The Titan Corporation

Part I—FINANCIAL INFORMATION

Item 1. Financial Statements

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

	Three months ended March 31,

	2002				2001

Revenues	$	340,545			$	239,312

Costs and expenses:
Cost of revenues		271,774				179,683
Selling, general and administrative expense		42,768				46,049
Research and development expense		4,868				3,435
Acquisition and integration related charges and other		—				27,700

Total costs and expenses			319,410				256,867

Operating profit (loss)		21,135				(17.555		)
Interest expense		(8,473		)		(8,902		)
Interest income		140				278

Income (loss) from continuing operation before income taxes, minority interest and cumulative effect of change in accounting principle		12,802				(26,179		)
Income tax provision (benefit)		5,377				(7,068		)

Income (loss) from continuing operations before minority interest and cumulative effect of change in accounting principle		7,425				(19,111		)
Minority interest		—				4,405

Income (loss) from continuing operations before cumulative effect of change in accounting principle		7,425				(14,706		)
Loss from discontinued operations, net of tax benefit		(938		)		(45,164		)
Cumulative effect of change in accounting principle, net of tax benefit (from continuing operations $6,144, from discontinued operations $33,967)		(40,111		)		—

Net loss		(33,624		)		(59,870		)
Dividend requirements on preferred stock		(172		)		(172		)

Net loss applicable to common stock	$	(33,796		)	$	(60,042		)

Basic earnings (loss) per share:
Income (loss) from continuing operations before cumulative effect of change in accounting principle	$	0.10			$	(0.34		)
Loss from discontinued operations, net of tax benefit		(0.01		)		(0.95		)
Cumulative effect of change in accounting principle, net of tax benefit (continuing operations ($0.09) per share, discontinued operations ($0.48) per share)		(0.57		)		—

Net loss	$	(0.48		)	$	(1.29		)

Weighted average shares		70,771				53,377

Diluted earnings (loss) per share:
Loss from continuing operations before cumulative effect of change in accounting principle	$	0.09			$	(0.34		)
Loss from discontinued operations, net of tax benefit		(0.01		)		(0.95			)
Cumulative effect of change in accounting principle, net of tax benefit (continuing operations ($0.08) per share, discontinued operations ($0.47) per share)		(0.55		)		—


Net loss	$	(0.47		)	$	(1.29		)

Weighted average shares		72,385				53,377

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

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

	March 31, 2002			December 31, 2001

	(Unaudited)
Assets
Current Assets:
Cash and cash equivalents	$	28,569		$	28,957
Restricted cash		1,104			—
Accounts receivable—net		397,929			374,728
Inventories		29,583			29,112
Prepaid expenses and other		27,682			19,168
Deferred income taxes		63,260			53,941
Current assets of discontinued operations		64,439			67,841

Total current assets		612,566			573,747

Property and equipment — net		111,644			99,115
Long-term contract receivables		99,610			93,143
Goodwill — net		543,122			441,647
Other assets — net		140,336			137,144
Non-current assets of discontinued operations		75,010			115,606

Total assets	$	1,582,288		$	1,460,402

Liabilities and Stockholders' Equity
Current Liabilities:
Current portion of amounts outstanding under line of credit	$	13,750		$	12,813
Accounts payable		111,506			90,073
Acquisition debt		2,000			2,000
Current portion of long-term debt		1,068			1,413
Accrued compensation and benefits		75,771			68,762
Other accrued liabilities		87,536			76,478
Income taxes payable		243			1,174
Current liabilities of discontinued operations		28,855			42,422

Total current liabilities		320,729			295,135

Long-term portion of amounts outstanding under line of credit		298,750			317,187

Other long-term debt		5,578			5,612

Non-recourse debt		46,381			42,456

Other non-current liabilities		50,822			44,861

Non-current liabilities of discontinued operations		1,403			8,170

Company obligated mandatory redeemable convertible preferred securities of a subsidiary trust whose sole assets are senior subordinated debentures of Titan		250,000			250,000

Minority interests		148			23

Stockholders' Equity:
Preferred stock: $1 par value, authorized 5,000,000 shares:
Cumulative convertible, $13,800 liquidation preference, designated 1,068,102 shares: 689,628 and 689,678 shares issued and outstanding		690			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: 77,268,616 and 70,128,582 shares		773			701
Capital in excess of par value		728,452			588,184
Deferred compensation		(29,656	)		(34,519	)
Retained earnings (accumulated deficit)		(91,035	)		(57,239	)
Accumulated other comprehensive income		195			128
Treasury stock (345,750 and 372,050 shares), at cost		(942	)		(987	)

Total stockholders' equity		608,477			496,958

Total liabilities and stockholders' equity	$	1,582,288		$	1,460,402

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

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

	Three months ended March 31,

	2002			2001

Cash Flows from Operating Activities:
Income (loss) from continuing operations before cumulative effect of change in accounting principle	$	7,425		$	(14,706	)
Adjustments to reconcile loss from continuing operations to net cash used for operating activities, net of effects of businesses acquired and sold:
Depreciation and amortization		5,390			7,961
Write-offs due to asset impairments		—			14,899
Deferred income taxes and other		5,286			(417	)
Minority interests		—			(4,405	)
Deferred compensation		973			1,063
Changes in operating assets and liabilities, net of the effects of businesses acquired and sold:
Accounts receivable		5,531			(45,013	)
Inventories		(302	)		(1,420	)
Prepaid expenses and other assets		(8,781	)		(4,362	)
Accounts payable		16,636			(9,201	)
Accrued compensation and benefits		6,913			8,033
Income taxes payable		(955	)		—
Other liabilities		(8,687	)		19,435

Net cash provided by (used for) continuing operations		29,429			(28,133	)

Loss from discontinued operations		(938	)		(45,164	)
Minority interest attributable to discontinued operations		(112	)		(7,818	)
Issuance of stock in subsidiaries		114			60,841
Deferred compensation charge attributable to discontinued operations		3,890			38,925
Changes in net assets and liabilities of discontinued operations		(27,669	)		(62,799	)

Net cash provided by (used for) discontinued operations		(24,715	)		(16,015	)

Net cash provided by (used for) operating activities		4,714			(44,148	)

Cash Flows from Investing Activities:
Capital expenditures		(6,525	)		(14,515	)
Acquisition of businesses and other equity interests, net of cash acquired		26,838			(6,358	)
Capitalized software development costs		(828	)		(1,533	)
Proceeds from sale of investments and business		1,500			3,217
Other investments		(6,156	)		(2,541	)
Other		135			188

Net cash provided by (used for) investing activities		14,964			(21,542	)

Cash Flows from Financing Activities:
Additions to debt		—			74,375
Retirements of debt		(20,444	)		(365	)
Issuance of stock by subsidiaries		123			—
Deferred financing costs		(1,132	)		(25	)
Increase in restricted cash		(1,104	)		—
Dividends paid		(172	)		(172	)
Exercise of stock options and other		2,605			899
Other		(9	)		(178	)

