant knowledge of
legacy information technology and C4ISR systems currently in operation and the
ability to integrate its solutions into existing systems. This ability to
provide full-service solutions, coupled with our employee base of over 5,700
"Secret" and above-cleared personnel, is enabling us to bid on larger,
more comprehensive government contracts than at any time in our history.
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| | Extensive
Acquisition and Integration Experience.  In anticipation of changes in U.S.
government procurement policies toward awarding more comprehensive contracts to
meet its defense-related requirements, we initiated an acquisition strategy in
1997. Since January 1, 1998, we have acquired and successfully integrated 16
government information technology companies into Titan Systems. These
acquisitions occurred and are continuing to occur at a time when a broad
consolidation in the government information technology industry was and is
ongoing. We have substantial experience in identifying, acquiring and
integrating government information technology and communications companies.
Successful integration of technologies, expertise and intellectual property has
enabled Titan Systems to bid on more comprehensive government contracts. Titan
Systems has won several new, large government contracts as a result of the
successful integration of acquired resources and capabilities and continues to
bid on larger, more comprehensive government contracts.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Strategy.  
Titan Systems' objective is to be the premier provider of information  technology and communications  solutions and
services to U.S. defense,  intelligence and civilian government agencies and to allied  governments.
To achieve this objective,  Titan Systems intends to pursue the following strategies:

| | Maintain
Technology Advantage.  Titan Systems' successful track record with
research and development projects has helped us create a diversified portfolio
of technologies which in turn helps us obtain additional research and
development funding and ultimately new system and product contracts. We believe
that Titan Systems' expertise and capabilities with a wide range of
technologies makes us well positioned to provide information technology and
communications systems, products and services to our customers. Titan Systems
will seek to maintain this advantage by keeping pace with new developments in
technology, and by continuing to compete for contracts that require
high-quality, sophisticated technical solutions.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Build
Upon our Competitive Strengths to Bid on Larger, More Comprehensive
Contracts.  Titan Systems has an extensive history of providing information
systems and communications solutions and services to defense and
intelligence-related government agencies. We expect this experience, our
reputation, our products and services, and the enhanced technical and personnel
resources resulting from Titan Systems' acquisitions to enable Titan
Systems to bid on and win more comprehensive government contracts.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Solutions,
Services and Products.  Titan Systems' information systems solutions and
services include systems analysis, design, and architecture, software
development services and systems integration. Titan Systems' initial work
in this area generally involves a joint analysis of the customer's
enterprise structure and processes and information and communication system
needs. Once this analysis is completed, Titan Systems designs the technology
solution to meet the customer's needs. This process typically involves
software development by Titan Systems, coupled with integration of commercial
off-the-shelf software and hardware. Titan Systems also provides a variety of
professional and technical support services, including electronics and
mechanical design and fabrication, computer-aided design and manufacturing
services, technical documentation and prototyping. In addition, Titan Systems
offers a variety of standard products, including satellite communications modems
and terminals, radio direction finding systems, lasers, sensors, and
electro-optical systems. As a result of the complex nature of Titan
Systems' customer solutions, its engagements often are long-term and
involve follow-on contracts. Examples of Titan Systems' information systems
solutions, support services and communications products include the following:

Information Systems Solutions

| |  | Developing the Joint Range Extension.  Titan
Systems has developed an information solution that allows
real-time tactical data link information developed by a variety of sensors to be
transmitted over any communications medium. This capability allows commanders to
see and share the actual tactical events of a campaign at different
locations simultaneously. This innovative capability was used very successfully
in the recent Afghanistan operations to provide commanders with a view of the
battlespace at extended ranges, thus allowing forces to be coordinated,
sequenced, and generated rapidly to meet the needs of the operational commander.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  | Developing Advanced Digital Waveform for the U.S. Navy.  Titan
Systems' Advanced Digital Waveform, or ADW, increases data throughput rates
on dedicated ultra-high frequency satellite communication channels. Titan
Systems' Mini-Demand Assigned Multiple Access, or Mini-DAMA, terminals will
be the first U.S. Navy systems to receive ADW capability. Once this capability
is installed, the terminals will be capable of passing information at three to
four times the previous rate. The current project contemplates that the majority
of the U.S. Navy's Mini-DAMA terminals will be outfitted with this improved
communications feature within the next couple of years.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Developing New Technologies for the U.S. Army's Mobile Positioning
Initiative.  Titan Systems is the primary systems integrator for the U.S.
Army's Mobile Positioning Initiative, a unique initiative providing
real-time visibility, including satellite tracking, of military trucks,
trailers, and cargo. The initiative combines commercial, off-the-shelf hardware
and software with government-furnished equipment. Titan Systems' team
supports a growing, integrated in-transit visibility network that currently
comprises 200 sites in 13 countries supporting 1,000 global users and that has
achieved an operational system readiness of 95% or better. This initiative was
used to track trains during the deployment of forces in Kosovo. We believe that
the U.S. Army's success in Europe with Titan Systems' in-transit
visibility solution was instrumental in its selecting Titan Systems as the U.S.
Army's proponent to support the Transportation Coordinators Automated
Information for Movement System II Operational Test. This system has been
selected for the Department of Defense's program to provide an integrated
transportation information system capability for routine deployment,
sustainment, and redeployment operations.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Support Services

| |  | Supporting Key Transformational Programs.  The United States Defense
establishment is in the process of transforming itself for the future. Titan
Systems is working as a partner to all of the Services on key
transformational programs such as the Navy's Littoral Surface Craft - Experimental, the
ForceNet, Network Centric Warfare, the Army's Interim Brigade Combat Team concept,
the Air Force Global Strike Task Force, and many other innovative service initiatives.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Supporting the Joint Deployable Intelligence Support System (JDISS).  
Titan Systems is assisting with the systems engineering for JDISS, a worldwide intelligence
network with over 7,000 nodes that Titan Systems' engineers and technicians maintain
on a seven day per week/24 hour per day basis (7/24).
This secure network provides critical intelligence
information to all facets of the United States military. JDISS is a critical part
of every military operation and located at all front line combat locations.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Supporting Navy Cash.  Titan Systems is assisting the U.S. Treasury, Naval Supply
Systems Command, JP Morgan Chase and others in providing a cashless
environment for sailors and marines deployed anywhere in the world, so that
their money is safe and their families have 7/24 access to it. It
is an innovative system of point of sales, ATMs, and other automated financial
services provided to service members.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Supporting the Naval Air Systems Command/Naval Air Warfare Center.  Titan
Systems is helping with the systems engineering and integration of Naval
Aviation Reconnaissance and Surveillance systems under a multi-year contract.
Under current tasking, Titan Systems' engineers provide design and analysis
support for the installation and integration of state-of-the-art sensor systems
in both manned and unmanned reconnaissance platforms. Systems level support
typically includes concept exploration, specification preparation, interface
design, laboratory integration, and test and evaluation. Titan Systems also
supports tactical manned and unmanned platforms and avionics equipment. Titan
Systems' engineers provide design and analysis support for the integration of
sophisticated subsystems into the avionics and weapons systems of many types of
aircraft. These subsystems include electro optic/infra red devices, radar,
electronic warfare systems, mission planning modules, and tactical data links.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Supporting Military Satellite Communications.  Titan Systems engineers and
technicians provide engineering, program and operational support to the Space
and Naval Warfare Systems Command and the Space Warfare Systems Centers in San
Diego, California and Charleston, South Carolina. Our satellite communications
experts are involved in all aspects of U.S. Navy and other military satellite
programs including: the determination of requirements, laboratory and in-field
operational testing, on-the-job and formal training, maintenance, operation,
technical assistance, integration, and installation. Titan Systems' members
of the Fleet System Engineering Team provide on-site support at U.S. Navy
satellite communications sites in Norfolk, Virginia, Wahiawa, Hawaii, Naples,
Italy and Bahrain.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  | Information Assurance and e-Government Services.  Titan Systems provides
systems and solutions related to information assurance, security consulting and
e-government applications. Titan Systems also focuses on the design,
installation and maintenance of local and wide area networks used to operate the
U.S government's Internet-based initiatives. Titan Systems designs
electronic filing, procurement and payment systems for the government agencies
involved in those initiatives, along with Internet portals used to
electronically distribute confidential and non-confidential information to other
government entities and the public at large.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Communications Products

| |  | Designing Technology for the U.S. Army's Prophet Initiative.  Titan
Systems' initial role as part of this initiative was to design and
integrate a multi-faceted, radio frequency intercept and direction-finding
system into an existing vehicle to provide that vehicle with
receive/direction-finding capabilities. Titan Systems completed the initial 13
systems ahead of schedule and was awarded a contract to produce and field up to
83 production-level mobile systems, with the number that Titan Systems will
ultimately produce and field depending upon whether options under the contract
are exercised. Titan Systems will initially produce and field six systems under
the contract. In its eventual implementation, the U.S. Army's Prophet
initiative is planned to be a combination of mobile, ground-based
intercept/direction-finding receivers and an airborne complement of unmanned
aerial vehicles. The development and integration of this product was a result of
a collaborative effort of six of Titan Systems' divisions. This innovative
system was pressed into service in Afghanistan to hunt down Al Qaeda and Taliban forces.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Producing Channel Control Modems for Integrated Monitoring and Power Control
Subsystems.  Titan Systems is engineering, developing and producing a modem
for the Integrated Monitoring and Power Control Subsystem, or IMPCS. IMPCS is
being developed to reduce manpower requirements and increase the efficiency of
communication between the various control terminals and deployed, tactical
terminals that use the geosynchronous satellites of the Defense Satellite
Communications System. Satellite network efficiency is greatly improved by
balancing the power levels arriving at the satellites. Today's system uses
a manpower-intensive manual approach to monitor the entire global network and
conduct point-to-point communications with terminal operations to provide
power-balancing direction. Titan Systems' modem is expected to fully
automate this process.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Designing and Developing DAMA Products.  Titan Systems' DAMA products
combine low cost, low power, reduced weight and size, and reduced component
count with high reliability. Each of Titan Systems' DAMA products has been
developed with an open-architecture format that allows future upgrades and
enhancements to be provided as communications needs evolve, and is designed to
support commercial off-the-shelf components. Titan Systems markets its DAMA
products directly to all branches of the U.S. military, its allies and
international companies that supply such allies, and also works with strategic
partners to incorporate its technologies into their products.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Contract Profile.  
Titan Systems is currently performing work under approximately 1,600 contracts.
No single Titan Systems contract accounted for more than 2.3% of Titan
Systems' total 2001 revenues. Of Titan Systems' total revenues from
government business in 2000, approximately 39% were generated by time and
materials contracts, approximately 43% were generated by cost reimbursement
contracts, and approximately 18% were generated by fixed-price contracts. Of
Titan Systems' total revenues from government business for 2001,
approximately 43% were generated by time and materials contracts, approximately
41% were generated by cost reimbursement contracts, and approximately 16% were
generated by fixed-price contracts. Since operating margins on time and
materials contracts are generally higher than those generated by cost
reimbursement contracts, Titan Systems has made and continues to make an effort
to generate an increasing amount of revenue from time and materials contracts.

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Backlog.  Titan
Systems possesses a substantial backlog of contracts that provide multiyear
revenues. Most of its contracts generate revenue over a one to five-year period.
In the past, Titan Systems has generally been successful in expanding the scope
of its principal contracts by offering more comprehensive information technology
solutions. Titan Systems had an estimated total backlog, including funded and
unfunded backlog, of approximately $2.8 billion at December 31, 2001, comprised
of approximately $0.6 million of funded backlog and $2.2 billion of unfunded
backlog. Funded backlog consists of the aggregate contract revenue
remaining to be earned by us at a given time, but only to the extent such
amounts have been appropriated by Congress and allocated to the contract by the
procuring government agency. Unfunded backlog consists of the
aggregate contract revenues expected to be earned as our customers incrementally
allot funding to existing contracts, whether we are acting as a prime contractor
or subcontractor, and the aggregate contract revenues to be funded on contracts
which have been newly awarded to us. Unfunded backlog includes priced options,
which consist of the aggregate contract revenues expected to be earned as a
result of a customer exercising an option period that has been specifically
defined in the original contract award. Backlog is the total of the
government and commercial funded and unfunded backlog. The determination of
unfunded backlog involves substantial estimation, particularly with respect to
customer requirements and contracts. These estimates are based 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 value will be realized as contract revenue or earnings.

We
believe that year-to-year comparisons of backlog are not
necessarily indicative of future revenues. Titan Systems' backlog is
typically subject to large variations from quarter to quarter as existing
contracts are renewed or new contracts are awarded. Additionally, all U.S.
government contracts included in backlog, whether or not funded, may be
terminated at the convenience of the U.S. government.

Competition.  Titan
Systems is one of many companies involved in providing information systems
solutions, support services and communications products for a variety of
programs for agencies of the U.S. government and civil governments. Most activities in which Titan
Systems engages are very competitive and require Titan Systems to have highly
skilled and experienced technical personnel to compete. Many of Titan
Systems' competitors have significantly greater financial, personnel and
other resources than Titan Systems. These competitors include
Booz, Allen & Hamilton Inc., Computer Sciences Corporation, General Dynamics Corporation,
Lockheed Martin Corporation, Northrop Grumman, Raytheon Company, Science
Applications International Corporation and TRW Inc. In addition, Titan Systems competes
with smaller and medium sized companies such as:  Anteon Corporation,
CACI International Inc., Dynamics Research Corporation, Veridian Corporation and ViaSat, Inc.
Titan Systems believes that the primary competitive factors for its
information systems solutions, support services and communications products
include reputation, technical skills, past contract performance, experience in
the industry and customer relationships.

Our Commercial Segments

Our
approach to creating and building commercial technology-based businesses and
attempting to monetize our intellectual property involves the following three
phases:

Phase I:  Technology and Market Evaluation

As
part of our strategy of leveraging our intellectual property portfolio, we have
a well defined process of continually evaluating the likelihood of successfully
transitioning a technology or application of a technology developed under our
government contracts into a commercial businesses. This evaluation typically
involves assessing potential market size, market demand, competitive strengths
and whether the potential technological advantages and strength of our
intellectual property protection provide a competitive advantage. We seek
commercial applications that address large, rapidly growing, potentially global
markets where we believe our products and services can differentiate themselves
from competing products and services. To facilitate our assessments, we often
call upon our relationships with technology-focused venture capital firms and
third-party market consultants. We also seek intellectual property protections
for our technology and applications of technologies that we have developed or
acquired.

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Phase II:  Technology Transfers and Creation of New Corporate Subsidiaries

Once
we have made an assessment that a technology or application can be successfully
transitioned into the commercial market, we determine whether we should finance
the development of that business on our own or in conjunction with partners or
whether we should sell or license the technology to a third party. This
determination again involves assessments of the business's market and
competitive position, as well as time-to-market considerations and
considerations relating to the capital requirements and risk/reward profile of
the business. The vast majority of technologies reviewed are either licensed to
third parties or left within Titan Systems, Titan's government business, and
not commercialized.

For
those few select technologies that we choose to develop within Titan, we
typically take a number of actions to create that business that we believe
differentiate our approach from that of other government information technology
companies that have attempted to execute a commercialization strategy. In our
Emerging Technologies and Businesses segment, we form a corporate subsidiary to
operate the business. We also create an employee stock option plan for the
subsidiary, and use option grants under that plan to help recruit a management
team with relevant market expertise and management skills in the business's
industry.

We
believe that forming separate subsidiaries in our Emerging Technologies and
Businesses segment to operate our new technology-based businesses also provides
them with certain advantages compared with technology-based businesses backed by
venture capitalists. Each of our new businesses benefits from the various
resources that we have in-house and can make available to it. Unlike many other
newly-formed technology-based businesses that must look outside their
organization for many resources, we support our new businesses with financial,
accounting, marketing, administrative and legal expertise. We may also loan
funds to our new businesses, a financing alternative that is generally not
readily available to early-stage technology-based businesses.

The
subsidiaries that become significant from a revenue and profit perspective
become segments of Titan for financial reporting purposes. Today, we have three
commercial business segments -- Titan Wireless, Cayenta and SureBeam (discontinued) -- in
addition to our core government segment, Titan Systems, and our Emerging Technologies
and Businesses Segment.

Phase III:  Pursue Monetization for Commercial Subsidiaries

We
intend to pursue a monetization strategy for our subsidiaries that includes
initial public offerings and complete spin-offs to our stockholders; however, we
may also pursue an outright sale of a business where appropriate. Our preferred
monetization strategy for our subsidiaries is to pursue, market and other
conditions permitting, an initial public offering. We prefer this approach
because we believe that by accessing capital markets our subsidiaries will be
better able to execute their strategies and achieve greater value for our
stockholders. To the extent possible, we create capital structures for and
intend to structure any initial public offerings of our subsidiaries in order to
preserve the ability to later distribute the stock we retain in these
subsidiaries to our stockholders on a tax-free basis. We create these capital
structures because we believe that a tax-free spin-off of subsidiary shares
would ultimately be a tax-efficient way to deliver value to our stockholders. We
were able to implement our monetization strategy with our initial public
offering of our SureBeam subsidiary, which is quoted on the Nasdaq National
Market under the symbol SURE.

Titan Wireless

Overview.
  Titan Wireless provides communications services and systems to developing
countries primarily in Africa, Central Asia, the Middle East and Latin America.
In conjunction with its subsidiary, Sakon, and newly acquired GlobalNet, Inc., Titan Wireless has
built a global communications network. This network currently consists of:

| |  | leased transponder space on various satellites that together provides global geosynchronous satellite coverage;
| | - | ---------------------------------------------------------------------------------------------------------------

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| |  | three hubs that route network transmissions between satellites and the international fiber optic network backbone;
| | - | ------------------------------------------------------------------------------------------------------------------

| |  | international gateways that route network transmissions between the satellites
and a country's public switched telephone network, or PSTN;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------

| |  | leased fiber optic routes providing backbone infrastructures for internet protocol traffic; and
| | - | -----------------------------------------------------------------------------------------------

| |  | network operations centers in California and New Jersey from which the network is monitored.
| | - | --------------------------------------------------------------------------------------------

While
Titan Wireless has historically generated most of its revenues by supplying
communications systems and products and providing related integration services
in developing countries, Titan Wireless is increasingly generating revenues from
providing communications services over this network. Service revenues are
currently generated from wholesale sales to long distance carriers that
use our network to carry their long distance communications traffic and to a
much lesser extent from business customers in developing countries. Titan
Wireless's network has been built using its own communications products and products purchased from other equipment vendors,
which include advanced satellite ground terminals, Very Small
Aperture Terminals, or VSATs, monitoring and control software, satellite voice/data modems,
broadband access systems, packet switches and voice over Internet protocol (VoIP) gateways.

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

Titan
Wireless's project for the national telephone company (Office des Postes et Télécommunications) of Benin, Africa
illustrates our full product and system integration capabilities. Titan
Wireless, the prime contractor for the project, was hired to install and operate
several important components of the government's communications
infrastructure, including a global system for mobile communications, or GSM,
cellular network, a rural telephony network, fiber optic backbone, and local
telephone switching equipment. Alcatel of France was a major subcontractor to
Titan Wireless on this project, with responsibility for installing, among other
parts of the project, the GSM cellular network. Under the terms of the
applicable contracts governing the project, Titan Wireless will co-operate the
system with the national telephone company until all equipment has been paid for
and then transfer the operations to the national telephone company. In addition
to realizing revenue and profit on the equipment portion of the project, Titan
Wireless will share in the service revenue generated by the system. The terms of
the Titan Wireless agreement with the customer include, among other things, a
revenue sharing of total net receipts on this project for up to a maximum of
nine years, depending upon when the equipment has been paid for. Revenues of
approximately $27.4 million, or approximately 29.5%, of Titan Wireless's
revenues were generated from the Benin project during 2001. In October 2000, we
collected an $18.0 million receivable from an African group related to a sale of
a portion of our economic interest, net of all fixed equipment payments, in the
revenue sharing of this project.

In the third quarter of 2001, Titan Wireless entered into a contract with Intercellular Nigeria, Ltd., a leading
code division multiple access (CDMA) fixed wireless
operator, to provide system integration services and equipment which will expand Intercellular's existing capacity and
provide international long distance service via the Titan Global Network.

In July 2001, Titan Wireless, through its subsidiary Sakon, acquired a minority interest in Gateway Systems, one of the largest
providers of data transmission services to the corporate market in India. Gateway currently provides data and high
speed Internet service to corporate customers in Mumbai, Bangalore and Pune, and plans to expand into five additional
cities within the year, including New Delhi and the technology centers of Hyderabad and Chennai.
Titan Wireless has subsequently opted to increase its ownership position and will own a majority
interest in Gateway pending regulatory approval.

9

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In March 2002, Titan acquired GlobalNet, Inc., an international wholesale long
distance carrier, that utilizes voice over Internet protocol (VoIP) technology to deliver
long distance traffic to developing markets, primarily
in Latin America. GlobalNet will become a part of Titan Wireless.

Titan
Wireless's core network technology relies heavily on our DAMA technology,
which was developed under U.S. Department of Defense contracts beginning in
1983. DAMA enables more cost-effective and efficient use of satellite
transmission capacity by increasing the amount of information that can pass
through a satellite transponder and by allowing each VSAT in a satellite network
to communicate with any other VSAT in the network without going through a
central hub. We believe that our DAMA technology allows us to route customer
connectivity requests more efficiently than any of our competitors.

Titan
Wireless has also developed substantial expertise in critical engineering
disciplines such as satellite ground system design, radio frequency and digital
engineering, digital and communications signal processing software, network
management and modem technology. This expertise, combined with the adaptable
core technologies and design supporting Titan Wireless's network, allows
Titan Wireless to offer customers in emerging countries complete
communications systems that can use satellite-based technology,
terrestrial-based wireless local loop technology, and/or GSM technology.

Through
Sakon and GlobalNet, Titan Wireless is currently providing long
distance or other communications services in more than 40 developing countries. For
the year ended December 31, 2001, Titan Wireless had revenues of approximately
$92.7 million, which represented 8.2% of our consolidated revenues.

Industry
Overview.  Vast regions of the world remain without adequate
communications infrastructure. For this this reason, developing countries constitute
attractive and growing markets. According to Telegeography, international voice
traffic increased by over 21% to 132.7 billion minutes in 2000. The continuing
rise of international traffic has been propelled by two broader
trends:   liberalization of international 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 5.3 billion. While specialist VoIP carriers carry most of
this traffic, many minutes are originated by traditional PSTN operators who have
chosen to outsource some of their international traffic to VoIP operators.
International VoIP traffic reached approximately 10 billion minutes in
2001 and is expected to continue to grow over the next several years.

Since countries in our targeted markets had
fewer than two subscriber lines per 100 inhabitants compared to 67.30 in the
United States, Internet connections and broadband systems are not readily
available. Government deregulation combined with unmet demand for communications
services, including voice, data, and Internet connectivity, in many emerging
countries has provided numerous opportunities for companies able to provide
cost-effective, high quality services. A combination of several factors,
including advancement in voice and data transmission technologies, development
of low cost ground terminals, the existence of commercial satellite
availability, and the development of relatively low cost terrestrial-based
wireless local loop equipment has made the commercial delivery of communications
services, including voice, facsimile, data, Internet and network communications
services, to developing countries more feasible.

Competitive Strengths.  
Titan Wireless considers the following to be its competitive strengths:

| | Low
Network and Operating Costs.  Titan Wireless's global communications
network is well-suited for commercial deployment in developing countries because
it is designed to function at relatively low network and operating costs.
In addition, Titan Wireless leases access to the geosynchronous
satellites that it uses in its operations rather than purchasing satellites
outright, and as a result does not have to recover the substantial costs
associated with investments in satellites. Titan Wireless has also established
its hubs in locations where Titan Wireless has been able to economically lease
access to the international fiber optic network, which has also contributed to
its ability to provide its communications services at relatively low cost.
Finally, Titan Wireless makes extensive use of VoIP
technology, which utilizes bandwidth capacity more efficiently than
circuit-switched technology. Because of these relatively low operating costs,
Titan Wireless can charge prices for its communications services in developing
countries that are both profitable to Titan Wireless and affordable to
customers.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

10

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| | Strategic
Alliances with Local Partners.  Titan Wireless develops and markets its
broadband communications services and systems to retail customers through
strategic alliances with local partners, such as regional and local
communications services providers. In each location that Titan Wireless is
operating broadband retail service, a local partner serves an important role as
Titan Wireless's intermediary with local regulators and experts in the
local market. Titan Wireless considers its ability to identify and enter into
strategic relationships with effective local partners to be one of its
competitive advantages.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Adaptable
Technology and Integration Expertise.  The core technologies and design
supporting Titan Wireless's network can be adapted for use with different
types of services such as voice, data or Internet or different technology such
as VSAT technology, terrestrial-based wireless local loop technology and GSM
technology. This adaptability, combined with Titan Wireless's expertise in
integrating these different types of communications technology, provides Titan
Wireless with the ability to offer different types of communications services to
customers and to pursue many different types of opportunities in developing
countries.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Strategy.
Titan Wireless's objective is to become a leading provider of
communications services and systems in developing countries. To achieve this
objective, Titan Wireless intends to pursue the following strategies:

| |  | Grow    International    Voice    and    Data
     Traffic.  Through  expansion of its internet  protocol  based
     packet  networks,  carrier grade quality,  competitive  pricing,  effective
     customer  service  and  account  management,   Titan  Wireless  expects  to
     significantly  grow the volume of  traffic,  revenues,  and  profits of the
     international wholesale long distance business.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Increase Usage of Existing Broadband Local
     Access  Systems.  As  backbone  facilities continue to expand
     into   developing   countries,   Titan  Wireless  will  address  the
     bottleneck created by the lack of effective "last mile" by providing
     state of the art  cost-effective  fixed wireless  broadband access systems.
     This  technology  will be focused  at  multinational  corporate  customers,
     governments,  and local  partners  that are providing  Internet  access and
     other communications services to the local population.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Add    Value-added    Functionality   to   the
     Network.  The   inherence  architecture  of  Titan  Wireless's
     network  provides  for   convergence,   or  the  transmission  of  multiple
     applications  over  a  single  bandwidth   segment.   Future   applications
     complimenting the voice, fax, and basic data services today will be unified
     messaging,  video  teleconferencing,  virtual private networks, and network
     security features.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Centrally    Manage   the    Global    Network
     Infrastructure.  The  central  management,  procurement  and
     operations  of global  backbone  infrastructure  facilities  will allow the
     Titan Wireless  network to remain in a cost-effective  position as various
     technologies  evolve and prices change over time. This applies to satellite
     bandwidth (space segment),  fiber optic facilities,  teleports, and network
     operations centers (NOC).
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Further   Develop   the   Systems
     Integration  Business.  The  principal  core  competencies
     historically have been in the design,  building,  integration and operation
     of communications  facilities.  Titan Wireless will continue to focus on
     providing   complete   solutions  to  both  governments  and  operators  in
     developing countries.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Competition.
While the markets in which Titan Wireless competes are only somewhat competitive
today, we expect that competition will increase in the future. Titan Wireless
encounters competition from numerous companies, including large and emerging
domestic and international companies, many of which have far greater financial,
engineering, technological, marketing, sales and distribution and customer
service resources than Titan Wireless. Some of Titan Wireless's competitors
include tier 1 long distance carriers. In addition, Titan
Wireless generally competes against one or more local companies in each market
in which it is operating its fixed wireless retail business.

11

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Cayenta

Overview.  
Cayenta provides software applications and implementation and integration
services to customers to solve specific business and operating problems. These
software applications can be tailored for the customers' business and
operating requirements and made accessible via the Internet. Cayenta's
target markets include municipalities/utilities, transportation/logistics,
retailing, federal government agencies and manufacturing. Cayenta currently
offers proprietary software applications and related customized services for
revenue cycle management, equipment monitoring and maintenance, and retailing.

For
the year ended December 31, 2001, Cayenta had revenues of approximately $58.3
million, which represented approximately 5.1% of our consolidated revenues.

Industry
Overview.  The rapid growth of the Internet and related increases in
accessibility of information and frequency of e-business and e-government
transactions is creating significant new opportunities and challenges for
businesses and governmental entities. Businesses and governmental entities face
significant technical challenges in their efforts to use the Internet to improve
communications with their trading partners, customers and constituents and
enhance operational efficiencies, including:

| |  | solving integration and compatibility issues caused by the patchwork of
proprietary and third party systems that businesses and governmental entities
often implemented without a focused information technology strategy;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | integrating data from disparate systems to increase its value;
| | - | --------------------------------------------------------------

| |  | adopting and integrating new and rapidly changing technologies while preserving investments in existing systems;
| | - | ----------------------------------------------------------------------------------------------------------------

| |  | developing comprehensive end-to-end e-business solutions that link web sites
with accounting and fulfillment systems and accommodate and account for complex
billing, settlement and supply-chain transactions; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | tailoring standard software applications to their business processes and
governmental functions while ensuring that these applications are compatible
with those of their trading partners, customers and constituents.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Many
businesses and governmental entities currently have to manage multiple software
applications, systems integrators and service vendors to address their
challenges in doing business, increasing operational efficiencies and managing
information over the Internet. Many information technology companies specialize
in only a single aspect of services delivery, such as web design, software
application development, systems integration or hosting of commercially
available software applications. We believe that the complexity of combining all
of these elements from different providers makes it difficult for businesses and
governmental entities to implement information technology products and services
in a cost-effective and timely manner. We believe that an
opportunity exists for information technology providers such as Cayenta that
understand their customers' businesses and governmental functions and
provide consulting and integration services and customized software
applications.

The Cayenta  Solution.  
Cayenta  believes  that the following  features of its  information  technology  products and services
differentiate Cayenta from its competitors:

| | Vertical
Market Focus and Tailored Offerings for Customers' Business Processes and
Governmental Functions. Cayenta's vertical industry expertise helps us
define and deliver tailored software applications and services for its
customers. We allow our customers to add additional functions to standard
software applications that are specific to their needs. Cayenta adds these
functions by using separate, tailored software applications that extend the
capabilities of standard software applications.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

12

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| | Proprietary
Revenue Cycle Management Offering. Cayenta offers software applications that
our utility and municipality customers use to track, collect and settle billing
and payment transactions with their customers and trading partners. These
software applications help Cayenta's customers address their needs relating
to customer enrollment, creditworthiness, purchasing, contract management, bill
generation, bill presentment, collections and settlement. Cayenta's
software also provides audit and compliance functions that its customers use to
manage the complex contract terms that are prevalent in e-business and their
receivables and fulfillment process.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Proprietary
Equipment Monitoring and Maintenance Offering. Cayenta offers software
applications that enable manufacturing customers to efficiently manage their
equipment monitoring and maintenance processes. These software applications
address maintenance scheduling, materials and parts management, and work order
processing.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Proprietary
Multi-Channel Retailing Package. Cayenta integrates a customer's web
site with the customer's existing software applications and systems to
support order processing, catalog management, customer service, inventory
management, order fulfillment, billing and collections and account settlement.
We believe that this multi-channel retailing package provides Cayenta's
retail customers with a single point of contact for managing and monitoring all
of their retailing transactions, including e-business, catalog and in-store
transactions.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Increased
Operability and Adaptability of Customers' Systems. Cayenta designs
server operating systems and software applications that permit its customers to
integrate different systems within their organizations and between their
organizations and those of their trading partners. Cayenta's information
technology products and services also accommodate customer technology
preferences for server operating systems, and facilitate accessibility of
software applications over the Internet. By providing its customers'
systems with greater operability, we believe that Cayenta's information
technology products and services reduce their manual and redundant business
processes and related costs, and enable them to use their systems to help create
new business relationships with other companies. By being adaptable, we believe
that our information technology products and services permit our customers to
add or change software applications rapidly as their businesses evolve.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Strategy.
Cayenta's objective is to be a leading provider of electronic and
Internet-based management systems in each of its target vertical markets. To
achieve this objective, Cayenta intends to pursue the following strategies:

| | Target
Specific Industries. Cayenta targets industries with complex and substantial
information technology requirements. Cayenta currently has expertise in multiple
industries, including municipalities/utilities, transportation/logistics,
retailing, and manufacturing. Cayenta believes that focusing on several specific
industries provides it with a competitive advantage in developing information
technology products and services for those industries.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Continue
to Develop Core Competencies. Cayenta intends to expand its expertise in
building and deploying software applications and in integrating its
customers' internal systems with one another and with those of their
customers, trading partners and constituents. Cayenta intends to continue
incorporating technologies that support its customers' complex information
technology needs into both standard and tailored software applications that it
designs and implements for customers. Cayenta seeks out and tests new
technologies as part of its internal research activities and in conjunction with
customer projects. Cayenta augments its software offerings by utilizing open
source software that is publicly available for reuse from Internet-based and
other software development initiatives. Cayenta believes that its ability to
successfully implement information technology products and services for its
customers that incorporate leading technology enables it to gain insight into
the relative strengths and weaknesses of competing technologies and to sell
value-added consulting and integration services.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Build
its Hosted Customer Base. Cayenta markets its hosted proprietary software
applications and implementation services both to existing customers and to new
customers of its software applications as they replace or upgrade systems or
increase their e-business or e-government activities. We believe Cayenta's
hosted proprietary software applications and implementation services will allow
it to establish stronger relationships with customers, provide a recurring
revenue stream and enable it to sell additional services.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

13

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Competition.  
The  information  technology  services  business is  intensely  competitive  and subject to rapid  technological
change. Cayenta expects the competition to continue and intensify. Cayenta's competitors include:

| |  | information technology service providers, such as Accenture, Answerthink, Inc., KPMG Consulting, Inc., Sapient
Consulting and Tanning Technology Corporation; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | software product companies, such as CommercialWare, Inc., Datastream Systems, Inc., ORCOM Solutions, Inc., Peace SW,
MRO Software, Ecometry Corporation, SCT Technologies, and Yantra Corporation.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In
comparison with Cayenta, many of its competitors are larger, have more brand
recognition and have substantially greater financial infrastructure, personnel,
and marketing resources. Existing or future competitors may independently
develop and patent or copyright technologies that are superior or substantially
similar to Cayenta's technologies. The costs to develop and to provide
information technology services are relatively low. Moreover, barriers to entry,
particularly in the areas of information technology consulting and integrating
software applications, are low. Therefore, Cayenta will likely continue to face
additional competition from new entrants into its industry. Cayenta believes
that the primary competitive factors for its business include client value and
service, the experience, technical knowledge and creative skills of personnel
delivering solutions and services, and the success and reliability of the
delivered solutions and services.

SureBeam (Discontinued October 16, 2001)

Overview.
  SureBeam is a leading provider of electronic irradiation systems and services
for the food industry. SureBeam's patented electronic food irradiation
system combines its conveyor and shielding systems, proprietary software and
electron beam and x-ray linear accelerator technology, developed from technology
we developed under contracts with the federal government related to strategic
defense initiatives during the 1980s. SureBeam intends to generate revenue from
processing food using its electronic food irradiation system as well as from the
sale of its systems. SureBeam has designed its systems so that it can install a
system as part of a customer's production line and plans to retain
ownership and operate any systems that it does install within customers'
production lines. SureBeam also  operates company owned service centers.
SureBeam may also sell systems to third parties who would own and operate
service centers in the United States or internationally. SureBeam generally
structures these sale transactions so that it can participate in the potential
future value created through the use of the systems that it sold. Typically,
SureBeam obtains a right to acquire a minority equity interest in the entity
that owns and operates the system. SureBeam has provided and may in the future
provide limited working capital or project financing in connection with these
third party service centers.

Emerging Technologies and Businesses

Overview.  
In Emerging Technologies and Businesses, we leverage our intellectual property
portfolio to create commercial technology applications or individual businesses
from technologies primarily developed from government-sponsored research and
development programs. We include in Emerging Technologies and Businesses at any
given time those commercial technology applications and individual businesses
that we have not at that point developed into separate operating segments.

For
the year ended December 31, 2001, Emerging Technologies and Businesses had
revenues of approximately $62.0 million, which represented 5.5% of our
consolidated revenues.

The
following are examples of some of the technology-based businesses and investments that are
currently included in our Emerging Technologies segment.

14

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| | e-tenna's core technologies and expertise were acquired as part of our acquisition of
Atlantic Aerospace Electronics Corporation during 1999 and then further
developed by us. We have chosen to utilize external equity financing to help
fund the development of this business and have retained an investment in this company.
As a result, e-tenna's results are not consolidated with our results of operations. e-tenna is developing antennas and radio
frequency systems based on electromagnetic technology that it expects will
establish new performance standards for the next generation of radio frequency
technology. The key features of the technology are that it suppresses undesired
radio frequency currents, thereby isolating the antenna from influences that
could degrade performance. It also improves signal strength by causing power to
radiate away from the device or equipment in which the technology is being used.
e-tenna is currently focused on creating products for the mobile device market
where their technology has the potential to significantly reduce the size,
increase the functionality, improve the performance, and decrease the cost of
wireless equipment. Another key benefit of e-tenna's technology is the
isolation property that allows multi-frequency devices such as phones, PDAs, and
laptops to function efficiently and without significant interference.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | LinCom
Wireless's core technologies and expertise were acquired as part of our
acquisition of LinCom during 2000 and then further developed by us. LinCom
Wireless is a fabless semiconductor company focused on commercializing wireless
networking chipsets that will enable wireless connectivity among local area
networks, personal area networks, and home area networks. LinCom Wireless's initial
products are based on the dominant wireless local area networking standards
known as 802.11. LinCom Wireless has developed an 802.11b baseband chipset for
3Com and has been working on the development of an 802.11a chipset for more than
a year. LinCom Wireless's next product will be a combination 802.11a/802.11b product
which will bridge the gap between the dominant wireless lan standard today,
802.11b, and the next generation, higher speed, 802.11a. The development of this
chipset is scheduled to be completed by the fourth quarter of 2002.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Titan
Scan Technologies' core technologies and expertise were developed by us
from our government contracts business. Titan Scan Technologies sells medical
equipment sterilization systems and provides medical equipment sterilization
services, which utilize the electron beam process that SureBeam uses for food
irradiation. Titan Scan Technologies' medical equipment sterilization
systems are currently used in the medical device production 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 Scan Technologies is currently building a system for Isotron in the United
Kingdom. Titan Scan Technologies also offers contract sterilization services for
medical product manufacturers at facilities that it owns in San Diego, Denver,
Colorado and Lima, Ohio.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | AverCom's core technologies and expertise were acquired as part of our acquisition of
AverStar during 2000 and then further developed by us. AverCom provides
information technology consulting services for customers in the financial
services and insurance industries. AverCom's information technology
consulting services include implementing and supporting software applications
for these customers, integrating implemented software applications with these
customers' existing software applications and systems, and integrating
these customers' web sites with their software applications and systems to
support their e-business activities.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Competition.  
Because it is attempting to commercialize a number of diverse technologies and
products, Emerging Technologies and Businesses effectively competes in many
areas. Other companies are engaged in significant research and development
activities in these areas, either on their own or in collaboration with others.
Some of these companies have greater financial and personnel resources, and more
experience in these specific areas than we do. We anticipate that Emerging
Technologies and Businesses will face increased competition in the future as new
companies enter these areas and additional and potentially more sophisticated
technologies become available.

