<PAGE>

================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

     [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002

                                       OR

     [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

           FOR THE TRANSITION PERIOD FROM ____________ TO ____________

                         COMMISSION FILE NUMBER: 0-27491

                            DALEEN TECHNOLOGIES, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                                         <C>
                     DELAWARE                                   65-0944514
   (State or other Jurisdiction of incorporation             (I.R.S. Employer
                 or organization)                           Identification No.)

          902 CLINT MOORE ROAD, SUITE 230
                BOCA RATON, FLORIDA                              33487
     (Address of principal executive offices)                 (Zip Code)
</TABLE>

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (561) 999-8000

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

As of November 1, 2002, there were 22,984,272 shares of registrant's common
stock, $0.01 par value, outstanding.

================================================================================
<PAGE>
                   DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES
                                    FORM 10-Q

                        QUARTER ENDED SEPTEMBER 30, 2002

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                          PART I - FINANCIAL INFORMATION                                                  PAGE
                                                                                                                          ----
<S>             <C>                                                                                                       <C>
Item 1.         Condensed Unaudited Consolidated Financial Statements.

                Condensed Unaudited Consolidated Balance Sheets as of December 31, 2001 and September 30, 2002              3

                Condensed Unaudited Consolidated Statements of Operations for
                the three months and nine months ended September 30, 2001 and 2002                                          4

                Condensed Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2001
                and 2002                                                                                                    5

                Notes to Condensed Unaudited Consolidated Financial Statements                                              6

Item 2.         Management's Discussion and Analysis of Financial Condition and Results of Operations.                     21

Item 3.         Quantitative and Qualitative Disclosures about Market Risk.                                                46

Item 4.         Controls and Procedures.                                                                                   46

                                          PART II - OTHER INFORMATION

Item 1.         Legal Proceedings.                                                                                         47

Item 6.         Exhibits and Reports on Form 8-K.                                                                          48

                Signatures                                                                                                 49

                Certifications                                                                                             50
</TABLE>

                                       2
<PAGE>
                                     PART I

                              FINANCIAL INFORMATION

ITEM 1.      CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.

                   DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES

                 CONDENSED UNAUDITED CONSOLIDATED BALANCE SHEETS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                                    DECEMBER 31,    SEPTEMBER 30,
                                                                                                        2001            2002
                                                                                                    ------------    -------------
<S>                                                                                                 <C>             <C>
ASSETS
Current assets:
        Cash and cash equivalents                                                                    $    13,093     $     5,984
        Restricted cash                                                                                       30              30
        Accounts receivable, less allowance for doubtful accounts
                of $3,789 at December 31, 2001 and $3,640 at September 30, 2002                            2,397           1,259
        Unbilled revenue                                                                                     488              37
        Other current assets                                                                                 436             153
        Deferred acquisition costs                                                                             -             537
                                                                                                     -----------     -----------
                Total current assets                                                                      16,444           8,000
Notes receivable, less reserve of $1,188 at December 31, 2001 and $279 at September 30, 2002                 659             212
Property and equipment, net                                                                                2,704           1,534
Other assets                                                                                               1,386           1,355
                                                                                                     -----------     -----------
                Total assets                                                                         $    21,193     $    11,101
                                                                                                     ===========     ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
        Accounts payable                                                                             $       678     $       440
        Accrued payroll and other accrued expenses                                                         3,733           1,650
        Billings in excess of costs                                                                        1,323             542
        Deferred revenue                                                                                   1,013             917
        Other current liabilities                                                                              -              16
                                                                                                     -----------     -----------
                Total current liabilities                                                                  6,747           3,565
Minority interest                                                                                            184               -
Stockholders' equity:
        Series F convertible preferred stock, $.01 par value; 356,950 shares
                authorized; 247,882  and 231,362 issued and outstanding at
                December 31, 2001 and September 30, 2002, respectively
                ($110.94 per share liquidation value)                                                     25,564          23,704
        Common stock, $.01 par value; 200,000,000 shares authorized; 21,876,554 shares
                issued and outstanding at December 31, 2001 and 23,899,431 shares issued
                and 22,984,272 shares outstanding at September 30, 2002                                      219             239
        Stockholders' notes receivable                                                                      (241)            (73)
        Deferred stock compensation                                                                          (88)              -
        Additional paid-in capital                                                                       190,065         191,857
        Accumulated deficit                                                                             (201,257)       (208,054)
        Treasury stock at cost (no shares at December 31, 2001 and 915,159 shares
                at September 30, 2002)                                                                         -            (137)
                                                                                                     -----------     -----------
                Total stockholders' equity                                                                14,262           7,536
                                                                                                     -----------     -----------
                Total liabilities and stockholders' equity                                           $    21,193     $    11,101
                                                                                                     ===========     ===========
</TABLE>

See accompanying notes to condensed unaudited consolidated financial statements.