Net cash provided by (used for) financing activities		(20,133	)		74,534

Effect of exchange rate changes on cash		67			69

Net increase (decrease) in cash and cash equivalents		(388	)		8,913
Cash and cash equivalents at beginning of period		28,957			26,263

Cash and cash equivalents at end of period	$	28,569		$	35,176

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

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

	Cumulative Convertible Preferred Stock			Common Stock		Capital In Excess of Par Value		Deferred Compen-sation			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Income			Treasury Stock			Total

Three Months Ended March 31, 2002
Balances at December 31, 2001	$	690	$	701	$	588,184	$	(34,519	)	$	(57,239	)	$	128		$	(987	)	$	496,958
Issuance of stock for acquisitions				66		134,071											39			134,176
Exercise of stock options and other				4		2,601														2,605
Amortization of deferred compensation								4,863												4,863
Foreign currency translation adjustment														67						67
Shares contributed to employee benefit plans				2		3,596											6			3,604
Dividends on preferred stock - Cumulative convertible, $.25 per share											(172	)								(172	)
Net loss											(33,624	)								(33,624	)

Balances at March 31, 2002	$	690	$	773	$	728,452	$	(29,656	)	$	(91,035	)	$	195		$	(942	)	$	608,477

Three Months Ended March 31, 2001
Balances at December 31, 2000	$	690	$	541	$	191,358	$	(13,882	)	$	(9,960	)	$	108		$	(1,439	)	$	167,416
Exercise of stock options and other				1		898														899
Deferred compensation, related to the issuance of stock options						78,604		(78,604	)											—
Amortization of deferred compensation								39,988												39,988
Foreign currency translation adjustment														69						69
Unrealized loss on investments														(55	)					(55	)
Gain related to issuance of stock in subsidiary											52,025									52,025
Dividends on preferred stock - Cumulative convertible, $.25 per share											(172	)								(172	)
Net loss											(59,870	)								(59,870	)

Balances at March 31, 2001	$	690	$	542	$	270,860	$	(52,498	)	$	(17,977	)	$	122		$	(1,439	)	$	200,300

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

THE TITAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2002
(in thousands, except share and per share data, or as otherwise noted)

Note (1) Basis of Financial Statement Preparation

The accompanying consolidated financial information of The Titan Corporation and its subsidiaries ("Titan" or the "Company") should be read in conjunction with the Notes to Consolidated Financial Statements contained in the Company's Annual Report on Form 10-K to the Securities and Exchange Commission for the year ended December 31, 2001. The accompanying financial information includes substantially all subsidiaries on a consolidated basis and all normal recurring adjustments which are considered necessary by the Company's management for a fair presentation of the financial position, results of operations and cash flows for the periods presented. However, these results are not necessarily indicative of results for a full fiscal year. Additionally, certain prior year amounts have been reclassified to conform to the 2002 presentation.

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

During the first quarter of 2002, the Company made the decision to sell certain of its commercial information technology operations within Cayenta and Titan Technologies in order to allow management to focus on operations with the most near term growth opportunities. As a result, Cayenta’s federal government operations are being reported in Titan Systems, and Cayenta’s remaining operations are being reported in Titan Technologies, formerly Titan’s Emerging Technologies and Businesses segment. In accordance with Statement of Financial Accounting Standard No. 144, “Accounting for the Impairment or Disposal of Long-lived Assets and for Long-Lived Assets to be Disposed of,” all commercial operations that are held for sale have been reflected as discontinued operations for all periods presented in Titan’s consolidated financial statements. All prior period financial information has been restated to reflect the new segments.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets and 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 adopted SFAS No. 144 in the first quarter of 2002 (refer to Note 5). The Company has reported the discontinuance of its SureBeam segment under the provisions of APB No. 30 and the discontinuance of its commercial information technology businesses under the provisions of SFAS No. 144. 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 its consolidated financial position or results of operations.

Note (2) Acquisitions and Investment

On March 21, 2002, Titan completed the acquisition of GlobalNet, Inc. ("GlobalNet"), a provider of international voice, data, and Internet services to further Titan’s goal of building a global telecommunications network. Titan issued approximately 1,452,800 shares of common stock for all the common stock of GlobalNet at an aggregate value of $28.1 million, based on $19.37 per Titan share, the closing price as of March 14, 2002, and assumed stock options and warrants representing approximately 77,900 shares of Titan common stock at an aggregate value of $0.8 million, based on an exchange ratio of 0.3853 shares of Titan common stock for each share of GlobalNet common stock. GlobalNet's operations are reported in our Titan Wireless segment from March 22, 2002. The transaction was accounted for as a purchase. The excess of the purchase price of $28.9 million over the estimated fair market value of the net liabilities acquired of approximately $18.9 million was approximately $47.8 million. In April 2002, the Company had an independent valuation report completed for the purchase price allocation of the GlobalNet acquisition, in which the determination was made to allocate $47.8 million to goodwill and $0 to intangible assets. The consolidated balance sheet reflects this allocation to goodwill.

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 to further Titan’s goal of acquiring government information technology companies which fit strategically with Titan Systems. Titan issued 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 at an aggregate value of $99.6 million, based on $20.24 per Titan share, the average trading price ending March 20, 2002, the date on which the formula for consideration became fixed. Jaycor's operations are reported in our Titan Systems segment from March 22, 2002. The excess of the purchase price of $99.6 million over the estimated fair market value of the net assets acquired of approximately $56.8 million was approximately $42.8 million. The transaction was accounted for as a purchase. In April 2002, the Company had an independent valuation report completed for the purchase price allocation of the Jaycor acquisition, in which the determination was made to allocate $38.9 million to goodwill and $3.9 million to intangible assets. The intangible assets consist of backlog, customer relationships and trade name of $0.7 million, $1.3 million, and $1.9 million, respectively, which will be amortized over the estimated useful lives of 1 year, 1 to 3 years and 5 years, respectively.

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 or third quarter of 2002, and the transaction is expected to close shortly thereafter.

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, to further Titan’s goal of acquiring government information technology companies which fit strategically with Titan Systems. The purchase price was comprised 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 are reported in our Titan Systems segment. The transaction was accounted for as a purchase, and goodwill of $2.4 million was recorded.

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. The acquisition was to further Titan’s goal of acquiring government information technology companies which fit strategically with Titan Systems. Titan issued approximately 4,024,100 shares of its common stock at an aggregate value of $99.9 million based on $24.814 per Titan share, the average trading price ending November 19, 2001, the date on which the formula for consideration became fixed, 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 valued at $12.2 million, 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. The excess of the purchase price of approximately $135.5 million over the estimated fair market value of the net liabilities acquired of approximately $15.0 million was approximately $150.5 million. 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 additional purchase price allocated to the fair value of the assets and liabilities acquired by the Company. The Company recognized approximately $0.3 million in the three months ended March 31, 2002, as a reduction of costs, with the remaining $8.4 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.