15

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Government Contracts

A substantial portion of our revenues are dependent upon continued
funding of United States and allied government agencies, as well as continued funding of the programs
targeted by our businesses. Our revenues from U.S. government business represented approximately 84% of
our total revenues for the year ended December 31, 1999, approximately 76% of our total revenues
for the year ended December 31, 2000, and approximately 80% of our total revenues for the year ended
December 31, 2001. Any significant reductions in the funding of United States government agencies or
in the funding areas targeted by our businesses could materially and adversely affect our operating results
and hinder our ability to execute our commercialization strategy.

U.S.
government contracts are subject to termination for the convenience of the government, as well as termination, reduction or modification in the event of budgetary constraints or
any change in the government's requirements. When we subcontract with prime contractors, such subcontracts are also subject to the ability of the prime contractor to perform its obligations under its
prime contract. We often have little or no control over the resources allocated by the prime contractor to the prime contract, and any failure by the prime contractor to perform its obligations under
the prime contract
could result in our loss of our subcontract. In addition, our contract-related costs and fees, including allocated indirect costs, are subject to audits and adjustments by negotiation between us and
the U.S. government. As part of the audit process, the government audit agency verifies that all charges made by a contractor against a contract are legitimate and appropriate. Audits may result in
recalculation of contract revenues and non-reimbursement of some contract costs and fees. Any audits of our contract-related costs and fees could result in material adjustments to our
revenues. In addition, U.S. government contracts are conditioned upon the continuing availability of congressional appropriations. Congress usually appropriates funds on a fiscal year basis even
though contract performance may take several years. Consequently, at the outset of a major program, the contract is usually incrementally funded and additional funds are normally committed to the
contract by the procuring agency as Congress makes appropriations for future fiscal years. Any failure of such agencies to continue to fund such contracts could have a material adverse effect on our
operating results and hinder our ability to execute our commercialization strategy.

Our
business with the U.S. government and prime contractors is generally performed under cost reimbursement, fixed-price or time and materials contracts. Cost reimbursement contracts
for the government provide for reimbursement of costs plus the payment of a fee. Under fixed-price contracts, we agree to perform certain work for a fixed price. Under time and materials contracts, we
are reimbursed for labor hours at negotiated hourly billing rates and are reimbursed for travel and other direct expenses at actual costs plus applied general and administrative expense. The following
table gives the percentage of revenues realized by us from the three primary types of government contracts during the periods indicated.

|                   |  | Year Ended December 31, |  
|------------------ |  | ----------------------- | -
|
|Cost Reimbursement |  | 39.4                    | %
|Time and Materials |  | 41.4                    |  
|Fixed-Price        |  | 19.2                    |  
|                   |  |                         |  
|                   |  | 100.0                   | %
|                   |  |                         |  

16

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Backlog

Contracts undertaken
     by us may extend beyond one year. Accordingly, portions are carried forward
from one year to the next as part of backlog.  Because many  factors  affect the
scheduling  of projects,  no  assurance  can be given as to when revenue will be
realized on projects  included in our backlog.  Although  funded  backlog
represents  only business  which is  considered to be firm, we cannot  guarantee
that  cancellations or scope adjustments will not occur. The majority of funded backlog
represents contracts under the terms of which cancellation by the customer would
entitle  us to all or a  portion  of our  costs  incurred  and  potential  fees.

Many of our contracts
with the U.S.  government are funded by the procuring  agency from year to year,
primarily  based on its  fiscal  requirements.  This  results  in two  different
categories of U.S.  government  backlog:  funded and unfunded  backlog.  "Funded
backlog" consists of the aggregate  contract revenues  remaining to be earned by
us at a given time,  but only to the extent such amounts have been  appropriated
by Congress and  allocated to the contract by the procuring  government  agency.
"Unfunded  backlog"  consists of the aggregate  contract revenues expected to be
earned as our  customers  incrementally  allot  funding to  existing  contracts,
whether we are acting as a prime contractor or subcontractor,  and the aggregate
contract revenues to be funded on contracts which have been newly awarded to us.
Unfunded  backlog  includes  priced  options,  which  consist  of the  aggregate
contract revenues expected to be earned as a result of a customer  exercising an
option period that has been specifically defined in the original contract award.
"Backlog"  is the total of the  government  and  commercial  funded and unfunded
backlog.

Our
backlog consisted of the following approximate amounts as of the following dates:

|                                 |  | As of December 31,
|-------------------------------- |  | ------------------
|
|
|U.S. Government funded backlog   |  | $                 
|U.S. Government unfunded backlog |  |                   
|Commercial backlog               |  |                   
|                                 |  |                   
|Total backlog                    |  | $                 
|                                 |  |                   

We
expect to realize approximately 53% of our December 31, 2001 backlog by December 31, 2002.

Management  believes that
year-to-year comparisons of backlog are not necessarily indicative
of future  revenues.  The  actual  timing of  receipt of  revenues,  if any,  on
projects  included in backlog  could  change  because  many  factors  affect the
scheduling of projects.  In addition,  cancellations or adjustments to contracts
may occur.  Backlog is  typically  subject to large  variations  from quarter to
quarter  as  existing  contracts  are  renewed  or new  contracts  are  awarded.
Additionally,  all United  States  government  contracts  included  in  backlog,
whether or not funded, may be terminated at the convenience of the United States
government.

Manufacturing

We operate both fabrication and assembly facilities and also purchase certain components and assemblies from other suppliers. No one supplier accounts for a
significant portion of total purchases. In
limited cases, we obtain products from a sole supplier or a limited group of suppliers. Consequently, we risk disruptions in our supply of key products and components if these suppliers fail or are
unable to perform because of strikes, natural disasters, financial condition or other factors.

17

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Patents, Trademarks and Trade Secrets

Our   policy  is  to
     apply  for  patents  and other  appropriate  statutory  protection  when we
     develop new or improved  technology.  We  presently  hold over 100 U.S. and
     foreign issued  patents,  as well as a number of trademarks and copyrights.
     However,  we do not rely solely on these  statutory  protections to protect
     our technology  and  intellectual  property.  In addition to seeking patent
     protection for our  inventions,  we rely on the laws of unfair  competition
     and trade secrets to protect our unpatented  proprietary rights. We attempt
     to protect our trade secrets and other unpatented  proprietary  information
     through agreements with customers,  vendors, employees and consultants.  In
     addition,  various names used by us for our products and services have been
     registered with the United States Patent and Trademark Office.

SureBeam
     owns 11 of our U.S. and foreign issued  patents.  SureBeam also owns
38 patent  applications that are pending in the United States and abroad.
The U.S. and foreign issued  patents  relating to the SureBeam  technology  have
claims  relating to methods of transporting  products  through the electron beam
process,  means of increasing the efficiency and reliability of the process, and
ways of  shielding  the  process  that  miniaturizes  the  size  of the  system.
SureBeam's pending patent  applications  include claims relating to improvements
in the  operation,  efficiency,  and  reliability  of the  SureBeam  technology,
shielding,  multiple  pass x-ray system and in-line  processing  systems.  These
patents  will  expire over the period  from 2009 to  2021,  and have been
issued or are pending in markets that are key targets for  SureBeam's  expansion
objectives.  While  electron  beam,  x-ray and linear  accelerator  machines and
technology  are  considered to be part of the public domain and not  patentable,
SureBeam  believes  its patents  cover the most  efficient  method of  utilizing
electron  beam,  x-ray  and  linear  accelerator  technology  for food and other
applications.  Titan has purchased an exclusive  license from SureBeam to the
patented tchnology in all fields other than food, flowers and animal hides.

Third
parties could independently develop competing technology or design around our technology. If we are unable to successfully detect infringement and enforce our rights in our
technology, we may lose competitive position in the applicable market. We cannot be certain that our means of protecting our proprietary rights in the U.S. or abroad will be adequate or that competing
companies will not independently develop similar technology.

To
date we have not been notified that our technologies infringe the proprietary rights of any third parties, but third parties may, in the future, claim that our current or future
technologies infringe upon their proprietary rights. In addition, third parties have and may continue to challenge the validity or enforceability of our proprietary rights. Any such claim, whether
meritorious or not, could be time consuming, result in costly litigation, cause delays in our development of technologies and products, or require us to enter into royalty or licensing agreements.
Such royalty or licensing agreements may not be available on terms acceptable to us, or at all. As a result, any such claim could harm our business and prospects.

Research and Development

We maintain a staff of engineers, other
scientific professionals and support personnel engaged in development of new applications of technology
and improvement of existing products. These programs' costs are expensed as incurred. Titan-funded
research and development expenditures were $6.7 million in the year ended December 31, 1999,
$11.8 million in the year ended December 31, 2000 and $13.0 million in the year ended December 31, 2001.
A portion of our research and development activities during 2001 was customer-funded and as
such was paid for through contract revenues with an associated expense in operating expenses.
The majority of our customer-funded research and development activity is funded under contracts with the U.S. government.

Government and Environmental Regulations

We must comply with and are affected by various government regulations. These regulations affect how we and our customers can do business and, in some
instances, impose added costs to our businesses. Any changes in applicable laws could adversely affect the financial performance of the business affected by the changed regulations. Any failure to
comply with applicable laws could result in material fines and penalties or affect how we conduct our business in the future.

18

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We
are subject to environmental and safety laws and regulations governing the use, storage and disposal of hazardous substances or wastes and imposing liability for the cleanup of
contamination from these substances. We cannot completely eliminate the risk of contamination or injury from these substances or wastes, and, in the event of such an incident, we could be held liable
for any damages that result. From time to time, we have been notified of violations of government and environmental regulations. We attempt to correct these violations promptly without any material
impact on our operations. In addition, we may be required to incur significant additional costs to comply with environmental laws and regulations in the future. These costs, and any future violations
or liability under environmental laws or regulations, could have a material adverse effect on our business, financial condition and results of operations.

Titan
Wireless must comply with applicable laws and obtain the approval of the regulatory authorities of each foreign country in which it operates. The laws and regulatory
requirements relating to satellite communications and other wireless communications systems vary from country to country. Some countries have substantially deregulated satellite communications and
other wireless communications, while other countries maintain strict and often burdensome regulations. The procedure to obtain these regulatory approvals can be time-consuming and costly,
and the term of the approvals vary from different countries. In addition, in some countries there may be restrictions on the ability to interconnect satellite communications with ground-based
communications systems. Titan Wireless's sale of products outside the U.S. is also subject to compliance with the regulations of the U.S. Export Administration Regulations.

Employees

As of December 31, 2001, we employed approximately 9,650 employees,
most of whom were located in the United States. We currently are not subject to collective bargaining arrangements,
and we believe that our relationships with our employees are satisfactory.

Item 2.  Properties

Our operations' facilities occupy approximately 2,545,000
square feet of space located primarily throughout the United States. The large majority of the space is office space.
Substantially all of our facilities are leased. We describe our lease commitments in Note 9 to the accompanying
consolidated financial statements.

Item 3.  Legal Proceedings

On January 6, 2000, Ion Beam Applications
s.a., a Belgian corporation,  and some of its U.S. subsidiaries ("IBA") filed an
action for declaratory judgment in a federal court in Virginia against Titan and
the  SureBeam  Corporation  ("SureBeam")  relating  to  SureBeam's  patents  for
SureBeam  systems.  The action  attacked the validity of SureBeam's core patent,
sought a declaration  that IBA and its customers had not infringed any of the 62
claims in  SureBeam's  patent,  and alleged that Titan and  SureBeam  engaged in
unfair  competition  and that Titan and SureBeam's  conduct  constituted  patent
misuse.  The case was moved to the federal  court in San Diego.  On November 22,
2000,  IBA filed an amended  complaint  alleging,  in addition  to the  original
claims,  that Titan and SureBeam engaged in false  advertising,  monopolization,
restraint on trade and unfair business practices.

On  January  25,  2002,  Titan and  SureBeam  announced  that they  settled  the
litigation  with IBA. Under the  settlement,  IBA dropped all the claims it made
against Titan and SureBeam in the  litigation,  including IBA's challenge to the
validity and enforceability of SureBeam's core patent. Titan and SureBeam agreed
that IBA and its  customers  may  continue  to operate  or use IBA's  electronic
irradiation  facility in Bridgeport,  New Jersey.  The settlement terms include,
among other things, that IBA will purchase its requirements in the United States
for e-beam and x-ray systems for use for  processing  food and  sanitizing  mail
from Titan and SureBeam during the next four years,  provided Titan and SureBeam
offer  competitive  terms.  Titan and  SureBeam  also agreed to  purchase  their
requirements of  accelerators  with above 150 kilowatts of power from IBA during
the same four-year period, provided IBA offers competitive terms. Other terms of
the settlement agreement are immaterial and were not discloseable.

19

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In the ordinary course of business, defense contractors are subject to many levels
of audit and investigation by various government agencies. Further, we are subject
to claims and from time to time are named as defendants in legal proceedings. We may
also assert claims from time to time. In the opinion of management, the amount of
ultimate liability or recovery with respect to these actions will not materially affect
our financial position or results of operations taken as a whole.

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

No information is requied by Item 4.

20

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PART II

Item 5.  Market for the Company's Common Equity and Related Stockholder Matters

The Company's common stock and cumulative convertible preferred
stock are traded on the New York Stock Exchange (NYSE). As of March 22, 2002, there were
approximately 3,700 holders of record of the Company's common stock and 485 holders of
record of the Company's preferred stock, excluding beneficial owners of shares held in the names of
brokers or other nominees. The closing prices for the common and preferred stock on the NYSE as
of March 22, 2002, were $19.78 and $19.50, respectively. The quarterly market price ranges for
the Company's common and preferred stock on the NYSE in 2001 and 2000 were as follows:

Common Stock
Fiscal Quarter

2001

2000High

Low

High

LowFirst

$
25.49

$
15.75

$
60.50

$
32.50Second


25.15


13.20


55.50


25.31Third


22.48


16.24


44.56


15.38Fourth


29.01


17.82


21.81


11.13  Cumulative Convertible
Preferred StockFiscal Quarter

2001

2000High

Low

High

LowFirst

$
21.25

$
17.75

$
11.98

$
10.66Second


20.85


15.55


11.74


11.11Third


18.90


16.75


12.07


11.50Fourth


21.30


17.00


12.28


11.28


No dividends were paid on the Company's
common stock in 2001 or 2000. Regular quarterly dividends of $.25 per share were paid on the cumulative
convertible preferred stock in both years.

21

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Item 6.  Selected Financial Data (in thousands of dollars, except per share data)

|                                                                                                                                                                           |  | 2001 |           | 2000 |   | 1999      |   | 1998 |         | 1997 |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | ---- | - | --------- | - | ---- | ------- | ---- | -
|Operating Results:                                                                                                                                                         |  |      |           |      |   |           |   |      |         |      |  
|Revenues                                                                                                                                                                   |  | $    | 1,132,052 |      | $ | 1,008,003 |   | $    | 805,392 |      | $
|Income (loss) from continuing 
   operations before minority 
   interests, extraordinary loss and
   cumulative effect of change in
   accounting principle               |  |      | (21,024   | )    |   | (16,216   | ) |      | 43,533  |      |  
|Income (loss) from continuing operations
   before minority interests, extraordinary 
   loss and cumulative effect of change in
   accounting principle per common share: |  |      |           |      |   |           |   |      |         |      |  
|Basic                                                                                                                                                                      |  | $    | (.32      | )    | $ | (.30      | ) | $    | .91     |      | $
|Diluted                                                                                                                                                                    |  |      | (.32      | )    |   | (.30      | ) |      | .81     |      |  
|Financial Position:                                                                                                                                                        |  |      |           |      |   |           |   |      |         |      |  
|Cash, cash equivalents and investments                                                                                                                                     |  | $    | 28,957    |      | $ | 27,291    |   | $    | 13,469  |      | $
|Total assets                                                                                                                                                               |  |      | 1,358,698 |      |   | 951,107   |   |      | 628,040 |      |  
|Amounts outstanding under lines of    credit, long-term                                                                                                                    |  |      | 317,187   |      |   | 260,625   |   |      | 215,987 |      |  
|Other long-term debt                                                                                                                                                       |  |      | 5,612     |      |   | 38,265    |   |      | 14,802  |      |  
|Company obligated mandatory
   redeemable convertible preferred
   securities                                                                                              |  |      | 250,000   |      |   | 250,000   |   |      |        |      |  
|Redeemable preferred stock                                                                                                                                                 |  |      |          |      |   |          |   |      |        |      |  
|Stockholders' equity                                                                                                                                                       |  |      | 481,150   |      |   | 167,416   |   |      | 166,348 |      |  
|Preferred dividends                                                                                                                                                        |  |      | 690       |      |   | 692       |   |      | 695     |      |  

22

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Item 7.  Management's Discussion And Analysis Of Financial Condition And Results Of Operations

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

Overview and Outlook

We are a diversified technology company
whose business is to create, build and launch technology-based businesses
primarily from technologies developed for the government. For more than 20 years
we have been providing information systems solutions and services to the
Department of Defense (DoD) and intelligence agencies. Today, we are organized
into four segments, our core government business and our three commercial
businesses, (including our SureBeam business, which was discontinued on
October 16, 2001) that reflect the specific markets and industries in which
we operate and our Emerging Technologies and Businesses segment. On
October 16, 2001, Titan adopted a definitive plan to spin off SureBeam in
the form of a tax-free dividend to Titan shareholders within 12 months from that
date. The plan involves filing a letter ruling request with the Internal Revenue
Service seeking approval of the tax-free distribution. Titan has filed the
letter ruling request, and intends to execute the spin off as soon as practical
following the receipt of a favorable ruling and all required third party consents. Titan has historically reported the
SureBeam business as a separate segment. In accordance with Accounting
Principles Board Opinion No. 30, "Reporting the Results of
OperationsReporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions," the
consolidated financial statements of Titan for all periods presented have been
restated to reflect SureBeam as a discontinued operation.

|Segment                                                  |  | Segment Description                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Titan Systems                                            |  | Information technology and communications
      solutions, services and products for defense, intelligence, and other U.S.
      and allied government agencies                                                                                                                                                                                                                                                                                                       
|Titan Wireless                                           |  | Satellite-based and wireless-based
      communication services and systems which provide cost-effective voice,
      data and Internet services in developing countries                                                                                                                                                                                                                                                                                              
|Cayenta (included in our Software Systems
      segment) |  | Total services provider of information
      technology services and software product applications for its customers' business
      and governmental functions, including retailing, finance, accounting,
      customer billing and collection, contract management, supply chain
      management and equipment monitoring and maintenance primarily in four vertical markets:  
      utility/municipality, manufacturing and logistics, retail and transportation
|SureBeam
      (Discontinued)                            |  | Electronic food irradiation
      systems and services                                                                                                                                                                                                                                                                                                                                                                                                                
|Emerging Technologiesand
    Businesses                  |  | Development of commercial applications and
      businesses using technologies created by Titan. We currently have several
      new businesses in development, including businesses in which we have
      applied for patent protection for the underlying
      technology                                                                                                                                                                                         

23

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The results of operations shown for each
of our operating segments includes each of the segment's direct
costs of operations and administration. The segment performance is based upon
profit or loss before interest expense, income taxes and before allocated costs
of corporate overhead. Corporate overhead may include, among other things, costs
for financial, accounting, marketing, administrative and legal activities
incurred by Titan. Consequently, the results of operations of the segments may
not be indicative of the actual results that would be shown in the financial
statements of these segments if prepared on a stand-alone basis.

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

At December 31, 2001, we controlled
approximately 98% of the voting power and approximately 80% of the outstanding equity
ownership of SureBeam through our ownership of 46,774,235 shares of Class B
common stock. SureBeam completed its initial public offering of 6,700,000 shares
of its Class A common stock in March 2001. Upon completion of the
initial public offering of SureBeam, the number of shares owned by Titan
represented approximately 98% of the voting power of SureBeam. Each Class A
share is entitled to one vote and each Class B share is entitled to ten
votes, with Class A and Class B shares voting together on all matters
submitted to the vote of the holders of common stock. As of December 31,
2001, SureBeam had also reserved  approximately 7,731,210 shares of
Class A common stock under stock option and employee stock purchase plans.
On December 31, 2001, $2.0 million of SureBeam's promissory note payable to
Titan was exchanged for 190,385 Class B common shares of SureBeam, and on
February 13, 2002, the remaining $73.0 million of SureBeam's note payable to Titan was
exchanged for 4,441,496 Class A and 3,225,765 Class 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 power and
82% of the outstanding equity of SureBeam.

We control approximately 97% of the
voting power of Cayenta through our ownership of 10 million shares of
Class B common stock, which represents approximately 76% of Cayenta's
outstanding equity ownership. Each Class A share is entitled to one vote
and each Class B share is entitled to ten votes, with Class A and
Class B shares voting together on all matters submitted to the vote of the
holders of common stock. In addition to Class A and Class B common stock,
Cayenta has outstanding 2,345,000 shares of Series A preferred stock that
are convertible into its Class A common stock and warrants for approximately 496,000
shares of its Class A common stock that have a weighted average exercise
price of $13.11 per share. As of December 31, 2001, Cayenta had also
reserved approximately 31% of its fully diluted common stock under stock option
plans.

- Titan Systems

Titan Systems provides and is expected
to continue to provide the largest percentage of our consolidated revenues.
During the year ended December 31, 2001, Titan Systems had total revenues of
$919.0 million, which represented 81% of our consolidated revenues for the
period. Titan Systems' revenues have grown internally and through our
well-defined strategy of increasing our core competencies and expanding our
customer base through acquiring government information technology companies as
part of the general trend of the defense and government information technology industry consolidation.

Titan Systems' backlog, including both
funded and unfunded backlog, was approximately $2.8 billion at December 31, 2001.
Although funded backlog represents only business which is considered to be firm, we
cannot guarantee that cancellations or scope adjustments will not occur. "Funded backlog" consists of the aggregate
contract revenue remaining to be earned by us at a  given time, but only to the extent such amounts
have been appropriated by Congress and allocated to the contract by the procuring government agency.
"Unfunded backlog" consists of the aggregate contract revenues expected to be earned as our customers
incrementally allot funding to existing contracts, whether we are acting as a prime contractor or subcontractor,
and the aggregate contract revenues to be  funded on contracts
which have been newly awarded to us. Unfunded backlog includes priced options, which consist of the
aggregate contract revenues expected to be earned as a result of a customer exercising an option
period that has been specifically defined in the original contract award.  "Backlog" is the total
of the government and commercial funded and unfunded backlog. The determination of unfunded
backlog involves substantial estimation, particularly with respect to customer requirements
and contracts. These estimates are based 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 value will be realized as
contract revenue or earnings.

24

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Titan Systems' operating margin is
affected by the mix of contract types (cost reimbursement, fixed-price or time
and materials) as well as by the mix of prime contracts versus subcontracts.
Significant portions of Titan Systems' contracts are time and materials and cost reimbursement
contracts. Titan Systems is reimbursed for labor hours at negotiated hourly billing rates
and other direct expenses under time and materials contracts and reimbursed for all actual costs, plus a
fee, or profit, under cost plus fixed fee contracts. The financial risks under these contracts generally are lower
than those associated with other types of contracts, and margins are also
typically lower. The U.S. government also has awarded Titan Systems fixed-price
contracts. Such contracts carry higher financial risks because Titan Systems
must deliver the contracted services at a cost below the fixed price in order to
earn a profit. Of Titan Systems' total revenues from government business in
2001, approximately 43.1% were generated by time and materials contracts,
approximately 40.9% were generated by cost reimbursement contracts, and
approximately 16.0% were generated by fixed price contracts.

On March 23, 2001, our
subsidiary, Titan Systems Corporation, consummated an agreement to purchase
certain assets from Maxwell Technologies Systems Division, Inc., a
subsidiary of Maxwell Technologies, Inc., which specializes in research,
development and technical services primarily for military applications. The
purchase price was approximately $11.5 million in cash, subject to
post-closing adjustments and indemnification obligations, less a
$1.7 million holdback, due 180 days from the date of closing. The
initial $9.8 million of the purchase price was paid on April 2, 2001.
We received approximately $0.6 million in July 2001 from
Maxwell Technologies, Inc. resulting from the resolution of post-closing working
capital adjustments. Under the agreement, we had full recourse to the
seller for all accounts receivable not collected within 180 days of the closing
date. In October 2001, we paid approximately $1.5 million in full
satisfaction of the $1.7 million holdback, as adjusted for uncollected accounts
receivable. The transaction was accounted for as a purchase, and the excess of
the purchase price over 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 is reflected as goodwill in
the accompanying consolidated balance sheet.

On September 28, 2001, we
completed the acquisition of the remaining shares of Datron Systems Incorporated
("Datron"), a provider of radio and satellite-based communication systems and
broadband communication products for government and commercial markets, that
were acquired through a stock for stock exchange tender offer that closed in
August 2001. We issued approximately 2.3 million shares of Titan common stock
for all the outstanding shares of Datron common stock and assumed Datron stock
options representing approximately 437,000 shares of Titan common stock, based
on an exchange ratio of approximately .81919 shares of Titan common stock for
each share of Datron common stock. The transaction was accounted for as a
purchase, and the excess of the purchase price over the estimated fair market
value of the net assets acquired was recorded as goodwill of $22.5
million and intangible assets of $5.6 million.
In connection with the determination of the fair value of assets acquired and pursuant to the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations," we have valued
contracts in process at contract price, minus the estimated costs to complete and
an allowance for the normal industry profit on its effort to complete such
contracts which amounted to $1.4 million. This deferred profit has been reflected in
the accompanying consolidated balance sheet as an increase to goodwill. We recognized approximately $0.8
million in the year ended December 31, 2001, as a reduction of costs, with the
remaining $0.6 million to be recorded as a reduction of costs in future periods
as work on certain contracts is performed, which is estimated to be through
fiscal 2002.

On November 27, 2001, we
completed the acquisition of BTG, Inc. ("BTG"), a provider of information
technology solutions and services primarily to the U.S. military and other
government agencies, for $13.35 per BTG share. We issued approximately
4,024,100 shares of Titan common stock and paid cash of $23.4 million for all the
outstanding shares of BTG common stock and assumed BTG stock options
representing approximately 734,200 shares of Titan common stock, based on an
exchange ratio of approximately 0.5380 shares of Titan stock for each share of
BTG common stock. We also paid off $37.1 million of BTG's outstanding debt as
of the closing date. The transaction was accounted for as a purchase, and the
excess of purchase price over the estimated fair value of the net assets
acquired was recorded as goodwill of $126.6 million and intangible assets of
$9.8 million. In connection with the determination of the fair value of assets
acquired and pursuant to the provisions of SFAS No. 141, we have
valued contracts in process at contract price, minus the
estimated costs to complete and an allowance for the normal industry profit on
its effort to complete such contracts, which amounted to $9.2 million. This
adjustment has been reflected in the accompanying consolidated balance sheet as an increase
to goodwill and a corresponding offset to unbilled receivables. The Company
recognized approximately $0.5 million in the year ended December 31, 2001, as a
reduction of costs, with the remaining $8.7 million to be recorded as a
reduction of costs in future periods as work on certain contracts is performed,
which is estimated to continue through fiscal 2016.

25

---

During 2000, we consummated a merger
with Advanced Communication Systems, Inc., or ACS, in a stock-for-stock, pooling
of interests transaction. ACS provides communications, information systems and
aerospace services and solutions primarily to U.S. government agencies. We
issued approximately 5,082,000 shares of common stock for all the
outstanding shares of ACS, and assumed ACS stock options representing
approximately 263,000 shares of our common stock. ACS's operations are
included in Titan Systems.

Also during 2000, we consummated a
merger with AverStar, Inc., or AverStar, in a stock-for-stock, pooling of
interests transaction. AverStar provides services and software focused on the
areas of information technology assurance, information technology development
and information technology management and operations for the mission-critical
systems of civilian and defense agencies of the U.S.
government. We issued approximately 2,850,000 shares of common stock for all the
outstanding shares of AverStar common stock, and assumed AverStar stock options
representing approximately 551,000 shares of our common stock. AverStar's
operations are primarily included in Titan Systems, with its AverCom business
being reported in the Emerging Technologies and Businesses segment.

Also during 2000, we acquired Pulse
Engineering (Pulse), LinCom Corporation (LinCom) and SenCom Corporation (SenCom)
in transactions that were accounted for as purchases. The excess of our purchase
price for these entities over the estimated fair market value of the net assets
acquired, which was being amortized on a straight line basis over 30 years, was
approximately $75.1 million at December 31, 2001, and is reflected as Goodwill in
the accompanying consolidated balance sheet.

We describe our acquisitions
in Note 2 to our consolidated financial statements. For all acquisitions
accounted for as purchases, the acquired companys' results of operations are consolidated
with the Company's results of operations immediately subsequent to the acquisition date.

- Titan Wireless

Titan Wireless has historically
generated most of its revenues by supplying communications systems and products
and providing related integration services in developing countries. Titan
Wireless is increasingly generating revenues from providing communications services over its global communications network.
While the majority of service revenues are currently being generated from long distance carriers that use our network to carry their
long distance communications traffic to and from developing countries, service revenues are starting
to be generated from retail customers in developing countries. In the retail business,
Titan Wireless installs an on-site antenna at businesses that use its fixed wireless systems
for local and/or long distance communications services. The cost of that antenna
and its installation is paid for either by Titan Wireless or its customers,
depending on the terms of the business arrangement. Titan Wireless derived
approximately 51% of its revenues during 2001 from providing communications
services to long distance carriers.

Titan Wireless's wholly-owned
subsidiary, Titan Africa, Inc., completed work on a satellite-based
communications system for Benin's national telephone company during 2001.
Revenues for Titan Wireless for 2001 included revenues of approximately
$27.4 million from the Benin project. Titan Wireless, the prime contractor
for the project, was contracted to build, install and operate several important components
of the government's communications infrastructure including a global system for
mobile communications, or GSM, cellular network, rural telephony network, fiber
optic backbone, and local telephone switching equipment. Alcatel of France is a
major subcontractor to Titan Wireless on this project, with responsibility for
installing, among other parts of the project, the GSM cellular network. During
2001, the original project was expanded to include an additional 35,000 GSM
lines, and expansion of the capacity and capability of the VSAT sites by a multiple
of 10 times more lines per site, resulting in an overall increase 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
will co-operate the system with the national telephone company of Benin until
all equipment costs, including integration costs, have been paid for via the
revenues generated from the system and then transfer the operations to the
national telephone company of Benin. A portion of the build-out costs under this
contract were subcontracted costs payable by Titan Wireless to Alcatel. The
terms of Titan Wireless's agreement with the customer include, among other
things, a revenue sharing of total net receipts on this project for up to a
maximum period of 9 years, depending upon when the equipment has been paid
for.

26

---

Titan Wireless recognizes revenue on
systems integration contracts on a percentage-of-completion basis. Service
revenues are recognized as the related services are performed.

In 1999, Titan Wireless formed Sakon LLC
with Sakon Corporation to provide carrier, direct dial telephony and enhanced
communications services, including voice over Internet protocol and Internet
services, in certain developing countries. Titan Wireless holds a 49.9% equity
interest in Sakon LLC. The excess of the purchase price over the estimated fair
market value of assets acquired was approximately $26.8 million at December 31,
2001, and is reflected as goodwill in our accompanying consolidated balance sheet.

In June 2000, Titan Wireless
Africa, a wholly-owned subsidiary of Titan Wireless, made an investment in
Ivoire Telecom S.A. Holding (Ivoire Telecom), acquiring an 80% interest in
Ivoire Telecom and through such interest acquired a majority equity interest in each of its subsidiaries which own
communications licenses covering a number of developing countries in
Africa. The investment of approximately $50.0 million is included in the
accompanying consolidated balance sheet in Other Assets, and is accounted for under the cost
method. This investment furthers Titan Wireless's strategic objective
in the continent of Africa and supports our Titan Wireless business
initiative in the areas of long distance communication services. A key component
included in this strategy is to promote increased teledensity and increased
mobile and broadband services availability in Africa, which we believe will generate increased demand for our long distance
services. We believe that this strategic investment helps advance our
overall goal of being a leading provider of long distance in emerging
markets. While financial returns are not our primary goal, we believe this
strategic investment will provide both strategic benefits as well as financial returns.

- Cayenta (included in our Software Systems segment)

Cayenta has historically derived its
revenues from consulting services and from sales of its proprietary software
applications. For the year ended December 31, 2001, Cayenta's revenues from
consulting services represented 71.1% of its revenues and revenues from
sales of its software applications and hosting revenues represented 28.9% of its
revenues. Cayenta provides its services primarily on a fixed-time, fixed-price
basis and on a time and materials basis. Under its fixed-time, fixed-price
contracts, Cayenta recognizes revenues on a percentage-of-completion basis.
Cayenta's fixed-time, fixed-price contracts usually require an advance payment
from its customer with additional payments due on achievement of specific
milestones or on a predetermined schedule. Revenues earned but not yet billed
are recorded as unbilled receivables. Under its time and materials contracts,
Cayenta is paid at an agreed upon hourly rate for the actual time spent on a
customer's projects, and revenues are recorded at the time services are
performed. Cayenta recognizes revenues from the sale of its proprietary software
when the software is delivered and accepted, in accordance with the American
Institute of Certified Public Accountants' Statement of Position 97-2, "Software
Revenue Recognition." The related software support and maintenance is billed at
the beginning of the maintenance period, recognized ratably over the term of the
applicable contract and recorded as deferred revenues until recognized. Cayenta
has historically derived a significant portion of its revenues from a limited
number of customers, and we expect that it will continue to do so during 2002.
During 2002, Cayenta intends to continue
to reduce its selling, general and administrative expenses as a percentage of
revenues.

Historically, Cayenta's interest expense
has related to borrowings from us to fund its acquisitions and working capital
requirements. As of December 31, 2001, Cayenta owed approximately $107.9
million to us under a promissory note on which interest accrues at the greater
of the rate of 10% per annum or our effective weighted average 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 senior
credit facility as of December 31, 2001 was 5.0%.

- SureBeam (Discontinued)

We developed our SureBeam electron beam
process from technology developed under contracts with the federal government
related to strategic defense initiatives during the 1980s. In August 2000,
SureBeam Corporation was formed and we contributed to it specified assets,
liabilities and operations related to our electronic food irradiation business.
In the fourth quarter of 2000, we formed a new business unit, Titan Scan
Technologies, within our Emerging Technologies and Businesses segment. The new
business unit encompasses all of our medical product sterilization operations
which were previously a part of SureBeam. As a result, all prior period data
have been restated to reflect this change in our segment reporting.

27

---

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

- Emerging Technologies and Businesses

Emerging Technologies and Businesses
pursues commercial applications for technologies originally developed by Titan.
This segment's operating activities consist primarily of various early stage or
developing commercial businesses in which we hold equity interests, including,
in some cases, less than 20% equity interests. The businesses included in Emerging Technologies and Businesses
may change over time as we develop new commercial applications and transition
those applications into businesses in which we hold a minority or controlling
equity interest that becomes included in Emerging Technologies and Businesses.
The businesses included in Emerging Technologies and Businesses also change over
time when we designate businesses that had been historically included in that
segment as stand-alone operating segments and as a result report their results
of operations separately or when we sell or spin-off businesses that have
previously been included. We also may move businesses that had been historically
included in a different operating segment into Emerging Technologies and
Businesses when we consider it appropriate to include those businesses' results
of operations in Emerging Technologies and Businesses.

Examples of businesses currently included in our
Emerging Technologies and Businesses segment are LinCom Wireless and Titan Scan Technologies, which are both
subsidiaries of Titan. LinCom Wireless is a fabless semiconductor company focused on standards-based solutions
for wireless connectivity of voice, data, and video in the enterprise and home environments, whose core
technologies and expertise were acquired as part of our acquisition of LinCom during 2000 and then further
developed by us. Titan Scan Technologies sells medical equipment sterilization systems and provides medical
equipment sterilization services, which utilize the electron beam process that SureBeam uses for food irradiation.
Following the outbreak of anthrax in several major cities in the US, Titan Scan Technologies became known for
its efforts to sanitize the mail to remove this bioterrorism threat from treated mail and parcels. In addition to contracting for use of
Titan Scan's facility for mail sanitization, the Postal Service also signed a contract with Titan for the
purchase of eight mail sanitization systems. Titan Scan has also begun to enter markets for electron beam
technology outside of its traditional medical device customer base, including the use of electron beam
technology to improve material performance in semiconductors, aerospace composites, wire and cable,
plastics and packaging films.