                                       3
<PAGE>
                   DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES

            CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                        THREE MONTHS ENDED             NINE MONTHS ENDED
                                                                           SEPTEMBER 30,                 SEPTEMBER 30,
                                                                    ------------------------       --------------------------
                                                                        2001          2002             2001            2002
                                                                    ----------     ---------       -----------      ---------
<S>                                                                 <C>            <C>             <C>              <C>
Revenue:
        License fees                                                $      418     $     397        $     3,193     $   1,361
        Professional services and other                                  1,786           849              7,601         3,831
                                                                    ----------     ---------        -----------     ---------
               Total revenue                                             2,204         1,246             10,794         5,192
                                                                    ----------     ---------        -----------     ---------
Cost of revenue:
        License fees                                                     1,236            34              1,604           171
        Professional services and other                                  1,287           404              6,331         1,980
                                                                    ----------     ---------        -----------     ---------
               Total cost of revenue                                     2,523           438              7,935         2,151
                                                                    ----------     ---------        -----------     ---------
Gross margin                                                              (319)          808              2,859         3,041
                                                                    ----------     ---------        -----------     ---------
Operating expenses:
        Sales and marketing                                              1,826           789              8,781         3,028
        Research and development                                         2,430           713             10,931         3,098
        General and administrative                                       3,149         1,093             11,976         3,681
        Amortization of goodwill and other intangibles                   3,661             -             11,156             -
        Impairment of long lived assets                                 23,408             -             27,906             -
        Restructuring charges                                                -             -              7,758           745
                                                                    ----------     ---------        -----------     ---------
               Total operating expenses                                 34,474         2,595             78,508        10,552
                                                                    ----------     ---------        -----------     ---------

Operating loss                                                         (34,793)       (1,787)           (75,649)       (7,511)

Other income:
        Interest income and nonoperating income, net                       447            42                989           321
        Gain on sale of subsidiary                                           -             -                  -           391
                                                                    ----------     ---------        -----------     ---------
               Total other income, net                                     447            42                989           712
                                                                    ----------     ---------        -----------     ---------
Net loss                                                               (34,346)       (1,745)           (74,660)       (6,799)
Less: preferred stock dividends arising from beneficial
        conversion feature                                              (2,447)            -            (28,512)            -
                                                                    ----------     ---------        -----------     ---------
Net loss applicable to common stockholders                          $  (36,793)    $  (1,745)       $  (103,172)    $  (6,799)
                                                                    ==========     =========        ===========     =========
Net loss applicable to common stockholders per share -basic
        and diluted                                                 $    (1.68)    $   (0.07)       $     (4.73)    $   (0.29)
                                                                    ==========     =========        ===========     =========
Weighted average shares outstanding- basic and diluted                  21,870        23,376             21,823        23,049
                                                                    ==========     =========        ===========     =========
</TABLE>

See accompanying notes to condensed unaudited consolidated financial statements.

                                       4
<PAGE>
                   DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES

            CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                            NINE MONTHS ENDED
                                                                                  -----------------------------------
                                                                                   SEPTEMBER 30,       SEPTEMBER 30,
                                                                                        2001                2002
                                                                                  --------------       --------------
<S>                                                                               <C>                  <C>
Cash flows from operating activities:
    Net loss                                                                         $(74,660)            $  (6,799)
    Adjustments to reconcile net loss to net cash used in operating activities:
         Depracistion and amortization                                                   2,808                1,939
         Amortization of deferred stock compensstion                                     1,628                   68
         Amortization of goodwill and other intanglbles                                 11,156                    -
         Loss on disposal of property and equipment                                      1,992                   13
         Impalment of long lived assets and other assets                                30,106                    -
         Bad debt expense                                                                2,653                  410
         Interest income on stockholders' notes receivable                                (126)                 (70)
         Non-cash stock settlement expense                                                 495                    -
         Gain on sale of subsidiary                                                          -                 (391)
         Changes in assets and liabilities:
              Restricted cash                                                              101                    -
              Accounts receivable                                                        8,983                  667
              Costs in excess of billings                                                1,928                  (51)
              Unbilled revenue                                                               -                  451
              Other current assets                                                          53                 (167)
              Other assets                                                                (158)                  16
              Account payable                                                           (1,810)                (272)
              Accrued payroll and other accrued expenses                                (6,489)              (2,004)
              Billings in excess of costs                                                 (175)                (771)
              Deferred revenue                                                          (1,526)                 (99)
              Other current liabilites                                                    (954)                  25
                                                                                     ---------           ----------
                 Net cash used in operating activities                                 (23,995)              (7,035)
                                                                                     ---------           ----------
Cash flows provided by (used in) financing activities:
    Proceeds from sale of Series F prefereed stock and warrants, net                    25,539                    -
    Payment of capital lease                                                              (476)                   -
    Proceeds from exercise of stock options and bridge warrants                             27                    -
    Payment of expenses related to Series F convertible preferred stock                      -                  (28)
    Payment of expenses related to proposed transaction with Abiliti                         -                 (107)
                                                                                     ---------           ----------
                 Net cash provided by (used in) financing activities                    25,090                 (135)
                                                                                     ---------           ----------
Cash flows used in investing activities:
    Issuancs of stockholder's notes receivable                                          (1,186)                   -
    Proceeds from sale of fixed assets                                                       -                    1
    Net procceds from sale of subsidiary                                                     -                   68
    Repayment of stockholder's notes receivable                                             36                   39
    Capital expenditures                                                                  (768)                (172)
                                                                                     ---------           ----------
                 Net cash used in investing activities                                  (1,918)                 (64)
                                                                                     ---------           ----------
Effect of exchanges rates on cash and cash equivalents                                    (494)                 125
Net decrease in cash and cash equivalents                                               (1,317)              (7,109)
Cash and cash equivalents-beginning of period                                           22,268               13,093
                                                                                     ---------           ----------
Cash and cash equivalents-end of period                                              $  20,951           $    5,984
                                                                                     =========           ==========
</TABLE>

See accompanying notes to condensed unaudited consolidated financial statements.

                                       5
<PAGE>
                   DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES
         NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2002

(1)      BASIS OF PRESENTATION

         The accompanying condensed unaudited consolidated financial statements
for Daleen Technologies, Inc. and subsidiaries (collectively referred to as
"Daleen" or the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, these
financial statements do not include all of the information and footnotes
necessary for a fair presentation of financial position, results of operations
and cash flows in conformity with generally accepted accounting principles. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation of the results for the
periods presented have been included. The condensed unaudited consolidated
balance sheet at December 31, 2001 has been derived from the Company's audited
consolidated financial statements at that date. These condensed unaudited
consolidated financial statements should be read in conjunction with the
audited consolidated financial statements and notes thereto for the year ended
December 31, 2001, included in the Company's annual report on Form 10-K as of
and for the year ended December 31, 2001, filed with the Securities and
Exchange Commission ("SEC") on April 1, 2002.

         The results of operations for the three or nine months ended September
30, 2002 are not necessarily indicative of results that may be expected for any
other interim period or for the full fiscal year.

(2)      PRINCIPLES OF CONSOLIDATION

         The accompanying financial statements include the accounts of Daleen
Technologies, Inc. and its subsidiaries, which include the accounts of
PartnerCommunity, Inc. ("PartnerCommunity") through June 24, 2002. On June 24,
2002, the Company sold this subsidiary (see note 14). All significant
intercompany balances and transactions have been eliminated in consolidation.

(3)      BASIC AND DILUTED NET LOSS PER SHARE

         Basic and diluted net loss per share was computed by dividing net loss
applicable to common stockholders by the weighted average number of shares of
common stock outstanding for each period presented. Common stock equivalents
were not considered since their effect would be antidilutive. Common stock
equivalents amount to 28,698,771 shares and 28,708,226 shares for the three
months and nine months ended September 30, 2002, respectively. Common stock
equivalents amounted to 30,232,330 shares and 30,678,693 shares for the three
months and nine months ended September 30, 2001.

         Net loss applicable to common stockholders differs from net loss in
the three and nine months ended September 30, 2001 due to the preferred stock
dividends arising from the beneficial conversion features from the sale ("2001
Private Placement") in June 2001 of the Series F convertible preferred stock
("Series F preferred stock") and warrants to purchase additional shares of
Series F preferred stock ("Series F Warrants").