In February 2002, an independent valuation was completed to assist management in its purchase price allocation for the BTG acquisition, which supported the Company’s allocation of $141.8 million to goodwill, $8.2 million to intangible assets and $0.5 million deferred compensation related to unvested options assumed. The intangible assets consist of backlog, customer relationships and a strategic relationship of $1.7 million, $5.5 million and $1.0 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 commenced 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. The acquisition was to further Titan’s goal of acquiring government information technology companies which fit strategically with Titan Systems. Titan issued approximately 2.3 million shares of its common stock for all the outstanding shares of Datron common stock at an aggregate value of $44.9 million, based on $19.544 per Titan share, the average trading price ending July 27, 2001, the date on which the formula for consideration became fixed, and assumed Datron stock options representing approximately 437,000 shares of Titan common stock at an aggregate value of $4.0 million, 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. The excess of the purchase price of approximately $48.9 million over the estimated fair market value of the net assets acquired of approximately $15.9 million was approximately $33 million. 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 adjustment has been reflected in the accompanying consolidated balance sheet as additional purchase price allocated to the fair value of the assets and liabilities acquired by the Company. The Company recognized approximately $0.3 million in the three months ended March 31, 2002, as a reduction of costs, with the remaining $0.3 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 completed to assist management in its purchase price allocation for the Datron acquisition, in which the determination was made to allocate $27.4 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 commenced 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 $7.3 million at March 31, 2002, 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 a start-up telecommunications provider, 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. Ivoire Telecom is a telecommunications service provider, conducting business in several western African countries. Ivoire Telecom provides a number of telecommunications services including voice and data via VSAT’s (Very Small Aperture Terminals), satellite fixed wireless and prepaid calling cards. 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. The investment is reflected in 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 and other expenditures necessary to build out the Ivoire Telecom network. Titan has also provided equipment as a part of its investment with an approximate aggregate value of $4.5 million. At March 31, 2002, this $35 million commitment had been substantially funded. Our aggregate investment in Ivoire Telecom of approximately $50 million has been reflected in Other Assets in the Company's consolidated balance sheet at March 31, 2002, and has been reported on the cost method as a result of the Company’s inability to exercise control and significant influence and receive reliable timely financial information.

Management does, however, on a continuous basis, evaluate the build-out of the Ivoire Telecom network in relation to its operation plan, has dialogue with Ivoire Telecom’s operating management, and evaluates various alternatives relative to realizing the value of its investment. Based on these factors, management believes that the value is properly stated at cost. We will continue to evaluate the carrying value of our investment.

Unaudited pro forma data giving effect to the purchase of Jaycor, GlobalNet, BTG and Datron as if they had been acquired at the beginning of 2001 are shown below. Pro forma information related to the Maxwell or International Systems acquisitions are not included, because the effects are not significant.

		Three months ended March 31,

		2002			2001

Revenues		$	379,473		$	354,444

Income (loss) from continuing operations before cumulative effect of change in accounting principle			(5,457	)		(19,020	)
Net income (loss)			(12,247	)		(64,185	)

Basic earnings (loss) per share:
Income (loss) from continuing operations before cumulative effect of change in accounting principle		$	(0.08	)	$	(0.42	)
	Net income (loss)		(0.66	)		(1.20	)

Diluted earnings (loss) per share:
Income (loss) from continuing operations before cumulative effect of change in accounting principle		$	(0.08	)	$	(0.42	)
	Net income (loss)		(0.66	)		(1.20	)

During the three months ended March 31, 2002, approximately $2.0 million was paid in satisfaction of purchase price holdbacks for the SenCom Corporation acquisition made in 2000, and $3.75 million for the Sakon investment. All amounts had been accrued previously.

Note (3) Acquisition and Integration Related Charges and Other

There were no acquisition and integration related charges and other in the first quarter of 2002.

The $27.7 million charge in the first quarter of 2001 includes costs of $12.2 million 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 and retention 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 those matters were resolved in 2001.

Included in the acquisition and integration related charges is a charge of $15.0 million related to the restructuring of Cayenta’s headquarters office. 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 headquarters and network operations center, which included a reduction in workforce of approximately 40 personnel, resulting in a charge of $1.2 million, and the elimination of duplicate and excess facilities, resulting in a charge of approximately $0.8 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 $13.0 million was comprised of the following: $5.5 million for fixed assets associated with Cayenta's network operations center, $2.0 million for prepaid advertising costs, $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 in the three months ended March 31, 2001 is a charge of $0.5 million in the Titan Wireless segment for employee termination costs related to certain organizational changes within that business unit.

As of March 31, 2002, approximately $1.2 million was remaining to be paid primarily related to excess facilities which are expected to be paid during 2002.

Note (4) Adoption of SFAS No. 142, “Goodwill and Other Intangible Assets”

Effective January 1, 2002, the Company adopted SFAS No. 142, "Goodwill and Other Intangible Assets," which establishes financial accounting and reporting for acquired goodwill and other intangible assets and supersedes Accounting Principles Board Opinion No. 17, "Intangible Assets". Under SFAS No. 142, goodwill and indefinite-lived intangible assets are no longer amortized but are reviewed at least annually for impairment. Separable intangible assets that have finite useful lives, will continue to be amortized over their useful lives.

SFAS No. 142 requires that goodwill be tested for impairment at the reporting unit level at adoption and at least annually thereafter, utilizing a two step methodology. The initial step requires the Company to determine the fair value of each reporting unit and compare it to the carrying value, including goodwill, of such unit. If the fair value exceeds the carrying value, no impairment loss would be recognized. However,if the carrying value of thereporting unit exceeds its fair value, the goodwill of this unit may beimpaired. The amount, if any, of the impairment would then be measured in thesecond step.

In connection with adopting this standard as of January 1, 2002, during the first quarter the Company’s independent valuation consultant, KPMG Consulting Inc. (“KCI”) completed step one of the test for impairment, which indicated that the carrying values of certain reporting units exceeded their estimated fair values, as determined utilizing various evaluation techniques including discounted cash flow and comparative market analysis. Thereafter, given the indication of a potential impairment, KCI has substantially completed step two of the test. Based on that analysis, a transitional impairment loss of $40.1 million, which was net of a $10.0 million tax benefit, or $0.57 basic earnings per share and $0.55 diluted earnings per share, was recognized as the cumulative effect of an accounting change. The impairment charge resulted from a change in the criteria for themeasurement of the impairment loss from anundiscounted cash flow method, as required by SFAS No. 121, "Accounting for theImpairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," toa discounted cash flow method and comparative market analysis as required by SFAS No. 142. The gross $50.1 million impairment charge recorded in the first quarter of 2002 was comprised of approximately $27.5 million in certain components of our Cayenta business, approximately $14.9 million in our AverCom business, which was reported in our Titan Technologies segment (previously our Emerging Technologies and Businesses segment), both attributable to lower valuations and weakened outlook in commercial IT services, and approximately $7.7 million in our Titan Wireless business. Approximately $34.0 million of this charge, net of tax, pertained to businesses that were discontinued by the Company on March 1, 2002.