In 1996, we contributed the core
technology to form Servnow! NetTechnologies, Inc., which later became known
as IPivot. In October 1999, as a result of the acquisition by Intel
Corporation of IPivot, we received approximately $41.8 million for our
approximate 8% equity interest, which was reported as a gain in 1999. We
received an additional $3 million in October 2000 as final
consideration for our equity interest, which was recorded as a gain in 2000, net of expenses.

28

---

During 2000, AverStar, prior to our
acquiring AverStar, acquired MJR Associates, Inc. or MJR, a provider of
information technology staffing solutions to major corporations, through a stock
purchase for a purchase price of $9.6 million plus contingent consideration of
up to $3.75 million based upon the company's performance during 2000. The
$3.75 million in contingent consideration was paid in April 2001. MJR's
operations are included in Emerging Technologies and Businesses as part of our
AverCom business. The excess of our purchase price for MJR over the estimated
fair market value of the assets acquired, including the contingent
consideration, which has been amortized on a straight line basis over 20 years, was
approximately $11.2 million as of December 31, 2001, and is reflected as Goodwill in
the accompanying consolidated balance sheet.

In June 2000, e-tenna Corporation was
formed to facilitate the transfer of an antenna technology originally designed
for government and military customers to the commercial wireless market. Titan's
initial investment of approximately $0.6 million in e-tenna in 2000 consisted of its
contribution of certain intellectual property and patents. As of December 31, 2001, Archery
Capital and other investors invested a total of $9.9 million for common and voting preferred stock,
and Titan invested $5.8 million in non-voting preferred stock and $0.4 million in common stock. Through February 28, 2002,
Titan paid $1.9 million in satisfaction of its commitment to acquire additional non-voting preferred stock.
As of December 31, 2001, Titan's investment of approximately $6.8 million is included in the
accompanying consolidated balance sheet in Other Assets, and is reflected under the cost
method. As of February 28, 2002, Titan's investment in e-tenna represented approximately 58.7% of
the total equity of e-tenna and approximately 29.1% of the voting power of e-tenna.

Deferred Compensation

We and each of our SureBeam and Cayenta
subsidiaries have recorded deferred compensation as follows:

Titan.Option grants to our employees in 1999 exceeded the remaining
common shares available under our stock option plans. Our stockholders approved
our 2000 Employee and Director Stock Option and Incentive Plan on May 30,
2000. The option grants in 1999 that were in excess of the shares
available under our stock option plans at the time of their grant were placed
under the 2000 stock option plan following its approval by our stockholders.
Under the provisions of Financial Accounting Standards Board Interpretation
No. 44 "Accounting for Certain Transactions Involving Stock Compensation"
(an Interpretation of APB Opinion No. 25), the approval date for the 2000 stock
option plan becomes the grant date for purposes of comparing the market value of
the shares covered by those option grants against those options' exercise price.
This resulted in deferred compensation of $15.6 million in 2000. The
deferred compensation is being amortized to expense over the four-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 of December 31, 2001, was $6.3 million.

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

29

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Cayenta.Under its variable stock option plan, Cayenta has granted
options to certain employees who have agreed to resell shares purchased with
those options to Cayenta. Cayenta recorded a deferred compensation charge
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 this
buyback option at exercise prices that were less than the deemed fair market
value of the underlying common shares on the date of grant. Cayenta has
recognized deferred compensation relating to these grants of approximately $1.2
million and is amortizing this deferred charge to expense over the four-year
vesting period of these options.

Consolidated Financial
Data

|                                                                 |  | Year Ended
      December 31, |          
|---------------------------------------------------------------- |  | ----------------------------- | ---------
|
|Revenues                                                         |  | $                             | 1,132,052
|Cost of revenues                                                 |  |                               | 844,859  
|Selling, general and administrative                              |  |                               | 223,805  
|Research and development                                         |  |                               | 13,039   
|Acquisition and integration related charges and
    other        |  |                               | 36,768   
|                                                                 |  |                               |          
|Operating profit                                                 |  |                               | 13,581   
|Interest expense, net                                            |  |                               | 34,952   
|Income tax provision (benefit)                                   |  |                               | (347     
|Minority interests                                               |  |                               | 6,826    
|Loss from discontinued operations,
    net                       |  |                               | (84,416  
|Extraordinary loss from early extinguishments
      of debt, net |  |                               |         
|                                                                 |  |                               |          
|Net income (loss)                                                |  | $                             | (98,614  
|                                                                 |  |                               |          

As a Percentage of Revenues

|                                                                 |  | Year Ended
      December 31, |   
|---------------------------------------------------------------- |  | ----------------------------- | --
|
|Revenues                                                         |  | 100.0                         | % 
|Cost of revenues                                                 |  | 74.6                          |   
|Selling, general and administrative                              |  | 19.8                          |   
|Research and development                                         |  | 1.2                           |   
|Acquisition and integration related charges and
    other        |  | 3.2                           |   
|                                                                 |  |                               |   
|Operating profit                                                 |  | 1.2                           |   
|Interest expense, net                                            |  | 3.1                           |   
|Income tax provision (benefit)                                   |  | (0.0                          | ) 
|Minority interests                                               |  | 0.6                           |   
|Loss from discontinued operations,
    net                       |  | (7.4                          | ) 
|Extraordinary loss from early extinguishments
      of debt, net |  |                              |   
|                                                                 |  |                               |   
|Net income (loss)                                                |  | (8.7                          | )%
|                                                                 |  |                               |   

30

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Segment Financial Data

|                                           |  | Year Ended
      December 31, |          
|------------------------------------------ |  | ----------------------------- | ---------
|
|Titan Systems                              |  |                               |          
|Revenues                                   |  | $                             | 918,978  
|Operating profit                           |  |                               | 63,564   
|Titan Wireless                             |  |                               |          
|Revenues                                   |  |                               | 92,748   
|Operating profit                           |  |                               | 5,219    
|Software Systems (Cayenta)                 |  |                               |          
|Revenues                                   |  |                               | 58,283   
|Operating profit
      (loss)              |  |                               | (37,438  
|Emerging Technologies and
      Businesses |  |                               |          
|Revenues                                   |  |                               | 62,043   
|Operating profit                           |  |                               | 1,190    
|Corporate                                  |  |                               | (18,954  
|                                           |  |                               |          
|Total Revenues                             |  | $                             | 1,132,052
|Total Operating Profit                     |  | $                             | 13,581   

|                                                          |  | Year Ended
      December 31, |  
|--------------------------------------------------------- |  | ----------------------------- | -
|
|                                                          |  |                               |  
|Segment Revenues as a Percentage of Total
      Revenues: |  |                               |  
|Titan Systems                                             |  | 81.2                          | %
|Titan Wireless                                            |  | 8.2                           |  
|Software Systems (Cayenta)                                |  | 5.1                           |  
|Emerging Technologies and
Businesses                      |  | 5.5                           |  
|                                                          |  |                               |  
|                                                          |  | 100.0                         | %
|                                                          |  |                               |  

On October 1, 2000, we formed a new
business unit, Titan Scan Technologies, within our Emerging Technologies and
Businesses segment. The new business unit encompasses all of our medical
equipment sterilization operations, which were previously a part of SureBeam, and prior to the initial public offering of SureBeam, was reported as part of the results of operations of the SureBeam segment.
Accordingly, our discontinued SureBeam business is comprised entirely of our
electronic food irradiation business. The financial information included in this
document has been restated to reflect this change in our segment
accounting.

The 2000 and 2001 results of operations
presented for our Software Systems segment include only the results of
operations of our Cayenta subsidiary. Prior to 2000, the results of operations
presented for our Software Systems segment include the results of
operations for our Year 2000 business as well as, following its formation, our
Cayenta subsidiary.

On October 16, 2001,
Titan adopted a definitive plan to spin off SureBeam in the form of a tax-free
dividend to Titan shareholders within the next 12 months from that date. The
plan involves filing a letter ruling request with the Internal Revenue Service
("IRS") seeking approval of the tax-free distribution. Titan filed the letter
ruling request and intends to execute the spin off as soon
as practical following the receipt of a favorable ruling and all required third party consents. Titan has historically
reported the SureBeam business as a separate segment. In accordance with
Accounting Principles Board Opinion No. 30, "Reporting the Results of
OperationsReporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions," the
consolidated financial statements of Titan have been restated to reflect
SureBeam as a discontinued business for all periods presented.

31

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Results of Operations

Fiscal Years Ended December 31, 1999, 2000 and
2001

Revenues

Consolidated.
Our consolidated revenues increased from $805.4 million
in 1999 to $1.0 billion in 2000 and from $1.0 billion in 2000 to $1.1 billion in
2001. Increased revenues of $122.8 million, $11.3 million, and $9.1 million were
reported across our Titan Systems, Titan Wireless and Emerging Technologies and
Businesses segments, respectively in 2001. Revenue growth in 2001 was primarily
attributable to internal revenue growth in certain of our information and intelligence solutions
and logistics management businesses in our Titan Systems segment, as well as to
a lesser extent, the impact of the acquisitions of Datron Systems, Inc.
("Datron") and BTG, Inc. ("BTG") made in 2001 in our Titan Systems segment, and
to a lesser degree increased service revenues generated by Titan's consolidated
joint venture, Sakon LLC ("Sakon") in our Titan Wireless segment and revenues
generated on Titan's new contract with the United States Postal Service (USPS)
to provide mail sanitization systems in our Emerging Technologies and Businesses
segment. These increases were partially offset by reduced revenues in Cayenta,
resulting from slower corporate spending on commercial information technology services.

Revenue growth in 2000 was in part attributable to the impact of the
acquisitions of SenCom Corporation ("SenCom"), Pulse Engineering ("Pulse") and
LinCom Corporation ("LinCom") made in 2000 in our Titan Systems segment, the
acquisitions of JB Systems, Inc. doing business as Mainsaver, Assist Cornerstone
Technologies, Inc. ("Assist") and SFG Technologies, Inc. ("SFG") made in the
fourth quarter of 1999 by Cayenta and other new business in our Software Systems
(which includes Cayenta) segment, and continued shipments of hardware to our
customer in Benin, Africa in our Titan Wireless segment, in which we built a
telecommunications system for the national telephone company.

Titan
Systems. Titan Systems' revenues increased
from $689.5 million in 1999 to $796.2 million in 2000 and from $796.2 million in
2000 to $919.0 million in 2001. The increase in 2001 reflects strong demand from
the Air Force for information solutions support, and from the Army for
acquisition and logistics management, systems engineering for intelligence agencies, software test and
evaluation, and a variety of other technical services, as well as assisting the Navy in transformation initiatives,
coupled with the impact
of the acquisitions of Datron and BTG in the last half of 2001. The increase in
2000 reflects the impact of the acquisitions of SenCom, Pulse and LinCom, as
well as the acquisitions of System Resources Corporation ("SRC") and Atlantic
Aerospace Electronics Corporation ("AAEC") made in mid 1999. In addition, to a
lesser degree, 2000 revenues were impacted by increased production of Titan
Systems' compact infantry signal intercept systems and increased demand for signal processing antennas, as well
as increased demand for systems design and integration services from the Air
Force, Army and intelligence community.

Titan
Wireless. Titan Wireless' revenues increased
from $27.3 million in 1999 to $81.4 million in 2000 and from $81.4 million in
2000 to $92.7 million in 2001. Increased service revenues in 2001 of $17.5 million
generated by Titan's consolidated joint venture, Sakon, in Latin America,
Africa, and the Middle East, and increased revenues of $17.2 million in new international
business, primarily in certain countries in Africa, were offset by reduced revenues of approximately $23.4 million on
Titan Wireless' project in Benin to build a telecommunications system for its
customer, The Office of Post and Telecommunication of Benin ("OPT"), as Titan
Wireless completed the system during 2001. The revenues in 2001 recorded on this
project are a result of the expansion of the original project to include:
increased GSM lines, expansion of the capacity and capability of the VSAT sites
and an overall increase of lines in the country of Benin. The increase in 2000
revenues was due primarily to Titan Wireless's contract with the OPT, and, to a
lesser extent, the increased services revenues generated by Titan's consolidated
joint venture, Sakon LLC, in Latin America, Africa, and the Middle
East.

32

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Software Systems
(including Cayenta). Software Systems'
revenues increased from $45.9 million in 1999 to $77.4 million in 2000 and
decreased from $77.4 million in 2000 to $58.3 million in 2001. The decrease in
2001 was driven by slower corporate spending on commercial information
technology services and e-business software applications, which resulted in
reduced demand for Cayenta's services and products. The increase in 2000 was
primarily driven by software license revenues from e-commerce, asset management
and revenue cycle management applications principally generated by the companies
acquired by Cayenta in the fourth quarter of 1999, as well as by growth in
Cayenta's enterprise application business, including new work on an
international systems integration project which contributed approximately $9
million. Revenues from one federal agency accounted for approximately $8.5
million, $5.8 million and $16.2 million of Software Systems' revenues during
1999, 2000 and 2001, respectively.

Emerging Technologies
and Businesses. Emerging Technologies'
revenues increased from $42.6 million in 1999 to $52.9 million in 2000 and from
$52.9 million in 2000 to $62.0 million in 2001. The increase in 2001 is related
to revenues of approximately $16.4 million generated on Titan's new contract
with the U.S. Postal Service to provide mail sanitization systems, partially
offset by reduced revenues resulting from reduced demand in our AverCom
business, which was affected by slower corporate spending on commercial
information technology services similar to Cayenta, and reduced demand in our
digitized fingerprint business. The increase in 2000 was principally a result of
the acquisitions of MJR and LinCom Wireless, a part of LinCom, in March 2000.

Selling, General and Administrative

Our SG&A expenses
increased from $131.0 million in 1999 to $202.1 million in 2000 and from $202.1
million in 2000 to $223.8 million in 2001. SG&A, as a percentage of
revenues, increased from 16.3% in 1999 to 20.1% in 2000 and decreased from 20.1%
in 2000 to 19.8% in 2001. The decrease in 2001 was due in part to reduced
goodwill amortization from $27.5 million in 2000 to $26.6 million in 2001 and
reduced deferred compensation from $5.5 million in 2000 to $4.3 million in 2001.
Excluding the goodwill amortization and deferred compensation, SG&A
increased slightly from 16.8% in 2000 to 17.0% in 2001, reflecting increases in bid and proposal
activity in our Titan Systems segment as well as increased infrastructure costs in our Titan Wireless segment. The increase in 2000 is
due to increased goodwill amortization of $19.0 million, as well as an increase
in deferred compensation of $5.5 million. Excluding the impact of the
amortization and deferred compensation, SG&A increased from 15.2% in 1999 to
16.8% in 2000.

Research and Development

Our R&D expenses
increased from $6.7 million in 1999 to $11.8 million in 2000 and from $11.8
million in 2000 to $13.0 million in 2001. The increased R&D expenditures in
2001 were primarily related to development of software reprogrammable modems and
network control software in our Titan Systems segment. The increased R&D
expenditures in 2000 were principally incurred in our Software Systems segment
to web enable and to develop added features and functionality for certain of our
software applications within Cayenta, and to a lesser degree, to develop the
next generation Xpress Connection product within our Titan Wireless segment.

Acquisition and Integration Related Charges and Other

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

December 31,2001
    
    2000
    
    1999Employee termination costs
    
    $
    8.6
    
    $
    7.6
    
    $
    3.1Elimination of duplicate facilities and assets
    
    
    4.6
    
    
    4.1
    
    
    3.4Acquisition related transaction costs
    
    
    
    
    
    11.6
    
    
    Other costs
    
    
    1.8
    
    
    2.7
    
    
    Non-cash asset impairments
    
    
    18.8
    
    
    15.5
    
    
    2.1Pre-acquisition contingencies
    
    
    3.0
    
    
    
    
    
    4.5Net cash proceeds on sale of investment
    
    
    
    
    
    (2.1
    )
    
    (41.8
    )$
    36.8
    
    $
    39.4
    
    $
    (28.7
    )


At December 31, 2001, a total of $1.3 million of liabilities remained on the accompanying consolidated balance sheet in Other
Accrued Liabilities, related primarily to restructuring activities initiated in 2000 and 2001.  We anticipate
that the remaining liabilities will be paid in 2002.

33

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Fiscal 2001 Charges

Acquisition and
integration related charges and other of $36.8 million in 2001 were comprised of
costs of $12.2 million related to the integration of ACS and AverStar, and a
realignment of business around the major categories of customers of Titan
Systems, which together resulted in personnel reductions and the closing of
several facilities. Included in these costs is approximately $3.1 million of
employee termination costs, $3.5 million of costs to eliminate
duplicate and excess facilities and assets, $1.1 million of duplicate personnel
costs to transition processes and functions, and $1.5 million of asset
impairment costs of certain asset balances for which the recoverability of such
balances was impaired due to the exit of a satellite services business within
the Titan Systems segment. Approximately $3.0 million of the charge was related
to another subsidiary acquired in a prior year for contingencies arising from
matters pre-existing to Titan's acquisition of the business. That acquisition
was accounted for as a purchase, and those matters have been resolved in 2001.

Included in
acquisition and integration related charges and other is $21.3 million related
to the restructuring of Cayenta (which is included in our Software Systems
segment). As a result of reduced corporate spending on corporate information
technology services and e-business software applications, we developed
and approved a plan to restructure the Cayenta business, which included a
reduction in workforce, resulting in a charge of approximately $2.9 million and
the elimination of duplicate and excess facilities, resulting in a charge of
approximately $1.1 million. As a result of management's evaluation of the
recoverability of all the assets of Cayenta, in accordance with Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of", management
concluded from this evaluation that a significant impairment of intangible as
well as long-lived assets had occurred. An impairment charge was required
because the estimated fair value was less than the carrying value of the assets.
The impairment charge of $17.3 million was comprised of the following: $5.9
million for fixed assets associated with Cayenta's network operations center,
$1.9 million for capitalized software designed for B2B exchanges, $2.0 million
for prepaid advertising costs, $2.0 million for accounts receivable and $5.3
million for Cayenta's investment in Soliance, LLC, a joint venture that markets
and delivers information technology systems and solutions to the utility
industry, and $0.2 million for certain other assets.

Also included in the
acquisition and integration related charges and other is a charge of $0.5
million of employee termination costs and $2.0 million of restructuring costs
incurred in the Titan Wireless segment related to certain organizational changes
within that business unit and the elimination of the internal product
development group, including $1.3 million of employee termination costs.
In addition, employee termination costs of $0.8 million were
recorded in the Emerging Technologies and Businesses segment related to a
reduction in workforce in AverCom resulting from the same economic conditions
which impacted demand for corporate information technology services at
Cayenta.

Fiscal 2000 Charges

Acquisition related
charges of $39.4 million in 2000 include costs of $30.5 million related to the
ACS merger including direct transaction costs of approximately $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 of
approximately $5.5 million related to the impairment of certain receivables, for
which the realizability of such assets were 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, $3.8
million of costs to eliminate duplicate facilities and assets and a valuation
allowance of $10.0 million against certain contract receivables provided in
connection with certain of the Company's integration activities, particularly as
they relate to conforming ACS to Titan's accounting policies and procedures, and
determining appropriate valuation allowances against potential contract
receivables which may not be realizable under normal contract reimbursement
cycles.

34

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Included in acquisition
related charges is $8.3 million related to the merger with AverStar. These costs
consisted of approximately $2.5 million of direct transaction costs,
approximately $5.5 million of employee termination costs, and
costs to eliminate duplicate facilities of approximately $0.3 million. The
acquisition related charges in the year ended December 31, 2000 also include
$2.7 million of transaction costs related to the filing of a registration
statement with the Securities and Exchange Commission (SEC) for the initial
public offering of Cayenta which was subsequently withdrawn by the Company in
February 2001. These costs are primarily comprised of direct transaction costs,
including accounting, legal, investment banker, financial printing, and other
direct costs. Also included in acquisition related charges is a net $2.1 million
gain resulting from the final consideration from the sale of the Company's
approximate 8% equity interest in IPivot, which was sold in October of 1999.

Fiscal 1999 Charges

Acquisition and related
charges in 1999 were $13.1 million, which included approximately $4.5 million of
legal costs and approximately $8.6 million of integration and restructuring
expenses. The integration and restructuring expenses include $2.1 million
related to the wind-down of our Year 2000 business, consisting primarily of
employee termination costs and lease termination costs, a $2.1 million write-off
of intangible costs to estimated realizable value, approximately $1.0 million
for severance, outplacement and relocation costs related to approximately 31
employees across the Company, and $3.4 million related to the closure and
elimination of leased facilities, primarily duplicate field offices.

On October 26, 1999, the
Company received approximately $41.8 million in cash as a result of the
acquisition by Intel Corporation of IPivot, Inc. ("IPivot"), a technology
spin-off from Titan. The cash payment to the Company was for its ownership
interest in IPivot of approximately 8% after the dilutive impact of IPivot stock
options, warrants and other equity investments. In addition, approximately $3
million was received in October 2000 as final consideration. The income is
netted against the charges discussed above in acquisition related charges and
other for the 1999 and 2000 amounts received.

Operating Profit

Consolidated. Our
operating profit decreased from $87.7 million in 1999 to $12.5 million in 2000
and increased from $12.5 million in 2000 to $13.6 million in 2001. Our operating
profits have been significantly impacted by a number of factors in each of 1999,
2000 and 2001. The 2001 operating results include the integration related
charges and other of $36.8 million noted above, the 2000 operating results
include the net acquisition charge of $39.4 million noted above, and the 1999
operating results include a net credit of $28.7 million, reflecting a $41.8
million gain we realized on the sale of our minority ownership interest in
IPivot, net of $13.1 million of acquisition, integration, and reorganization
costs. In addition, the decrease in operating profit from 1999 to 2000 was
impacted by the increase in goodwill amortization from $8.6 million in 1999 to
$27.5 million in 2000, as well as the $5.5 million in deferred compensation in
2000, up from $0 in 1999. Amortization of goodwill and deferred compensation
were $26.6 million and $4.3 million, respectively, in 2001. Excluding the impact of the acquisition related
charges, amortization of goodwill and the deferred compensation, operating
profit increased from $67.5 million in 1999 to $84.9 million in 2000 and
decreased from $84.9 million in 2000 to $81.3 million in 2001.

Segment Operating
Profit. Operating profit reported by business segment includes substantially
all of the segment's costs of operations and administration. The segment
performance is based upon profit or loss before interest expense, income taxes
and before allocated costs of corporate overhead. Corporate overhead may
include, among other things, costs for financial accounting, marketing,
administrative and legal activities incurred by Titan. Consequently, the results
of operations of the segments may not be indicative of the actual results that
would be shown in the financial statements of these segments if prepared on a
stand-alone basis. The discussion of segment operating profit below includes
only the operating profits for each of our business segments, and does not
include separate discussion of our corporate overhead.

35

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Titan Systems.
Titan Systems' operating profit decreased from $43.5 million in 1999 to $28.5
million in 2000 and increased from $28.5 million in 2000 to $63.6 million in
2001. The operating results for 1999, 2000 and 2001 include acquisition and
integration related charges and other of $5.5 million, $38.8 million, and $12.2
million, respectively. The 2001 integration related charges were related to the
continued integration of ACS and AverStar, and a realignment of businesses
around the major categories of customers of Titan Systems, which together
resulted in personnel reductions and the closing of several facilities. The 2000
acquisition related charges were incurred to consummate the ACS and AverStar
acquisitions, as well as for certain activities to integrate these businesses
into Titan Systems. The 1999 acquisition related costs were primarily comprised
of costs to eliminate duplicate facilities, estimated costs to integrate and
consolidate employee benefit plans and employee termination costs. Included in
1999, 2000 and 2001 operating results is amortization of goodwill of $7.9
million, $9.6 million and $9.7 million, respectively. Excluding the impact of
these charges and the amortization of goodwill, Titan Systems' operating income
increased from $56.9 million in 1999 to $76.9 million in 2000 and from $76.9
million in 2000 to $85.5 million in 2001. Operating income in 2000 and 2001
increased primarily due to the increased revenue volume discussed previously.

Titan Wireless. Titan Wireless' operating performance increased from operating profit of $5.1
million in 1999 to $11.6 million in 2000 and decreased from $11.6 million in
2000 to $5.2 million in 2001. Included in the 2001 operating results is
amortization of goodwill of $1.5 million as well as a charge of $2.5 million,
comprised of $2.0 million of restructuring costs related to the elimination of
the internal product development group and $0.5 million for employee termination
costs. The 2000 operating results include amortization of goodwill of
approximately $0.5 million. Excluding the impact of these charges and the
amortization of goodwill, operating profit increased from $5.1 million in 1999
to $12.1 million in 2000 and decreased from $12.1 million in 2000 to $9.2
million in 2001. The reduced operating profit in 2001 was a result of increased
investment in the development of Titan Wireless' corporate retail business and
new very small aperture terminal ("VSAT") development costs.

Software Systems
(including Cayenta). Software Systems' operating profit decreased from $7.0
million in 1999 to an operating loss of $18.0 million in 2000 and from an
operating loss of $18.0 million in 2000 to an operating loss of $37.4 million in
2001. Included in the 2001 operating results is a charge of $21.3 million for
restructuring costs of Cayenta which reflected the Company's plan to restructure
Cayenta to respond to reduced corporate spending on commercial information
technology services and e-business software applications described previously.
Included in the 2000 operating results is a $2.7 million charge reflecting the
direct transaction costs related to the withdrawn registration statement for
Cayenta. Included in the 1999 operating results is a $2.1 million charge related
to reorganization and restructuring costs we incurred primarily during the
fourth quarter to restructure and wind-down our Year 2000 business unit.
Employee termination costs, facilities costs and lease termination costs
comprised a substantial portion of this charge. Included in 1999, 2000 and 2001
operating results is a deferred compensation charge of $0, $0.6 million and $0.4
million, respectively, and goodwill amortization of $0.6 million, $16.9 million
and $14.1 million in 1999, 2000, and 2001, respectively. Excluding the impact of
charges noted previously, the deferred compensation charge and the amortization
of goodwill, Software Systems' operating profit decreased from $9.7 million in
1999 to $2.1 million in 2000 and from $2.1 million in 2000 to an operating loss
of $1.6 million in 2001. The decline is a result of the decrease in revenues,
particularly due to the reduced demand of the higher margin software
applications business.

Emerging Technologies
and Businesses. Emerging Technologies' operating results decreased from
operating profit of $46.6 million in 1999 to $6.7 million in 2000 and decreased
from $6.7 million in 2000 to $1.2 million in 2001. Included in the 2001
operating results is a charge of $0.8 million related to restructuring
activities at AverCom, primarily employee termination benefits resulting from
decreased demand for services provided by AverCom, which has also been affected by economic conditions
and changes in the commercial information technology services market. Included
in the operating results of 1999 and 2000 is a $41.8 million gain and a net $2.1
million gain, respectively, resulting from the sale of the Company's approximate
8% equity interest in IPivot. The Company sold its interest in IPivot in October
1999, for which the final consideration was paid in October 2000. Included in
operating results for 2000 and 2001 is amortization of goodwill of $0.6 million
and $1.2 million, respectively. Excluding the amortization of goodwill and the
gains from IPivot, net of an approximate $0.2 million charge for reorganization
costs in 2000, and the restructuring costs of AverCom in 2001, operating profit
increased from $4.8 million in 1999 to $5.2 million in 2000 and decreased from
$5.2 million in 2000 to $3.2 million in 2001. The primary causes for the
decrease in operating profit in 2001 were the decreased demand at AverCom and
increased development expenditures in our LinCom Wireless business, partially
offset by operating profit generated from Titan's contract with the USPS to
provide mail sanitization systems.

36

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Interest Expense, Net

Our net interest expense
increased from $17.4 million in 1999 to $32.4 million in 2000 and from $32.4
million in 2000 to $35.0 million in 2001. Net interest expense has increased
over 1999, 2000 and 2001, primarily as a direct result of the increased level of
our borrowings, to primarily fund the growth in the various segments, and to
fund the acquisitions made in our Titan Systems segment during 1999, 2000 and
2001 and in our Software Systems segment during 1999. Our increased effective
interest rate in 2000 also resulted in increased interest expense in 2000. In
addition, net interest expense in 2000 increased due to the issuance of our
Remarketable Term Income Deferrable Equity Securities or HIGH TIDES. Borrowings
from our primary bank lines of credit, excluding working capital lines from
acquired companies, averaged $88.8 million at a weighted average interest rate
of 7.9% during 1999, $196.9 million at a weighted average interest rate of 10.5%
during 2000 and $337.3 million at a weighted average interest rate of 7.5%
during 2001. Also included in interest expense is interest on our deferred
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.

Income Taxes

Consolidated income taxes
reflect effective rates of a provision rate of 38% in 1999 and a benefit rate of
19% and 2% in 2000 and 2001, respectively. The reduced rate for the tax benefit
in 2000 and 2001 is primarily due to significant non-deductible expenses which
were recorded for financial reporting purposes, which resulted in a reduced
benefit rate for the net loss reported.

Net Income (Loss)

We reported 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 in 2001. Included in net income (loss) for 1999, 2000 and 2001 are
net losses from discontinued operations of $5.8 million, $1.9 million and $84.4
million, respectively. The discontinued operations in these years include SureBeam, and
to a lesser degree, our access control systems business and the
disposal of our commercial information security and assurance business, as well
as operations discontinued by certain of the companies acquired by us during
2000. Included in the net loss for 2000 is an extraordinary loss of $4.7
million, net of tax, related to the early extinguishments of AverStar's credit
facility in the second quarter of 2000 and our credit facility with Scotia Bank
in the first quarter of 2000. Also included in the 2000 and 2001 net loss is
goodwill amortization of $27.5 million and $26.6 million, respectively, a
deferred compensation charge of $5.5 million and $4.3 million, respectively, and
acquisition and integration related charges and other of $39.4 million and $36.8
million, respectively. Also included in the 1999 net income is a net acquisition
related credit of $28.7 million, and goodwill amortization of $8.6
million.

37

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Liquidity and Capital Resources

We have used our cash and cash
equivalents principally to fund acquisitions and investments, capital expenses
and working capital. We fund our cash requirements principally from borrowings from under our senior credit facility, proceeds
from the sale of our securities, and to a lesser degree, from cash flows
from our core government operations. Net cash flow from our continuing operations
used $23.9 million, primarily resulting from an increase in accounts receivable
balances of $69.7 million, with the most notable increases in our Titan
Wireless and Titan Systems segments.

Our investing activities used cash of
$144.4 million in 2001, primarily to finance acquisitions of $90.4 million and
equity and other investments of $24.1 million, and to fund capital expenditures
of $24.8 million, with the most significant capital expenditures in our Titan
Wireless segment to develop its retail fixed wireless service business. Our financing
activities provided cash of $174.2 million, reflecting increased
borrowings of $66.9 million on our credit facility as well as the net proceeds of
$136.2 million from the sale of our common stock in a public offering, net of a
reduction of debt of approximately $38.3 million, primarily reflecting our pay-off of BTG's
existing debt at the time of acquisition. The exercise of Titan stock options also provided $11.4 million.

On February 23, 2000, we entered into a
credit agreement for $275 million of financing from a syndicate of commercial banks. The credit
facility also allowed us to increase total availability by an additional $100 million, if needed,
for an aggregate of $375 million. The credit facility was subsequently amended on June 1, 2000 to
provide for an increase in total availability for an additional $50 million, for an aggregate
total of $425 million. The proceeds of the loan were used in part to refinance outstanding
indebtedness on our $190 million credit facility arranged by Bank of Nova Soctia in June 1999.
The credit facility is secured by substantially all of our and our subsidiaries' assets and
guaranteed by substantially all of our subsidiaries, other than, in each case, SureBeam and
our foreign operations. SureBeam ceased being a guarantor and having its assets pledged as
collateral for the credit facility following the completion of its initial public offering on
March 16, 2001. The $425 million credit facility is comprised of a six-year senior secured
multi-draw term loan facility in an aggregate principal amount of up to $75 million, two
seven-year senior secured term loan facilities in an aggregate principal amount of $250
million, and a five-year senior secured revolving credit facility in a aggregate principal amount
of up to $100 million. Loans made under the multi-draw term loan facility mature on the sixth
anniversary of the closing date of the credit facility, and amortize beginning in the credit
facility's second year, which began with the quarter ended June 30, 2001 and ends with the
quarter ending March 31, 2002, as follows:  2.5% quarterly in the third and fourth
quarters of year two of the credit facility, 3.75% quarterly in year three of the credit
facility, 5% quarterly in year four of the credit facility, 6.25% quarterly in year five of
the credit facility, 7.5% quarterly in the first and second quarters of year six of the credit
facility and 10% in the third quarter of year six of the credit facility and on the sixth
anniversary of the closing date of the credit facility. Loans made under the term loan facilities
mature on the seventh anniversary of the closing date of the credit facility, and began amortizing
in the credit facility's first year, which began with the quarter ended June 30, 2000 and ended
with the quarter ended March 31, 2001, with the following amortization schedule:  0.25%
quarterly for years one through six of the credit facility and 23.5% quarterly for the first three
quarters of year seven of the credit facility and on the seventh anniversary of the closing date of
the credit facility. Under each of the term loan facilities and the revolving facility, we have
the option to borrow at the bank's base rate or at adjusted LIBOR plus, in each case, an applicable
ratio based on the ratio of our total debt to EBITDA, or earnings before interest and taxes and
depreciation and amortization. The agreement contains financial covenants that set maximum debt
to EBITDA limits and require us to maintain minimum interest and fixed charge coverages and
levels of net worth.

At December 31, 2001, total borrowings
outstanding under our credit facility were $330.0 million at a weighted average
interest rate of 5.0%. Commitments under letters of credit were $13.9 million at
December 31, 2001, $9.1 million of which reduce availability of our working
capital line, resulting in $75.9 million of availability on our working capital line at December 31, 2001.
Of the total borrowings, $12.8 million was short-term.

38

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On December 10, 1999, our
wholly owned subsidiary, Titan Africa, Inc. ("Titan Africa"), in connection with
its contract to build a satellite-based telephone system for its customer, the
national telephone company of Benin, Africa, entered into a Loan Facility
agreement for up to 30.0 billion Francs CFA (the currency of the African
Financial Community), equivalent to approximately $45.0 million U.S. dollars,
with a syndicate of five banks, with Africa Merchant Bank as the arranger. This
medium term financing is a non-recourse loan to Titan Africa which is guaranteed
by the national telephone company of Benin, Africa and secured by the national
telephone company's equipment and revenues related to the project. The facility
has a fixed interest rate of 9.5% and will be repaid in seven equal semi-annual
payments from the net receipts of this project, or by the OPT in the event that
such receipts are not adequate to make these payments, which commenced on
December 31, 2000 and were scheduled to end on December 31, 2003. The borrowings on this facility
have been utilized to fund the subcontractor costs incurred by Alcatel of
France, a major subcontractor to this project. The non-Alcatel equipment
provided by Titan Africa was financed through arrangement with the OPT whereby
Titan Africa would be paid in seven equal semi-annual installments, which
commenced on December 31, 2000. Due to the approximate six to nine month delay
in the delivery of the system, which was impacted by the expansion of the
original project to include increased GSM lines, increased capacity and
capability of the VSAT sites and an overall increase in lines in Benin, the
Africa Merchant Bank and Titan Africa have collectively agreed to extend the due
date of the semi-annual principal payments until such time as the service revenues have
achieved certain levels, which is anticipated to occur in mid to late 2002. The
terms of Titan Africa's agreement with the customer include, among other things,
a revenue sharing of total net receipts earned on this project for up to a
period of 9 years depending upon when the equipment has been paid for. As of
December 31, 2001, approximately $42.5 million was drawn on this facility, and
has been used to reduce the related receivable balance due from the OPT related to subcontract costs. In October 2000,
we collected an $18 million receivable from an African group related to the
sale of a portion of our economic interest, net of all fixed equipment payments,
in the revenue sharing of this project. As of December 31, 2001, the outstanding
receivable balance due on this contract was approximately $50.7 million. Management
believes that the appropriate insurance policies are in place to cover risk related
to loss of equipment in certain foreign countries.

In relation to our investment in Ivoire
Telecom, we provided equipment
with an approximate aggregate value of $4.5 million and we committed to provide up to a maximum of $35 million for capital
expenditures to build out the Ivoire Telecom network. At December 31, 2001, this maximum
commitment has been substantially funded, resulting in an investment balance of
approximately $50.0 million, which includes our initial equity investment of approximately
$10.5 million and equipment we provided. Our investment is reflected in Other Assets in the accompanying consolidated balance
sheet. In addition, in connection with our agreement to acquire an additional
30.0% equity interest in Sakon, an additional $12.5 million of consideration was
due and payable upon certain revenue targets being attained. These targets were
met in January 2001, and a $5.0 million installment was made in the second
quarter 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 by issuance of Titan common
stock later in 2002.

There are no Titan guarantees of debt, either directly or
indirectly, associated with Ivoire Telecom or Sakon or any  other unconsolidated subsidiaries other
than approximately $2.0 million of equipment financing.