(4)      LIQUIDITY

         The Company continued to experience operating losses during the nine
months ended September 30, 2002 and has an accumulated deficit of $208.1 million
at September 30, 2002. Cash and cash equivalents at September 30, 2002 was $6.0
million. Cash used in operations for the nine months ended September 30, 2002
was $7.0 million which was principally used to fund the operating losses.

                                       6
<PAGE>
         On October 7, 2002, the Company, Daleen Solutions, Inc., an indirect
wholly-owned subsidiary of Daleen ("Acquisition Sub") and Abiliti Solutions,
Inc. ("Abiliti") entered a definitive agreement whereby Acquisition Sub will
purchase substantially all of the assets and assume certain liabilities of
Abiliti in exchange for capital stock and warrants (the "Asset Purchase"). In
addition to the Asset Purchase, Behrman Capital II, L.P., Abiliti's largest
shareholder, and an affiliated fund (collectively, the "Behrman Funds") have
agreed to purchase from Daleen capital stock and warrants for an aggregate
purchase price of $5.015 million (the "2002 Private Placement"). See note 15 for
a detailed description of the Asset Purchase and the 2002 Private Placement.

         The Asset Purchase is subject to approval by the stockholders of
Daleen and Abiliti and the 2002 Private Placement is subject to approval by the
stockholders of Daleen and each is subject to a limited number of other closing
conditions that must be satisfied prior to the completion of the transactions.
Daleen stockholders and Abiliti stockholders holding sufficient voting power to
approve the Asset Purchase and 2002 Private Placement have signed agreements to
vote in favor of the transactions. The Company intends to complete the Asset
Purchase and 2002 Private Placement as soon as possible following the special
meeting of stockholders which is expected to be held in December 2002.

         The Company believes that the cash and cash equivalents at September
30, 2002, together with the assets and the additional funding resulting from
the completion of the Asset Purchase and 2002 Private Placement as well as
anticipated revenue may be sufficient to fund the Company's operations for the
foreseeable future. Although unlikely, there is a possibility that the Asset
Purchase and 2002 Private Placement will not be consummated. If the
transactions are not consummated the Company believes the cash and cash
equivalents at September 30, 2002 may be sufficient to fund the operations
through June 30, 2003 and the Company will be required to further reduce
operations and/or seek additional public or private equity financing or
financing from other sources. Although the Company is precluded from
considering other strategic alternatives pending completion or termination of
the Asset Purchase, if the transactions are not completed, the Company will
also consider other strategic alternatives. There can be no assurance that
additional financing will be available, or that, if available, the financing
will be obtainable on terms acceptable to the Company or that any additional
financing would not be substantially dilutive to the Company's existing
stockholders. There can be no assurance that any other strategic alternatives
will be available, or if available, will be on terms acceptable to the Company,
or all of its stockholders. Failure to consummate the Asset Purchase and 2002
Private Placement will have a material adverse effect on the Company's ability
to operate as a going concern which may result in filing for bankruptcy
protection, winding down operations and/or liquidation of assets. The
condensed unaudited financial statements have been prepared assuming that the
Company will continue as a going concern, and do not include any adjustments
that might result from the outcome of this uncertainty.

(5)      REVENUE RECOGNITION

         The Company recognizes revenue under Statement of Position 98-9,
Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain
Transactions ("SOP 98-9"). SOP 98-9 requires recognition of revenue using the
"residual method" when (1) there is vendor-specific objective evidence ("VSOE")
of the fair values of all undelivered elements in a multiple-element arrangement
that is not accounted for using long-term contract accounting, (2) VSOE of fair
value does not exist for one or more of the delivered elements in the
arrangement, and (3) all revenue recognition criteria in Statement of Position
97-2, Software Revenue Recognition ("SOP 97-2") other than the requirement for
VSOE of the fair value of each delivered element of the arrangement are
satisfied.

         The following elements could be included in the Company's arrangements
with its customers:

                  -        Software license;

                  -        Maintenance and support;

                                       7
<PAGE>
                  -        Professional services;

                  -        Third-party software licenses and maintenance; and

                  -        Training

         VSOE exists for all of these elements except for the software license.
The software license is delivered upon the execution of the license agreement.
Based on this delivery and the fact that VSOE exists for all other elements,
the Company recognizes revenue under SOP 98-9 as long as all other revenue
recognition criteria in SOP 97-2 are satisfied.