The adjustment of previously reported net income (loss) and earnings (loss) per share below represents the recorded amortization of goodwill and other purchased intangibles. The impact on net income (loss), and basic and diluted net earnings (loss) per share for the quarters ended March 31, 2002 and 2001 is set forth below:

Reconciliation of Net Income (Loss) and Earnings (Loss) Per Share:

	Three months ended March 31,

	2002			2001

Reported income (loss) from continuing operations before cumulative effect of change in accounting principle	$	7,425		$	(14,706	)
Add back goodwill amortization, net of tax		—			2,740

Adjusted income (loss) from continuing operations before cumulative effect of change in accounting principle		7,425			(11,966	)

Loss from discontinued operations, net of tax		(938	)		(45,164	)
Add back goodwill amortization, net of tax		—			3,494

Adjusted loss from discontinued operations		(938	)		(41,670	)

Cumulative effect of change in accounting principle (from continuing operations $6,144, from discontinued operations $33,967)		(40,111	)		—

Adjusted net loss		(33,624	)		(53,636	)
Dividend requirements on preferred stock		(172	)		(172	)

Adjusted loss applicable to common stock	$	(33,796	)	$	(53,808	)

Basic earnings per share:
Reported income (loss) before cumulative effect of change in accounting principle	$	0.10		$	(0.34	)
Add back goodwill amortization, net of tax		—			0.05

Adjusted income (loss) from continuing operations before cumulative effect of change in accounting principle		0.10			(0.29	)

Loss from discontinued operations, net of tax benefit		(0.01	)		(0.95	)
Add back amortization of goodwill		—			0.07

Adjusted loss from discontinued operations, net of tax		(0.01	)		(0.88	)

Cumulative effect of change in accounting principle, net of tax benefit(from continuing operations ($0.09), from discontinued operations ($0.48))		(0.57	)		—

Adjusted income (loss) applicable to common stock	$	(0.48	)	$	(1.17	)

Weighted average shares – basic		70,711			53,377

Diluted earnings per share:
Reported income (loss) from continuing operations before cumulative effect of change in accounting principle	$	0.09		$	(0.34	)
Add back goodwill amortization, net of tax benefit		—			0.05

Adjusted income (loss) from continuing operations before cumulative effect of change in accounting principle		0.09			(0.29	)

Loss from discontinued operations, net of tax benefit		(0.01	)		(0.95	)
Add back amortization of goodwill		—			0.07

Adjusted loss from discontinued operations, net of tax		(0.01	)		(0.88	)

Cumulative effect of change in accounting principle, net of tax benefit principle (from continuing operations ($0.08), from discontinued operations ($0.47))		(0.55	)		—


Adjusted loss applicable to common stock	$	(0.47	)	$	(1.17	)

Weighted average shares		72,385			53,377

Note (5) Discontinued Operations

2002 Discontinued Operations

On March 1, 2002, the Company made the decision to sell certain of its commercial information technology operations within Cayenta and Titan Technologies in order to allow management to focus on operations with the most near term growth opportunities. As a result, Cayenta’s federal government operations have become a part of Titan Systems, and Cayenta’s remaining operations are being reported in Titan Technologies, formerly Titan’s Emerging Technologies and Businesses segment. In accordance with Statement of Financial Accounting Standard No. 144, “Accounting for the Impairment or Disposal of Long-lived Assets and for Long-Lived Assets to be Disposed of,” all commercial operations that are held for sale have been reflected as discontinued operations for all periods presented in Titan’s consolidated financial statements. All prior period financial information has been restated to reflect the new segments.

Included in the loss from discontinued operations for certain components of Cayenta are acquisition and integration related charges and other in the first quarter of 2001 of $3.9 million related to the restructuring of Cayenta as well as certain asset impairments. 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 employee termination costs of approximately $0.1 million and the elimination of excess facilities of $0.1 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 $3.7 million was comprised of the following: $0.4 million for fixed assets, $2.0 million for accounts receivable, and approximately $1.3 million for capitalized software developed for B2B exchanges.

2001 Discontinued Operations

On March 16, 2001, SureBeam Corporation, Titan's subsidiary that provides electronic food irradiation systems and services, completed its initial public offering ("IPO"). 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, and Titan intends to execute the spin off as soon as practical, subject to obtaining 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 business.

Revenues and net loss generated by SureBeam for the three months ended March 31, 2002 were $2.1 million and $10.5 million, respectively. Revenues and net loss generated by SureBeam for the three months ended March 31, 2001 were $5.5 million and $40.6 million, respectively. At the time the Company adopted the plan to spin-off SureBeam, the Company recorded a charge of $35.4 million for estimated costs of disposal and for estimated operating losses up to the date of disposal. This charge was recorded in the quarter ended September 30, 2001. All losses incurred by SureBeam since that time have been charged against this accrual. The remaining balance at March 31, 2002 was approximately $5.4 million. Management will continue to assess the estimated disposal costs and losses, and may from time to time adjust the allowance for such costs accordingly.

2000 Discontinued Operations

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. Accordingly, the results of these businesses have been accounted for as discontinued operations in 2001. In addition, the accompanying consolidated financial statements reflect operations discontinued by Titan in 2000. All periods presented reflect these specific operations as discontinued operations. Management continues to assess the estimated wind-down and/or disposal costs associated with the businesses, and may from time to time adjust the allowance for such costs accordingly.

Following is a table of all related balance sheet categories for each discontinued operation as of March 31, 2002:

	As of March 31, 2002		As of December 31, 2001

Current assets of discontinued operations
SureBeam	$	49,693	$	44,940
Commercial information technologies		13,054		21,209
Other		1,692		1,692

	$	64,439	$	67,841

Non-current assets of discontinued operations
SureBeam	$	63,500	$	65,704
Commercial information technologies		11,510		49,902
Other		—		—

	$	75,010	$	115,606

Current liabilities of discontinued operations
SureBeam	$	16,176	$	33,470
Commercial information technologies		10,343		8,952
Other		2,336		—

	$	28,855	$	42,422

Non-current liabilities of discontinued operations
SureBeam	$	—	$	7,608
Commercial information technologies		1,403		562
Other		—		—

	$	1,403	$	8,170

Note (6) Debt

At March 31, 2002, total borrowings outstanding under the Company's primary credit facility with a syndicate of commercial banks were $312.5 million at a weighted average interest rate of 5.04%. Commitments under letters of credit were $8.8 million at March 31, 2002, $6.0 million of which reduce availability of the working capital line. Of the total borrowings, $13.8 million was short-term. At March 31, 2002, the Company was in compliance with all financial covenants under its various debt agreements.