As part of our strategy of seeking
external financing to grow our commercial businesses, our discontinued SureBeam subsidiary
completed its initial public offering of its common stock on March 16, 2001 and
raised gross proceeds of $67 million. We extended a credit facility for up to a
maximum of $75.0 million under which SureBeam owed us approximately $73.0
million as of December 31, 2001. On December 31, 2001, $2.0 million of the note
was exchanged for common stock of SureBeam, at $10.505, the fifteen day trading
average of SureBeam stock as of December 30, 2001, which resulted in the
exchange for 190,385 Class B common shares of SureBeam. As of December 31,
2001, SureBeam had approximately $73.0 million in principal outstanding under
the note. On February 13, 2002, the remaining outstanding balance on the note of
$73.0 million was exchanged for equity of SureBeam, at $9.521 per share, the
twenty day trading average of SureBeam stock as of February 12, 2002, which
resulted in the exchange for 4,441,496 Class A and 3,225,765 Class B common
shares of SureBeam.

39

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On October 16, 2001, Titan adopted a
definitive plan to spin off SureBeam in the form of a tax-free dividend to Titan
stockholders within 12 months from that date. The plan involves filing a letter
ruling request with the Internal Revenue Service seeking approval of the
tax-free distribution. Titan has filed the letter ruling request, and intends to
execute the spin off as soon as practical following the receipt of a favorable ruling and all required third party consents.
Titan has purchased a world-wide perpetual and exclusive, non-royalty bearing license to
use SureBeam's intellectual property for all applications and fields other than
the food, animal hide and flower markets for the following consideration: 1) a $50 million senior secured line of credit,
with customary financial, affirmative and negative covenants, 2) the exchange of the
 $75 million debt owed by SureBeam to Titan for additional shares of
Class B and Class A common stock of SureBeam, and 3) a cash payment of $8
million, with $4 million paid at September 30, 2001 and
four installments of $1.0 million payable
on each of March 31, 2002, June 30,
2002, September 30, 2002 and December 31, 2002. The Company has obtained approval from
its senior lenders to extend $25 million of this credit facility, and expects to obtain
the consent of its lenders for the remaining $25 million prior to the spin-off of SureBeam.
In addition, Titan and SureBeam are negotiating other customary
agreements in connection with the planned spin off of SureBeam.

On July 26, 2001 we sold
8,048,685 shares of our common stock in a public offering, which included an
over-allotment of 1,125,000 shares, at a price of $18.00 per share. We
received approximate aggregate proceeds from the offering of $137.6 million, net
of underwriters' commissions, in July 2001. Transaction expenses
related to the offering were approximately $1.4 million. We used the net proceeds from this offering to fund
acquisitions, capital expenditures and other investments.  In addition, certain
Titan stockholders sold 576,315 shares, including 489,972 shares from the
exercise of options, from which we received proceeds of $3.0 million.

Funding for the advancement of our
strategic goals, including acquisitions and continued investment in targeted
commercial businesses and start-up ventures and capital expenditures, is
expected to continue. We plan to finance these requirements from a combination
of sources, 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 expected to be generated from our operations will be sufficient to
fund planned investments and working capital requirements for at least the next
twelve months. However, we could elect, or we could be required, to raise
additional funds during that period and we may need to raise additional capital
in the future. Additional capital may not be available at all, or may not be
available on terms favorable to us. Any additional issuance of equity or
equity-linked securities may result in substantial dilution to our stockholders.
Management is continually monitoring and reevaluating its level of investment in
all of its operations, specifically the investment required in fiscal 2002 to
further grow its commercial businesses, and the financing sources available to
achieve our goals in each business area.

Long-Term Debt and Other Commitments

Our contractual cash obligations as of
December 31, 2001, including principal maturities of long-term debt and other commitments, were as follows,
excluding contingent obligations and interest:

2002


2003


2004


2005


2006


Thereafter


Total(in thousands)Long-term debt:   Senior credit facility

$
12,813

$
16,562

$
20,313

$
280,312

$


$


$
330,000Other


1,413


948


963


416


540


2,745


7,025HIGH TIDES (1)

















250,000


250,000Other commitments:   Operating leases


37,296


28,940


21,118


18,163


16,185


39,155


160,857Capital leases


527


393


249


473


15


1


1,658Investment in e-tenna


1,914

















1,914SureBeam license 
      agreement


4,000

















4,000Total contractual cash   obligations

$
57,963

$
46,843

$
42,643

$
299,364

$
16,740

$
291,901

$
755,454


(1)  The HIGH TIDES has a remarketing
feature beginning approximately five years after the date of issuance, at which
time we may elect to refinance or retire the HIGH TIDES. See Note 8 to the
accompanying consolidated financial statements.

40

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Critical Accounting Policies

Use of Estimates

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

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

Our accounts receivable balances include
unbilled receivables which are comprised of work-in-process which will be billed
in accordance with contract terms and delivery schedules, as well as amounts
billable upon final execution of contracts, contract completion, milestones or
completion of rate negotiations. Payments to us for performance on certain of
our U.S. Government contracts are subject to audit by the DCAA,
and are subject to government funding. We provide a reserve against our
receivables for estimated losses that may result from rate negotiations, audit
adjustments, and/or government funding availability. To the extent that actual
adjustments due to rate negotiations, audit adjustments, or government funding
availability differ from our estimates, our provisions for doubtful accounts may be
impacted. Due to a high degree of diversification in our government business,
where any one contract accounts for no more than 2 percent of Titan Systems'
annual revenues, the likelihood of a material loss to Titan on an uncollectible account from this activity
is not probable.

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

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

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

41

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Valuation of deferred income
taxes.   Valuation allowances are established, when necessary, to
reduce deferred tax assets to the amount expected to be realized. The likelihood
of a material change in our expected realization of these assets is dependent on
future taxable income, our ability to deduct tax loss carryforwards against
future taxable income, the effectiveness of our tax planning and strategies
among the various tax jurisdictions that we operate in, and any significant
changes in the tax treatment received on our business combinations.

Estimated losses from discontinued
operations.   We provided for an accrual for the estimated loss on
our discontinued SureBeam business based upon management's estimates of the
estimated operating losses to be incurred by SureBeam from the date we adopted
our plan to spin off SureBeam on October 16, 2001, through October 16, 2002,
as well as estimated spin-off related costs. To the extent that the actual
operating losses incurred by SureBeam differ from the estimates we used to
calculate our estimated loss on disposal and to the extent that the estimated
spin-off costs differ from the actual costs we incur, the loss from discontinued
operations may change.

Revenue recognition.  
We recognize a portion of our revenue using the percentage-of-completion method,
which includes revenues recognized as units are delivered, in accordance with
Statement of Position 81-1. Total estimated costs are based on management's
assessment of costs to complete the project based upon evaluation of the level
of work achieved and costs expended to date. To the extent that our estimated
costs materially change, our revenues recorded under such contracts could
materially be affected and could have a material adverse effect on our operations in the future periods.
In 2001, approximately 16.0% of Titan Systems' revenues were
generated by fixed price contracts, which are generally recognized using the
percentage-of-completion method. The remaining 84.0% of Titans Systems' revenues in 2001
were generated by cost plus fixed fee contracts and time and material contracts,
for which percentage-of-completion is not used, and revenues are generally recognized as work is performed
and billed to the customer.

Accounting for business combinations.   Since February of 2000, we have acquired two companies (ACS and
AverStar), that have been accounted for under the pooling of interests method of
accounting. To qualify for the pooling of interests method, criteria relating to
the attributes of the combining companies prior to the combination, the manner
of combining the companies and the absence of certain planned transactions after
the combination must be met. Under the pooling of interests method, the value of
the assets and liabilities of the combined companies are carried forward at
their recorded amounts and the reported income for all periods prior to the
combination are combined and restated as if the combination had occurred at the
beginning of the period presented.

If the criteria for pooling of interests
accounting treatment are not met, then the purchase method of accounting would
have been applied. Under the purchase method of accounting, all assets and
liabilities acquired are recorded at their fair values at the date of the
acquisition and results of operations are included in the consolidated financial
statements from the date of acquisition. Accounting for these two acquisitions
under the purchase method of accounting would have resulted in materially
different reported results.

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

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

42

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Risks Relating to Our Business

Titan is committed to creating, building and launching
technology-based commercial businesses primarily from technologies developed for the government. As part
of implementing this strategy, Titan has developed the three commercial businesses known as SureBeam, Titan Wireless and
Cayenta, and is in the process of developing and commercializing the technology applications and businesses in
Titan's Emerging Technologies and Businesses segment. If the market for irradiation technology for non-food applications fails to develop or Titan Wireless
or Cayenta fail to develop and grow as Titan anticipates, or Titan
Wireless's and/or Cayenta's principal products and services do not gain market acceptance, Titan's revenues will
be less than Titan expects and Titan may be unable to recoup the equity investments and intercompany advances
Titan has made to develop and grow those businesses. To grow as currently contemplated, Titan may need to
derive an increasing portion of its revenues from its commercial businesses, including the businesses in Titan's
Emerging Technologies and Businesses segment. If the markets for some or all of the businesses in Titan's
Emerging Technologies and Businesses segment fail to develop and grow as expected, or those markets do develop
and grow as expected but those businesses' principal products and services do not meet with market acceptance,
Titan's future prospects may suffer. If any of Titan's businesses fail to grow as Titan anticipates, it may not
be able to monetize these businesses and enable its stockholders to realize value from that process.

Titan Wireless

Titan Wireless's principal strategy is to provide communications services and systems to developing
countries primarily in Asia, Africa, the Middle East, Central Asia and Latin America. Titan Wireless's future success will
depend substantially on the rate and the extent to which the markets for communications services and systems
develop in the developing countries that it targets. Titan cannot guarantee that substantial markets for
communications services and systems in these developing countries will ever develop, or if those markets do
develop, that Titan Wireless will be able to capture a
significant portion of those markets. The development of a market for communications services and systems in a
particular developing country will depend upon a variety of factors including whether that country has sufficient
resources to support such a market and whether the communications services and systems are offered at an
affordable cost to their end users so that adequate traffic can be generated. In certain countries, the
competition to provide services may become increasingly competitive which could adversely affect revenue growth
and margins.

Cayenta

Cayenta's  market is  characterized  by fluctuating  demand for its products and services based on overall
economic  conditions  and their  impact on  government  and  corporate  information  technology  budgets as well as
changes  in  user  sentiment  toward  particular  technologies,   technology  applications  and  related  services.
Cayenta's  operating  results  for the year ended  December  31,  2001 were  adversely  affected  by a slowdown  in
corporate spending on commercial information  technology services and e-business software  applications.  Cayenta's
market is also intensely  competitive.  Cayenta's  competitors  include numerous  companies across various segments
of the  information  technology  services  and  software  products  markets.  Existing  or future  competitors  may
independently  develop  and  patent or  copyright  technologies  that are  superior  or  substantially  similar  to
Cayenta's  technologies.  The costs to develop and to provide  information  technology services are relatively low.
Moreover,  barriers to entry,  particularly  in the areas of  information  technology  consulting  and  integrating
software  applications,  are low. Therefore,  Cayenta will likely continue to face additional  competition from new
entrants into its market.  If overall  economic  conditions  continue to weaken  demand for Cayenta's  products and
services,  or if Cayenta is unable to  anticipate  and respond  effectively  to changing  market  conditions  or to
compete effectively for any reason, its business will suffer.

Emerging Technologies and Businesses

The businesses in Titan's  Emerging  Technologies  and Businesses  segment face the ongoing  challenges of
developing  technology  applications  that  anticipate and satisfy  customer  requirements  and achieving  market
acceptance for those technology  applications in new and rapidly changing  markets.  To the extent these businesses
fail to  effectively  meet either of those  challenges,  Titan's  ability to execute its  monetizing  strategy  and
provide increased value to Titan's stockholders will be diminished.

43

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Titan has a limited history of commercializing new technologies and Titan's
commercial businesses may not remain or ever become successful.

In 1991, Titan adopted a strategy of seeking to develop commercial  businesses using technology  developed
for  government  purposes in Titan's  government  defense  business.  SureBeam  and the Titan  Wireless  business are a
product of this strategy.  For the most part,  Titan's  commercial  businesses are in a relatively early stage of development.
 These  technology-based  businesses  are  subject  to risks  and  uncertainties
inherent in companies at these early stages of development, including:

| |  | the risks that their base technology will become obsolete and that they will
fail to respond in a timely and cost-effective manner to rapid technological changes;          
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the risks associated with operating in markets that are subject to a high degree of competition;                                                                            
| |  | the risk that they will have inadequate management resources to capitalize on market
opportunities and execute their strategy;                                              
| |  | the risk that they will be unable to manage rapid growth effectively;                                                                                                       
| |  | the risk that they will be unable to execute  successfully  each  portion of their  business  strategy  on
         schedule;                                               
| |  | the  risk  that  Titan  may  not  identify  markets  with  sufficient  opportunities  to  justify  Titan's
         investments in products and solutions for these markets;
| |  | the market and operating risks that are unique to each particular business; and                                                                                             
| |  | the risk that adequate capital may not be available to fund their continued development.                                                                                    

Titan balances its investment  objectives for each of its businesses  with Titan's  overall  profitability
objectives.  This  balancing  is a  basic  part of  Titan's  approach  to  creating  and  building  new  commercial
businesses  and creates the  possibility  that any or all of Titan's  businesses may not grow at the pace or to the
level  that  they  otherwise  might  if they  were  independent  companies.  These  factors,  including  the  risks
identified  above,  could affect  Titan's  ability to monetize its  investments  in its  businesses or diminish the
value that Titan's stockholders ultimately recognize from those investments.

Titan may make equity investments or intercompany advances which Titan could lose or
have to write off.

Titan has historically funded businesses in its Emerging
Technologies and Businesses segment, as well as its other
other
commercial businesses, with equity investments
and/or intercompany advances, and expects to continue to do so in the future. From time to time, we also make
investments in businesses that are not controlled by Titan to further our strategic objectives. For example,
Titan has advanced $107 million to Cayenta and has invested approximately $50 million in Ivoire Telecom and
approximately $6.8 million in e-tenna as of December 31, 2001. At the
time Titan makes these investments or advances, these businesses are typically at an early stage of development.
If these businesses do not become profitable or Titan is unable to monetize its investments in them, Titan could
lose all or a portion of its equity in those businesses and be required to write off some or all of any amounts
advanced.

Titan  previously  funded its publicly traded  subsidiary,
SureBeam, through a $75 million  subordinated
promissory note of which Titan  exchanged $73 million on 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 average price of $10.505 per share.  Titan has agreed to extend a new $50 million  senior secured  revolving  line of credit to SureBeam.  Titan
is required to obtain the consent of its lenders under its credit  facility in order to extend the credit  facility
to  SureBeam.  If Titan does lend money to SureBeam, and if SureBeam does not become profitable, Titan may be
required to write off some or all of any amounts advanced.

44

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Titan may not be able to effect the tax-free  spin-off of its  ownership  interest in SureBeam in  accordance  with
its announced plan.

Titan has filed a request for a letter ruling from the Internal Revenue Service to enable Titan to
distribute its remaining ownership interest in SureBeam to Titan's stockholders on a tax-free basis as soon as
practical following receipt of a favorable letter ruling. Titan also is seeking consent from its lenders under
its credit facility in order to effect the spin-off of SureBeam and Titan cannot be certain that its lenders will
authorize this spin-off under these circumstances. Titan may not obtain a favorable letter ruling from the
Internal Revenue Service. Further, Titan is not obligated to make such a distribution. However, Titan's board of
directors has adopted a plan to spin-off SureBeam and, as a result, Titan has discontinued SureBeam for financial
reporting purposes.

Titan's commercial businesses' growth may be impaired because of investment or funding choices Titan makes or
because Titan is unable to generate sufficient cash flow or to access capital from external sources.

Titan  typically  funds its  businesses'  growth with equity  investments,  intercompany  advances  and/or
public or private  financing.  Titan may choose not to fund potential growth  opportunities for its businesses with
equity  investments or intercompany  advances based on risk  considerations  or Titan's balancing of its investment
objectives for those  businesses with its overall  profitability  objectives.  In addition,  Titan may be unable to
fund  potential  growth  opportunities  for its  businesses  to the extent  that Titan  Systems  does not  generate
sufficient  cash flow for Titan to do so or Titan does not  otherwise  have  capital on hand and/or  cannot  access
adequate  capital.  Titan may also be precluded  from funding  potential  growth  opportunities  for its commercial
businesses  with public or private  financing  based on market  conditions.  To the extent that Titan is unable to,
or chooses not to, provide capital to its commercial  businesses to fund potential  growth  opportunities,  Titan's
commercial businesses' growth could be impaired.

Market  conditions and legal and  contractual  restrictions  may impair Titan's ability to monetize its investments
in its commercial technology applications and businesses.

Titan  cannot  guarantee  that  it  will be able to  monetize  any of its  investments  in its  commercial
technology  applications  or businesses,  whether  through an initial public  offering of a subsidiary,  a complete
spin-off to Titan's  stockholders,  an outright sale of a subsidiary,  or a technology  license or sale.  Market or
competitive  conditions may be such that Titan is unable to complete  initial public  offerings of its subsidiaries
or spin-offs of its subsidiaries to Titan's stockholders at valuations that Titan considers  appropriate,  in which
case Titan may choose to delay or forego  initial  public  offerings or spin-offs of these  subsidiaries.  Based on
market  or  competitive  conditions,  Titan  may  also be  unable  to sell or  license  its  commercial  technology
applications  or sell its  businesses at valuations or for other  consideration  Titan  considers  appropriate,  in
which case Titan may choose to delay or forego those sales or licenses.  To the extent  possible,  Titan intends to
structure any initial public offerings that its  subsidiaries  conduct in a manner to preserve the ability to later
distribute the stock Titan retains in the  subsidiaries  to its  stockholders  on a tax-free  basis.  Under current
law,  there are a number of tax and other  legal  requirements  that  must be  satisfied  in order to  successfully
execute  this  strategy  and  Titan  cannot  guarantee  that they will be met.  Contractual  restrictions  may also
restrict  Titan's  ability to  successfully  execute this strategy.  With the exception of Cayenta,  Titan's credit
facility does not permit its  subsidiaries to conduct  initial public  offerings or, with the exception of Cayenta,
allow  Titan to  distribute  the  stock of its  subsidiaries  to Titan  stockholders  without  the  consent  of the
lenders.  Titan may  distribute  the stock of Cayenta to Titan  stockholders  without the consent of the lenders so
long as Titan is in compliance with financial  ratios  specified in, and not otherwise in default under, its credit
facility.

Titan  depends on  government  contracts  for a  substantial  majority of its revenues  and the loss of  government
contracts  or a decline in funding of  existing or future  government  contracts  could  adversely  affect  Titan's
revenues and cash flows and Titan's ability to fund its commercial businesses.

Titan's revenues from U.S.  government  business  represented
approximately 76% of Titan's total  revenues in 2000,  and  approximately  80% of Titan's  total  revenues in 2001.
Titan's U.S.  government contracts  are only funded on an annual  basis,  and the U.S.  government  may cancel  these  contracts
at any time without  penalty or may  change its  requirements,  programs  or  contract  budget or  decline to  exercise  option
periods,  any of which  could  reduce  Titan's  revenues  and cash flows from U.S.  government  contracts.  Titan's
revenues and cash flow from U.S.  government  contracts could also be reduced by declines in U.S. defense and other
federal agency budgets.

45

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A significant  percentage of Titan's  products and services are  predominantly  sold
and performed  under  contracts with various parts of the U.S. Navy or U.S. Air Force or with prime  contractors to
the U.S.  Navy or U.S. Air Force.  Although  these  various parts of the U.S. Navy or U.S. Air Force are subject to
common  budgetary  pressures and other factors,  Titan's  various U.S. Navy and U.S. Air Force  customers  exercise
independent  purchasing  decisions.  However,  because  of  such  concentration  of  Titan's  contracts,  Titan  is
vulnerable to adverse  changes in its revenues and cash flows if a significant  number of Titan's U.S. Navy or U.S.
Air Force contracts and subcontracts are simultaneously delayed or canceled for budgetary or other reasons.

In addition to contract cancellations and declines in agency
budgets, Titan may be adversely affected by:

| |  | budgetary constraints affecting U.S. government spending generally, and changes in fiscal policy;             
|- |  | --------------------------------------------------------------------------------------------------------------
| |  | curtailment of the U.S government's use of technology services and products providers;                        
| |  | the adoption of new laws or regulations;                                                                      
| |  | technological developments;                                                                                   
| |  | U.S. government shutdowns, such as that which occurred during the U.S. government's 1996 fiscal year;
     and
| |  | general economic conditions.                                                                                  

These or other  factors  could cause U.S.  defense and other  federal  agencies to reduce their  purchases
under  contracts,  to exercise their right to terminate  contracts or not to exercise  options to renew  contracts.
Any of these actions or any of the other actions  described above could reduce Titan's  revenues and cash flows and
impair Titan's ability to make equity investments in or intercompany  advances to Titan's  commercial  subsidiaries
as part of Titan's approach to creating and building new businesses.

Government  audits of Titan's  government  contracts could result in a material charge to Titan's earnings and have
a negative effect on Titan's cash position.

Titan's  government  contracts  are  subject  to cost  audits by the  government.  These  audits may occur
several  years  after  completion  of the  audited  work.  Titan  could have a material  charge to its  earnings or
reduction  in its cash  position  as a result of an audit,  including  an audit of one of the  companies  Titan has
acquired.  Some of Titan's acquired  companies did not historically  impose internal  controls as rigorous as those
Titan imposes on the  government  contracts  Titan  performs,  which may increase the  likelihood  that an audit of
their government contracts could cause a charge to Titan's earnings or reduction in Titan's cash position.

Titan's  operating  margins may decline under its fixed-price  contracts if Titan fails to estimate  accurately the
time and resources necessary to satisfy Titan's obligations.

Some of  Titan's  contracts  are  fixed-price  contracts  under  which  Titan  bears  the risk of any cost
overruns.  Titan's profits are adversely  affected if its costs under these contracts exceed the assumptions  Titan
used in bidding for the contract.  In 2000 and 2001,  approximately  30% of Titan's  revenues were derived from
fixed-price contracts of which 16% of Titan Systems revenues are derived from fixed-price contracts with the remaining
14% related to our commercial businesses. Often,
Titan is  required  to fix the price for a contract  before  Titan  finalizes  the  project  specifications,  which
increases the risk that Titan will misprice these contracts.  The complexity of many of Titan's  engagements  makes
accurately estimating Titan's time and resources more difficult.

If Titan is not able to retain its  contracts  with the U.S.  government  and  subcontracts  under U.S.  government
prime contracts in the competitive rebidding process, Titan's revenues may suffer.

46

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Upon expiration of a U.S. government  contract or subcontract under a U.S.  government prime contract,  if
the  government  customer  requires  further  services of the type provided in the contract,  there is frequently a
competitive  rebidding  process.  Titan  cannot  guarantee  that  Titan,  or if we are a subcontractor that the  prime  contractor,  will  win any
particular  bid, or that Titan will be able to replace  business lost upon  expiration or completion of a contract.
Further,  all U.S.  government  contracts  are subject to protest by  competitors.  The  termination  of several of
Titan's significant  contracts or nonrenewal of several of Titan's significant  contracts,  the imposition of fines
or damages,  or Titan's  suspension or debarment from bidding on additional  contracts  could result in significant
revenue shortfalls.

Titan may be liable for penalties under a variety of procurement  rules and regulations,  and changes in government
regulations could adversely affect Titan's business.

Titan's  defense  and  commercial  businesses  must comply  with and are  affected  by various  government
regulations.  Among the most significant regulations are the following:

| |  | the U.S. Federal Acquisition  Regulations,  which comprehensively  regulate the formation,  administration
              and performance of government contracts;                                                  
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the U.S. Truth in Negotiations  Act, which requires  certification  and disclosure of all cost and pricing
              data in connection with contract negotiations;                                            
| |  | the U.S. Cost Accounting  Standards,  which impose  accounting  requirements  that govern Titan's right to
              reimbursement under certain cost-based government contracts;                              
| |  | laws, regulations and Executive Orders restricting the use and dissemination of information classified
              for national security purposes and the exportation of certain products and technical data; and
| |  | laws and regulatory  requirements  relating to satellite  communications and other wireless  communication
              systems in the developing countries where Titan Wireless operates.                        

These  regulations  affect how Titan's  customers  and Titan do business  and, in some  instances,  impose
added  costs on  Titan's  businesses.  Any  changes  in  applicable  laws  could  adversely  affect  the  financial
performance of the business affected by the changed  regulations.  With respect to U.S. government  contracts,  any
failure  to comply  with  applicable  laws  could  result  in  contract  termination,  price or fee  reductions  or
suspension or debarment from contracting with the U.S. government.

Titan's  failure to identify,  attract and retain  qualified  technical and management  personnel  could  adversely
affect its existing businesses and its ability to build additional commercial businesses.

Titan  cannot  guarantee  that  Titan will be able to attract  and retain the highly  qualified  technical
personnel  for each of its  segments,  including  engineers,  computer  programmers  and  personnel  with  security
clearances  required  for  classified  work,  that are  necessary  for  maintaining  and growing  Titan's  existing
businesses or building additional  commercial  businesses.  Titan's success also depends to a significant extent on
the continued  contributions  of Titan's  management  personnel for each of its segments.  Titan's ability to build
additional  commercial  businesses  in its  Emerging  Technologies  and  Businesses  segment will depend in part on
Titan's ability to attract  management  personnel from outside Titan with relevant market  expertise and management
skills, and on Titan's ability to retain and motivate these managers.

Titan competes in highly  competitive  markets  against many companies that are larger,  better financed and better
known than Titan.  If Titan is unable to compete  effectively,  Titan's  business and  prospects  will be adversely
affected.

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Titan's  businesses  operate in highly  competitive  markets.  Many of its competitors are larger,  better
financed  and  better  known  companies  who may  compete  more  effectively  than Titan  can.  Titan's  commercial
businesses  compete  against other  technologies as well as against  companies with similar  products and services.
In order to remain competitive,  Titan must invest to keep its products  technically  advanced and compete on price
and on value  added to Titan's  customers.  Titan's  ability  to compete  may be  adversely  affected  by limits on
Titan's capital resources and Titan's ability to invest in maintaining and expanding its market share.

Titan has completed numerous strategic acquisitions and may complete others, which could increase Titan's costs
or liabilities or be disruptive.

Since January 1, 1998, Titan has acquired 17 government
information technology businesses, including the recently completed acquisition of Jaycor, Inc., and has entered
into a merger agreement to acquire Science and Engineering  Associates as part of Titan's strategy
of  consolidating  government  information  technology  businesses.  In addition,  since January 1, 1999, Titan has
acquired five  information  technology  services and solutions  companies as part of Cayenta's  development  of its
total services provider offering,  and Titan has made investments in a wireless  telecommunications  company,  Ivoire Telecom,
and acquired an international  voice,  data, and internet services provider,  and just complete the acquisition GlobalNet,
as part of Titan  Wireless's  business.  Several of the  businesses  that Titan  acquired had  themselves  acquired
other  businesses  prior  to  their  acquisition  by  Titan.  Titan  may  not be  able  to  complete  its  proposed
acquisition  of  Science and  Engineering  Associates or to  integrate  successfully  any
acquired  businesses  without  substantial  expense,   delay  or  other  operational  or  financial  problems.  The
acquisition  and  integration of new  businesses  involves  risk.  The  integration  of acquired  businesses may be
costly and may result in a decrease in the value of Titan's common stock for the following reasons, among others:

| |  | Titan  may need to  divert  more  management  resources  to  integration  than  Titan  planned,  which may
              adversely affect Titan's ability to pursue other more profitable activities;                                                                     
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the  difficulties  of  integration  may be  increased  by the  necessity  of  coordinating  geographically
              separated  organizations,  integrating  personnel with disparate  business  backgrounds and combining
              different corporate cultures;
| |  | Titan may not  eliminate  as many  redundant  costs as Titan  anticipated  in  selecting  its  acquisition
              candidates; and                                                                                                                                  
| |  | one or more of Titan's  acquisition  candidates also may have liabilities or adverse operating issues that
              Titan failed to discover through its diligence prior to the acquisition.                                                                         

Titan  intends  to  continue  to look  for  additional  strategic  acquisitions.  Instability  in the U.S.
securities  markets and  volatility in Titan's common stock price may make  acquisitions  with Titan's common stock
more expensive.

Titan may incur  significant  costs in  protecting  Titan's  intellectual  property  which could  adversely  affect
Titan's profit margins.  Titan's  inability to protect its patents and  proprietary  rights in the U.S. and foreign
countries could adversely affect Titan's businesses' prospects and competitive positions.

As part of Titan's  strategy,  Titan seeks to protect its  proprietary  technology and inventions  through
patents  and  other  proprietary-right  protection  in the U.S.  and  other  countries.  The  laws of some  foreign
countries  do not  protect  proprietary  rights to the same  extent  as the laws of the U.S.  If Titan is unable to
obtain or maintain  these  protections,  Titan may not be able to prevent third parties from using its  proprietary
rights.  In addition,  Titan may incur  significant  expense both in protecting  its  intellectual  property and in
defending or assessing claims with respect to intellectual property owned by others.

Titan assesses the strength of its patent and  intellectual  property  protection for its technologies and
products.  Despite Titan's  assessments and Titan's belief in the strength of its patent  protection for particular
technologies or products,  Titan's patents may not provide effective  barriers to entry against  competitors in the
markets  targeted by  particular  technologies  and products  because  Titan's  competitors  may develop  competing
technologies  and  products  that do not  infringe  upon  Titan's  patents.  Titan also  could  choose to modify or
abandon one or more planned or current  products  because of these  assessments  or actual or threatened  claims by
other companies.  Titan is not certain that its pending patent applications will be issued.

48

---

Titan also relies on trade  secrets,  proprietary  know-how and  continuing  technological  innovation  to
remain  competitive.  Titan has taken  measures to protect its trade  secrets and  know-how,  including  the use of
confidentiality  agreements  with  Titan's  employees,   consultants  and  advisors.  It  is  possible  that  these
agreements  may be breached and that any  remedies  for a breach will not be  sufficient  to  compensate  Titan for
damages  incurred.  Titan  generally  controls  and  limits  access  to,  and  the  distribution  of,  its  product
documentation  and other  proprietary  information.  Titan  also  cannot  guarantee  that  other  parties  will not
independently develop Titan's know-how or otherwise obtain access to Titan's technology.

Risks of Titan's  international  operations,  including  economic  conditions in other  countries,  could adversely
affect the prospects of its Titan Wireless, SureBeam and Cayenta businesses.

Titan's Cayenta, SureBeam and Titan Wireless businesses each operate in international markets. Through
Titan's subsidiary, Titan Wireless, Titan sells communications services and systems primarily in developing
countries. Although Titan currently sells its communications services and systems primarily in U.S. dollars,
currency devaluations and adverse market conditions in developing countries in the past have and in the future
could negatively affect demand for Titan's communications services and systems and, consequently, Titan's
revenues for this segment. In addition, Titan may in the future bill for its communications services in local
currency. As a result, revenues in this segment may be adversely affected by economic conditions in developing
countries. Titan's businesses that operate in international markets also face the possibility of becoming
subject to added costs as part of maintaining compliance with varied foreign regulatory requirements.
Titan does not believe that the international operations of its existing businesses currently
subject it to material risks from fluctuations in currency exchange rates. However, as Titan increases the
international operations of its businesses, Titan's risks from fluctuations in currency exchange rates, to the
extent Titan bills for its products in foreign currencies, will increase.

Selling  products or services in  international  markets also entails  other market,  economic,  cultural,
legal and political risks, conditions and expenses.  These risks include:

| |  | trade protective  measures and import or export  licensing  requirements or other  restrictive  actions by
              foreign governments;
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------
| |  | reduced protection of intellectual property rights;                                                                                          
| |  | political and economic instability;                                                                                                          
| |  | difficulties in collecting amounts owed to Titan;                                                                                            
| |  | difficulties in managing overseas employees and contractors; and                                                                             
| |  | changes in applicable laws and regulations, including licensing laws, tax laws and regulations.                                              

Any one of these factors or other  international  business risks could adversely affect Titan's  financial
performance.

The covenants in Titan's credit facility restrict Titan's financial and operational flexibility and Titan's
failure to comply with them could have a material adverse effect on Titan's business.

Titan's credit facility contains  covenants that restrict,  among other things,  Titan's ability to borrow
money, make particular types of investments,  including  investments in Titan's  subsidiaries,  or other restricted
payments,  swap or sell assets,  merge or  consolidate,  or make  acquisitions.  An event of default  under Titan's
credit  facility  could allow the lenders to declare all amounts  outstanding  to be  immediately  due and payable.
Titan has pledged  substantially  all of its  consolidated  assets and the stock of Titan's  subsidiaries to secure
the debt under Titan's credit facility,  excluding Titan's foreign  subsidiaries.  If the amounts outstanding under
the credit facility were  accelerated,  the lenders could proceed against those  consolidated  assets and the stock
of  Titan's  subsidiaries.  Any event of  default,  therefore,  could  have a  material  adverse  effect on Titan's
business.  Titan's credit  facility also requires Titan to maintain  specified  financial  ratios.  Titan's ability
to meet these financial ratios can be affected by events beyond Titan's  control,  and Titan cannot assure you that
Titan  will meet  those  ratios.  Titan  also may  incur  future  debt  obligations  that  might  subject  Titan to
restrictive  covenants that could affect Titan's  financial and  operational  flexibility or subject Titan to other
events of  default.  Any such  restrictive  covenants  in any future  debt  obligations  Titan  incurs  could limit
Titan's ability to fund its commercial  businesses with equity  investments or intercompany  advances,  which would
impede Titan's ability to execute its approach to creating and building new businesses.

49

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Titan's  operating  results may be adversely  affected by  disruptions  in its supply of products and components or
services.

Because Titan's  internal  manufacturing  capacity is limited,  Titan uses contract  manufacturers.  While
Titan uses care in selecting its  manufacturers,  this arrangement gives Titan less control over the reliability of
supply,  quality and price of products or components than if Titan  manufactured them itself. In some cases,  Titan
obtains  products from a sole supplier or a limited  group of  suppliers.  For example,  Titan relies upon SureBeam
as an exclusive supplier of linear  accelerators and SureBeam,  in turn, relies on one supplier for some of the key
components  used to  manufacture  SureBeam's  linear  accelerators.  Consequently,  Titan risks  disruptions in its
supply of key  products  and  components  if Titan's  suppliers  fail or are unable to perform  because of strikes,
natural  disasters,  financial  condition or other factors.  Any material supply disruptions could adversely affect
Titan's  business,  financial  condition  and  results  of  operations  as well as  Titan's  ongoing  product  cost
structure.

Titan's business is subject to significant environmental regulation. Compliance costs, or any future violations
or liability under environmental laws, could harm Titan's business.

Titan is  subject  to  environmental  and safety  laws and  regulations  governing  the use,  storage  and
disposal of hazardous  substances  or wastes and imposing  liability  for the cleanup of  contamination  from these
substances.  Titan  cannot  completely  eliminate  the risk of  contamination  or injury from these  substances  or
wastes,  and, in the event of such an incident,  Titan could be held liable for any damages that result.  From time
to time,  Titan has been notified of violations of government  and  environmental  regulations.  Titan  attempts to
correct these violations  promptly  without any material impact on Titan's  operations.  In addition,  Titan may be
required to incur  significant  additional costs to comply with  environmental  laws and regulations in the future.
These  costs,  and any future  violations  or  liability  under  environmental  laws or  regulations,  could have a
material adverse effect on Titan's business.

Titan's  results of operations  have  historically  fluctuated and may continue to fluctuate  significantly  in the
future, which could adversely affect the market price of its common stock.

Titan's  revenues are affected by factors such as the  unpredictability  of sales and  contracts  awards due to the
long  procurement  process for most of its products and services,  defense and  intelligence  budgets,  the time it
takes for the new markets Titan  targets to develop and for Titan to develop and provide  products and services for
those markets,  competition and general economic  conditions.  Titan's product mix and unit volume,  its ability to
keep expenses within budgets,  its  distribution  channels and its pricing affect its gross margins.  These factors
and other risk factors  described  herein may adversely  affect Titan's  results of operations  within a period and
cause Titan's  financial  results to fluctuate  significantly on a quarterly or annual basis.  Consequently,  Titan
does not believe that  comparison of its results of operations  from period to period is necessarily  meaningful or
predictive  of its likely future  results of  operations.  It is possible  that in some future  quarter or quarters
Titan's  operating  results will be below the  expectations  of public  market  analysts or  investors.  If so, the
market price of Titan's common stock may decline significantly.

50

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

Statements contained in this
Management's Discussion and Analysis of Financial Condition and Results of
Operations which are not historical facts are forward looking statements within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Examples of such
forward looking statements include our expectations regarding our continuing
investments in commercial businesses and start-up ventures, our planned
financing of these ventures and the sufficiency of our available liquidity to
fund investments and working capital, the Company's belief that its
technology-based businesses will continue to grow or result in profitability,
that it has built a financially sound company, that it is uniquely positioned to
grow its core operations or take advantage of new opportunities, that it will
continue to focus on strengthening and growing its businesses, building its
patent portfolio and commercializing new innovative technologies, that it
expects a greater percentage of revenues in Titan Wireless to be derived from
the provision of services, that the remaining $3.75 million due to Sakon under
our agreement to aquire an additional 30% interest will be satisfied by issuance
of Titan stock, that it will be able to spin off SureBeam to Titan
sharesholders, that Cayenta will continue to reduce its SG&A expenditures,
that service revenue levels for the system in Benin will reach certain levels in
2002, and that Titan Systems will continue to provide the largest percentage of
our consolidated revenues. Actual results may differ materially from those
stated or implied in the forward looking statements. Further, certain forward
looking statements are based upon assumptions of future events which may not
prove to be accurate and are subject to risks and uncertainties that could cause
actual results to differ materially from those set forth in or implied by forward
looking statements. These risks and uncertainties include the risks associated
with the Company's entry into new commercial businesses and new markets that
require the Company to develop demand for its product, its ability to execute
its spin off strategy, dependence on continued funding of U.S. Department of
Defense and Federal civilian agency programs, contract termination risks, risks
associated with acquiring other companies, including integration risks, and risk
of doing business in developing countries and international markets including
foreign currency risks.

