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## 6. Iloperidone Sublicense to Novartis Pharma AG 

We entered into an agreement with Novartis in 1997 pursuant to which we granted Novartis a sublicense for the worldwide (with the exception of Japan) development, manufacturing and marketing of iloperidone. In April 2001, we entered into an amendment to the agreement for the development and com- mercialization of iloperidone in Japan. Under the amendment, in exchange for rights to iloperidone in Japan, Titan received a $2.5 million license fee in May 2001. Novartis will make our milestone payments to Aventis during the life of the Novartis agreement, and will also pay to Aventis and Titan a royalty on future net sales of the product, providing Titan with a net royalty of 8% on the first $200 million of sales annually and 10% on all sales above $200 million on an annual basis. Novartis has assumed the responsibility for all clinical develop- ment, registration, manufacturing and marketing of iloperi- done, and we have no remaining obligations under the terms of this agreement, except for maintaining certain usual and customary requirements, such as confidentiality covenants. 

## 7. Licensing and Collaborative Agreement with Schering AG 

In January 2000, we entered into a licensing and collaborative agreement with Schering, under which we will collaborate with Schering on manufacturing and clinical development of our cell therapy product, Spheramine GLYPH<H23006> , for the treatment of Parkinson’s disease. Under the agreement, we will perform clinical development activities for which we will receive fund- ing. As of December 31, 2001, we recognized $2.2 million under this agreement. Schering will fully fund, and manage in collaboration with us, all future pilot and pivotal clinical studies, and manufacturing and development activities. We are entitled to certain payments upon the achievement of specific milestones. 

## 8. Acquisition of a Novel and Proprietary Agent 

In July 2000, we announced the acquisition of a worldwide, royalty-bearing, exclusive license to a novel and proprietary agent, gallium maltolate, for a potential treatment of cancer and other conditions, including HIV infection. We obtained these rights through the acquisition of GeoMed, Inc., a pri- vately held California corporation. Under this license agree- ment, we are required to make an annual license payment to Dr. Lawrence Bernstein, technology inventor, of $50,000, as well as royalty payments based on net sales of products and processes incorporating the licensed technology. We com- pleted the acquisition in August 2000 by assuming $1.4 million of GeoMed’s liabilities and issuing an aggregate of 94,000 shares of Titan common stock valued at approximately $3.6 million using the fair market value of our common stock 

at the date of the agreement in accordance with generally accepted accounting principles. The entire purchase price of approximately $5.0 million was charged to acquired in-process research and development as the acquired technology was in an early stage of development that, as of the acquisition date, had not achieved technological feasibility and no alternative use existed. 

## 9. Lease Commitments 

We lease facilities under operating leases that expire at var- ious dates through June 2006. Rent expense was $584,000, $411,000, and $331,000, for years ended December 31, 2001, 2000, and 1999, respectively. 

The following is a schedule of future minimum lease payments at December 31, 2001 (in thousands): 

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## 10. Stockholders’ Equity 

## Preferred Stock 

In connection with the merger of our Trilex Pharmaceu- ticals, Inc. subsidiary (Trilex) in 1997, we issued 222,400 shares of Series C convertible preferred stock (the Series C Preferred) to certain members of the Trilex management team and to certain consultants of Trilex. The Series C Preferred automati- cally converts to common stock, on a one-to-one basis, only if certain development milestones are achieved within certain timeframes. Upon achievement of the milestones, we would be required to value the technology using the then fair market value of our common stock issuable upon conversion. Holders of Series C Preferred are not entitled to vote but entitled to receive dividends, when, as and if declared by the board of directors ratably with any declaration or payment of any divi- dend on our common stock or other junior securities. The Series C Preferred has a liquidation preference equal to $0.01 per share. No value was assigned to the Series C Preferred in the accompanying financial statements. 

## Common Stock 

In March 2000, we completed a private placement of 1.2 mil- lion shares of our common stock for net proceeds of $38.8 million, after deducting fees and commissions and other expenses of the offering. 