At March 31, 2002, the Company had $1.1 million in restricted cash to secure certain letter of credit obligations.

Note (7) Other Financial Information

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 stockholders. 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.

On March 1, 2002, the Company adopted a plan to eliminate and hold for sale certain of its commercial information technology operations within Cayenta and Titan Technologies in order to allow management to focus on operations with the most near term growth opportunities. As a result, Cayenta’s federal government operations are now reported as a part of Titan Systems, and Cayenta’s remaining operations are being reported in Titan Technologies, which was formerly named Emerging Technologies and Businesses. In accordance with Statement of Financial Accounting Standards No. 144, all current and prior year data have been restated to reflect the operations of Cayenta which have been eliminated and held for sale as discontinued operations, and the segment of Cayenta (Software Systems) is no longer reported as a separate segment. Further, all prior period data has been restated to reflect the change in Titan’s segment reporting for the components previously reported as Cayenta that will be continued in Titan Systems and Titan Technologies.

The following tables summarize revenues and operating profit (loss) by operating segment for the three month period ended March 31, 2002 and 2001. All segment operating profit and loss data reported on an historical basis and for the current year have been reported before Corporate overhead costs.

	Three months ended March 31,

	2002			2001

Revenues:
Titan Systems	$	304,852		$	211,543
Titan Wireless		20,822			21,014
Titan Technologies		14,871			6,755

	$	340,545		$	239,312

Operating Profit (Loss):
Titan Systems	$	24,068		$	4,691
Titan Wireless		(897	)		(74	)
Titan Technologies		2,629			(561	)
Cayenta headquarters costs		—			(17,106	)
Corporate		(4,665	)		(4,505	)

	$	21,135		$	(17,555	)

The operating income of the Titan Systems segment for the three month period ended March 31, 2001 includes a planned $12.2 million restructuring charge related primarily to the integration of ACS and AverStar, acquired in 2000, and a realignment of business around its major categories of customers, which together resulted in personnel reductions and the closing of certain facilities (see Note 3). Also in the Titan Systems segment, deferred profit of $1.0 million and $0.7 million related to acquisitions in 2001, 2000 and 1999 was recognized in the three months ended March 31, 2002 and 2001, respectively.

Operating income in the Titan Wireless segment in the three month period ended March 31, 2001, includes restructuring charges of $0.5 million, as discussed in Note 3.

Cayenta headquarters costs include sales, general and administrative costs incurred to operate the Cayenta corporate headquarters and network operations center. As this office has been eliminated as of March 1, 2002 when certain of the components of Cayenta were discontinued, and these costs were incurred to operate the previous integrated operations of Cayenta, of which certain operations have been discontinued, and the continuing operations are now reported in Titan Systems and Titan Technologies segments, these costs have been separately disclosed above. Approximately $15.0 million of the operating results for the first quarter of 2001 are related to acquisition and integration related charges.

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

The following data summarize information relating to the per share computations for income (loss) before extraordinary item:

	Three months ended March 31, 2002							Three months ended March 31, 2001

	Loss (Numerator)			Shares (000's) (Denominator)	Per Share Amounts			Loss (Numerator)				Shares (000's) (Denominator)	Per Share Amounts

Loss from continuing operations before cumulative effect of change in accounting principle	$	7,425							$	(14,706	)
Less preferred stock dividends		(172	)							(172	)
Effect of minority interests		(466	)							(3,181	)

Basic EPS:
Income from continuing operations before cumulative effect of change in accounting principle available to common stockholders		6,787		70,771	$	0.10				(18,059	)	53,377	$	(0.34	)
Effect of dilutive securities:
Stock options and warrants		—		1,614		(1.01	)			—		—		—

Diluted EPS:
Income from continuing operations before cumulative effect of change in accounting principle available to common stockholders	$	6,787		72,385	$	0.09			$	(18,059	)	53,377	$	(0.34	)

In the three months ended March 31, 2002, options and warrants to purchase approximately 1,218,400 shares of common stock at prices ranging from $20.70 to $47.50 per share were not included in the computation of diluted EPS, as the effect would have been anti-dilutive due to the exercise price. Options to purchase approximately 2,303,800 and 1,204,900 shares of common stock at prices ranging from $1.12 to $20.04 per share and $20.70 to $47.50 per share, respectively, were not included in the computation of diluted EPS for the three month period ended March 31, 2001, due to the loss from continuing operations and/or the exercise price.

Approximately 5,038,000 shares in the three month periods ended March 31, 2002 and March 31, 2001 from the potential conversion of remarketable term income deferrable equity securities were not included in the computations as their effect was anti-dilutive. Approximately 460,000 shares of common stock in 2002 and 2001 that could result from the conversion of cumulative convertible preferred stock were not included in the computations of diluted EPS, as the effect would have been anti-dilutive.

Following are details concerning certain balance sheet data:

	March 31, 2002		December 31, 2001

Inventories:
Materials	$	15,977	$	15,720
Work-in-process		8,767		9,466
Finished goods		4,839		3,926

	$	29,583	$	29,112

Supplemental disclosure of cash flow information:

	Three months ended March 31,

	2002			2001

Noncash investing and financing activities:
Issuance of stock for acquisitions	$	134,176		$	—
Gain related to issuance of stock in subsidiary		—			52,025
Shares contributed to employee benefit plans		3,604			—

Cash paid for interest	$	9,859		$	6,926
Cash paid for (provided by) income tax		(309	)		910

Note (8) Commitments and Contingencies

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 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 the Company’s results of operations or cash flows in a future period.

Note (9) 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) Titan provides to SureBeam 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, provided 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.

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 March 31, 2002, Titan has guaranteed approximately $1.3 million, or 19.9% of the loan balance.

In March 2002, our Board of Directors adopted a stock option relinquishment program, the primary purpose of which is to align the interests of our directors and senior executives more closely with our stockholders' interests by allowing directors and senior executives to participate in the appreciation in our equity value:

•		without requiring our directors and executive officers to trade shares of our common stock obtained through the exercise of options on the open market; and

•		without the dilutive and potentially stock-price depressive effects associated with the exercise and subsequent sale of stock option shares.

The program also assists our directors and executive officers with their individual financial planning. Under the program, a participant can relinquish eligible, in-the-money stock options in exchange for a loan, the principal amount of which is 150% of the difference between the aggregate exercise price of the options and the product of (i) the number of shares issuable upon exercise of the options and (ii) a 20 day trailing average of the daily high and low sales price of our common stock prior to relinquishment. The loans will bear interest at a rate equal to the applicable federal rate as published by the Internal Revenue Service for the month in which the loan is made. The loans are contingent upon the participant's, within 90 days, utilizing a portion of the loan proceeds to purchase a life insurance policy with a death benefit sufficient to repay the loan and accrued interest thereon upon maturity. The deadline for notice from directors and executive officers of their intent to participate in the current program was March 29, 2002.