51

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Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

Market Risk

The principal objectives of
our asset/liability management activities are to minimize debt and maximize net investment income, while maintaining acceptable
levels of interest rate risk and facilitating our funding needs. Our net investment income and interest expense
are subject to the risk of interest rate fluctuations. To mitigate the impact of fluctuations in interest rates,
we manage the structure of the maturity of debt and investments. As of December 31, 2001, we did not hold any
material amounts of marketable securities. The amount of marketable securities we hold fluctuates based upon our
cash needs, including the use of our available cash resources to fund acquisitions. As a policy matter, we invest
cash in excess of our cash needs for limited periods in cash equivalents and available-for-sale investments.

The following table provides
information about our financial instruments that are sensitive to changes
in interest rates as of December 31, 2001. For debt obligations, the table presents principal cash flows and
related weighted average interest rates by expected maturity dates. For terms relating to our long-term debt, see
Note 8 of the notes to the accompanying consolidated financial statements.

|                                                                                          |                                    |   | 2002   |   |   | 2003   |   |   | 2004   |   |   | 2005   |   |   | 2006    |   |   | Beyond  |   |   | Total   |   |   | FairValue |  
|----------------------------------------------------------------------------------------- | ---------------------------------- | - | ------ | - | - | ------ | - | - | ------ | - | - | ------ | - | - | ------- | - | - | ------- | - | - | ------- | - | - | --------- | -
|                                                                                          |                                    |   |        |   |   |        |   |   |        |   |   |        |   |   |         |   |   |         |   |   |         |   |   |           |  
|                                                                                          | (in thousands, except percentages)
|Assets:  NoneLiabilities:Long-term debt     including debt
     due within one
     year: |                                   
|Fixed rate                                                                                |                                    | $ | 1,413  |   | $ | 948    |   | $ | 963    |   | $ | 416    |   | $ | 540     |   | $ | 2,745   |   | $ | 7,025   |   | $ | 7,025     |  
|Average interest     rate                                                                 |                                    |   | 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 interest     rate                                                                 |                                    |   | 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     rate                                                                       |                                    |   |       | % |   |       | % |   |       | % |   |       | % |   |        | % |   | 5.75    | % |   | 5.75    | % |   | 5.75      | %

(1)  Maturities assume extension of the revolving
portion of the Company's senior credit agreement to the end of the term loan maturities.
See Note 8 in the notes to the accompanying consolidated financial statements.

(2)  The HIGH TIDES has a remarketing
feature beginning approximately five years after the date of issuance, at which
time we may elect to refinance or retire the HIGH TIDES. See Note 8 to the
accompanying consolidated financial statements.

52

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Item 8.  Financial Statements and Supplementary Data



Index to Financial Statements and Financial Statement Schedule

PageReport of Independent Public
      Accountants
    
    54Financial Statements:Consolidated Statements of
      Operations
    
    55Consolidated Balance
      Sheets
    
    56Consolidated Statements of
      Cash Flows
    
    57Consolidated Statements of
      Stockholders' Equity
    
    58Notes to Consolidated
      Financial Statements
    
    59Supporting Financial Statement Schedule
      Covered by the Foregoing   Report of Independent Public
      Accountants:Schedule II  Valuation and Qualifying
      Accounts
    
    100


53

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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To The Titan Corporation:

We have audited the accompanying
consolidated balance sheets of The Titan Corporation (a Delaware corporation)
and subsidiaries as of December 31, 2001 and 2000, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 2001. These
financial statements and the schedule referred to below are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements and schedule based on our audits.

We conducted our audits in accordance
with auditing standards generally accepted in the United States. Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements
referred to above present fairly, in all material respects, the financial
position of The Titan Corporation and subsidiaries as of December 31, 2001
and 2000, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 2001 in conformity with
accounting principles generally accepted in the United States.

Our audits were made for the purpose of
forming an opinion on the basic financial statements taken as a whole. The
schedule listed in the index to financial statements and financial statement
schedules is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in our audit of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.

ARTHUR ANDERSEN LLP

San Diego, CaliforniaFebruary 11, 2002 (except with respect to the matters discussed in Note 2, 
      as to which the date is February 28, 2002 and 
      with respect to the matters discussed in 
      Note 15, as to which the date is March 21, 2002)

54

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THE TITAN CORPORATIONCONSOLIDATED STATEMENTS
OF OPERATIONS(In thousands, except per share data)

|                                                                                                                       |  | For the Years Ended
      December 31, |          
|---------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------- | ---------
|
|Revenues                                                                                                               |  | $                                      | 1,132,052
|                                                                                                                       |  |                                        |          
|Costs and expenses:                                                                                                    |  |                                        |          
|Cost of revenues                                                                                                       |  |                                        | 844,859  
|Selling, general and
      administrative expense                                                                      |  |                                        | 223,805  
|Research and development
      expense                                                                                 |  |                                        | 13,039   
|Acquisition and integration
      related charges and other                                                            |  |                                        | 36,768   
|                                                                                                                       |  |                                        |          
|Total
      costs and expenses                                                                                         |  |                                        | 1,118,471
|                                                                                                                       |  |                                        |          
|Operating profit                                                                                                       |  |                                        | 13,581   
|Interest expense                                                                                                       |  |                                        | (36,750  
|Interest income                                                                                                        |  |                                        | 1,798    
|                                                                                                                       |  |                                        |          
|Income (loss) from continuing operations
      before income    taxes, minority interests and
      extraordinary loss |  |                                        | (21,371  
|Income tax provision (benefit)                                                                                         |  |                                        | (347     
|                                                                                                                       |  |                                        |          
|Income (loss) from continuing operations
      before minority    interests and extraordinary
      loss               |  |                                        | (21,024  
|Minority interests                                                                                                     |  |                                        | 6,826    
|                                                                                                                       |  |                                        |          
|Income (loss) from continuing operations
      before    extraordinary loss                                            |  |                                        | (14,198  
|Loss from discontinued operations, net of tax
      benefit of    $6,438, $761 and $2,509                              |  |                                        | (84,416  
|                                                                                                                       |  |                                        |          
|Income (loss) before extraordinary
    loss                                                                            |  |                                        | (98,614  
|Extraordinary loss from early extinguishments
      of debt, net   of tax benefit of $1,541                            |  |                                        |         
|                                                                                                                       |  |                                        |          
|Net income (loss)                                                                                                      |  |                                        | (98,614  
|Dividend requirements on preferred
      stock                                                                         |  |                                        | (690     
|                                                                                                                       |  |                                        |          
|Net income (loss) applicable to common
      stock                                                                     |  | $                                      | (99,304  
|                                                                                                                       |  |                                        |          
|Basic earnings (loss) per share:                                                                                       |  |                                        |          
|Income (loss) from
      continuing operations                                                                         |  | $                                      | (0.32    
|Loss from discontinued
      operations, net of taxes                                                                  |  |                                        | (1.44    
|Extraordinary loss from
      early extinguishments of debt,       net
      of taxes                                  |  |                                        |         
|                                                                                                                       |  |                                        |          
|Net income (loss)                                                                                                      |  | $                                      | (1.76    
|                                                                                                                       |  |                                        |          
|Weighted average
      shares                                                                                          |  |                                        | 58,793   
|                                                                                                                       |  |                                        |          
|Diluted earnings (loss) per share:                                                                                     |  |                                        |          
|Income (loss) from
      continuing operations                                                                         |  | $                                      | (0.32    
|Loss from discontinued
      operations, net of taxes                                                                  |  |                                        | (1.44    
|Extraordinary loss from
      early extinguishments of debt,       net
      of taxes                                  |  |                                        |         
|                                                                                                                       |  |                                        |          
|Net income (loss)                                                                                                      |  | $                                      | (1.76    
|                                                                                                                       |  |                                        |          
|Weighted average
      shares                                                                                          |  |                                        | 58,793   
|                                                                                                                       |  |                                        |          

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

55

---

THE TITAN CORPORATIONCONSOLIDATED BALANCE
SHEETS(In thousands, except share and per share data)

|                                                                                                                                                                                              |  | As of
      December 31, |          
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ---------
|
|Assets                                                                                                                                                                                        | 
|Current Assets:                                                                                                                                                                               |  |                          |          
|Cash and cash
      equivalents                                                                                                                                                               |  | $                        | 28,957   
|Accounts receivable 
      net                                                                                                                                                               |  |                          | 430,898  
|Inventories                                                                                                                                                                                   |  |                          | 29,131   
|Prepaid expenses and
      other                                                                                                                                                              |  |                          | 28,470   
|Deferred income
    taxes                                                                                                                                                                     |  |                          | 57,983   
|Net assets of discontinued
      operations                                                                                                                                                   |  |                          | 12,891   
|                                                                                                                                                                                              |  |                          |          
|Total
      current assets                                                                                                                                                                    |  |                          | 588,330  
|                                                                                                                                                                                              |  |                          |          
|Property and equipment  net                                                                                                                                                                  |  |                          | 101,053  
|Goodwill  net of accumulated amortization of
      $75,829 and $44,651                                                                                                                       |  |                          | 485,161  
|Other assets  net                                                                                                                                                                            |  |                          | 125,787  
|Net long-term assets of discontinued
      operations                                                                                                                                         |  |                          | 58,367   
|                                                                                                                                                                                              |  |                          |          
|Total
      assets                                                                                                                                                                            |  | $                        | 1,358,698
|                                                                                                                                                                                              |  |                          |          
|Liabilities and
      Stockholders' Equity                                                                                                                                                    | 
|Current Liabilities:                                                                                                                                                                          |  |                          |          
|Current portion of amounts outstanding under
      line of credit                                                                                                                             |  | $                        | 12,813   
|Accounts payable                                                                                                                                                                              |  |                          | 92,290   
|Acquisition debt                                                                                                                                                                              |  |                          | 2,000    
|Current portion of
      long-term debt                                                                                                                                                       |  |                          | 1,413    
|Accrued compensation and
      benefits                                                                                                                                                       |  |                          | 70,659   
|Other accrued
      liabilities                                                                                                                                                               |  |                          | 81,305   
|Income taxes
    payable                                                                                                                                                                      |  |                          | 1,185    
|                                                                                                                                                                                              |  |                          |          
|Total
      current liabilities                                                                                                                                                               |  |                          | 261,665  
|                                                                                                                                                                                              |  |                          |          
|Long-term portion of amounts outstanding under line of
      credit                                                                                                                           |  |                          | 317,187  
|                                                                                                                                                                                              |  |                          |          
|Other long-term debt                                                                                                                                                                          |  |                          | 5,612    
|                                                                                                                                                                                              |  |                          |          
|Other non-current liabilities                                                                                                                                                                 |  |                          | 43,061   
|                                                                                                                                                                                              |  |                          |          
|Commitments and contingencies                                                                                                                                                                 |  |                          |          
|Company obligated mandatory redeemable
      convertible preferred   securities of a subsidiary
      trust whose sole assets are senior   subordinated
      convertible debentures of Titan |  |                          | 250,000  
|                                                                                                                                                                                              |  |                          |          
|Minority interests                                                                                                                                                                            |  |                          | 23       
|                                                                                                                                                                                              |  |                          |          
|Stockholders' Equity:                                                                                                                                                                         |  |                          |          
|Preferred stock: $1 par
      value, authorized 5,000,000 shares:                                                                                                                             |  |                          |          
|Cumulative convertible, $13,800
      liquidation preference:                                                                                                                                 |  |                          |          
|689,678 and
      689,978 shares issued and outstanding                                                                                                                                       |  |                          | 690      
|Series A junior
      participating: designated 1,000,000
      authorized         shares:  None
      issued                                                                                 |  |                          |         
|Common stock: $.01 par
      value, authorized 200,000,000 shares, issued
            and
      outstanding:  70,128,582 and 54,068,167 shares                                                |  |                          | 701      
|Capital in excess of par
      value                                                                                                                                                          |  |                          | 571,912  
|Deferred
    compensation                                                                                                                                                                     |  |                          | (34,055  
|Retained earnings
      (deficit)                                                                                                                                                             |  |                          | (57,239  
|Accumulated other comprehensive income                                                                                                                                                        |  |                          | 128      
|Treasury stock (372,050 and
      787,885 shares), at cost                                                                                                                                    |  |                          | (987     
|                                                                                                                                                                                              |  |                          |          
|Total
      stockholders' equity                                                                                                                                                              |  |                          | 481,150  
|                                                                                                                                                                                              |  |                          |          
|Total liabilities and stockholders'
      equity                                                                                                                                              |  | $                        | 1,358,698
|                                                                                                                                                                                              |  |                          |          

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

56

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THE TITAN CORPORATIONCONSOLIDATED STATEMENTS
OF CASH FLOWS(In thousands of dollars)

|                                                                                                                                                                                     |  | For the Years Ended
      December 31, |         
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------------------------------- | --------
|
|Cash Flows From Operating
      Activities:                                                                                                                                          |  |                                        |         
|Income (loss) from continuing
      operations                                                                                                                                       |  | $                                      | (14,198 
|Adjustments to reconcile income (loss) from
      continuing operations to net cash provided   by (used
      for) continuing operations, net of effects of businesses
    acquired: |  |                                        |         
|Depreciation and
      amortization                                                                                                                                                  |  |                                        | 43,091  
|Write-offs due to asset
      impairments                                                                                                                                            |  |                                        | 18,578  
|Deferred
      income taxes and other                                                                                                                                                |  |                                        | (1,603  
|Write-off
      of capitalized software development costs                                                                                                                            |  |                                        |        
|Minority
      interests                                                                                                                                                             |  |                                        | (6,826  
|Poolings
      of interests                                                                                                                                                          |  |                                        |        
|Deferred
      compensation charges                                                                                                                                                  |  |                                        | 4,282   
|Changes
      in operating assets and liabilities, net of effects of businesses
      acquired:                                                                                      |  |                                        |         
|Accounts
      receivable                                                                                                                                                            |  |                                        | (69,687 
|Inventories                                                                                                                                                                          |  |                                        | (6,299  
|Prepaid
      expenses and other assets                                                                                                                                              |  |                                        | 6,734   
|Accounts
      payable                                                                                                                                                               |  |                                        | 7,018   
|Income taxes
      payable/refundable                                                                                                                                                |  |                                        | 410     
|Accrued
      compensation and benefits                                                                                                                                              |  |                                        | 5,882   
|Other
      liabilities                                                                                                                                                              |  |                                        | (11,317 
|                                                                                                                                                                                     |  |                                        |         
|Net cash provided by (used for) continuing
      operations                                                                                                                          |  |                                        | (23,935 
|                                                                                                                                                                                     |  |                                        |         
|Loss from discontinued operations                                                                                                                                                    |  |                                        | (84,416 
|Deferred compensation charge attributable to
      discontinued operations                                                                                                           |  |                                        | 54,270  
|Issuance of stock in subsidiary                                                                                                                                                      |  |                                        | 61,327  
|Minority interest attributable to
      discontinued operations                                                                                                                      |  |                                        | (10,165 
|Changes in net assets and liabilities of
      discontinued operations                                                                                                               |  |                                        | (25,303 
|                                                                                                                                                                                     |  |                                        |         
|Net cash used for discontinued
      operations                                                                                                                                      |  |                                        | (4,287  
|                                                                                                                                                                                     |  |                                        |         
|Net cash provided by (used for) operating
      activities                                                                                                                           |  |                                        | (28,222 
|                                                                                                                                                                                     |  |                                        |         
|Cash Flows From Investing
      Activities:                                                                                                                                          |  |                                        |         
|Capital expenditures                                                                                                                                                                 |  |                                        | (24,781 
|Payments for purchases of businesses, net of
      cash acquired                                                                                                                     |  |                                        | (90,357 
|Capitalized software development
    costs                                                                                                                                           |  |                                        | (9,184  
|Proceeds from sales of investments                                                                                                                                                   |  |                                        | 3,217   
|Other investments                                                                                                                                                                    |  |                                        | (24,105 
|Other                                                                                                                                                                                |  |                                        | 835     
|                                                                                                                                                                                     |  |                                        |         
|Net cash used for investing
    activities                                                                                                                                           |  |                                        | (144,375
|                                                                                                                                                                                     |  |                                        |         
|Cash Flows From Financing
      Activities:                                                                                                                                          |  |                                        |         
|Issuance of redeemable covertible preferred
      securities                                                                                                                         |  |                                        |        
|Additions to debt                                                                                                                                                                    |  |                                        | 66,875  
|Retirements of debt                                                                                                                                                                  |  |                                        | (38,296 
|Issuance of stock by subsidiary                                                                                                                                                      |  |                                        | 42      
|Deferred debt issuance costs                                                                                                                                                         |  |                                        | (1,600  
|Proceeds from stock issuances                                                                                                                                                        |  |                                        | 147,579 
|Dividends paid                                                                                                                                                                       |  |                                        | (690    
|Purchase of stock                                                                                                                                                                    |  |                                        |        
|Other                                                                                                                                                                                |  |                                        | 333     
|                                                                                                                                                                                     |  |                                        |         
|Net cash provided by financing
      activities                                                                                                                                      |  |                                        | 174,243 
|                                                                                                                                                                                     |  |                                        |         
|Effect of exchange rate changes on
    cash                                                                                                                                          |  |                                        | 20      
|                                                                                                                                                                                     |  |                                        |         
|Net increase (decrease) in cash and cash
      equivalents                                                                                                                           |  |                                        | 1,666   
|Cash and cash equivalents at beginning of
      year                                                                                                                                 |  |                                        | 27,291  
|                                                                                                                                                                                     |  |                                        |         
|Cash and cash equivalents at end of
      year                                                                                                                                       |  | $                                      | 28,957  
|                                                                                                                                                                                     |  |                                        |         

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

57

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

|                                                                                |  | Cumulative Convertible
      Preferred Stock |     | Common Stock |   | Capital In Excess of Par
      Value |  | Deferred
    Compensation |         | Retained Earnings
      (Deficit) |   | Accumulated Other Comprehensive
      Income |   | Treasury Stock |         | Total |  
|------------------------------------------------------------------------------- |  | -------------------------------------------- | --- | ------------ | - | ------------------------------------ |  | ------------------------- | ------- | --------------------------------- | - | -------------------------------------------- | - | -------------- | ------- | ----- | -
|                                                                                |  |                                              |     |              |   |                                      |  |                           |         |                                   |   |                                              |   |                |         |       |  
|Balances at December 31, 1998                                                   |  | $                                            | 695 |              | $ | 435                                  |  | $                         | 131,674 |                                   | $ |                                             |   | $              | (31,785 | )     | $
|Conversion of subordinated debt                                                 |  |                                              |     |              |   | 79                                   |  |                           | 26,191  |                                   |   |                                              |   |                |         |       |  
|Exercise of stock options and other                                             |  |                                              |     |              |   | 11                                   |  |                           | 3,940   |                                   |   |                                              |   |                |         |       |  
|Shares contributed to employee benefit
      plans                              |  |                                              |     |              |   |                                      |  |                           | (364    | )                                 |   |                                              |   |                |         |       |  
|Deferred compensation, related to the
      issuance of   stock options         |  |                                              |     |              |   |                                      |  |                           | 841     |                                   |   | (738                                         | ) |                |         |       |  
|Purchase of stock                                                               |  |                                              |     |              |   |                                      |  |                           | (487    | )                                 |   |                                              |   |                |         |       |  
|Income tax benefit from employee
      stock   transactions                     |  |                                              |     |              |   |                                      |  |                           | 892     |                                   |   |                                              |   |                |         |       |  
|Distribution to shareholders of net liablity
      of   discontinued operations |  |                                              |     |              |   |                                      |  |                           | 565     |                                   |   |                                              |   |                |         |       |  
|Dividends on preferred stock
         Cumulative Convertible, $1.00 per share  |  |                                              |     |              |   |                                      |  |                           |         |                                   |   |                                              |   |                | (695    | )     |  
|Foreign currency translation
    adjustment                                     |  |                                              |     |              |   |                                      |  |                           |         |                                   |   |                                              |   |                | 6       |       |  
|Net income                                                                      |  |                                              |     |              |   |                                      |  |                           |         |                                   |   |                                              |   |                | 37,757  |       |  
|                                                                                |  |                                              |     |              |   |                                      |  |                           |         |                                   |   |                                              |   |                |         |       |  
|Balances at December 31, 1999                                                   |  |                                              | 695 |              |   | 525                                  |  |                           | 163,252 |                                   |   | (738                                         | ) |                | 5,283   |       |  
|Pooling adjustments                                                             |  |                                              |     |              |   |                                      |  |                           |         |                                   |   |                                              |   |                | 1,352   |       |  
|Exercise of stock options and other                                             |  |                                              |     |              |   | 16                                   |  |                           | 3,577   |                                   |   |                                              |   |                |         |       |  
|Proceeds from stock issuances                                                   |  |                                              |     |              |   |                                      |  |                           | 1,820   |                                   |   |                                              |   |                |         |       |  
|Issuance of stock for equity
    interest                                       |  |                                              |     |              |   |                                      |  |                           | 900     |                                   |   |                                              |   |                |         |       |  
|Deferred compensation, related to the
      issuance of   stock options         |  |                                              |     |              |   |                                      |  |                           | 19,331  |                                   |   | (19,331                                      | ) |                |         |       |  
|Amortization of deferred
    compensation                                       |  |                                              |     |              |   |                                      |  |                           |         |                                   |   | 6,187                                        |   |                |         |       |  
|Purchase of treasury stock                                                      |  |                                              |     |              |   |                                      |  |                           | (173    | )                                 |   |                                              |   |                |         |       |  
|Shares contributed to employee benefit
      plans                              |  |                                              |     |              |   |                                      |  |                           | 1,167   |                                   |   |                                              |   |                |         |       |  
|Foreign currency translation
    adjustment                                     |  |                                              |     |              |   |                                      |  |                           |         |                                   |   |                                              |   |                |         |       |  
|Conversion of preferred stock                                                   |  |                                              | (5  | )            |   |                                      |  |                           | 5       |                                   |   |                                              |   |                |         |       |  
|Income tax benefit from employee
      stock   transactions                     |  |                                              |     |              |   |                                      |  |                           | 1,479   |                                   |   |                                              |   |                |         |       |  
|Gain related to issuance of stock in
      subsidiary                           |  |                                              |     |              |   |                                      |  |                           |         |                                   |   |                                              |   |                | 2,825   |       |  
|Dividends on preferred stock
         Cumulative Convertible, $1.00 per share  |  |                                              |     |              |   |                                      |  |                           |         |                                   |   |                                              |   |                | (692    | )     |  
|Net loss                                                                        |  |                                              |     |              |   |                                      |  |                           |         |                                   |   |                                              |   |                | (18,728 | )     |  
|                                                                                |  |                                              |     |              |   |                                      |  |                           |         |                                   |   |                                              |   |                |         |       |  
|Balances at December 31, 2000                                                   |  |                                              | 690 |              |   | 541                                  |  |                           | 191,358 |                                   |   | (13,882                                      | ) |                | (9,960  | )     |  
|Proceeds from issuance of stock                                                 |  |                                              |     |              |   | 80                                   |  |                           | 136,102 |                                   |   |                                              |   |                |         |       |  
|Issuance of stock for acquisitions                                              |  |                                              |     |              |   | 40                                   |  |                           | 144,724 |                                   |   |                                              |   |                |         |       |  
|Exercise of stock options and other                                             |  |                                              |     |              |   | 40                                   |  |                           | 11,749  |                                   |   |                                              |   |                |         |       |  
|Deferred compensation, related to the
      issuance of   stock options         |  |                                              |     |              |   |                                      |  |                           | 78,725  |                                   |   | (78,725                                      | ) |                |         |       |  
|Amortization of deferred
    compensation                                       |  |                                              |     |              |   |                                      |  |                           |         |                                   |   | 58,552                                       |   |                |         |       |  
|Foreign currency translation
    adjustment                                     |  |                                              |     |              |   |                                      |  |                           |         |                                   |   |                                              |   |                |         |       |  
|Income tax benefit from employee
      stock   transactions                     |  |                                              |     |              |   |                                      |  |                           | 5,157   |                                   |   |                                              |   |                |         |       |  
|Gain related to issuance of stock in
      subsidiary                           |  |                                              |     |              |   |                                      |  |                           |         |                                   |   |                                              |   |                | 52,025  |       |  
|Shares contributed to employee benefit
      plans                              |  |                                              |     |              |   |                                      |  |                           | 4,097   |                                   |   |                                              |   |                |         |       |  
|Dividends on preferred stock
         Cumulative Convertible, $1.00 per share  |  |                                              |     |              |   |                                      |  |                           |         |                                   |   |                                              |   |                | (690    | )     |  
|Net loss                                                                        |  |                                              |     |              |   |                                      |  |                           |         |                                   |   |                                              |   |                | (98,614 | )     |  
|                                                                                |  |                                              |     |              |   |                                      |  |                           |         |                                   |   |                                              |   |                |         |       |  
|Balances at December 31, 2001                                                   |  | $                                            | 690 |              | $ | 701                                  |  | $                         | 571,912 |                                   | $ | (34,055                                      | ) | $              | (57,239 | )     | $
|                                                                                |  |                                              |     |              |   |                                      |  |                           |         |                                   |   |                                              |   |                |         |       |  

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

58

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

Note 1. Summary of Significant Accounting
Policies

Nature of
Operations.The Titan Corporation (the
"Company" or "Titan") is a diversified technology company whose business is to
create, build and launch technology-based businesses from technologies developed
for the government. The Company groups its businesses into five business
segments  Titan Systems, Titan Wireless, Software Systems, Emerging Technologies and Businesses and the SureBeam
business, which was discontinued on October 16, 2001.  Titan Systems, the Company's core government business, provides
information technology and communications solutions, services and products for
defense, intelligence, and other U.S. and allied government agencies. Titan
Wireless provides satellite-based and wireless-based communication services and
systems which provide cost-effective voice, data and Internet
services in developing countries. Software Systems is a
total services provider ("TSP") of information technology services and software product
applications for its customers' business and governmental functions, including
retailing, finance, accounting, customer billing and collection, contract
management, supply chain management and equipment monitoring and maintenance primarily in
four vertical markets:  utility/municipality, manufacturing and logistics, retail and transportation.
SureBeam provides electronic food irradiation systems and services for the food
industry. The Emerging Technologies and Businesses segment develops commercial
applications and businesses from technologies created for the government by the
Company.

On March 16, 2001, SureBeam
Corporation, Titan's subsidiary that provides electronic food irradiation systems and
services, completed an initial public offering ("IPO") of 6,700,000 shares of
Class A common stock at a price of $10 per share. On October 16, 2001,
Titan adopted a definitive plan to spin off SureBeam in the form of a tax-free
dividend to Titan shareholders within the next 12 months from that date. The
plan involves filing a letter ruling request with the Internal Revenue Service
("IRS") seeking approval of the tax-free distribution. Titan filed the letter
ruling request and intends to execute the spin off as soon
as practical following the receipt of a favorable ruling and all required third party consents. Titan has historically
reported the SureBeam business as a separate segment. In accordance with
Accounting Principles Board Opinion No. 30, "Reporting the Results of
OperationsReporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions," the
consolidated financial statements of Titan have been restated to reflect
SureBeam as a discontinued business.

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

Principles of
Consolidation.The consolidated financial
statements include the accounts of Titan and its subsidiaries. All significant
intercompany transactions and balances have been eliminated. From time to time,
the Company makes investments in joint ventures which may involve international
locations and operations. Management evaluates its investment in each joint
venture on an individual basis for purposes of determining whether or not
consolidation is appropriate. Investments in such ventures are generally
consolidated in instances where the Company retains control through
decision-making ability and generally a greater than 50% ownership interest. In
the absence of such factors, the Company generally accounts for these
investments under the cost or equity method, depending upon management's
evaluation of the Company's ability to exercise and retain control.

On February 25, 2000, the Company
consummated a merger with Advanced Communication Systems, Inc. ("ACS") in a
stock-for-stock, pooling of interests transaction (see Note 2). On June 26,
2000, the Company consummated a merger with AverStar, Inc. ("AverStar") in a
stock-for-stock, pooling of interests transaction (see Note 2). The accompanying
consolidated financial statements have been restated to reflect these
acquisitions for all periods presented.

59

---

Minority Interest in
Subsidiaries.Minority interest in
subsidiaries consists primarily of equity securities issued in 2000 by the
Company's subsidiary, Cayenta, Inc., which is the ongoing operations of the
Software Systems business, and equity securities issued in 2000 and 2001 by the
Company's SureBeam subsidiary. The Company owned substantially all of the voting
equity of Cayenta and SureBeam both before and after the transactions. The
Company records minority interest to reflect the portion of the earnings or
losses of majority-owned operations which are applicable to the minority
interest partners. The minority interest percentages of Cayenta and SureBeam are
approximately 24.3% and 19.9%, respectively, as of December 31, 2001. The
minority interest portion of SureBeam's losses is reflected in the loss from
discontinued operations.

Foreign Currency
Translation.The financial statements of
certain of the Company's foreign subsidiaries are measured using the local
functional currency. Assets and liabilities of these subsidiaries are translated
at exchange rates in effect as of the balance sheet date. Revenues and expenses
are translated at average rates of exchange in effect during the year. The
resulting cumulative translation adjustments have been recorded as a separate
component of stockholders' equity. Foreign currency transaction gains and losses
are included in consolidated net income.

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

Revenue
Recognition.A majority of the Company's
revenue, both government and commercial, is derived from products manufactured
and services performed under cost-reimbursement, time-and-materials, and
fixed-price contracts wherein revenues are generally recognized as services are
performed, using the percentage-of-completion method, which includes revenues
recognized as units are delivered. Total estimated costs are based on
management's assessment of costs to complete the project based upon evaluation
of the level of work achieved and costs expended to date. Estimated contract
losses are fully charged to operations when identified.

The Company's Software Systems segment
also generates revenues from licensing the rights to use its software products
primarily to end users. This segment further generates revenues from
post-contract support (maintenance), consulting and training services performed
for customers who license its products.

Revenues from software license
agreements are recognized currently, provided that all of the following
conditions are met:  a noncancelable license 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 the risk of concession is deemed remote, and no other significant vendor
obligations exist. Revenues from maintenance services are recognized ratably
over the term of the maintenance period, generally one year. Maintenance
revenues which are bundled with license agreements are unbundled using vendor
specific objective evidence.

As most of the Company's revenue
recognition practices are in accordance with AICPA Statement of Position 81-1
"Accounting for Performance of Construction-Type and Certain Production-Type
Contracts ("SOP 81-1") and Statement of Position 97-2 "Software Revenue
Recognition" ("SOP 97-2"), the adoption of Securities and Exchange Commission
("SEC") Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in
Financial Statements" in 2000 had no material impact on the Company's financial
statements.

Deferred
Revenues.Included in other accrued
liabilities are deferred revenues which consist principally of customer deposits
and payments for software maintenance agreements with customers whereby the
Company receives payment in advance of performing the service. Revenue from
these contracts is recognized ratably over the contract period.

60

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Cash
Equivalents.All highly liquid
investments purchased with an original maturity of three months or less are
classified as cash equivalents.

Unbilled Accounts
Receivable.Unbilled accounts receivable
are included in accounts receivable and include work-in-process which will be
billed in accordance with contract terms and delivery schedules, as well as
amounts billable upon final execution of contracts, contract completion,
milestones or completion of rate negotiations. Generally, unbilled accounts
receivable are expected to be collected within one year. Payments to the Company
for performance on certain U.S. Government contracts are subject to audit by the
Defense Contract Audit Agency. Revenues have been recorded at amounts expected
to be realized upon final settlement.

Concentration of
Risk.As the Company expands its business
into international markets and developing countries, certain accounts receivable
may be exposed to credit risk due to political and/or economic instability in
these areas. To mitigate credit risk in foreign countries, the Company generally
denominates its foreign contracts in U.S. dollars and requires payment primarily
in the form of stand-by letters of credit, advance deposits, or wire transfer,
prior to shipment. In addition, management
believes that the appropriate insurance policies are in place to cover risk related
to loss of equipment in certain foreign countries.

A majority of the Company's total
revenues are from U.S. government contracts. Any cancellations or modifications
of our significant contracts or subcontracts, or failure by the U.S. government
to exercise an option period relating to those contracts or subcontracts, could
adversely affect the Company's financial condition and results of operations in
the short- and long-term. A significant and continuing decline in U.S. defense and other federal
agency budgets also may negatively impact our business. Although we bid for and
are awarded long-term U.S. government contracts and subcontracts, the U.S.
government only funds these contracts on an annual basis, and many of the
Company's contracts and subcontracts include option years. The U.S. government
may cancel these contracts at any time without penalty or may change its
requirements, programs or contract budget, and generally has the right not to
exercise option periods. The U.S. Congress may decline to appropriate funds
needed to complete the contracts awarded to us or the prime contractor. On our
subcontracts, we generally do not control the prime contractor's allocation of
resources. We also depend upon the prime contractor to perform its obligations
on the primary government contract. In addition to contract cancellations and
declines in agency budgets, the Company's financial condition and results of
operations may be adversely affected by:

| |  | budgetary constraints affecting U.S. government spending generally, and
  changes in fiscal policy or available funding;
|- |  | ------------------------------------------------------------------------------------------------------------------------
| |  | curtailment of the U.S. government's use of technology services
  providers;                                            
| |  | the adoption of new laws or regulations;                                                                                
| |  | U.S. government shutdowns, such as that which occurred during the U.S.
  government's 1996 fiscal year;                 
| |  | competition and consolidation in our business areas; and                                                                
| |  | general economic conditions.                                                                                            

These or other factors could cause
government agencies to reduce their purchases under contracts, to exercise their
right to terminate contracts or not to exercise options to renew contracts. Any
of these actions could have a material adverse effect on our business, financial
condition and results of operations.

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

61

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Property and
Equipment.Property and equipment are
stated at cost. Depreciation is provided using the straight-line method, with
estimated useful lives of 5 to 40 years for buildings, 2 to 40 years for
leasehold improvements and 3 to 10 years for machinery and equipment and
furniture and fixtures. Certain machinery and equipment in the Company's medical
sterilization and food irradiation businesses is depreciated based on units of
production.

Goodwill and Other Acquired
Intangibles.The excess of the cost over
the fair value of net assets of purchased businesses ("goodwill" and/or
"acquired intangibles") has been amortized on a straight-line basis over varying
lives ranging from 1 to 40 years. The Company periodically re-evaluates the
original assumptions and rationale utilized in the establishment of the carrying
value and estimated lives of its goodwill and acquired intangibles. The criteria
used for these evaluations include management's estimate of the asset's
continuing ability to generate positive income from operations and positive cash
flow in future periods as well as the strategic significance of the intangible
asset to the Company's business objectives.

Impairment of Long-Lived
Assets.Periodically, the Company reviews
for possible impairments its long-lived assets and certain identifiable
intangibles to be held and used. Included in the Company's reviews of long-lived assets
are the Company's investments in emerging businesses, which are subject to risks associated
with developing and commercializing businesses, which include technology development, product and/or service
marketability, and adequate capital funding. Whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be fully recoverable,
asset values are adjusted accordingly. In evaluating whether an asset impairment
exists, the Company compares the carrying value of the asset to the estimated
undiscounted cash flows. If an impairment is deemed to exist, the asset's
carrying value is adjusted to the present value of its estimated future cash
flows.

Stock-Based
Compensation.The Company has elected to
adopt the disclosure only provisions of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123").
Accordingly, the Company will continue to account for its stock-based
compensation plans under the provisions of APB No. 25.

Income Taxes.The Company accounts for income taxes under Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"), which requires the use of the liability method of accounting for deferred
income taxes. Under this method, deferred income taxes are recorded to reflect
the tax consequences on future years of differences between the tax bases of
assets and liabilities and their financial reporting amounts at each year-end.
If it is more likely than not that some portion or all of a deferred tax asset
will not be realized, a valuation allowance is recognized.

Capitalized Software.The Company capitalizes certain software costs, in accordance with Statement of Financial Accounting Standards
("SFAS") No. 86, "Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed," after
technological feasibility has been established.  Capitalized costs are amortized based on current and future
revenue for each product with an annual minimum equal to the straight-line amortization over the remaining
estimated economic life of the product.  As of December 31, 2001, capitalized software, net of accumulated
amortization was approximately $10.0 million.

Per Share
Information.The Company computes
earnings per share based on the provisions of Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" ("SFAS 128").

