Results of Operations Critical Accounting Policies and the Use of Estimates The preparation of our financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes. Actual results could differ materially from those estimates. The items in our financial statements requiring significant estimates and judgments are as follows: Revenues in 2001 were $4.6 million compared to $1.9 million for 2000, an increase of $2.7 million. The increase in revenue was primarily due to a $2.5 million license fee payment from Novartis for the development and commercialization of iloperidone in Japan, and higher SBIR grant revenues from the National Institutes of Health in support of the development of Spheramine, our novel treatment for Parkinson’s disease. See Note 6 to the Consolidated Financial Statements. Research and development expenses for 2001 were $23.3 million compared to $16.7 million for 2000, an increase of $6.6 million. The planned increase in research and develop- ment is associated with our expanded clinical programs in can- cer, specifically the ongoing randomized, placebo-controlled Phase III clinical study of CeaVac in Dukes D colorectal cancer, Phase II studies with Pivanex, Phase I/II study with Spheramine and Phase I/II study with gallium maltolate. Research and development expenses are expected to continue to increase moderately in the future. The rate of increase depends on a number of factors including progress in pre-clinical programs and clinical trials. General and administrative expenses for 2001 were $5.4 mil- lion compared to $4.1 million for 2000, an increase of $1.3 million. The increase, consisting primarily of salaries and employment-related costs, was in support of our expanded clinical and pre-clinical operations and certain stock option related non-cash compensation charges. Other income, net, for 2001 was $6.7 million compared to $5.1 million for 2000, an increase of $1.6 million. The increase, primarily in interest income, was a result of our significantly larger average cash and marketable securities position. As a result of the foregoing, we had a net loss of $17.5 million in 2001 compared to a net loss of $18.8 million in 2000. None of our products have been commercialized, and we do not expect to generate any revenue from product sales or  royalties in the foreseeable future. With the advancement in clinical development of our products, we anticipate research and development expenses will increase in the near future, while general and administrative costs necessary to support such research and development activities will increase at a  • The consolidated financial statements include the accounts of Titan and GeoMed, Inc., our wholly owned subsid- iary, and Ingenex, Inc. and ProNeura, Inc., our majority owned subsidiaries. We do not have any unconsolidated subsidiaries. • Contract revenue for research and development is recorded as earned based on the performance requirements of the contract. Non-refundable contract fees or non-refundable upfront license fees for which no further performance obli- gations exist, and there is no continuing involvement by Titan, are recognized on the earlier of when the payments are received or when collection is assured. • Our marketable securities, consisting primarily of high- grade debt securities, are classified as available-for-sale at time of purchase and carried at fair value. Declines in mar- ket value that are deemed to be other than temporary would impact our financial position. • Our investment in equity instruments of other companies is accounted for under the cost method as we do not have the ability to exercise significant influence over their oper- ations. We monitor our investments for impairment and record reductions in carrying value when events or changes in circumstances indicate that the carrying value may not be recoverable. Revenue associated with performance milestones, con- sidered “at-risk” until the milestones are completed, is recognized based on the achievement of the milestones as defined in the respective agreements. Advance pay- ments received prior to the achievement of milestones are classified as deferred revenue until earned. Government grants, which support our research effort in specific projects, generally provide for reimbursement  of approved costs as defined in the grant documents,  and revenue is recognized when subsidized project costs are incurred. Comparison of Years Ended December 31, 2001 and 2000 Fifteen