If, subsequent to the individual's notice to participate and within 90 days after receiving the loan proceeds, the individual elects not to participate in the program or no life insurance policy is obtained, the loans are repaid with accrued interest thereon and the options are returned to the individual. The loans mature on the death of the second to die of the participant and his/her spouse. Under the program, to date the following conditional transactions have occurred, each still within the 90 day contingency period:

•		Dr. Ray, Chairman of the Board, President and Chief Executive Officer: 222,380 options conditionally relinquished, $3,985,725 principal amount of loan, 5.48% interest per annum;

•		Mr. Costanza, Senior Vice President, General Counsel and Secretary: 40,000 options conditionally relinquished, $614,400 principal amount of loans, 5.48% interest per annum;

•		Mr. Fink, director: 15,000 options conditionally relinquished, $336,337.50 principal amount of loan, 5.48% interest per annum;

•		Mr. Hanisee, director: 10,000 options conditionally relinquished, $220,184 principal amount of loan, 5.48% interest per annum; and

•		Mr. Alexander, director: 19,972 options conditionally relinquished, $499,999 principal amount of loan, 5.48% interest per annum.

At March 31, 2002, the Company had other loans receivable from three officers of two of the Company's subsidiaries totaling $0.3 million. In June 2002, Mr. Costanza and Mr. Hanisee repaid the outstanding balance of their loans in full.

Note (10) Subsequent Event

In May 2002, Titan received a favorable ruling request from the IRS for the tax free distribution of SureBeam.

On May 23, 2002, the Company entered into an agreement with Wachovia Bank, National Association and Wachovia Securities for a $485 million credit facility from a syndicate of commercial banks including Wachovia Securities acting as Sole Lead Arranger and Wachovia Bank, National Association, as Administrative Agent, The Bank of Nova Scotia and Comerica Bank as Co-Syndication Agents and Branch Banking Trust Company and Toronto Dominion Bank as Co-Documentation Agents and other financial institutions. The new credit facility replaces the Company’s existing $425 million credit facility and is comprised of a $135 million revolving credit facility and a $350 million term loan, which mature in six and seven years, respectively. No funds were drawn initially on the revolver, which will be available to the Company for general corporate needs, including strategic acquisitions. Additionally, the new facility excludes Titan’s ownership of SureBeam stock as collateral, enabling Titan to spin-off SureBeam in accordance with Titan’s plans to do so.

Loans made under the term loan facility would mature on the seventh anniversary of the closing date of the new credit facility, and amortize as follows: 1.0% per year in years one through six of the credit facility and 94% in year seven of the credit facility. Under each of the term loan facility and the revolving facility, we would have the option to borrow at the bank’s base rate or at adjusted LIBOR plus, in each case, an applicable margin based upon our 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 us to maintain minimum interest and fixed charge coverages and levels of net worth. The new agreement contains financial covenants, which are comprised of the following at March 31, 2002, on a pro forma basis for the new bank facility: a maximum debt to EBITDA limit of 3.1 to 1, a minimum interest coverage ratio of 2.75 to 1, a minimum fixed coverage ratio of 1.2 to 1 and a minimum net worth of $475 million. As of March 31, 2002, on a pro forma basis, taking into effect the new bank facility, Titan was in compliance with all financial covenants.

THE TITAN CORPORATION

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

(Dollar amounts in thousands, except share and per share data, or as otherwise noted)

Results of Operations

During the first quarter of 2002, the Company made the decision to sell certain of its commercial information technology operations within Cayenta and Titan Technologies in order to allow management to focus on those operations with the most near term growth opportunities. As a result, Cayenta’s federal government operations have become a part of Titan Systems, and Cayenta’s remaining operations are being reported in Titan Technologies, formerly Titan’s Emerging Technologies and Businesses segment. All commercial operations that are held for sale have been reflected as discontinued operations for all periods presented in Titan’s consolidated financial statements. All prior period financial information has been restated to reflect the new segments.

Three Months Ended March 31, 2002:

Consolidated. Our consolidated revenues increased from $239.3 million in the first quarter of 2001 to $340.5 million in the first quarter of 2002. Increased revenues were reported in our Titan Systems segment, primarily attributable to the acquisitions of BTG, Inc. in the fourth quarter of 2001 and Datron in the third quarter of 2001, and in our Titan Technologies segment, primarily as a result of revenues generated on Titan’s contract with the United States Postal Service (USPS) to provide mail sanitization systems.

Titan Systems. Titan Systems’ revenues increased from $211.5 million in the first quarter of 2001 to $304.9 million in the first quarter of 2002. The acquisitions of BTG and Datron contributed approximately $69.6 million and $9.0 million of the revenues in the first quarter of 2002, respectively, with the remaining increase in revenues driven by internal revenue growth generated by strong demand from the Army for acquisition and logistics management and systems engineering services, from the Navy for satellite navigation system support, and aviation engineering and integration services in support of C4ISR and network centric warfare activities, and for information solutions, including both software and modem products, designed to increase the efficiency of satellite communications systems. There was little impact from the acquisition of Jaycor, as the acquisition closed on March 24, 2002. Comparable revenues for the first quarter of 2001 for BTG and Datron (which were not acquired until the fourth and third quarters of 2001, respectively), were approximately $58.8 million and $21.2 million, respectively.

Titan Wireless. Titan Wireless’ revenues decreased slightly from $21.0 million in the first quarter of 2001 to $20.8 million in the first quarter of 2002. Increased service revenues of approximately $4.4 million from Titan’s wholesale long distance business generated by Titan’s consolidated joint venture, Sakon LLC, were offset by a $4.6 million decrease in revenues generated by the systems integration business, primarily a result of decreased revenues recorded on Titan Wireless’ project in Benin to build a telecommunications system for its customer, The Office of Post and Telecommunication of Benin (“OPT”).

Titan Technologies. Titan Technologies revenues increased from $6.8 million in the first quarter of 2001 to $14.9 million in the first quarter of 2002. The increase in 2002 is related to revenues of approximately $5.9 million generated on Titan’s contract with the U.S. Postal Service to provide mail sanitization systems, and due to increased revenues of approximately $1.7 million generated by certain components of Cayenta, which provide software and integration services for utilities and municipalities.