62

---

The following data summarize information
relating to the per share computations for continuing operations before extraordinary loss:

For the Year Ended
      December 31, 2001Income
      (Loss)(Numerator)
    
    Shares (000's)
      (Denominator)
    
    Per-Share AmountsLoss from continuing operations
    
    $
    (14,198
    )Less preferred stock dividends
    
    
    (690
    )Effect of minority interests
    
    
    (4,083
    )Basic EPS:Loss from continuing operations available to
      common stockholders
    
    $
    (18,971
    )
    58,793
    
    $
    (.32
    )Diluted EPS:
    
    
    same as basicFor the Year Ended
      December 31, 2000Income
      (Loss)(Numerator)
    
    Shares (000's)
      (Denominator)
    
    Per-Share AmountsLoss from continuing operations
    
    $
    (12,089
    )Less preferred stock dividends
    
    
    (692
    )Effect of minority interests
    
    
    (3,294
    )Basic EPS:Loss from continuing operations available to
      common stockholders
    
    $
    (16,075
    )
    52,717
    
    $
    (.30
    )Diluted EPS:
    
    
    same as basicFor the Year Ended
      December 31, 1999Income
      (Numerator)
    
    Shares (000's)
      (Denominator)
    
    Per-Share
AmountsIncome from continuing operations
    
    $
    43,533Less preferred stock dividends
    
    
    (695
    )Basic EPS:Income from continuing operations available
      to common stockholders
    
    
    42,838
    
    47,094
    
    $
    .91Effect of dilutive securities:Stock options
    
    
    
    
    2,650
    
    
    (.05
    )Debentures
    
    
    769
    
    4,392
    
    
    (.05
    )Diluted EPS:Income from continuing operations available
      to common stockholders plus assumed conversions
    
    $
    43,607
    
    54,136
    
    $
    .81


63

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

In 2001, approximately 459,900 shares,
and in 2000 and 1999, approximately 461,200 shares of common stock that could
result from the conversion of cumulative convertible preferred stock and
5,038,000 shares that could result from the conversion of the remarketable
term income deferrable equity securities (HIGH TIDES) in 2001 and 2000, were not
included in the computation of diluted EPS, as the effect would have been
anti-dilutive on the results of continuing operations. The effect of minority
interests outstanding in 1999 did not affect the above computation.

Comprehensive
Income.The Company has adopted Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
("SFAS 130"). This statement establishes standards for reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. The objective of the statement is to report a measure of
all changes in equity of an enterprise that result from transactions and other
economic events of the period other than transactions with owners. Comprehensive
income is the total of net income and all other nonowner changes in equity.

During the years ended December 31,
2001, 2000 and 1999, the Company's only element of other comprehensive income
resulted from foreign currency translation adjustments in 2001, which are
reflected in the consolidated statements of changes in stockholders' equity as
foreign currency translation adjustments within accumulated other comprehensive
income.

Business
Segments.The Company reports its
business segment information in accordance with Statement of Financial
Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and
Related Information" ("SFAS 131"). In the fourth quarter of 2000, the Company
formed a new business unit, Titan Scan Technologies within its Emerging
Technologies and Businesses segment. The new business unit encompasses all of
Titan's medical product sterilization operations, which were previously a part
of SureBeam. This realignment conforms to the provisions of SFAS 131. As a
result, all prior period data have been restated to reflect this change in
Titan's segment reporting.

Gain on Issuance of Stock in
Subsidiary.In 2000, the Company became
subject to the provisions of SEC Staff Accounting Bulletin No. 51
("SAB 51") to reflect the issuance of approximately 5% of Cayenta
Class A Common Stock in connection with an acquisition. In accordance with
the provisions of SAB 51, the transaction is reflected as an equity
transaction, and the net effect of the transaction is reflected in the
accompanying Consolidated Statement of Stockholders' Equity as "Gain related to
issuance of stock in subsidiary." In 2001, as a result of the SureBeam initial public
offering and in accordance with SAB 51, Titan has
recorded a gain of $52.0 million related to its equity interest in SureBeam
reflected in the accompanying Consolidated Statement of Stockholders' Equity as
"Gain related to issuance of stock in subsidiary".

64

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New Accounting
Standards. In June 2001, the
Financial Accounting Standards Board ("FASB") issued two new pronouncements:
Statement of Financial Accounting Standards ("SFAS") No. 141, "Business
Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS
No. 141 requires that the purchase method of accounting be used for all
business combinations initiated after June 30, 2001 and that the use of the
pooling-of-interests method is no longer permitted. SFAS No. 142 requires that
upon adoption, amortization of goodwill will cease and instead, the carrying
value of goodwill will be evaluated for impairment at least annually using a
fair value test. Identifiable intangible assets will continue to be amortized
over their useful lives and reviewed at least annually for impairment using a
method appropriate to the nature of the intangible asset. The Company implemented the business acquisition components of
 SFAS No.141 on July 1, 2001 and will implement SFAS No. 142 at the
beginning of its next fiscal year, January 1, 2002. In February 2002, the
Company obtained appraisals of the purchase price allocations of the Datron
Systems, Inc. ("Datron") and BTG, Inc. ("BTG") acquisitions from independent
valuation specialists. The accompanying balance sheet reflects the allocation
between goodwill and other intangible assets, as determined by the independent
valuation. The amortization expense related to the intangible assets will
commence in the first quarter of 2002, on a prospective basis. The Company is
evaluating the impact that the adoption SFAS No. 142 may have and has not yet
determined the full effect that the adoption will have on its consolidated
financial position or results of operations. Goodwill amortization for the years
ended December 31, 2001, 2000 and 1999 was $26.6 million, $27.5 million and $8.6
million, respectively. Commencing January 1, 2002, goodwill will no longer
be amortized.

In August 2001, the FASB issued SFAS No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No.
144 supersedes SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and the
accounting and reporting provisions of APB Opinion No. 30, "Reporting the
Results of OperationsReporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions," for the disposal of a segment of a business (as previously
defined in that Opinion). The provisions of SFAS No. 144 are effective for
financial statements issued for fiscal years beginning after December 15, 2001.
The Company does not expect the adoption of SFAS No. 144 to have a material
impact on its consolidated financial position or results of operations. As
discussed above, the Company has reported the discontinuance of its SureBeam
segment under the provisions of APB Opinion No. 30.

Also in August 2001, the FASB issued
SFAS No. 143, "Accounting for Asset Retirement Obligations". This statement
addresses financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs. It applies to (a) all entities and (b) legal obligations associated with
the retirement of long-lived assets that result from the acquisition,
construction, development and/or normal operation of long-lived assets, except
for certain obligations of lessees. This statement amends SFAS No. 19,
"Financial Accounting and Reporting by Oil and Gas Producing Companies," and is
effective for financial statements issued for fiscal years beginning after June
15, 2002. Management does not believe that the adoption of this statement will
have a material impact on the Company's consolidated financial position or results of
operations.

Note 2. Acquisitions and Investments

On November 27, 2001, the Company
completed its acquisition of BTG, Inc. ("BTG"), a provider of information
technology solutions and services primarily to the U.S. military and other
government agencies, for $13.35 per BTG share. Titan issued approximately
4,024,100 shares of its common stock and cash of $23.4 million for all the
outstanding shares of BTG common stock and assumed BTG stock options
representing approximately 734,200 shares of Titan common stock, based on an
exchange ratio of approximately 0.5380 shares of Titan stock for each share of
BTG common stock. Titan also paid off $37.1 million of BTG's outstanding debt as of
the closing date. The transaction was accounted for as a purchase. In connection
with the determination of the fair value of assets acquired and pursuant to the
provisions of SFAS No. 141, the Company has valued
contracts in process at contract price, minus the estimated costs to complete and
an allowance for the normal industry profit on its effort to complete such
contracts which amounted to $9.2 million. This adjustment has been reflected in
the consolidated balance sheet as an increase to goodwill and a corresponding
offset to unbilled receivables. The Company recognized approximately $0.5
million in the year ended December 31, 2001, as a reduction of costs, with the
remaining $8.7 million to be recorded as a reduction of costs in future periods
as work on certain contracts is performed, which is estimated to continue through
fiscal 2016.

65

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In February 2002, the Company had an
independent valuation report completed for the purchase price allocation for the
BTG acquisition, which determination was made to allocate $126.6 million to
goodwill and $9.8 million to intangible assets. The intangible assets consist of
backlog and customer relationships of $2.2 million and $7.6 million,
respectively, which will be amortized over the estimated useful lives of 1
year and 2 to 5 years, respectively. The consolidated balance sheet reflects this
allocation between goodwill and intangible assets. The amortization expense
related to the intangible assets will commence in the first quarter of
2002.

On September 28, 2001, the Company
completed the acquisition of the remaining shares of Datron Systems Incorporated
("Datron"), a provider of radio and satellite-based communication systems and
broadband communication products for government and commercial markets, that
were acquired through a stock for stock exchange tender offer that closed in
August 2001. Titan issued approximately 2.3 million shares of its common stock
for all the outstanding shares of Datron common stock and assumed Datron stock
options representing approximately 437,000 shares of Titan common stock, based
on an exchange ratio of approximately .81919 shares of Titan common stock for
each share of Datron common stock. The transaction was accounted for as a
purchase. In connection
with the determination of fair value of assets acquired and pursuant to the
provisions of SFAS No. 141, the Company has valued
contracts in process at contract price, minus the estimated costs to complete and
an allowance for the normal industry profit on its effort to complete such
contracts, which amounted to $1.4 million. This deferred profit has been reflected in
the accompanying balance sheet as an increase to goodwill. The Company recognized approximately $0.8
million in the year ended December 31, 2001, as a reduction of costs, with the
remaining $0.6 million to be recorded as a reduction of costs in future periods
as work on certain contracts is performed, which is estimated to continue through
fiscal 2002.

In February 2002, the Company had an
independent valuation report completed for the purchase price allocation for the
Datron acquisition, which determination was made to allocate $22.5 million to
goodwill and $5.6 million to intangible assets. The intangible assets consist of
backlog, customer relationships and trademarks and patents of $1.0 million, $3.2 million
and $1.4 million, respectively, which will be amortized over the estimated
useful lives of 1 to 2 years, 10 years and 5 years, respectively. The
consolidated balance sheet reflects this allocation between goodwill and
intangible assets. The amortization expense related to the intangible assets
will commence in the first quarter of 2002.

On March 23, 2001, the Company's
subsidiary, Titan Systems Corporation, consummated an agreement to purchase
certain assets from Maxwell Technologies Systems Division, Inc., a
subsidiary of Maxwell Technologies, Inc., which specializes in research,
development and technical services primarily for military applications. The
purchase price was approximately $11.5 million in cash, subject to
post-closing adjustments and indemnification obligations, less a
$1.7 million holdback, due 180 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 in July 2001 from
Maxwell Technologies, Inc. resulting from the resolution of post-closing working
capital adjustments. Under the agreement, the Company had full recourse to the
seller for all accounts receivable not collected within 180 days of the closing
date. In October 2001, the Company paid approximately $1.5 million in full
satisfaction of the $1.7 million holdback, as adjusted for uncollected accounts
receivable. The transaction was accounted for as a purchase, and the excess of
the purchase price over the estimated fair market value of the net assets
acquired, which had been amortized on a straight line basis over 30 years, was
approximately $6.8 million at December 31, 2001, and is reflected as goodwill in the Company's consolidated balance sheet.

On June 28, 2000, Titan Wireless Africa,
a wholly owned subsidiary of Titan Wireless,
made an investment in Ivoire Telecom S.A. Holding (Ivoire Telecom), acquiring an 80% interest in Ivoire Telecom and through
such interest acquired a majority equity interest in each of the principal
subsidiaries owned by Ivoire Telecom. The initial investment consisted of
$5.0 million in cash subject to certain indemnification obligations,
and an initial $5.5 million working capital note, which was funded shortly after the initial investment, which
were recorded as Other Assets in the Company's consolidated balance sheet. In addition, Titan committed to provide up to a
maximum of $35.0 million for capital expenditures to build out the Ivoire
Telecom network, and Titan has provided equipment with an approximate aggregate value of $4.5 million. At December 31, 2001, this commitment had been substantially
funded for such expenditures. Our aggregate investment in Ivoire Telecom of approximately $50 million has been reflected
in Other Assets in the Company's consolidated balance sheet at December 31,
2001, and has been reported on the cost method.

66

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On June 26, 2000, the Company
acquired AverStar in a stock-for-stock transaction. AverStar provides services
and software focused on the areas of information technology assurance,
information technology development and information technology management and
operations for the mission-critical systems of civilian and defense agencies of
the U.S. government. AverStar's operations are primarily included in the Titan
Systems segment, with certain operations reported in the Emerging Technologies
and Businesses segment. Titan issued approximately 2,850,000 shares of common
stock for all the outstanding shares of AverStar common stock, subject to a
holdback of 180,045 shares held in escrow to cover certain indemnification
obligations, and assumed AverStar stock options representing approximately
551,000 shares of Titan common stock, based on an exchange ratio of
approximately .41415 shares of Titan common stock for each share of AverStar
common stock. In September 2000, 171,645 shares were released from
escrow to AverStar shareholders in fulfillment of the Company's obligations. The
remaining 8,400 shares were released from escrow to AverStar shareholders in November 2000. The
acquisition constituted a tax-free reorganization and has been accounted for as
a pooling of interests.

On June 7, 2000, the Company
completed the acquisition of all of the stock of SenCom Corporation (SenCom) for
a purchase price of approximately $35 million in cash, subject to certain
post-closing adjustments and indemnification obligations, less a
$5.0 million holdback, and less $1.3 million for employee related
expenses to be paid one year from the closing date. Of the $5.0 million
holdback, $3 million was paid in September 2000, and the remaining
$2 million holdback was paid in January 2002, plus accrued interest of $0.2
million. An additional $2 million was paid in September 2000 as a result of
post-closing adjustments. SenCom, included in the Titan Systems segment,
provides information technology services to government customers and specializes
in the engineering and analysis of radar and electro-optical sensors, command
and control system development, computer and network security, and business
process engineering and program management. The transaction was accounted for as
a purchase. The excess of the purchase price over the estimated fair market value of the net
assets acquired, which has been amortized on a straight line basis over
30 years, was approximately $31.7 million at December 31, 2001, and is
reflected as goodwill in the Company's consolidated balance sheet.

In June 2000, e-tenna Corporation was
formed to facilitate the transfer of an antenna technology originally designed
for government and military customers to the commercial wireless market. Titan's
initial investment of approximately $0.6 million in e-tenna in 2000 consisted of its
contribution of certain intellectual property and patents. As of December 31, 2001, Archery
Capital and other investors invested a total of $9.9 million for common and voting preferred stock,
and Titan invested $5.8 million in non-voting preferred stock and $0.4 million in common stock. Through February 28, 2002,
Titan paid $1.9 million in satisfaction of its commitment to acquire additional non-voting preferred stock.
As of December 31, 2001, Titan's investment of approximately $6.8 million is included in the
accompanying consolidated balance sheet in Other Assets, and is reflected under the cost
method. As of February 28, 2002, Titan's investment in e-tenna represented approximately 58.7% of
the total equity of e-tenna and approximately 29.1% of the voting power of e-tenna.

On March 30, 2000, the Company
completed the acquisition of all of the stock of LinCom Corporation (LinCom) for
a purchase price of approximately $23 million in cash, subject to certain
post-closing adjustments and indemnification obligations, less a $1 million
holdback and a $2 million promissory note. The $1 million holdback was
due approximately 60 days after the closing date, and approximately $1.0 million
was paid in fulfillment of the Company's obligations, and the
$2 million note due one year after the closing date with accrued interest
at 7% was paid in March 2001. LinCom is a developer of wireless communications
and information systems for both commercial and government customers. The
operations of LinCom are primarily reported in the Titan Systems segment. The
commercial applications within LinCom are reported in the Emerging Technologies
and Businesses segment. The transaction was accounted for as a purchase. The excess of the
purchase price over the estimated fair market value of the net assets acquired,
which has been amortized on a straight line basis over 30 years, was
approximately $20.2 million at December 31, 2001, and is reflected as
goodwill in the Company's consolidated balance sheet.

On March 24, 2000, the Company
completed the acquisition of all the outstanding stock of Pulse Engineering
(Pulse) for a purchase price of approximately $27.4 million in cash,
subject to certain post-closing adjustments and indemnification obligations,
less a $1 million holdback placed in escrow and a $2 million deferred
payment due in March 2001. The holdback was paid to Pulse shareholders in
October 2000 in fulfillment of the Company's obligations, and the
$2 million deferred payment, plus interest of 8%, was paid by
March 31, 2001. Pulse provides specialized information security and signal
intelligence systems and services to the intelligence community and is included
in the Titan Systems segment. The transaction was accounted for as a purchase. The excess of the
purchase price over the estimated fair market value of the net assets acquired,
which has been amortized on a straight line basis over 30 years, was
approximately $23.2 million at December 31, 2001, and is reflected as goodwill in the Company's consolidated balance sheet.

67

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On March 10, 2000, AverStar
acquired all of the outstanding shares of the common stock of MJR Associates,
Inc. (MJR), which provides information technology staffing solutions to major
corporations. Consideration paid for the acquisition amounted to
$9.6 million in cash plus contingent consideration up to a maximum of
$3.75 million based upon fiscal year 2000 performance, which amount was
paid in 2001. The acquisition was accounted for as a purchase. The excess of the purchase price over the
estimated fair market value of the net assets acquired, including an accrual for
the contingent consideration, has been amortized on a straight line basis over
20 years, was approximately $11.2 million at December 31, 2001, and is
reflected as goodwill in the Company's consolidated balance sheet.

On February 25, 2000, the Company
acquired Advanced Communication Systems, Inc. (ACS), a government
information technology services company, in a stock-for-stock transaction. ACS'
operations are included in the Titan Systems segment. Titan
issued approximately 5,082,000 shares of common stock for all the outstanding
shares of ACS common stock and assumed ACS stock options representing
approximately 263,000 shares of Titan common stock, based on an exchange ratio
of approximately .57 shares of Titan common stock for each share of ACS
common stock. The acquisition constituted a tax-free reorganization and has been
accounted for as a pooling of interests.

Effective January 1, 2000, ACS'
September 30 fiscal year-end was changed to coincide with the Company's
year-end. The 1999 financial statements presented were restated to include the
combined results of operations, financial position and cash flows as if the
merger had occurred at the beginning of the periods presented. A pooling of
interests adjustment has been made in the consolidated statement of cash flows
and consolidated statement of stockholders' equity for the year ended
December 31, 2000, to reflect the activity for ACS in the quarter ended
December 31, 1999, as reported in ACS' 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 $1.4 million.

The separate and combined results of
Titan, ACS and AverStar in 2000 and 1999 are as follows:

Year Ended December 31,
      2000Revenues
    
    Income (Loss) from Continuing
      Operations
    
    Net Income (Loss)Titan
    
    $
    623,325
    
    $
    2,775
    
    $
    30ACS
    
    
    192,841
    
    
    (21,230
    )
    
    (17,249
    )AverStar
    
    
    191,837
    
    
    1,622
    
    
    (1,509
    )$
    1,008,003
    
    $
    (16,833
    )
    $
    (18,728
    )


Year Ended December 31,
      1999Revenues
    
    Income from Continuing
      Operations
    
    Net IncomeTitan
    
    $
    402,804
    
    $
    37,376
    
    $
    31,600ACS
    
    
    218,252
    
    
    3,581
    
    
    3,581AverStar
    
    
    184,336
    
    
    2,576
    
    
    2,576$
    805,392
    
    $
    43,533
    
    $
    37,757


68

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In 1999, the Company or its subsidiaries
acquired Atlantic Aerospace Corporation ("AAEC"), Systems Resources Corporation
("SRC") and Program Support Associates Inc. ("PSA"), all reporting in the
Company's Titan Systems segment, and SFG Technologies Inc. ("SFG"), Assist
Cornerstone Technologies, Inc. ("Assist"), JB Systems, Inc. doing business as
Mainsaver, and Transnational Partners II, LLC ("TNP"), all reporting in the
Company's Cayenta segment, in purchase transactions. In conjunction with the
Mainsaver and Assist acquisitions, approximately $4.3 million of the
purchase price was held back, subject to purchase price adjustments and
indemnification obligations, all of which was paid in 2001, including accrued
interest of $0.2 million, all of which was recorded as an increase to goodwill.
Related to the acquisition of SRC, a $2 million promissory note, subject to post-closing working
capital adjustments and indemnification obligations, was due on June 9, 2000.
The post-closing working capital adjustments and indemnification obligations are
currently in dispute with the stockholders of SRC. Accordingly, the promissory
note has not been paid. Related to the AAEC acquisition, up to an additional $3
million in contingent consideration may be due upon the award of future
contracts. During 2001, approximately $1.2 million of contingent consideration
was paid upon the award of certain contracts. As of December 31, 2001, the
Company estimates that an additional potential $2.2 million including interest, may be paid in 2002 based upon potential contract awards in 2002.

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

Twelve months ended
      December 31,2001
    
    2000(unaudited)Revenues
    
    $
    1,398,395
    
    $
    1,334,367Income (loss) from continuing operations
      before   extraordinary loss
    
    
    (30,826
    )
    
    (5,256
    )Net income (loss)
    
    
    (115,242
    )
    
    (11,985
    )Basic earnings (loss) per
share:Income (loss) from
      continuing operations
      before      extraordinary loss
    
    $
    (0.55
    )
    $
    (0.15
    )Net income (loss)
    
    
    (1.87
    )
    
    (0.26
    )Diluted earnings (loss) per
    share:Income (loss) from
      continuing operations
      before      extraordinary loss
    
    $
    (0.55
    )
    $
    (0.15
    )Net income (loss)
    
    
    (1.87
    )
    
    (0.26
    )


Included in BTG's operating results for
the eleven months ended November 30, 2001 is a charge of approximately $20.8 million consisting
of employee termination costs of approximately $9.0 million, lease termination costs and excess
facilities costs of approximately $2.7 million, impairments for certain assets of $4.4 million,
primarily comprised of costs of BTG's abandoned accounting 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 other
costs of $1.8 million. Revenues in 2001 for Datron were impacted unfavorably by the events that
occurred on September 11, 2001, which negatively impacted demand for Datron's antenna products for
airborne applications, as well as by reduced demand for certain of their products, resulting in reduced
revenues of approximately $12 million..

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The revenues of ACS were impacted in
2000 by a contract termination that occurred in late 1999, prior to Titan's
acquisition, which resulted in reduced revenues of approximately
$31.6 million. AverStar's revenues in 2000 were impacted by the wind-down
of its Year 2000 business in early 2000, which resulted in reduced revenues of
approximately $25.7 million.

Included in the 2000 results from
continuing operations are merger related expenses of $30.5 million and
$8.3 million related to the acquisitions 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 debt extinguishment
of Titan and AverStar's credit facilities, respectively. AverStar's net loss
reflects a loss from discontinued operations of $1.5 million. Included in
ACS' 1999 operating results is a write-off of $3.9 million of capitalized
software costs and a $1.8 million write-off of an uncollected receivable.
All interest expense is reflected in the Titan operating results from the date
of acquisition.

In January 1999, the Company
invested approximately $0.5 million for a 19.9% ownership interest in a
joint venture with Sakon. In July 2000, Titan loaned Sakon $15 million
pursuant to a loan agreement. In October 2000, Titan exercised
its option pursuant to the loan agreement to convert amounts owed under the loan into
additional equity interest of 30.0% of Sakon, bringing the total equity interest
in Sakon to 49.9%. At such time, the amount outstanding of $15 million
under the loan was converted to purchase consideration as the initial payment
due under the terms of the agreement and recorded as goodwill. Under the terms
of the agreement, an additional $12.5 million of consideration was due and
payable upon certain revenue targets being attained. These targets were met in
January 2001, and a $5.0 million installment was made in the second quarter of
2001, a $3.75 million installment was made in the first quarter of 2002, and the
remainder is expected to be satisfied by issuance of Titan common stock. The
excess of the purchase price over the estimated fair market value of the net
assets acquired, which has been amortized over 20 years, was approximately $26.8
million at December 31, 2001. Titan consolidates the operating results of Sakon
in accordance with the joint venture agreement which assigns 100% of the joint
venture revenues and operating results to Titan. Titan will continue to
consolidate the operating results of Sakon until a liquidity event, defined as
an initial public offering or the sale of Sakon.

In September 1999, together with
Sempra Energy Information Solutions, a subsidiary of Sempra Energy, and modis, a
company that focuses on configuring customers' software applications, Cayenta
established Soliance, LLC, a joint venture that markets and delivers information
technology systems and solutions, including TSP offerings, to the utility
industry. Cayenta owns a 10% equity interest in Soliance and has a management
services agreement with Soliance under which it provides TSP services to
Soliance's customers. At December 31, 2000, the Company's investment of $5
million in this joint venture was included in Other Assets. The investment was
accounted for under the cost method. During the first quarter of 2001, an
impairment charge of $5.3 million was taken for the Company's investment in
Soliance, as the fair value was deemed to be less than the carrying value. See
Note 3 for further discussion.

In connection with the determination of
the fair value of assets acquired in connection with acquisitions in 2000 and
1999, and pursuant to the provisions of SFAS No. 141, the Company has valued acquired contracts in process at contract
price, minus the estimated costs to complete and an allowance for the normal
industry profit on its effort to complete such contracts, which amounted to
$10.9 million. This adjustment has been reflected in the accompanying balance
sheet as an increase to goodwill and a corresponding increase to deferred
profit. The Company recognized approximately $1.4 million, $6.9 million and $2.6
million as a reduction of costs in 2001, 2000 and 1999, respectively.

70

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Note 3. Acquisition and Integration Related Charges and Other

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

December 31,2001
    
    2000
    
    1999Employee termination costs
    
    $
    8.6
    
    $
    7.6
    
    $
    3.1Elimination of duplicate facilities and assets
    
    
    4.6
    
    
    4.1
    
    
    3.4Acquisition related transaction costs
    
    
    
    
    
    11.6
    
    
    Other costs
    
    
    1.8
    
    
    2.7
    
    
    Non-cash asset impairments
    
    
    18.8
    
    
    15.5
    
    
    2.1Pre-acquisition contingencies
    
    
    3.0
    
    
    
    
    
    4.5Net cash proceeds on sale of investment
    
    
    
    
    
    (2.1
    )
    
    (41.8
    )$
    36.8
    
    $
    39.4
    
    $
    (28.7
    )


At December 31, 2001, a total of $1.3 million of liabilities remained on the consolidated balance sheet in Other
Accrued Liabilities, related primarily to restructuring activities initiated in 2000 and 2001.  We anticipate
that the remaining liabilities will be paid in 2002.

Fiscal 2001 Charges

Acquisition and integration related
charges and other were $36.8 million in 2001, comprised of $2.5 million for
employee termination costs and restructuring costs in Titan Wireless, $21.3
million for the restructuring of Cayenta and $12.2 million related to the
integration of ACS and AverStar and other restructuring and realignment
activities in Titan Systems and $0.8 million related primarily to employee
termination costs for AverCom.

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

Included in Cayenta's operating results
(which is included in our Software Systems segment) is a charge for $21.3
million related to the restructuring of Cayenta. As a result of reduced
corporate spending on commercial information technology services and e-business
software applications, the Company developed and approved a plan to restructure
the Cayenta business, which included a reduction in workforce of approximately
40 personnel, resulting in a charge of $2.9 million, and the elimination of
duplicate and excess facilities, resulting in a charge of approximately $1.1
million. As a result of management's evaluation of the recoverability of all the
assets of Cayenta, in accordance with Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of", management concluded from this evaluation
that a significant impairment of intangible as well as long-lived assets had
occurred. An impairment charge was required because the estimated fair value was
less than the carrying value of the assets. The impairment charge of $17.3
million was comprised of the following: $5.9 million for fixed assets associated
with Cayenta's network operations center, $1.9 million for capitalized software
designed for B2B exchanges, $2.0 million for prepaid advertising costs, $2.0
million for accounts receivable and $5.3 million for Cayenta's investment in
Soliance, LLC, a joint venture that markets and delivers information technology
systems and solutions to the utility industry, and $0.2 million for certain
other assets. In addition, employee termination costs of $0.8 million were
recorded in the Emerging Technologies and Businesses segment related to a
reduction in workforce in the Company's AverCom business resulting from the same
economic conditions resulting in reduced corporate information technology
spending which impacted Cayenta.

71

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The $12.2 million charge in Titan
Systems is primarily related to the integration of ACS and AverStar, and a
realignment of the business around the major categories of customers of Titan
Systems, which together resulted in a reduction in employee workforce of
approximately 50 employees and the closing of several facilities. Included in
these costs is approximately $3.1 million of employee termination
costs, $3.5 million of costs to eliminate duplicate and excess facilities and
assets, $1.1 million of duplicate personnel costs to transition processes and
functions, and $1.5 million of asset impairment costs of certain asset balances.
The recoverability of such balances was impaired due to our exit from a
satellite services business within the Titan Systems segment. Approximately $3.0
million of the charge was related to another subsidiary acquired in a prior year
for contingencies arising from matters pre-existing to Titan's acquisition of
the business. That acquisition was accounted for as a purchase, and the matters
pre-existing Titan's acquisition were resolved in 2001. Unpaid amounts of
approximately $1.3 million as of December 31, 2001 related to excess facilities
and personnel costs which are expected to be paid in 2002.

Fiscal 2000 Charges

Acquisition related charges of
$39.4 million in 2000 include costs of $30.5 million related to the
ACS merger including direct transaction costs of approximately $9.1 million
comprised of accounting, legal, investment banking, financial printing and other
direct costs. Also included in the ACS merger costs was a write-down of
approximately $5.5 million related to the impairment of certain
receivables, for which the realizability of such 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, $3.8 million of costs to eliminate duplicate facilities
and assets and a valuation allowance of $10.0 million against certain
contract receivables provided in connection with certain of the Company's
integration activities, particularly as they relate to conforming ACS to Titan's
accounting policies and procedures, and determining appropriate valuation
allowances against potential contract receivables which may not be realizable
under normal contract reimbursement cycles. Unpaid amounts at December 31,
2000 were paid by December 31, 2001.

Included in acquisition related charges
in 2000 is $8.3 million related to the merger with AverStar. These costs
consisted of approximately $2.5 million of direct transaction costs,
approximately $5.5 million of employee termination costs, and
costs to eliminate duplicate facilities of approximately $0.3 million. The
acquisition related charges in the year ended December 31, 2000 also
include $2.7 million of transaction costs related to the filing of a
registration statement with the Securities and Exchange Commission (SEC) for the
initial public offering of Cayenta which was subsequently withdrawn by the
Company in February 2001. These costs are primarily comprised of direct
transaction costs, including accounting, legal, investment banking, financial
printing, and other direct costs. Also included in acquisition related charges
is a net $2.1 million gain resulting from the final consideration from the
sale of the Company's approximate 8% equity interest in IPivot, which was sold
in October of 1999. Unpaid amounts at December 31, 2000 were paid by
December 31, 2001.

Fiscal 1999 Charges

During the year ended December 31,
1999, the Company recorded acquisition and related charges of
$13.1 million, which include approximately $4.5 million of legal costs
and approximately $8.6 million of integration and restructuring expenses. The
integration and restructuring expenses include $2.1 million related to the
wind-down of our Year 2000 business, consisting primarily of employee
termination costs and lease termination costs, a $2.1 million write-off of
intangible costs to estimated realizable value, approximately $1.0 million for
severance, outplacement and relocation costs related to approximately 31
employees across the Company, and $3.4 million related to the closure and
elimination of leased facilities, primarily duplicate field offices. These
charges were all cash charges, with the exception of the write-off of intangible
costs, and were paid by December 31, 2000.

On October 26, 1999, the Company
received approximately $41.8 million in cash as a result of the acquisition by
Intel Corporation of IPivot, Inc. ("IPivot"), a technology spin-off from
Titan. The cash payment to the Company was for its ownership interest in IPivot
of approximately 8% after the dilutive impact of IPivot stock options, warrants
and other equity investments. In addition, approximately $3 million was
received in October 2000 as final consideration. The income is netted
against the charges discussed above in acquisition related charges and other for
the 1999 and 2000 amounts received.

72

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Note 4. Discontinued Operations

On March 16, 2001, SureBeam
Corporation, Titan's subsidiary that provides electronic irradiation systems and
services, completed an initial public offering ("IPO") of 6,700,000 shares of
Class A common stock at a price of $10 per share. On October 16, 2001,
Titan adopted a definitive plan to spin off SureBeam in the form of a tax-free
dividend to Titan shareholders within the next 12 months from that date. The
plan involves filing a letter ruling request with the IRS seeking approval of
the tax-free distribution. Titan has filed the letter ruling request and intends
to execute the spin off as soon as practical following the receipt of that
ruling. Titan has historically reported the SureBeam business as a separate
segment. In accordance with Accounting Principles Board Opinion No. 30,
"Reporting the Results of OperationsReporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions," the consolidated financial statements of Titan for all
periods presented have been restated to reflect SureBeam as a discontinued
business. At the time Titan adopted 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, primarily comprised of
estimated operating losses to be incurred by SureBeam from the date the plan was
adopted through the estimated disposal date 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 net current assets of discontinued operations.
Management will review this estimate on a periodic basis and revise estimates
when determined necessary, and reflect the effect of those revisions in the
consolidated financial statements.

Revenues and net loss generated by
SureBeam for the year ended December 31, 2001 were $24.2 million and $76.1
million, respectively. Revenues and net income generated by SureBeam for the
year ended December 31, 2000 were $25.2 million and $0.4 million,
respectively. Included in SureBeam's net losses is interest expense of $7.0
million and $3.8 million for the years ended December 31, 2001 and 2000 related
to the promissory note SureBeam had payable to us.

Net current assets of SureBeam of
approximately $13.7 million, which are included in net current assets of discontinued
operations at December 31, 2001, include assets of approximately $51.4 million,
primarily accounts receivable and inventories, net of liabilities of
approximately $37.7 million, which are primarily comprised of the accrual for estimated losses and other accrued liabilities. Net long-term assets of SureBeam of approximately
$58.4 million, which are included in net long-term assets of discontinued operations,
include primarily fixed assets and intangible and other long-term assets.

In November 2000, the Company's Board of
Directors adopted a plan to dispose of the Company's commercial information
assurance and network monitoring businesses. In 1998 and 1997, the Company's
Board of Directors adopted a plan to wind down the Company's access control
systems business and broadband communications business, respectively.
Accordingly, the results of these businesses have been accounted for as
discontinued operations. In addition, the accompanying consolidated financial
statements reflect operations discontinued by certain of the companies acquired
by Titan during 1998 and 2000. All periods presented reflect these specific
operations as discontinued operations. Net current liabilities of discontinued
operations related to these businesses of approximately $0.8 million at December 31,
2001 consist primarily of accrued liabilities of approximately $2.5 million
net of current assets (primarily deferred losses) of approximately $1.7 million.
In accordance with EITF 85-36, "Discontinued Operations with expected Gain and
Interim Operating Losses", all operating losses incurred in the commercial
information assurance and network monitoring businesses from the measurement
date are being deferred until the date of disposal. The liabilities consist of
accruals for contract losses, estimated wind-down costs and costs related to the
closure and elimination of certain leased facilities. Charges of approximately
$1.6 million were made against the accrued liabilities in 2001. The liabilities
were increased by a $5.6 million charge in 1999 based on management's
review of estimated future wind-down costs. Management continues to
assess the estimated wind-down and and/or disposal costs associated with the
businesses, and may from time to time adjust the allowance for such costs
accordingly. As of December 31, 2001, management believes that the current accrual for estimated wind-down costs is adequate.

73

---

Note 5. Other Financial Data

Following are details concerning certain
balance sheet accounts:

At December 31,2001
    
    2000Accounts Receivable:U.S. Government  billed
    
    $
    263,837
    
    $
    205,618U.S. Government  unbilled
    
    
    45,720
    
    
    31,818Trade
    
    
    129,816
    
    
    96,135Less allowance for doubtful
accounts
    
    
    (8,475
    )
    
    (4,419
    )$
    430,898
    
    $
    329,152Inventories:Materials
    
    $
    15,739
    
    $
    7,120Work-in-process
    
    
    9,466
    
    
    8,651Finished goods
    
    
    3,926
    
    
    3,949$
    29,131
    
    $
    19,720Property and Equipment:Machinery and equipment
    
    $
    127,806
    
    $
    113,197Furniture and fixtures
    
    
    30,143
    
    
    21,908Land, buildings and leasehold
      improvements
    
    
    38,868
    
    
    22,797Construction in progress
    
    
    20,013
    
    
    10,259216,830
    
    
    168,161Less accumulated depreciation and
      amortization
    
    
    (115,777
    )
    
    (89,446
    )$
    101,053
    
    $
    78,715


Supplemental disclosures of cash flow
information:

2001
    
    2000
    
    1999Noncash investing and financing
      activities:Stock issued for acquisitions
    
    $
    144,764
    
    $
    
    
    $
    Gain related to issuance of stock in
      subsidiary
    
    
    52,025
    
    
    2,825
    
    
    Income tax benefit from employee
      stock   transactions
    
    
    5,157
    
    
    1,479
    
    
    892Shares contributed to employee benefit
      plans
    
    
    4,941
    
    
    2,364
    
    
    3,594Extraordinary loss on
      early   extinguishments of debt
    
    
    
    
    
    4,744
    
    
    Equity issued in exchange for
    services
    
    
    
    
    
    2,000
    
    
    Issuance of stock for equity
    interest
    
    
    
    
    
    900
    
    
    Conversion of subordinated debt
    
    
    
    
    
    
    
    
    26,270Stock used for option exercise
    
    
    292
    
    
    
    
    
    Cash paid for interest
    
    $
    38,068
    
    $
    34,828
    
    $
    18,281Cash paid for taxes
    
    
    3,612
    
    
    11,909
    
    
    6,119


74

---

Note 6. Segment Information

Management evaluates the performance of
its operating segments separately to individually monitor the different factors
affecting financial performance. Segment profit or loss includes substantially
all of the segment's direct costs of operations and administration. The Company
manages income taxes on a corporate-wide basis. Thus, the Company evaluates
segment performance based on profit or loss before interest expense, income
taxes and before allocated costs of corporate overhead. Corporate overhead
may include, among other things, costs for financial, accounting,
marketing, administrative and legal activities. The Company typically manages
and evaluates equity investments and related income on a segment level. However,
certain significant investments are managed at the corporate level. Financial
costs, such as gains and losses and interest income and expense, are managed at
the Corporate segment. Consequently, the results of operations of the segments
may not be indicative of the actual results that would be shown in the financial
statements of these segments if prepared on a stand-alone basis.

The Company has historically reported
SureBeam as a separate operating segment. On October 16, 2001, the Company
adopted a definitive plan to spin off SureBeam in the form of a tax-free
dividend to Titan shareholders. In accordance with Accounting Principles Board
Opinion No. 30, "Reporting the Results of OperationsReporting the Effects
of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions," all current and prior year data
have been restated to reflect SureBeam as a discontinued business, and it is no
longer reported as a separate segment.

In the fourth quarter of 2000, the
Company formed a new business unit, Titan Scan Technologies within its Emerging
Technologies and Businesses segment. The new business unit encompasses all of
Titan's medical product sterilization operations, which were previously a part
of SureBeam, which prior to the initial public offering of SureBeam, was reported as part of the results of operations of the SureBeam segment. As a result, all prior period data have been restated to reflect
this change in Titan's segment reporting.

The Titan Systems segment provides
comprehensive information systems solutions and services to U.S. and allied
government defense and intelligence agencies and to civil government agencies
with sophisticated data management, information processing, information fusion
and knowledge-based systems and communications requirements. The Titan Systems
segment also develops and manufactures digital imaging products, electro-optical
systems, threat simulation/training systems, intelligence electronic hardware
and defense communications systems. The Titan Systems segment also installs,
tests and maintains government information systems.

The Titan Wireless segment provides
satellite-based and wireless-based communication systems and services which
provide cost-effective voice, data and Internet services in developing countries, primarily Asia, Africa, the
Middle East and Latin America.

The Software Systems segment is a total
services provider, or TSP, of information technology products and services for
commercial and government customers' business functions, including retailing,
finance, accounting, customer billing and collection, contract management,
supply chain management and equipment monitoring and maintenance. Also included
in this segment is the Company's Year 2000 business unit, which has been
wound-down.

The Software Systems segment contains
the Company's majority owned subsidiary, Cayenta, Inc. The Company recorded
a $2.7 million charge in 2000 related to a registration statement for the
initial public offering of Cayenta which was withdrawn in February 2001.

The Emerging Technologies and Businesses
segment includes several businesses which apply the Company's proprietary
knowledge and core competencies to create commercial technology applications or
individual businesses, including the Company's investment in an antenna business, e-tenna, its
wireless networking chip business, LinCom Wireless, its information technology
consulting business, AverCom, and its medical products sterilization systems and
services business, Titan Scan Technologies.

Substantially all of the Company's
operations are located in the United States. Export and foreign revenues
amounted to approximately $74.0 million, $66.9 million and $33.3 million in
2001, 2000 and 1999, respectively, primarily to countries in Africa, Asia,
Europe and South America. Substantially all international sales are denominated
in U.S. dollars.

75

---

The following tables summarize industry
segment data for 2001, 2000 and 1999.

2001
    
    2000
    
    1999Revenues:Titan Systems
    
    $
    918,978
    
    $
    796,202
    
    $
    689,513Titan Wireless
    
    
    92,748
    
    
    81,450
    
    
    27,325Software Systems
    
    
    58,283
    
    
    77,435
    
    
    45,922Emerging Technologies and
      Businesses
    
    
    62,043
    
    
    52,916
    
    
    42,632$
    1,132,052
    
    $
    1,008,003
    
    $
    805,392


Sales to the United States Government,
including both defense and non-defense agencies, and sales as a subcontractor as
well as direct sales, aggregated approximately $905.9 million in 2001, $766.5
million in 2000 and $677.5 million in 1999. Inter-segment sales were not
significant in any year.

2001
    
    2000
    
    1999Operating Profit (Loss):Titan Systems
    
    $
    63,564
    
    $
    28,462
    
    $
    43,469Titan Wireless
    
    
    5,219
    
    
    11,644
    
    
    5,063Software Systems
    
    
    (37,438
    )
    
    (18,028
    )
    
    6,962Emerging Technologies and
      Businesses
    
    
    1,190
    
    
    6,683
    
    
    46,590Corporate
    
    
    (18,954
    )
    
    (16,290
    )
    
    (14,417
    )$
    13,581
    
    $
    12,471
    
    $
    87,667


Operating results for the Titan Systems,
Titan Wireless, Software Systems and Emerging Technologies and Businesses
segments for the year ended December 31, 2001 include acquisition and
intergration related charges and other of $12.2 million, $2.5 million, $21.3
million, and $0.8 million, respectively. Operating results for the Titan Systems
and Software Systems segments for the year ended December 31, 2000, include
acquisition and other charges of $38.8 million and $2.7 million, respectively.
Operating profit in 2000 for Emerging Technologies and Businesses includes the
final $2.1 million gain from the IPivot stock sale as discussed in Note 3, net
of expenses.

Operating profit for the Titan Systems
and Software Systems segments for the year ended December 31, 1999, included
acquisition and other charges of $5.5 million and $2.1 million, respectively. In
addition, 1999 operating results in the Titan Systems segment included a $3.9 million charge related to
previously capitalized software development costs as well as a $1.8 million
charge for an uncollected receivable, both resulting from ACS transactions prior to Titan's acquisition of ACS in 2000. Operating profit for Emerging Technologies
and Businesses for the year ended December 31, 1999, includes the $41.8 million
gain on IPivot stock sale as discussed in Note 3, net of acquisition related
charges and other of $0.2 million related to other business in the Emerging
Technologies segment.

Corporate includes corporate general and
administrative expenses, certain corporate, integration, legal and restructuring
charges ($5.3 million in 1999), and gains or losses from the sale of businesses.
Corporate general and administrative expenses are generally recoverable from
contract revenues by allocation to operations.

76

---

As of
      December 31,2001
    
    2000Identifiable Assets:Titan Systems
    
    $
    806,129
    
    $
    518,712Titan Wireless
    
    
    190,561
    
    
    128,579Software Systems
    
    
    91,068
    
    
    109,211Emerging Technologies and
      Businesses
    
    
    71,846
    
    
    54,164Discontinued Operations,
      net
    
    
    71,258
    
    
    45,955General corporate
      assets
    
    
    127,836
    
    
    94,486$
    1,358,698
    
    $
    951,107


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

2001
    
    2000
    
    1999Depreciation and Amortization of Property
      and   Equipment, Goodwill, and Other Assets:Titan
      Systems
    
    $
    18,381
    
    $
    17,595
    
    $
    16,695Titan
      Wireless
    
    
    4,240
    
    
    1,540
    
    
    607Software
      Systems
    
    
    16,493
    
    
    19,530
    
    
    1,063Emerging
      Technologies and Businesses
    
    
    2,917
    
    
    1,763
    
    
    715Corporate
    
    
    1,060
    
    
    737
    
    
    1,129$
    43,091
    
    $
    41,165
    
    $
    20,209Capital Expenditures:Titan Systems
    
    $
    9,090
    
    $
    9,447
    
    $
    7,839Titan Wireless
    
    
    8,839
    
    
    14,263
    
    
    3,839Software Systems
    
    
    3,827
    
    
    13,430
    
    
    1,002Emerging Technologies and
      Businesses
    
    
    1,730
    
    
    5,357
    
    
    125Corporate
    
    
    1,295
    
    
    1,672
    
    
    832$
    24,781
    
    $
    44,169
    
    $
    13,637


Note 7. Income Taxes

The components of the income tax
provision (benefit) from continuing operations are as follows:

2001
    
    2000
    
    1999Current:Federal
    
    $
    (3,394
    )
    $
    (8
    )
    $
    21,500Foreign
    
    
    1,415
    
    
    
    
    
    State
    
    
    1,955
    
    
    1,227
    
    
    4,831(24
    )
    
    1,219
    
    
    26,331Deferred
    
    
    (323
    )
    
    (4,931
    )
    
    447$
    (347
    )
    $
    (3,712
    )
    $
    26,778


77

---

Following is a reconciliation of the
income tax provision from continuing operations expected (based on the United
States federal income tax rate applicable in each year) to the actual tax
provision on income:

2001
    
    2000
    
    1999Expected Federal tax provision on
      continuing   operations
    
    $
    (7,266
    )
    $
    (6,757
    )
    $
    24,499State income taxes, net of Federal income
      tax   benefit
    
    
    (641
    )
    
    (600
    )
    
    4,243Goodwill amortization
    
    
    4,281
    
    
    6,664
    
    
    378State taxes in separate filing states, net
      of   Federal benefit
    
    
    1,290
    
    
    
    
    
    Change in valuation allowance
    
    
    
    
    
    (8,100
    )
    
    Acquisition charges and other
    
    
    851
    
    
    3,943
    
    
    (660
    )Utilization of NOL not realized in prior
      periods
    
    
    
    
    
    
    
    
    (2,000
    )Foreign losses not benefited
    
    
    731
    
    
    642
    
    
    Foreign tax rate differential
    
    
    120
    
    
    
    
    
    Meals and entertainment
    
    
    229
    
    
    457
    
    
    Other
    
    
    58
    
    
    39
    
    
    318Actual tax provision (benefit) on continuing
      operations
    
    $
    (347
    )
    $
    (3,712
    )
    $
    26,778


The net deferred tax asset as of
December 31, 2001 and 2000, results from the following temporary
differences:

2001
    
    2000Loss carryforward
    
    $
    13,268
    
    $
    9,201Employee benefits
    
    
    22,688
    
    
    12,131Purchased other intangibles
    
    
    (5,638
    )
    
    Tax credit carryforwards
    
    
    1,075
    
    
    1,075Inventory, contract loss and other
      reserves
    
    
    22,142
    
    
    15,083Accounts and unbilled receivables
    
    
    (5,255
    )
    
    (9,558
    )Accrued liabilities
    
    
    5,481
    
    
    2,079Depreciation and amortization
    
    
    (4,494
    )
    
    (1,273
    )Other
    
    
    15
    
    
    69149,282
    
    
    29,429Valuation allowance
    
    
    (3,100
    )
    
    (3,100
    )Deferred tax asset, net
    
    $
    46,182
    
    $
    26,329


Realization of certain components of the
net deferred tax asset is dependent upon the Company generating sufficient
taxable income prior to expiration of loss and credit carryforwards. Although
realization is not assured, management believes it is more likely than not that
the net deferred tax asset will be realized. The amount of the net deferred tax asset considered
realizable, however, could be reduced in the near term if estimates of future
taxable income during the carryforward period are changed. Also, under Federal
tax law, certain potential changes in ownership of the Company may limit annual
future utilization of these carryforwards. As such, the valuation allowance recorded is
provided against certain carryforwards which may not be utilized as well as for certain
preacquisition net operating losses which may not be utilized due to annual limitations. Other accrued liabilities at December
31, 2001 include a deferred tax liability of $2.1 million. Other non-current
liabilities at December 31, 2001 and 2000 include a deferred tax liability
of $9.7 million and $1.6 million, respectively.

78

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Note 8. Debt

On February 9, 2000, the Company
and Titan Capital Trust (the Trust), our wholly owned subsidiary, issued
4 million convertible preferred securities (Remarketable Term Income
Deferrable Equity Securities, or HIGH TIDES) at $50 per security, for a total of
$200 million, with an over-allotment exercised on February 16, 2000
for an additional 1 million securities, for an additional $50 million.
The trust used the proceeds from the sale of the HIGH TIDES to purchase from the
Company 53/4% Convertible Senior Subordinated
Debentures, due February 15, 2030. The debentures have the same financial
terms as the HIGH TIDES. The HIGH TIDES will accrue distributions of
53/4% per annum, with quarterly distributions to be
paid in arrears on February 15, May 15, August 15 and
November 15, commencing May 15, 2000. The trust's ability to pay
distributions on the HIGH TIDES is solely dependent on its receipt of interest
payments from the Company on the debentures. Approximately five years after
issuance of the HIGH TIDES, the HIGH TIDES may be remarketed, which means that a
remarketing agent will attempt to establish an annual distribution rate,
conversion price and redemption features for the HIGH TIDES that are consistent
with a price per HIGH TIDES equal to 101% of its liquidation preference and also
are most favorable to the Company. The 53/4% per annum
rate will be applicable from the date of original issuance to, but excluding the
the reset date. The reset date is any date (a) not later than February 15,
2005, or the final reset date, or, if the day is not a business day, the next
succeeding day, and (b) not earlier than 70 business days prior to
February 15, 2005, as may be determined by the remarketing agent, in its
sole discretion. On or after the reset date, the applicable rate will be the
term rate established by the remarketing agent based on the outcome of the
remarketing. The Company can, on one or more occasions, defer the interest
payments due on the debentures for up to 20 consecutive quarters unless an event
of default under the debentures has occurred and is continuing. The holders of
the HIGH TIDES may convert each security into shares of common stock of Titan at
the initial rate of 1.0076 shares of common stock for each HIGH TIDES
(equivalent to an initial conversion price of $49.625 per share of common
stock). The Company may redeem the debentures in whole or in part, at any time
on or after February 20, 2003 until but excluding the tender notification
date, at a redemption price equal to 101.44% of the principal amount of the
debentures, declining to 100% of the principal amount of the debentures on or
after February 20, 2004, plus any accrued and unpaid interest; and after
the reset date, in accordance with the term call projections, if any,
established in the remarketing or, upon a failed final remarketing, on or after
the third anniversary of the reset date at a redemption price equal to 100% of
the principal amount of debentures, plus any accrued and unpaid interest.

On February 23, 2000, the Company
entered into a credit agreement for $275 million of financing from a
syndicate of commercial banks including Credit Suisse First Boston acting as
Lead Arranger and Administrative Agent, First Union Securities, Inc. acting
as Co-Arranger and Syndication Agent and the Bank of Nova Scotia serving as
Documentation Agent. The credit facility also allowed the Company to increase
total availability by an additional $100 million, if needed, for an
aggregate of $375 million. The credit facility was subsequently amended on
June 1, 2000 to provide for an increase in total availability for an additional $50 million, for an aggregate total of
$425 million. The proceeds of the loan were used in part to refinance
outstanding indebtedness on the Company's $190 million credit facility
arranged by Bank of Nova Scotia in June 1999. The senior credit facility is
secured by substantially all of our and our subsidiaries' assets (other than the
assets of SureBeam and our foreign operations) and guaranteed by substantially all of our subsidiaries. The
$425 million facility is comprised of a six-year senior secured multi-draw
term loan facility in an aggregate principal amount of up to $75 million,
two seven-year senior secured term loan facilities in an aggregate principal
amount of $250 million, and a five-year senior secured revolving credit
facility in an aggregate principal amount of up to $100 million. Loans made
under the multi-draw term loan facility mature on the sixth anniversary of the
closing date of the credit facility, and amortize beginning in the credit
facility's second year, which began with the quarter ended June 30, 2001
and ends with the quarter ending March 31, 2002, as follows: 2.5% quarterly
in the third and fourth quarters of year two of the credit facility, 3.75%
quarterly in year three of the credit facility, 5% quarterly in year four of the
credit facility, 6.25% quarterly in year five of the credit facility, 7.5%
quarterly in the first and second quarters of year six of the credit facility
and 10% in the third quarter of year six of the credit facility and on the sixth
anniversary of the closing date of the credit facility. Loans made under the
term loan facilities mature on the seventh anniversary of the closing date of
the credit facility, and began amortizing in the credit facility's first
year, which began with the quarter ended June 30, 2000 and ended with the
quarter ended March 31, 2001, with the following amortization schedule:
0.25% quarterly for years one through six of the credit facility and 23.5%
quarterly for the first three quarters of year seven of the credit facility and
on the seventh anniversary of the closing date of the credit facility. Under
each of the term loan facilities and the revolving facility, the Company has the
option to borrow at the bank's base rate or at adjusted LIBOR plus, in each
case, an applicable ratio based on the ratio of our total debt to EBITDA
(earnings before interest and taxes and depreciation and amortization). The
agreement contains financial covenants that set maximum debt to EBITDA limits
and require the Company to maintain minimum interest and fixed charge coverages
and levels of net worth. SureBeam Corporation is no longer a guarantor under the
credit facility, and its assets shall no longer be collateral for the senior
credit facility.

79

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At December 31, 2001, deferred
financing costs included in Other Assets related primarily to this facility were
approximately $17.4 million and are being amortized over the term of the
agreement. Upon consummation of this agreement in February 2000, the
Company expensed the deferred financing costs related to the previous agreement
as an extraordinary item in the first quarter of 2000.

At December 31, 2001, total
borrowings outstanding under our credit facility were $330.0 million at a weighted
average interest rate of 5.0%. Commitments under letters of credit were $13.9
million at December 31, 2001, $9.1 million of which reduces availability of the working capital
line, resulting in $75.9 million of availability on our working capital line at December 31, 2001. Of the total borrowings, $12.8 million was short-term.

In November 1996, Titan issued
$34.5 million of 81/4% convertible subordinated debentures
due 2003. On September 7, 1999, the Company announced a call for redemption
on November 2, 1999, of the debentures still outstanding. At the time of
the call, the Company had outstanding debentures in the aggregate principal
amount of approximately $11.6 million. All except $1 of the debentures were
converted prior to the redemption date. Accordingly, the remaining $1 was
redeemed on November 2, 1999. The conversion of the debentures was a
non-cash transaction.

On December 10, 1999, the Company's
wholly owned subsidiary, Titan Africa, Inc. ("Titan Africa"), in connection
with its contract to build a satellite-based telephone system for the national
telephone company of Benin, Africa, the OPT, entered into a Loan Facility
Agreement for up to 30.0 billion Francs CFA (the currency of the African
Financial Community), equivalent to approximately $45.0 million U.S. dollars,
with a syndicate of five banks, with Africa Merchant Bank as the Arranger. This
medium-term financing is a non-recourse loan to Titan Africa which is guaranteed
by the national telephone company of Benin, Africa and secured by the national
telephone company's equipment and revenues related to the project. The facility
has a fixed interest rate of 9.5% and will be repaid in seven equal semi-annual
payments from the net receipts of this project, or by the OPT in the event that
such receipts are not adequate to make these payments, which commenced on
December 31, 2000, and were scheduled to end on December 31, 2003. The Africa
Merchant Bank and Titan Africa have collectively agreed to extend the principal
payments until service revenues reach certain levels, which is anticipated in
mid to late 2002. Approximately $42.5 million was drawn on this facility at
December 31, 2001, and has been used to reduce the related receivable balance due from the
OPT related to subcontract costs.

At December 31, 2001, Titan had
other secured and unsecured debt outstanding under various agreements totaling
$1.4 million short-term and $5.6 million long-term, with interest rates ranging from 6.8% to
9.3%. These agreements mature by 2015.

80

---

Details of long-term debt are as follows:

December 31,2001
    
    2000Senior credit facility
    
    $
    330,000
    
    $
    263,125Non-recourse equipment financing
    
    
    
    
    
    Note payable to bank, interest at 9.30%, due February 2006,
secured by a First Deed of Trust on an office building
    
    
    457
    
    
    539Note payable to Urban Business Development Corporation, interest at 8.58%,
due January 2015, guaranteed by the Small Business Administration and secured by a Second Deed of Trust on an office building
    
    
    644
    
    
    638Note payable, interest at 6.76%, paid in 2002
    
    
    3,008
    
    
    Acquisition related notes payable of acquired companies, interest at 8.5%,
due March 2005
    
    
    2,626
    
    
    Promissory note, secured by equipment, interest at 8.5%, due April 2002
    
    
    152
    
    
    896All other long-term debt
    
    
    138
    
    
    503337,025
    
    
    265,701Less:  Current portion
    
    
    (14,226
    )
    
    (3,491
    )$
    322,799
    
    $
    262,210


The non-recourse equipment financing of $42.5 million at
December 31, 2001, which was previously classified as long-term debt at December 31, 2000 and
was $36.7 million, has been reclassified as an offset against the related receivable due from
the OPT related to subcontract costs on the Company's contract in Benin.

Titan Debt Maturities

Maturities of long-term debt are as follows:

2002
    
    $
    14,2262003
    
    
    17,5102004
    
    
    21,2762005
    
    
    280,7282006
    
    
    540Thereafter
    
    
    2,745$
    337,025


At December 31, 2001 the Company
was in compliance with all financial covenants under its various debt
agreements.

81

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Note 9. Commitments and Contingencies

The Company leases certain buildings and
equipment under non-cancelable operating lease agreements. These leases
generally require the Company to pay all executory costs such as taxes,
insurance and maintenance related to the leased assets. Certain of the leases
contain provisions for periodic rate accelerations to reflect cost-of-living
increases. Rental expense under these leases was $27.9 million in 2001, $22.1 million in
2000 and $18.6 million in 1999. Through August 1999, the Company was obligated under a
long-term lease agreement for facilities which are owned by an entity in which
Titan had a minority ownership interest.  In
February 2000, Cayenta entered into a new long-term lease agreement with
this entity which requires future minimum lease payments of approximately $6.6
million over 7 years. There is additional space in the facilities which, if
vacant or desired by Cayenta, could obligate Cayenta for additional future
minimum lease payments of approximately $0.7 million over the 7 years. The
Company is a guarantor on the lease. Rental expense in 2001, 2000 and 1999
includes $0.8 million, $0.8 million and $0.6 million, respectively, paid related to this space.
Also included in rent expense is $280 for
1999 incurred by ACS on a lease for office space with a related party which includes
the principal stockholders of ACS. In 1999, this facility was sold to a
non-affiliated third party from whom ACS currently leases the office space.

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

2002
    
    $
    37,2962003
    
    
    28,9402004
    
    
    21,1182005
    
    
    18,1632006
    
    
    16,185Thereafter
    
    
    39,155Total minimum lease payments
    
    $
    160,857


Obligations under capital leases
were $1.6 million, $0.5 million short-term included in Other accrued liabilities and $1.1 million long-term
included in Other non-current liabilities in the consolidated balance sheet at December 31, 2001.

In the ordinary course of
business, Titan will guarantee the obligations (primarily lease commitments) entered
into by its consolidated subsidiaries.

In 1997, DBA recorded a $3.0 million
charge in recognition of certain environmental matters at its Kissimmee facility
including, but not limited to, soil contamination and potential asbestos and
lead-based paint contamination. These matters became known to DBA as a result of
an environmental study performed as part of Titan's due diligence process
related to the merger with DBA. The accrual was recorded in accordance with SFAS
No. 5 and SOP 96-1 and represented an initial estimate for the cost of clean-up
activities. These activities were completed, and the property was sold in 2001.
Based on the completion of the clean-up activities as well as the pending sale
of the land and building, the Company determined that the unused portion of the
associated liability was not required as of December 31, 2000.

82

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On January 6, 2000, Ion Beam Applications
s.a., a Belgian corporation,  and some of its U.S. subsidiaries ("IBA") filed an
action for declaratory judgment in a federal court in Virginia against Titan and
the  SureBeam  Corporation  ("SureBeam")  relating  to  SureBeam's  patents  for
SureBeam  systems.  The action  attacked the validity of SureBeam's core patent,
sought a declaration  that IBA and its customers had not infringed any of the 62
claims in  SureBeam's  patent,  and alleged that Titan and  SureBeam  engaged in
unfair  competition  and that Titan and SureBeam's  conduct  constituted  patent
misuse.  The case was moved to the federal  court in San Diego.  On November 22,
2000,  IBA filed an amended  complaint  alleging,  in addition  to the  original
claims,  that Titan and SureBeam engaged in false  advertising,  monopolization,
restraint on trade and unfair business practices.

On  January  25,  2002,  Titan and  SureBeam  announced  that they  settled  the
litigation  with IBA. Under the  settlement,  IBA dropped all the claims it made
against Titan and SureBeam in the  litigation,  including IBA's challenge to the
validity and enforceability of SureBeam's core patent. Titan and SureBeam agreed
that IBA and its  customers  may  continue  to operate  or use IBA's  electronic
irradiation  facility in Bridgeport,  New Jersey.  The settlement terms include,
among other things, that IBA will purchase its requirements in the United States
for e-beam and x-ray systems for use for  processing  food and  sanitizing  mail
from Titan and SureBeam during the next four years,  provided Titan and SureBeam
offer  competitive  terms.  Titan and  SureBeam  also agreed to  purchase  their
requirements of  accelerators  with above 150 kilowatts of power from IBA during
the same four-year period, provided IBA offers competitive terms. Other terms of
the settlement agreement are immaterial and were not discloseable.

We are involved in legal actions in the
normal course of our business,  including audits and  investigations  by various
governmental agencies that result from our work as a defense contractor.  We and
our subsidiaries are named as defendants in legal  proceedings from time to time
and we or our subsidiaries may assert claims from time to time. In addition,  we
acquire companies from time to time that have legal actions pending against them
at the time of  acquisition.  Based upon  current  information  and  review,  we
believe the ultimate liability or recovery with respect to pending actions would
not  materially  affect our  consolidated  financial  position or our results of
operations.  However, our evaluation of the likely impact of these actions could
change in the future and an unfavorable  outcome,  depending upon the amount and
timing, could have a material adverse effect on our results of operations or our
cash flows in a future period.

Note 10. Cumulative Convertible Preferred Stock

Each share of $1.00 cumulative
convertible preferred stock is entitled to 1/3 vote,
annual dividends of $1 per share and is convertible at any time into
2/3 share of the Company's common stock (subject to
customary anti-dilution adjustments). Common stock of 459,785 shares has been
reserved for this purpose. The $1.00 cumulative convertible preferred stock is
redeemable at the Company's option at a redemption price of $20 per share, plus
cumulative dividends in arrears. Upon liquidation, the $1.00 cumulative
convertible preferred stockholders are entitled to receive $20 per share, plus
cumulative dividends in arrears, before any distribution is made to the common
stockholders.

Note 11. Common Stock

At December 31, 2001, approximately
20,080,100 common shares were reserved for future issuance for conversion of
preferred stock, employee benefit and stock incentive plans and
acquisition-related obligations.

On July 26, 2001, the Company sold
8,048,685 shares of its common stock in a public offering, which included an
over-allotment of 1,125,000 shares, at a price of $18.00 per share. The Company
received approximate aggregate proceeds from the offering of $137.6 million in
July 2001, net of underwriters' commissions. Transaction expenses related
to the offering were approximately $1.4 million. In addition, certain Titan
stockholders sold 576,315 shares, including 489,972 shares from the exercise of
options, from which Titan received proceeds of $3.0 million.

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

83

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If a person or group acquires 15% or
more of the Company's common stock, each Right (other than Rights held by the
acquiring person or group which become void) will entitle the holder to receive
upon exercise a number of shares of the Company's common stock having a market
value of twice the Right's exercise price. If the Company is acquired in a
transaction not approved by the Board, each Right may be exercised for common
shares of the acquiring company having a market value of twice the Right's
exercise price. Titan may redeem the Rights at $.01 per Right, subject to
certain conditions. The Rights expire on August 17, 2005.

Note 12. Stock-Based Compensation Plans

The Company provides stock-based
compensation to officers, directors and key employees through various fixed
stock option plans and to all non-executive employees through an employee stock
purchase

plan. The Company has adopted the disclosure only provisions of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." Compensation cost if any, is measured as the excess of the quoted
market price of the Company's stock on the date of grant over the exercise price
of the grant. No compensation has been recognized for the Company's stock
purchase plan. Had compensation cost for the Company's stock-based compensation
plans been determined based on the fair value at the grant dates for awards
under those plans consistent with the method of SFAS 123, the Company's results
of operations would have been reduced to the pro forma amounts indicated below:

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


Options authorized for grant under the
Stock Option Plans of 1994 and 1997 and The 1996 Directors' Stock Option and
Equity Participation Plan (the "1996 Directors' Plan") are 2,000,000 and
125,000, respectively. Grants in 1999 and the beginning of 2000 exceeded the
remaining shares available under these plans. The 2000 Employee and Director
Stock Option and Incentive Plan (the "2000 Plan") was approved by the Company's
shareholders on May 30, 2000, authorizing 4,000,000 shares available
for grant. Under all plans, the options outstanding have been granted at prices
that are equal to the market price of the Company's stock on the date of grant.
Under the intrinsic value method prescribed by APB 25, no compensation cost
is recorded. However, the grants in 1999 that exceeded the shares available at
that time were placed under the 2000 Plan after its approval by the
shareholders. Under the provisions of Financial Accounting Standards Board
Interpretation No. 44 "Accounting for Certain Transactions Involving Stock
Compensation" (an Interpretation of APB 25), the plan approval date becomes
the grant date for purposes 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 at May 30, 2000, and the grant
price. This deferred compensation will be amortized to expense over the four
year vesting period of these options, including $3.9 million in 2001, and $4.9 million
expensed in 2000, respectively. Unamortized deferred 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 1996 Directors' Plan, options expire 90
days after the option holder ceases to be a director. Under the applicable
plans, directors may elect to receive stock in lieu of fees, such stock to have
a fair market value equal to the fees. Employee options may be granted
throughout the year; directors' options are granted annually. Under the 2000
Plan, vesting for directors and first-time option grantees is over four years,
with 25% exerciseable at the completion of one year, and monthly vesting
thereafter. For option grants prior to the 2000 Plan, vesting is monthly over
4 years. Options in the Stock Option Plans of 1994 and 1997 and the 1996
Directors' Plan vest in 25% increments beginning one year after the grant date.
Stock options assumed by the Company as a result of the mergers discussed in
Note 2 generally retain the terms under which they were granted.

84

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The fair value of each option grant is
estimated on the date of grant using the Black-Scholes option-pricing model
using the following weighted-average assumptions: zero dividend yield and an
expected life 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.

A summary of the status of the Company's
fixed stock option plans as of December 31, 2001, 2000 and 1999, and changes
during the years ending on those dates is presented below:

|                                                                   |  | 2001 |        | 2000 |  | 1999      
|------------------------------------------------------------------ |  | ---- | ------ | ---- |  | ----------
|
|
|Outstanding at beginning of year                                   |  |      | 4,972  |      |  | $    11.84
|Granted                                                            |  |      | 953    |      |  | 17.16     
|Exchanged                                                          |  |      | 1,169  |      |  | 12.68     
|Exercised                                                          |  |      | (1,735 | )    |  | 7.07      
|Canceled                                                           |  |      | (231   | )    |  | 15.36     
|                                                                   |  |      |        |      |  |           
|Outstanding at end of year                                         |  |      | 5,128  |      |  | 14.45     
|                                                                   |  |      |        |      |  |           
|Options exercisable at year-end                                    |  |      | 2,863  |      |  |           
|Weighted-average fair value of 
   options granted during the year |  | $    | 12.15  |      |  |           

The following table summarizes
information about fixed stock options outstanding at December 31, 2001:

Options Outstanding
    
    Options ExercisableRange of Exercise
      Prices
    
    Number Outstanding at
      12/31/01
    
    Weighted-Average Remaining
      Contractual Life
    
    Weighted-Average Exercise
      Price
    
    Number Exercisable at
      12/31/01
    
    Weighted-Average Exercise
      Price$
    1.39
    
    $
    9.14
    
    1,325,972
    
    5.07 years
    
    
    $      4.21
    
    1,102,277
    
    
    $      4.119.25
    
    
    16.01
    
    1,332,192
    
    7.45 years
    
    
    10.72
    
    930,270
    
    
    11.0216.04
    
    
    20.94
    
    1,282,691
    
    8.22 years
    
    
    18.31
    
    435,343
    
    
    18.3321.35
    
    
    47.50
    
    1,186,849
    
    8.53 years
    
    
    25.92
    
    394,665
    
    
    27.395,127,704
    
    7.28 years
    
    
    14.45
    
    2,862,555
    
    
    11.74


Under the 2000 Employee Stock Purchase
Plan, the Company is authorized to issue up to 1,500,000 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. Elected officers of
the Company are not eligible to participate. Under the terms of the plan,
employees may elect to have between 1 and 15 percent of their regular earnings,
as defined in the plan, withheld to purchase the Company's common stock. The
purchase price of the stock is 85 percent of the lower of its market price at
the beginning or at the end of each offering period. An
offering period is six months, beginning January 1 and July 1 of each
year. Approximately 24%, 27% and 10% of
eligible employees participated in the Plan and purchased approximately
476,100, 559,000 and 216,000 shares of the
Company's common stock in 2001, 2000 and 1999, respectively. The
weighted-average fair value of the purchase rights granted in 2001, 2000 and
1999 was $5.09, $3.33 and $5.60,
respectively, which represents the approximate intrinsic value to the participants
related to the benefits of participation in the plan as determined in accordance with SFAS 123.

At December 31, 2001, the Company also had warrants outstanding
for 5,000 shares of the Company's common stock at a price of $21.35 per share.

85

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Each of Titan Systems, SureBeam and
Titan Wireless is a subsidiary of Titan and has its own key employee stock
option plan. LinCom Wireless, AverCom and Scan Technologies, subsidiaries of Titan in the
Emerging Technologies and Businesses segment, also have key employee stock
option plans. As of December 31, 2001, Titan Systems and Titan Wireless
each had approximately 20% of its fully diluted common stock that had been
reserved for issuance under its plan, and SureBeam had approximately
11.7% of their fully diluted common stock
that had been reserved for issuance under its respective plans. As of December
31, 2001, LinCom Wireless, AverCom and Scan Technologies had approximately 17%, 14% and 14%, respectively, of their fully
diluted common stock that had been reserved for issuance under their plans.

At December 31, 2001, Titan Systems and
Titan Wireless had options outstanding of approximately 5,564,225 and 780,250,
respectively. LinCom Wireless, AverCom and Scan Technologies had options outstanding of
approximately 1,442,250, 1,192,500 and 634,000, respectively, at December 31, 2001.
SureBeam had options outstanding of approximately 6,335,200 at December 31, 2001.

During 1999, SureBeam granted 3,237,578
options to purchase shares of its Class A common stock with a weighted
average exercise price of $0.1438 per share. These option grants resulted in
deferred compensation to SureBeam calculated as the difference between the fair
market value of the shares of common stock underlying the option at the date of
grant and the option exercise price. The deferred compensation is amortized over
the vesting period of the underlying options which is four years. Accordingly,
SureBeam recorded deferred compensation of approximately $17 which resulted in
an insignificant non-cash compensation amortization expense for the year ended
December 31, 1999. During 2000, SureBeam recorded deferred compensation of
approximately $3.2 million which resulted in a non-cash compensation
amortization expense of approximately $0.6 million. SureBeam also recorded
$78.6 million as deferred compensation at the time its recently completed
initial public offering closed. This amount was recognized as a non-cash charge
to SureBeam's earnings of approximately $38.9 million in March 2001 at
the time initial public offering closed, with the balance being recognized over
the remaining four-year vesting period of the options. The amortization of
deferred compensation expense is reflected in the loss from
discontinued operations in all years.

Under its variable stock option plan,
Cayenta has granted options to certain employees who have agreed to resell
shares purchased with those options to Cayenta. Cayenta recorded a deferred
compensation charge 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
this buyback option at exercise prices that were less than the deemed fair
market value of the underlying common shares on the date of grant. Cayenta has
recognized deferred compensation relating to these grants of approximately
$1.2 million and is amortizing this deferred charge to expense over the
four-year vesting period of these options.

Note 13. Benefit Plans

The Company has various defined
contribution benefit plans covering certain employees. The Company's
contributions to these plans were $14.1 million, $11.1 million and $9.9 million
in 2001, 2000 and 1999, respectively. The Company's combined discretionary
contributions to employee stock ownership plans, including those of acquired companies, were $1.0 million in 1999.
No contribution was made in 2000 or 2001. Discretionary contributions to a
profit sharing plan covering certain employees were $0.2 million in 1999.

The Company has a non-qualified
executive deferred compensation plan for certain officers and key employees. The
Company's expense for this plan, including interest, was $0.9 million, $0.8
million and $1.0 million in 2001, 2000 and 1999, respectively. Interest expense
for the years ended December 31, 2001, 2000 and 1999 includes $0.5 million,
$0.3 million and $0.8 million, respectively, related to the plan. Included in
other non-current liabilities is $6.2 million and $5.7 million related to this
plan at December 31, 2001 and 2000, respectively. Cash surrender value of the
life insurance related to this plan was $7.3 million and $9.8 million included
in Other Assets at December 31, 2001 and 2000, respectively. The Company
also has performance bonus plans for certain of its employees. Related expense
amounted to approximately $12.0 million, $12.3 million and $6.2 million in 2001,
2000 and 1999, respectively.

86

---

The Company has previously provided for
postretirement benefit obligations of operations discontinued in prior years.
The Company also implemented a post retirement medical benefit plan for senior executives in 2000.
All values related to this plan are immaterial.
The Company has no other postretirement benefit obligations for any of its continuing
operations nor for its recently discontinued businesses.

Note 14. Related Party Transactions

In connection with our SureBeam business,
we have entered into a number of agreements with SureBeam, including a Corporate services agreement pursuant to which we
provide general corporate administrative support, facility space and related maintenance and
occupancy services through a facilities allocation and a tax allocation agreement whereby in the event Titan
offsets its taxable gains with SureBeam losses, Titan will compensate SureBeam in cash for the benefit it
receives for use of SureBeam losses, when SureBeam demonstrates that it is able to utilize those losses or the
losses would have otherwise expired.

In September 2001, Titan purchased a world-wide
perpetual and exclusive, non-royalty bearing license to use
SureBeam's intellectual property for all applications and fields other than the food, animal hide and flower
markets, for the following consideration: 1) a $50 million senior secured line of credit, with
customary financial, affirmative and negative covenants, 2) the exchange of the $75 million debt owed
by SureBeam to Titan for additional shares of Class B and Class A common stock of SureBeam, and 3) a cash payment
of $8 million, with $4 million paid at September 30, 2001 and four installments of $1
million each payable on March 31, 2002, June 30, 2002, September 30, 2002 and December 31, 2002.
The company has obtained approval from its senior lenders to extend $25 million of this credit facility, and
expects to obtain the consent of its lenders for the remaining $25 million prior to the spin-off of SureBeam.