Selling, General and Administrative

Our SG&A expenses decreased from $46.0 million in the first quarter of 2001 to $42.8 million in the first quarter of 2002. SG&A, as a percentage of revenues, decreased from 19.2% in the first quarter of 2001 to 12.6% in the first quarter of 2002. The decrease in 2002 was due in part to reduced amortization of goodwill and purchased intangibles from $3.7 million in the first quarter of 2001 to $1.4 million in the first quarter of 2002. Excluding the amortization of goodwill and purchased intangibles and deferred compensation of $1.0 million in both years, SG&A decreased from 17.2% in 2001 to 11.9% in 2002. The decrease in 2002 is in part attributable to certain cost reductions that were made during 2001, as well as to a difference in the methodology of the classification of operating costs reported as costs of sales versus sales, general & administrative costs, as defined by the recently acquired company BTG’s stated disclosure statement with its appropriate government customers. We expect to conform BTG’s disclosure statement and classification of operating costs to those classifications used by Titan by the end of 2002.

Research and Development

Our R&D expenses increased from $3.4 million in the first quarter of 2001 to $4.9 million in the first quarter of 2002. The increase in 2002 is attributable to increased development expenses incurred in LinCom Wireless. As a percentage of revenues, R&D expenses remained flat at 1.4% in the first quarter of 2001 and 2002.

Acquisition and Integration Related Charges and Other

Fiscal 2001 Charges

Acquisition and integration related charges and other of $27.7 million in the first quarter of 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 and retention 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 were resolved in 2001.

Also included in the acquisition and integration related charges and other is a charge of $0.5 million of employee termination costs in the Titan Wireless segment related to certain organizational changes within that business unit and the elimination of the internal product development group.

Operating Profit (Loss)

Consolidated. Our operating profit improved from an operating loss of $17.6 million in the first quarter of 2001 to operating profit of $21.1 million in the first quarter of 2002. Our operating loss in 2001 included acquisition and integration related charges and other of $27.7 million, as well as $3.7 million of amortization of goodwill and $1.1 million of deferred compensation. Included in our operating profit in 2002 is $1.4 million of amortization of purchased intangibles as well as $1.0 million of deferred compensation. Excluding the acquisition and integration related charges and amortization of goodwill and purchased intangibles and deferred compensation, operating profit increased from $15.0 million in the first quarter of 2001 to $23.5 million in the first quarter of 2002. Increased operating profit was primarily attributed to the increase in revenues discussed previously, offset by lower margins in our government business and in Titan Wireless, both attributable to a higher mix of lower margin service business in 2002.

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. Also included in segment operating profit for the quarter ended March 31, 2002 are overhead and administrative costs associated with the previous corporate headquarters and network operations center of Cayenta, which were eliminated in the first quarter of 2002, when certain components of Cayenta were discontinued. Included in these costs for the Cayenta headquarters are certain charges of $15.0 million related to the impairment of assets of Cayenta’s network operations center and the restructuring of the Cayenta headquarters which are included in the acquisition and integration related charges for the year ended December 31, 2001. 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 those 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.

Titan Systems. Titan Systems' operating profit increased from $4.7 million in the first quarter of 2001 to $24.1 million in the first quarter of 2002. Included in the 2001 operating results is an integration and acquisition related charge of $12.9 million and amortization of goodwill of $2.4 million. Included in the 2002 operating results is amortization of purchased intangibles of $1.4 million. Excluding the charges and the amortization of goodwill and purchased intangibles, operating profit increased from $19.9 million in the first quarter of 2001 to $25.4 million in the first quarter of 2002. The increase in operating profit was primarily a result of the increased revenues discussed previously, offset by lower margins as a result of the BTG and Datron acquisitions, which increased the service business mix in Titan Systems.

Titan Wireless. Titan Wireless’ operating performance decreased from an operating loss of $0.1 million in the first quarter of 2001 to an operating loss of $0.9 million in the first quarter of 2002. Included in the 2001 operating loss was a charge of $0.5 million for employee termination benefits as well as $0.4 million for amortization of goodwill. Excluding the charge and amortization of goodwill, operating profit in the first quarter of 2001 was $0.9 million compared to an operating loss of $0.9 million in the first quarter of 2002. Decreased margins were primarily the result of the shift to a higher proportion of service revenue in wholesale long distance business from the more profitable systems integration business. In addition, continued investment in the development of Titan Wireless’ corporate retail business impacted the first quarter of 2002 operating results.

Titan Technologies. Titan Technologies operating results improved from an operating loss of $0.6 million in the first quarter of 2001 to operating income of $2.6 million in the first quarter of 2002. The operating profits in 2002 were impacted by the increase in revenues discussed previously, offset partially by increased research and development expenses in LinCom Wireless. The first quarter of 2001 operating results include approximately $0.9 million of amortization of goodwill. Excluding the impact of the amortization of goodwill in 2001, operating profit increased from $0.4 million in the first quarter of 2001 to $2.6 million in the first quarter of 2002.

Interest Expense, Net

Our net interest expense decreased slightly from $8.6 million in the first quarter of 2001 to $8.3 million in the first quarter of 2002. Net interest expense decreased primarily as a result of reduced effective interest rates. Borrowings from our primary bank lines of credit, excluding working capital lines from acquired companies, averaged $310.9 million at a weighted average rate of 8.5% during the first quarter of 2001, compared to $357.9 million at a weighted average rate of 5.08% during the first quarter of 2002.

Income Taxes

Consolidated income taxes reflect effective rates of a benefit rate of 27% in the first quarter of 2001 compared to a provision rate of 42% in the first quarter of 2002. The reduced rate for the tax benefit in 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)

In the first quarter of 2001, we reported a net loss of $59.9 million compared to a net loss of $33.6 million in the first quarter of 2002. Included in the net loss for the first quarter of 2002 is a charge of $40.1 million, net of related tax benefits of $10.0 million, for the cumulative effect of change in accounting principle, reflecting the adoption of SFAS No. 142. Loss from discontinued operations was $45.2 million in the first quarter of 2001 compared to a loss of $0.9 million in the first quarter of 2002. Included in the loss from discontinued operations in 2001 was approximately $34.5 million of a net loss from the Company’s SureBeam operations, which included approximately $38.9 million of deferred compensation related to the initial public offering of SureBeam in March 2001. There are no losses included in the loss from discontinued operations for the first quarter of 2002 related to SureBeam as all operating losses were offset against the accrual for estimated operating losses which the Company accrued in the third quarter of 2001.

Liquidity and Capital Resources

We generated approximately $29.4 million cash from our continuing operations during the quarter ended March 31, 2002, resulting from income from continuing operations coupled with a net source resulting from changes in working capital. Our investing activities generated net cash of approximately $15.0 million, resulting from net cash acquired of approximately $26.8 million, primarily from the Jaycor acquisition which closed in late March 2002, offset by investments and capital expenditures.

Our financing activities used cash of $20.1 million, primarily reflecting reductions of debt of $20.4 million, including $17.5 million on our credit facility and reductions of the debt of acquired companies. Proceeds of $2.6 million were received from the exercise of stock options.