Related to the  exchange of the $75 million  debt
owed by SureBeam to us, we exchanged $2 million of the balance on
December  31, 2001 for 190,385  Class B common  shares of  SureBeam,  and  exchanged the remaining $73 million of the balance on
February 13, 2002 for 4,441,496 Class A and 3,225,765 Class B common shares of SureBeam.

We have entered into subcontract agreements with SureBeam for
them to build, design and integrate linear
accelerators we are providing for our customers in our Scan Technologies business to provide medical
sterilization electron beam accelerators as well as mail sanitization systems for the United States Postal
Service ("USPS").  All appropriate intercompany eliminations have been made in our consolidated financial
statements.

Titan has also committed to utilize SureBeam
as its exclusive supplier, provide SureBeam offers competitive terms, for all e-beam and x-ray accelerator
systems owned and operated by Titan or sold to a third party through at least December 31, 2003. In addition,
Titan has also committed to utilize SureBeam exclusively for all integration services related to accelerator
systems until at least December 31, 2002.

87

---

In relation to SureBeam's strategic
alliance with Hawaii Pride, Titan has guaranteed up to the greater of SureBeam's equity interest
in Hawaii Pride or 19.9% of Hawaii Pride's $6.8 million, 15-year loan from its lender, Web Bank.
As of December 31, 2001, Titan has guaranteed approximately $1.3 million, or 19.9% of the loan balance.

At December 31, 2001, the Company had loans receivable
from three officers of two of the Company's subsidiaries totaling $0.3 million.

Note 15. Subsequent Events

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

On February 22, 2002, Titan completed the acquisition of
International Systems, LLC, which designs and builds low-cost combat
systems for the Department of Defense (DoD) and agencies of the DoD, for a purchase
price of approximately 100,000 shares of Titan common stock, subject to post-closing adjustments and indemnification obligations.
Also, additional consideration may be paid based on the
receipt of certain potential future contract awards and the achievement of defined earnings
levels on certain contracts,
which consideration may be satisfied with cash or Titan
common stock. The operations of International Systems will be reported in our Titan Systems
segment.

On February 25, 2002, Titan entered into
a definitive agreement to acquire Science and Engineering Associates, Inc.
("SEA"), a New Mexico based privately held provider of engineering and information
 technology services and specialized laser, sensor,
and imaging products for approximately $72.0 million in Titan common stock less a $3.8 million holdback,
which is subject to the satisfaction of certain indemnification obligations for a one year period following
the close date. In addition,  a potential $3.8 million earnout may be paid upon the attainment of certain
operating performance targets. The
exchange ratio and the number of shares of Titan stock will be determined based
upon the average closing sale prices of Titan common stock over the 20
consecutive trading days ending on the day prior to the date of the SEA
special meeting of shareholders called to approve the merger agreement. The
special meeting has not yet been scheduled, but is expected to be held in the second quarter
of 2002, and the transaction is expected to close shortly thereafter.

On March 21, 2002, Titan
completed the acquisition of GlobalNet, Inc. ("GlobalNet"), a provider of
international voice, data, and internet services. Titan will issue approximately 1,448,700 shares
of common stock for all the common stock of GlobalNet and assumed stock options and warrants representing
approximately 77,900 shares of Titan common stock, based on an exchange ratio of 0.3853 shares of Titan common stock
for each share of GlobalNet common stock. GlobalNet's operations will be reported in our Titan Wireless segment.

On March 21, 2002, Titan completed the acquisition of
Jaycor, Inc. ("Jaycor"), a San Diego, California, based provider of information technology services and specialized
communications and sensor products.  Titan will issue approximately 4,919,500 shares of common stock for all the
common stock of Jaycor, based on an exchange ratio of 0.50160 shares of Titan common stock for each share of Jaycor common stock.
Jaycor's operations will be reported in our Titan Systems segment.

88

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Note 16. Unaudited Quarterly Financial Data (in thousands,
except per share data)

|2001                                           |  | FirstQuarter |         | Second Quarter |   | Third Quarter |   | Fourth Quarter |         | Total Year |  
|---------------------------------------------- |  | ------------ | ------- | -------------- | - | ------------- | - | -------------- | ------- | ---------- | -
|Revenues                                       |  | $            | 254,637 |                | $ | 271,351       |   | $              | 274,158 |            | $
|Gross profit                                   |  |              | 67,310  |                |   | 67,007        |   |                | 68,941  |            |  
|Income (loss) from continuing
      operations |  |              | (25,394 | )              |   | (144          | ) |                | 3,488   |            |  
|Net income (loss)                              |  |              | (59,870 | )              |   | (7,805        | ) |                | (38,791 | )          |  
|Basic earnings per share:                      |  |              |         |                |   |               |   |                |         |            |  
|Income (loss) from continuing
      operations |  | $            | (.56    | )              | $ | (.01          | ) | $              | .06     |            | $
|Net income (loss)                              |  |              | (1.29   | )              |   | (.16          | ) |                | (.63    | )          |  
|Diluted earnings per share:                    |  |              |         |                |   |               |   |                |         |            |  
|Income (loss) from continuing
      operations |  |              | (.56    | )              |   | (.01          | ) |                | .06     |            |  
|Net income (loss)                              |  |              | (1.29   | )              |   | (.16          | ) |                | (.61    | )          |  

|2000                                                                     |  | FirstQuarter |         | Second Quarter |   | Third Quarter |   | Fourth Quarter |         | Total Year |  
|------------------------------------------------------------------------ |  | ------------ | ------- | -------------- | - | ------------- | - | -------------- | ------- | ---------- | -
|Revenues                                                                 |  | $            | 216,141 |                | $ | 248,538       |   | $              | 268,371 |            | $
|Gross profit                                                             |  |              | 52,427  |                |   | 61,165        |   |                | 67,839  |            |  
|Income (loss) from continuing operations
      before extraordinary loss |  |              | (11,685 | )              |   | (10,825       | ) |                | 6,555   |            |  
|Net income (loss)                                                        |  |              | (15,236 | )              |   | (12,485       | ) |                | 5,691   |            |  
|Basic earnings per share:                                                |  |              |         |                |   |               |   |                |         |            |  
|Income (loss) from continuing operations
      before extraordinary loss |  | $            | (.25    | )              | $ | (.21          | ) | $              | .11     |            | $
|Net income (loss)                                                        |  |              | (.32    | )              |   | (.24          | ) |                | .09     |            |  
|Diluted earnings per share:                                              |  |              |         |                |   |               |   |                |         |            |  
|Income (loss) from continuing operations
      before extraordinary loss |  |              | (.25    | )              |   | (.21          | ) |                | .10     |            |  
|Net income (loss)                                                        |  |              | (.32    | )              |   | (.24          | ) |                | .09     |            |  

The above financial information for each
quarter reflects all normal and recurring adjustments.

Loss from continuing operations and net
loss for 2001 include acquisition and integration related charges and other of
$36.8 million. Net loss for 2001 includes a loss from discontinued operations of
$84.4 million.

Loss from continuing operations and net
loss for 2000 include acquisition related charges of $41.5 million, net of
other income of $2.1 million. Net loss for 2000 includes a loss from
discontinued operations of $1.9 million.

89

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PART III

Item 9.  Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

No information is required by Item 9.

Item 10.  Directors and Executive Officers of the Company

The  information
     required  by  Item 10  with  respect  to the  directors  and the  executive
     officers of the Company is  incorporated  herein by this  reference to such
     information under "Election of Directors - Information  Concerning Nominees,"
     "Management - Executive  Officers" and "Section 16(A) Beneficial  Ownership
     Reporting  Compliance" in the Company's  definitive proxy statement for the
     2002 Annual Meeting of Stockholders.

Item 11.  Executive Compensation

The  information
     required  by Item 11 is  incorporated  herein  by  this  reference  to such
     information  under  "Report of the  Compensation,  Stock Option and Pension
     Committee  of  the  Board  of  Directors  on  Executive  Compensation"  and
     "Executive  Compensation and Other Information" in the Company's definitive
     proxy statement for the 2002 Annual Meeting of Stockholders.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

The  information
     required  by Item 12 is  incorporated  herein  by  this  reference  to such
     information under "Ownership of the Common Stock of the Titan  Corporation"
     in the Company's  definitive proxy statement for the 2002 Annual Meeting of
     Stockholders.

Item 13.  Certain Relationships and Related Transactions

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

90

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PART IV

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

|(a) | 1 and 2. Financial Statements being filed as part of this report are
listed in the index in Item 8, on page 53.
|--- | ---------------------------------------------------------------------------------------------------------------
|    |                                                                                                                
|(b) | During the three months ended December 31, 2000, the
Registrant filed the following:                           
|    |                                                                                                                
|    | (1)                                                                                                            
|    |                                                                                                                
|    | (2)                                                                                                            
|    |                                                                                                                
|    | (3)                                                                                                            
|    |                                                                                                                
|(c) | Listing of Exhibits                                                                                            

Exhibit Index

|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | Page No.
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------
|1.1         |  | Form  of  Purchase  Agreement  among  The  Titan
     Corporation,  the selling  stockholders  named  therein,  and Merrill Lynch
     & Co.,  Merrill Lynch,  Pierce,  Fenner &  Smith  Incorporated  and
     Credit  Suisse  First  Boston   Corporation  as   representatives   of  the
     underwriters, which was Exhibit 1.1 to Registrant's Amendment No. 1 to Form
     S-3  (No.  333-63274),  dated  July  6,  2001,  is  incorporated  herein  by this
     reference.                                                                                                                                                                                                                                                                                           |  | *       
|3.1         |  | Registrant's Certificate of Amendment of Restated
     Certificate of Incorporation dated as of  October 21,  1998, which was
     Exhibit No.  3.1 to Registrant's  Quarterly  Report on  Form 10-Q
     dated  November 16,  1998,is  incorporated  herein by this  reference.
     Registrant's   Restated   Certificate   of   Incorporation   dated   as  of
     November 6,  1986, which was Exhibit No. 3.1 to Registrant's 1987
     Annual Report on Form 10-K  is incorporated  herein by this reference.
     Registrant's   Certificate   of  Amendment  of  Restated   Certificate   of
     Incorporation dated as of June 30, 1987, which was Exhibit 3.2 to
     Registrant's 1987 Annual Report on Form 10-K is incorporated herein by
     this reference. |  | *       
|3.2         |  | Registrant's By-laws, as amended, which was filed
     with  the   Registrant's   Quarterly   Report   on   Form 10-Q   dated
     November 13,  1995, as  Exhibit 6(a)(3) is incorporated herein by
     this reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | *       
|3.3         |  | Registrant's  By-laws, which was Exhibit 3.3
     to  Registrant's  1999 Annual  Report on  Form 10-K,  is  incorporated
     herein by this reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  | *       
|3.4         |  | Amendments  to Bylaws of  Registrant,  dated
March 22, 2000 and August 16, 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |         

91

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|4.1  |  | Rights  Amendment,  dated  as of  August 21,
     1995,  between The Titan  Corporation and American Stock Transfer and Trust
     Company,  which was  Exhibit 1  to  Registrant's  Form 8-A  dated
     September 5,     1995,    is     incorporated     herein    by    this
     reference.                                                         |  | *
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -
|4.2  |  | Letter  Agreement  dated  February 4,   1998
     between  the  Registrant  and DBA  Systems,  Inc.  ("DBA")  regarding  certain
     registration  rights  granted in connection  with the  acquisition  of DBA,
     which was  Exhibit 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 was  Exhibit 10.11 to Registrant's
     1989   Annual   Report   on   10-K,   is   incorporated   herein   by  this
     reference.                                                                                                                           |  | *
|10.2 |  | Stock Option Plan of 1994, which was filed in the
     1994 definitive proxy statement and was  Exhibit 10.17 to Registrant's
     1993  Annual  Report  on  Form 10-K,  is  incorporated  herein by this
     reference.                                                                                                                                |  | *
|10.3 |  | Amendment to Stock Option Plan Of 1994, which was
     Exhibit 10.3 to Registrant's 1999 Annual Report on Form 10-K,  is
     incorporated herein by this reference.                                                                                                                                                                                     |  | *
|10.4 |  | Stock Option Plan of 1997, which was filed in the
     Registrant's  1997   Definitive   Proxy  Statement  as   Appendix A,   is
     incorporated herein by this reference.                                                                                                                                                                             |  | *
|10.5 |  | Amendment to Stock Option Plan of 1997, which was
     Exhibit 10.5 to Registrant's 1999 Annual Report on Form 10-K,  is
     incorporated herein by this reference.                                                                                                                                                                                     |  | *
|10.6 |  | 1992 Directors' Stock Option Plan which was filed
     in the  1993  definitive  proxy  statement  and was  Exhibit 10.14  to
     Registrant's 1992 Annual Report on Form 10-K,  is incorporated  herein
     by this reference.                                                                                                                        |  | *

|10.7  |  | 1996   Directors'   Stock   Option   and  Equity
     Participation  Plan, which was filed in the 1996 definitive proxy statement
     and  was   Exhibit 10.7   to   Registrant's   1995  Annual  Report  on
     Form 10-K, is incorporated herein by this reference.                                                         |  | *
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -
|10.8  |  | 1995  Employee  Stock  Purchase  Plan,  which was
     Exhibit 4 to Registrant's Form S-8 dated December 18,  1995,
     is incorporated herein by this reference.                                                                                                                                                              |  | *
|10.9  |  | Lease Agreement dated as of July 9, 1991, by
     and  between  Torrey  Pines  Limited  Partnership,   a  California  limited
     partnership,   as  landlord,   and   Registrant,   as  tenant,   which  was
     Exhibit 10.1 to Registrant's Form  8-K dated July 11,  1991,
     is incorporated herein by this reference. |  | *
|10.10 |  | Executive  Severance  Plan  entered  into  by the
     Registrant  with  Ronald B.  Gorda,  which  was  Exhibit 6(a)(10) to
     Registrant's  Quarterly Report on  Form 10-Q  dated  November 13,
     1995, is incorporated herein by this reference.                                                                         |  | *
|10.11 |  | Executive  Severance  Plan  entered  into  by the
     Company with Gene W. Ray, Eric M. DeMarco and Nicholas J.  Costanza,  which
     was    Exhibit 10.15   to   Registrant's   1999   Annual   Report   on
     Form 10-K, is incorporated herein by this reference.                                                        |  | *
|10.12 |  | Loan    and    Security    Agreement,    dated
     December 29,  1995, by and between  Registrant and Capital  Associates
     International, Inc., which was Exhibit 10.17 to Registrant's 1995
     Annual  Report  on   Form 10-K,   is   incorporated   herein  by  this
     reference.                                   |  | *
|10.13 |  | Rider  dated  August 13,  1996,  to Loan and
     Security Agreement dated  December 29,  1995 by and between Registrant
     and    Capital     Associates     International, Inc.     which    was
     Exhibit 10.28 to Registrant's 1996 Annual Report on Form 10-K, is
     incorporated herein by this reference.         |  | *

92

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|10.14 |  | Agreement  and Plan of Merger and  Reorganization
     dated January 6,  1998 among The Titan Corporation,  Titan Acquisition
     Sub, Inc.   and   DBA   Systems, Inc.    which   was   filed   as
     Exhibit 2.1 to the Registrant's  Registration  Statement on Form S-4
     (No. 333-45719), is incorporated herein by this reference. |  | *
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -

|10.15 |  | Agreement  and Plan of Merger and  Reorganization
     dated  February 26,   1998,  among  The  Titan  Corporation,   Sunrise
     Acquisition Sub, Inc., Horizons Technology, Inc. ("Horizons") and
     certain  stockholders  of  Horizons,  which was filed as  Appendix A to the
     Registrant's  Registration  Statement on  Form S-4  (No.  333-47633),  is
     incorporated herein by this reference.                                                                                                                                |  | *
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -
|10.16 |  | Stock    Purchase   Agreement   dated   as   of
     March 24,  1998 between Titan  Technologies  and  Information  Systems
     Corporation,   Validity   Corporation  and  the  Shareholders  of  Validity
     Corporation,  which was  Exhibit 10.21  to  Registrant's  1999  Annual
     Report    on    Form 10-K,    is    incorporated    herein   by   this
     reference.                                                                                                                                                            |  | *
|10.17 |  | Agreement  and Plan of Reorganization dated as of
     June 30, 1998 by and among The Titan Corporation, Delsys Merger Corp.,
     and Delfin Systems,  which was filed as  Exhibit 2.1  to the Registrant's
     Registration  Statement on Form S-4 (No.  333-60127),  is incorporated
     herein by this reference.                                                                                                                                                                                                                         |  | *
|10.18 |  | Agreement  and Plan of Merger and  Reorganization
     dated as of  August 7,  1998 among The Titan  Corporation,  Merger Sub
     Acquisition   Corp.,   VisiCom    Laboratories, Inc.,    and   Certain
     Shareholders    of   VisiCom    Laboratories,     Inc.,    which   was
     Exhibit 10.23 to Registrant's 1999 Annual Report on Form 10-K, is
     incorporated herein by this reference.                                                                                                                                        |  | *
|10.19 |  | Stock Purchase Agreement dated as of June 9,
     1999 among Titan Technologies and Information Systems  Corporation,  System
     Resources Corporation and the Stockholders of System Resources Corporation,
     which was filed as  Exhibit 2.1  to the  Registrant's  Current  Report on
     Form 8-K  dated  June 9,  1999,  is  incorporated  herein by this
     reference.                                                                                                                                                            |  | *
|10.20 |  | Agreement  and Plan of Merger and  Reorganization
     dated as of  July 1,  1999 among Titan  Technologies  and  Information
     Systems   Corporation,   TTIS   MergerCo, Inc.,   Atlantic   Aerospace
     Electronics  Corporation,  and  the  Designated  Stockholders,   which  was
     Exhibit 10.25 to Registrant's 1999 Annual Report on Form 10-K, is
     incorporated herein by this reference.                                                                                                                                   |  | *
|10.21 |  | Limited  Liability  Company Agreement of Soliance
     Networks,  LLC dated as of August 25, 1999 among Sempra Energy  Information
     Solutions,   modis, Inc.,   and   Cayenta.com, Inc.,   which  was
     Exhibit 10.26 to Registrant's 1999 Annual Report on Form 10-K, is
     incorporated herein by this reference.                                                                                                                                                                                                                    |  | *
|10.22 |  | Agreement and Plan of Merger, as amended, dated as
     of October 4,  1999 among IPIVOT, Inc.,  Intel Corporation,  WCXT
     Acquisition  Corporation  and  Brett  Helm  and  William  Strensrud  as the
     representatives of the Escrow Securityholders, which was Exhibit 10.27
     to  Registrant's  1999 Annual  Report on  Form 10-K,  is  incorporated
     herein by this reference.                                                                                                                                               |  | *
|10.23 |  | Stock    Purchase   Agreement   dated   as   of
     November 2,  1999  among  Cayenta.com, Inc.,  J B  Systems,  Inc,
     d.b.a.  Mainsaver  Corporation and Mainsaver,  JKS Separate Property Trust,
     The Gehl Living  Trust,  JBS  Acquisition  Company,  LLC,  Epicor  Software
     Corporation,  Mark  Stevens and The Titan  Corporation,  which was filed as
     Exhibit 2.1  to the Registrant's  Current Report on  Form 8-K  dated
     November 2,     1999,     is     incorporated     herein    by    this
     reference. |  | *

|10.24 |  | Stock Exchange and Stock Purchase Agreement dated
     as of December 7,  1999 among Cayentai Inc.,  Cayenta Operating Company, The
     Titan  Corporation,  Assist  Cornerstone  Technologies, Inc.  and  the
     Selling  Shareholders,  which was  Exhibit 10.29  to Registrant's 1999
     Annual Report on Form  10-K, is incorporated herein by this reference.
     We have not filed Schedules and similar  attachments to this Exhibit.  Upon
     request,  the Registrant  will furnish  supplementally  to the Commission a
     copy of any omitted schedule. |  | *
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -

93

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|10.25 |  | Agreement   and  Plan  of  Merger  dated  as  of
     December 9,  1999 among The Titan Corporation,  Advanced Communication
     Systems, Inc.,   and  AT   Acquisition   Corp,   which  was  filed  as
     Exhibit 2.1  to the Registrant's  Current Report on  Form 8-K  dated
     December 9,     1999,     is     incorporated     herein    by    this
     reference.                                                                                                                                                                                                                     |  | *
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -
|10.26 |  | Agreement  and  Plan  of  Merger,  dated  as  of
     December 9, 1999 and amended as of January 20, 2000, among the Registrant,
     Merger Sub and ACS,  which was filed as  Exhibit 2.1  to the Registrant's
     Registration  Statement on Form  S-4 (No. 333-95245),  is incorporated
     herein by this reference.                                                                                                                                                                                                                                                                         |  | *
|10.27 |  | Loan    Facility    Agreement   dated   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 le Developpement,  Banque  Internationale
     du  Benin,  Continental  Bank  Benin and Bank of  Africa  Benin,  which was
     Exhibit  10.32  to  Registrant's  1999  Annual  Report  on  Form  10-K,  is
     incorporated herein by this reference.                                                                                             |  | *
|10.28 |  | Stock    Purchase   Agreement   dated   as   of
     December 23,  1999 among  Cayenta, Inc.,  SFG  Technologies, Inc.,  the
     Common Selling  Shareholders,  the Preferred  Selling  Shareholders and the
     Option  Holders,  which  was  filed as  Exhibit 2.1  to the  Registrant's
     Current  Report  on   Form 8-K   dated   December 22,   1999,  is
     incorporated herein by this reference.                                                                                                                                                                                    |  | *
|10.29 |  | Agreement  and Plan of Reorganization dated as of
     January 28,  2000 among The Titan  Corporation,  MT Acquisition Corp.,
     William  C.  Lindsey,  Inc.  (DBA  LinCom  Corporation)  and the  Principal
     Shareholder  of  William  C.  Lindsey,  Inc.,  which was  Exhibit  10.34 to
     Registrant's  1999 Annual  Report on Form 10-K, is  incorporated  herein by
     this reference. We have not filed Schedules and similar attachments to this
     Exhibit.  Upon  request,  the Company  will furnish  supplementally  to the
     Commission a copy of any omitted schedule. |  | *
|10.30 |  | 53/4%    Convertible
     Preferred Securities  Remarketable Term Income Deferrable Equity Securities
     (High Tides) dated as of February 3,  2000, which was Exhibit 10.35 to
     Registrant's  1999 Annual  Report on Form 10-K, is  incorporated  herein by
     this reference.                                                                                                                                                                                                                                                                                                            |  | *
|10.31 |  | Senior  Secured  Credit  Agreement,  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  Arranger  and as the  Administrative  Agent  for the
     Lenders,   First  Union   Securities, Inc.   as  Co-Arranger   and  as
     Syndication Agent and The Bank of Nova Scotia as the  Documentation  Agent,
     which was Exhibit 10.36 to Registrant's 1999 Annual Report on Form 10-K, is
     incorporated herein by this reference.          |  | *
|10.32 |  | Agreement   and  Plan  of  Merger  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 on  Form 10-K,  is  incorporated
     herein  by  this  reference.  We  have  not  filed  Schedules  and  similar
     attachments  to this  Exhibit.  Upon  request,  the  Registrant  will  furnish
     supplementally    to   the    Commission    a   copy    of   any    omitted
     schedule.                                               |  | *

|10.33 |  | Agreement  and  Plan  of  Merger,  dated  as  of
     March 24,  2000, by and among The Titan  Corporation,  V T Acquisition
     Corp. and  AverStar, Inc.,  which was Exhibit 2.1 to Registrant's
     Form S-4 (No. 333-35188) dated April  20,  2000, is incorporated  herein by this
     reference.                                                                                                                                                                               |  | *
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -
|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 Exhibit 10.39 to the Registrant's 2000 Annual Report
     on Form 10-K, is incorporated  herein by this reference.  We have not filed
     Schedules  and similar  attachments  to this  Exhibit.  Upon  request,  the
     Registrant will furnish supplementally to the Commission a copy of any omitted
     schedule. |  | *

94

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|10.35 |  | First   Amendment  to  Senior   Secured   Credit
     Agreement,  dated  June 1,  2000, by and among The Titan  Corporation,
     various  financial  institutions  from time to time  parties  thereto  (the
     "Lenders"),  Credit  Suisse First  Boston,  as the Lead Arranger and as the
     Administrative Agent for the Lenders, First Union Securities, Inc., as
     Co-Arranger  and as  Syndication  Agent and The Bank of Nova  Scotia as the
     Documentation  Agent,  which was Exhibit 10.40 to the Registrant's 2000 Annual
     Report on Form 10-K, is incorporated herein by this reference.                              |  | *
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -
|10.36 |  | Second   Amendment  to  Senior   Secured  Credit
     Agreement,  dated  June 22,  2000, by and among The Titan Corporation,
     various  financial  institutions  from time to time  parties  thereto  (the
     "Lenders"),  Credit  Suisse First  Boston,  as the Lead Arranger and as the
     Administrative Agent for the Lenders, First Union Securities, Inc., as
     Co-Arranger  and as  Syndication  Agent and The Bank of Nova  Scotia as the
     Documentation  Agent,  which was Exhibit 10.41 to the Registrant's 2000 Annual
     Report on Form 10-K, is incorporated herein by this reference.                              |  | *
|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 the  Registrant's  2000  Annual  Report on Form
     10-K, is incorporated herein by this reference. We have not filed Schedules
     and similar attachments to this Exhibit.  Upon request, the Registrant will
     furnish   supplementally   to  the   Commission   a  copy  of  any  omitted
     schedule.                                                                                          |  | *
|10.38 |  | The Titan Corporation 2000 Employee Stock Purchase
     Plan,  which  was  Exhibit 4.1  to  Registrant's  Form S-8  dated
     July 11, 2000, is incorporated herein by this reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | *
|10.39 |  | The Titan  Corporation 2000 Employee and Director
     Stock Option and Incentive Plan, which was Exhibit 4.2 to Registrant's
     Form S-8 (No. 333-41140) dated  July 11,  2000, is  incorporated  herein by this
     reference.                                                                                                                                                                                                                                                                                                                                                                                                              |  | *
|10.40 |  | Third   Amendment  to  Senior   Secured   Credit
     Agreement,  dated  August  22,  2000,  by and among The Titan  Corporation,
     various  financial  institutions  from time to time  parties  thereto  (the
     "Lenders"),  Credit  Suisse First  Boston,  as the Lead Arranger and as the
     Administrative Agent for the Lenders, First Union Securities, Inc., as
     Co-Arranger  and as  Syndication  Agent and The Bank of Nova  Scotia as the
     Documentation  Agent,  which was Exhibit 10.45 to the Registrant's 2000 Annual
     Report on Form 10-K, is incorporated herein by this reference.                         |  | *
|10.41 |  | Fourth   Amendment  to  Senior   Secured  Credit
     Agreement,   dated   November 20,   2000,   by  and  among  The  Titan
     Corporation,  various  financial  institutions  from  time to time  parties
     thereto (the "Lenders"),  Credit Suisse First Boston,  as the Lead Arranger
     and  as  the   Administrative   Agent   for  the   Lenders,   First   Union
     Securities, Inc., as Co-Arranger and as Syndication Agent and The Bank
     of Nova Scotia as the Documentation  Agent,  which was Exhibit 10.46 to the
     Registrant's 2000 Annual Report on Form 10-K,  is incorporated  herein by this
     reference. |  | *
|10.42 |  | Asset  Purchase Agreement dated March 23, 2001 by
     and  among   Maxwell   Technologies   Systems   Division,   Inc.,   Maxwell
     Technologies,  Inc., and Titan Systems Corporation,  which was Exhibit 10.1
     to the  Registrant's  Quarterly  Report on Form 10-Q  dated May 15,  2001,  is
     incorporated  herein  by this  reference.  We did not  file  Schedules  and
     similar attachments to this Exhibit. Upon request, the Registrant will furnish
     supplementally    to   the    Commission    a   copy    of   any    omitted
     schedule.                                                                     |  | *
|10.43 |  | Fifth   Amendment  to  Senior   Secured   Credit
     Agreement, dated June 11, 2001, by and among The Titan Corporation, various
     financial  institutions  from time to time parties thereto (the "Lenders"),
     Credit Suisse First Boston, as the Lead Arranger and as the  Administrative
     Agent for the Lenders, First Union Securities,  Inc., as Co-Arranger and as
     Syndication Agent and The Bank of Nova Scotia as the  Documentation  Agent,
     which was Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q dated
     August 14, 2001, in incorporated herein by this reference.                        |  | *

95

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|10.44 |  | Sixth   Amendment  to  Senior   Secured   Credit
     Agreement, dated July 11, 2001, by and among The Titan Corporation, various
     financial  institutions  from time to time parties thereto (the "Lenders"),
     Credit Suisse First Boston, as the Lead Arranger and as the  Administrative
     Agent for the Lenders, First Union Securities,  Inc., as Co-Arranger and as
     Syndication Agent and The Bank of Nova Scotia as the  Documentation  Agent,
     which was Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q dated
     August 14, 2001, in incorporated herein by this reference. |  | *
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -
|10.45 |  | Agreement  and  Plan  of  Reorganization,   dated
     September 19, 2001, among The Titan Corporation, T T Acquisition Corp., and
     BTG, Inc., which was filed as Exhibit 2.1 to the Registrant's  Current Report
     on Form 8-K  dated  September  19,  2001,  is  incorporated  herein by this
     reference.                                                                                                                                                                                                                                                                                                    |  | *
|10.46 |  | Agreement  and Plan of Merger and Reorganization,
     dated  as of June  24,  2001,  by and  among  The  Titan  Corporation,  Gem
     Acquisition Corp. and Datron Systems Incorporated, which was Exhibit 2.1 to
     Registrant's  Form S-4 dated July 9, 2001 (No.  333-64768) is  incorporated
     herein by this reference.                                                                                                                                                                                                                                                                                       |  | *
|10.47 |  | Agreement  and Plan of Merger,  dated  January 6,
     2002, among The Titan Corporation, T T III Acquisition Corp., and GlobalNet, Inc., which was
     Exhibit 2.1 to the  Registrant's  Current  Report on Form 8-K dated January 6,
     2002, is incorporated herein by this reference.                                                                                                                                                                                                                                                                                                                              |  | *
|10.48 |  | Agreement  and Plan of Merger and Reorganization,
     dated as of January 21, 2002, by and among The Titan Corporation,  Thunderbird  Acquisition
     Corp.  and Jaycor,  Inc.,  which was Exhibit 2.1 to the  Registrant's  Current
     Report on Form 8-K dated January 21, 2002, is incorporated  herein by this
     reference.                                                                                                                                                                                                                                                                                    |  | *
|10.49 |  | Agreement  and Plan of Merger and Reorganization,
     dated as of February 23, 2002, by and among The Titan Corporation, Thunderbird Acquisition,
     Inc. and Science and Engineering Associates, Inc., which was Exhibit 2.1 to
     the  Registrant's  Current  Report on Form 8-K dated  February  23,  2002,  is
     incorporated herein by this reference.                                                                                                                                                                                                                                                       |  | *
|10.50 |  | Amended   and  Restated  Senior  Secured  Credit
     Agreement,  dated as of February 13, 2002, among The Titan Corporation,  as
     the Borrower,  various financial institutions as the Lenders, Credit Suisse
     First Boston,  as Lead Arranger and  Administrative  Agent for the Lenders,
     First Union  Securities,  Inc., as Co-Arranger and as Syndication Agent and
     The Bank of Novia Scotia as Documentation  Agent, which was Exhibit 10.1 to
     the  Registrant's  Current  Report on Form 8-K dated March 22, 2002, is
     incorporated herein by this reference.                            |  | *
|10.51 |  | Exchange  Agreement  dated  December  31,  2001,
     between SureBeam  Corporation and The Titan Corporation,  which was Exhibit
     10.2 to the Registrant's  Current  Report on Form 8-K dated March 22, 2002, is
     incorporated herein by this reference.                                                                                                                                                                                                                                                                                                                                                         |  | *
|10.52 |  | Exchange Agreement dated February 11, 2002, between
     SureBeam  Corporation and The Titan Corporation,  which was Exhibit 10.3 to
     the  Registrant's  Current  Report on Form 8-K dated March 22, 2002, is
     incorporated herein by this reference.                                                                                                                                                                                                                                                                                                                                                             |  | *
|10.53 |  | License Agreement dated October
17,  2001,  between SB OperatingCo,  Inc. and The Titan  Corporation,  which was
     Exhibit 10.4 to the  Registrant's  Current  Report on Form 8-K dated March 22,
     2002, is incorporated herein by this reference.                                                                                                                                                                                                                                                                                                                                                                 |  | *
|10.54 |  | The Titan Corporation Deferred  Compensation Plan,
     Master Plan Document effective January 1, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |  
|10.55 |  | Contract  for Purchase and Sale of Equipment  and
     services  made and entered into as of February 11, 2002, by and between The
     Titan Corporation and SureBeam Corporation.                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |  
|10.56 |  | Letter Agreement dated March 29, 2002, between
The Titan Corporation and SureBeam Corporation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |  

96

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|21 |  | Subsidiaries of Registrant as of March 26, 2002.                     |  | 
|-- |  | -------------------------------------------------------------------- |  | 
|23 |  | Consent of Arthur Andersen LLP, Independent Public
     Accountants. |  | 
|99 |  | Letter to United States Securities and Exchange Commission.          |  | 

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*          Previously
filed as indicated and incorporated herein by reference from filings previously made by the Company.

97

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

|               |  | THE TITAN CORPORATION
|-------------- |  | ---------------------
|March 28, 2001 |  | By:                  

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and
on the dates indicated.

|Signature                                           |  | Title                                                                           |  | Date          
|--------------------------------------------------- |  | ------------------------------------------------------------------------------- |  | --------------
|                                                    |  |                                                                                 |  |               
|/s/GENE W. RAYGene W. Ray                           |  | President, Chief Executive Officer and Chairman of the Board                    |  | March 28, 2002
|/s/ERIC M. DEMARCOEric M. DeMarco                   |  | Executive Vice President and Chief Operating Officer                            |  | March 28, 2002
|/s/MARK W. SOPPMark W. Sopp                         |  | Senior Vice President and Chief Financial Officer (Principal Financial Officer) |  | March 28, 2002
|/s/DEANNA J. HOMDeanna J. Hom                       |  | Vice President, Corporate Controller (Principal Accounting Officer)             |  | March 28, 2002
|/s/MICHAEL B. ALEXANDERMichael B. Alexander         |  | Director                                                                        |  | March 28, 2002
|/s/EDWARD H. BERSOFF, Ph.D.Edward H. Bersoff, Ph.D. |  | Director                                                                        |  | March 28, 2002
|/s/JOSEPH F. CALIGIURIJoseph F. Caligiuri           |  | Director                                                                        |  | March 28, 2002
|/s/PETER A. COHENPeter A. Cohen                     |  | Director                                                                        |  | March 28, 2002

98

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|/s/DANIEL J. FINKDaniel J. Fink               |  | Director |  | March 28, 2002
|--------------------------------------------- |  | -------- |  | --------------
|/s/SUSAN GOLDINGSusan Golding                 |  | Director |  | March 28, 2002
|/s/ROBERT M. HANISEERobert M. Hanisee         |  | Director |  | March 28, 2002
|/s/ROBERT E. LA BLANCRobert E. La Blanc       |  | Director |  | March 28, 2002
|/s/JAMES ROTHJames Roth                       |  | Director |  | March 28, 2002
|/s/JOSEPH R. WRIGHT, JR.Joseph R. Wright, Jr. |  | Director |  | March 28, 2002

99

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THE TITAN CORPORATION

SCHEDULE IIVALUATION AND QUALIFYING
ACCOUNTS

(As Restatedsee Note 1 of the Notes to
Consolidated Financial Statements)

For the years ended December 31, 2001,
2000, and 1999

(in thousands of dollars)

|                                     |  | Balance atbeginning of
      year |        | Additions(charges
      toexpense)(a) |   | Charged
      toOtherAccounts |  | Deductions |   | Balance atend of
      year
|------------------------------------ |  | --------------------------------- | ------ | ------------------------------------- | - | ----------------------------- |  | ---------- | - | ---------------------------
|2001:                                |  |                                   |        |                                       |   |                               |  |            |   |                            
|Accrued merger and integration
costs |  | $                                 | 13,846 |                                       | $ | 36,768                        |  | $          |  |                            
|Allowance for doubtful accounts      |  |                                   | 4,419  |                                       |   | 7,827                         |  |            |  |                            
|2000:                                |  |                                   |        |                                       |   |                               |  |            |   |                            
|Accrued merger and integration
costs |  |                                   | 5,880  |                                       |   | 38,820                        |  |            |  |                            
|Allowance for doubtful accounts      |  |                                   | 4,099  |                                       |   | 1,413                         |  |            |  |                            
|1999:                                |  |                                   |        |                                       |   |                               |  |            |   |                            
|Accrued merger and integration
costs |  |                                   | 3,035  |                                       |   | 8,637                         |  |            |  |                            
|Allowance for doubtful accounts      |  |                                   | 2,427  |                                       |   | 4,674                         |  |            |  |                            

(a)          
Includes $4,334, $(326) and $1,441 added through acquisitions in 2001,
2000 and 1999, respectively.

100

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QuickLinks

PART I

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

PART II

Item. 5  Market for the Company's Common Equity and Related Skockholder Matters
                                  
                Item. 6  Selected Financial Data
                                  
                Item. 7  Management's Discussion and Analysis Of Financial Condition and Results Of Operations
                                  
                Item. 7A.  Quantitative and Qualitative Disclosures About Market Risk
                                  
                Item. 8  Financial Statements and Supplementary Data

Report Of Independent Public Accountants

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

Notes To Consolidated Financial Statements

Part III

Part IV

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

SIGNATURES

---