At March 31, 2002, total borrowings under our credit facility were $312.5 million at a weighted average interest rate of 5.04%. Commitments under letters of credit were $8.8 million at March 31, 2002, $6.0 million of which reduce availability of our working capital line, resulting in $94.0 million of availability on our working capital line at March 31, 2002. Of the total borrowings, $13.8 million was short-term.

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 Scotia 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 of 3.25 to 1 and require us to maintain minimum interest coverage of at least 4.0 to 1, minimum fixed charge coverage of at least 1.0 to 1 and minimum levels of net worth of $260.6 million. The Company was in compliance with all financial covenants as of March 31, 2002.

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 March 31, 2002, approximately $46.4 million was drawn on this facility, which has been reflected as Non-recourse debt in the accompanying consolidated balance sheet and approximately $99.6 million has been reflected as Long-term contract receivables, related to the gross amount due from the OPT on the contract. The $46.4 million drawn on the facility reflects the amount that has been funded by the Africa Merchant Bank to cover 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 March 31, 2002, the outstanding receivable balance, net of the non-recourse debt, due on this contract was approximately $53 million. Management believes that the appropriate insurance policies are in place to cover risk related to loss in Benin and certain other 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 and other expenditures necessary to build out the Ivoire Telecom network. At March 31, 2002, 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.

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) Titan provides to SureBeam 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.

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.

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, and that it expects a greater percentage of revenues in Titan Wireless to be derived from the provision of services. 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 or implied by forward looking statements. These risks and uncertainties include but are not limited to those referred to in the Company's Annual Report on Form 10-K for the year ended December 31, 2001, including the Company's entry into new commercial businesses that require the Company to develop demand for its product, its ability to execute its spin off strategy, its ability to access the capital markets, 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, the risks of doing business in developing countries and international markets, including foreign currency risks, and other risks described in the Company's Securities and Exchange Commission filings.

PART II—OTHER INFORMATION

THE TITAN CORPORATION

Item 1. Legal Proceedings

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. 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.

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

a.	List of exhibits:

	13*	The Titan Corporation 2001 Annual Report to Shareholders.


* Previously filed.

b.	During the three months ended March 31, 2002, the Company filed the following:

	(1)	Current report on Form 8-K dated January 6, 2002, to report that on January 6, 2002, The Titan Corporation, T T III Acquisition Corp., a wholly-owned subsidiary of Titan, and GlobalNet entered into a merger agreement, pursuant to which T T III Acquisition Corp. will be merged with and into GlobalNet. GlobalNet will be the surviving corporation in the merger and will become a wholly-owned subsidiary of Titan, which included a copy of the Agreement and Plan of Merger, dated January 6, 2002, among The Titan Corporation, T T III Acquisition Corp., and GlobalNet, Inc., the Press Release, dated January 7, 2002, and the Voting Agreement, dated as of January 6, 2002, among the Titan Corporation, T T III Acquisition Corp., and certain stockholders party thereto.

	(2)	Current report on Form 8-K dated January 21, 2002, to report that on January 21, 2002, The Titan Corporation, a Delaware corporation (“Titan”), Thunderbird Acquisition Corp., a California corporation and Jaycor, Inc., a California corporation (“Jaycor”) entered into a merger agreement, pursuant to which Thunderbird Acquisition Corp. will be merged with and into Jaycor (the “Merger”) with Jaycor as the surviving entity, which included the 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., the Press Release, dated January 21, 2002, and the Form of Voting Agreement.

	(3)	Current report on Form 8-K/A dated January 6, 2002, filed for the purpose of providing GlobalNet’s historical financial statements.

	(4)	Current report on Form 8-K/A dated January 6, 2002, filed for the purpose of providing Jaycor’s historical financial statements.

	(5)	Current report on Form 8-K dated February 11, 2002, to report the issuance of a press release regarding the Company’s earning for the fourth quarter and the year ended December 31, 2001, including a copy of such press release.

	(6)	Current report on Form 8-K dated February 23, 2002, to report that on February 23, 2002, The Titan Corporation, a Delaware corporation (“Titan”), Thunderbird Acquisition Inc., a New Mexico corporation and Science & Engineering Associates, Inc., a New Mexico corporation (“SEA”) entered in to a merger agreement, pursuant to which Thunderbird Acquisition Inc. will be merged with and into SEA (the “Merger”) with SEA as the surviving entity, which included the 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., Form of Voting Agreement, and the Press Release, dated February 25, 2002.

	(7)	Current report on Form 8-K dated March 22, 2002, to file financial information with the Securities and Exchange Commission for purposes of updating the Company’s publicly available disclosure.

	(8)	Current report on Form 8-K dated March 21, 2002, to report the completion on March 21, 2002, of the Company’s acquisitions by merger of GlobalNet, Inc., and Jaycor, Inc., which included the following exhibits:

		•	Agreement and Plan of Merger, dated as of January 6, 2002, by and among The Titan Corporation, T T III Acquisition Corp. and GlobalNet, Inc., as amended (incorporated by reference to Exhibit 2.1 to Titan’s Registration Statement on Form S-4 (Registration No. 333-81694)),

		•	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., (incorporated by reference to Exhibit 2.1 to Titan’s Registration Statement on Form S-4 (Registration No. 333-81782)),

		•	Consent of KGMP LLP, independent auditors, regarding the financial statements of GlobalNet, Inc.,

		•	Consent of Ernst & Young LLP, independent auditors, regarding the financial statements of Jaycor, Inc.,

		•	Consent of PricewaterhouseCoopers LLP, independent accountants, regarding the financial statements of Jaycor, Inc.,

		•	Audited consolidated balance sheets of GlobalNet as of December 31, 2001 and 2000, and the related consolidated statements of operations, stockholders’ deficit and cash flows for each of the three years in the period ended December 31, 2001, and the notes related thereto and the related independent auditors’ report, and

		•	Audited consolidated balance sheets of Jaycor as of January 31, 2001 and 2002, and the related consolidated statements of operations, stockholders’ equity and cash flows of Jaycor for each of the three years in the period ended January 31, 2002, and the notes related thereto and the related auditors’ reports.

THE TITAN CORPORATION
SIGNATURES

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

Dated: June 28, 2002	THE TITAN CORPORATION
	By:	/s/ MARK W. SOPP

		Mark W. Sopp Senior Vice President Chief Financial Officer
	By:	/s/ DEANNA J. HOM

		Deanna J. Hom Vice President, Corporate Controller (Principal Accounting Officer)

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Part I—FINANCIAL INFORMATION
Item 1. Financial Statements

THE TITAN CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
THE TITAN CORPORATION CONSOLIDATED BALANCE SHEETS
THE TITAN CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
THE TITAN CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

THE TITAN CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Part II—OTHER INFORMATION THE TITAN CORPORATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K.

THE TITAN CORPORATION SIGNATURES