         Under SOP 98-9, the arrangement fee is recognized as follows: (1) the
total fair value of the undelivered elements, as indicated by VSOE, is deferred
and subsequently recognized in accordance with the relevant sections of SOP
97-2 and as described below and (2) the difference between the total
arrangement fee and the amount deferred for the undelivered elements is
recognized as revenue related to the delivered elements.

         Revenue related to delivered elements of the arrangement is recognized
when persuasive evidence of an arrangement exists, the software has been
delivered, the fee is fixed and determinable and collectibility is probable.

         Revenue related to undelivered elements of the arrangement is valued
by the price charged when the element is sold separately and is recognized as
follows:

                  -        Revenue related to customer maintenance agreements is
                           deferred and recognized ratably using the
                           straight-line method basis over the applicable
                           maintenance period. The VSOE of maintenance is
                           determined using the rate that maintenance is
                           renewed at each year and is dependent on the amount
                           of the license fee as well as the type of
                           maintenance the customer chooses.

                  -        Professional service fees are recognized separately
                           from the license fee since the services are not
                           considered significant to the functionality of the
                           software and the software does not require
                           significant modification, production or
                           customization. There are two types of service
                           contracts that are entered into with customers:
                           fixed fee and time and materials.

                                   The Company recognizes revenue from fixed
                                   fee contracts using the percentage of
                                   completion method, based on the ratio of
                                   total hours incurred to date to total
                                   estimated labor hours. Changes in job
                                   performance, job conditions, estimated
                                   profitability and final contract settlement
                                   may result in revisions to costs and income
                                   and are recognized in the period in which
                                   the revisions are determined. Contract
                                   costs include all direct material and labor
                                   costs and those indirect costs related to
                                   contract performance, such as indirect
                                   labor and supplies. These costs are readily
                                   determinable since the Company uses the
                                   costs that would have been charged if the
                                   contract was a time and materials contract.
                                   Provisions for estimated losses on
                                   uncompleted contracts are recorded in the
                                   period in which losses are determined.
                                   Amounts billed in excess of revenue
                                   recognized to date are classified as
                                   "Billings in excess of costs", whereas
                                   revenue recognized in excess of amounts
                                   billed are classified as "Costs in excess
                                   of billings."

                                   Revenue related to professional services
                                   under a time and materials arrangement is
                                   recognized as services are performed.

                                       8
<PAGE>
                  -        Third-party software is recognized when delivered to
                           the customer. The value of third-party software is
                           based on the Company's acquisition cost plus a
                           reasonable margin and is readily determinable since
                           the Company sells these licenses separate of the
                           other elements.

                  -        Training revenue is recognized when training is
                           provided to customers and is based on the amount
                           charged for training when it is sold separately.

         The Company typically receives 25% of the license fee as a down
payment and the balance is typically due between three and nine months from
contract execution. In limited situations, the Company enters into extended
payment terms with certain customers if the Company believes it is a good
business opportunity. When it enters into these arrangements, the Company
evaluates each arrangement individually to determine whether collectibility is
probable and the fees are fixed and determinable. An arrangement fee is not
presumed to be fixed and determinable if payment of a significant portion of
the licensing fee is not due until after expiration of the license or due after
the normal and customary terms to customers. Revenue related to arrangements
containing extended payment terms where the fees are not considered fixed and
determinable is deferred until payments are due.

         In order to assess that collectibility is probable, the Company
performs credit reviews on each customer. If collectibility is determined to
not be probable upon contract execution, revenue is recognized when cash is
received.

         In December 1999, the SEC issued Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements" ("SAB No. 101"). SAB No. 101
summarizes certain of the SEC's views in applying accounting principles
generally accepted in the United States to revenue recognition in financial
statements. The Company recognizes revenue in accordance with SAB No. 101.

(6)      RESTRUCTURING ACTIVITIES

         During 2001, the Company performed various restructuring activities.
For the year ended December 31, 2001, the Company recorded $11.8 million of
restructuring charges related to restructuring activities which were announced
on January 5, 2001 (the "January Restructuring"), April 10, 2001 (the "April
Restructuring"), and October 17, 2001 (the "October Restructuring"). Management
started to implement these actions immediately following the announcements. The
Company recorded a $7.8 million restructuring charge for the nine months ended
September 30, 2001 related to the January and April Restructuring. Such charges
included the estimated costs related to workforce reductions, closing and
downsizing of facilities, asset writedowns and other costs.

         In May 2002, management initiated another business review continuing
to identify additional areas for cost reduction. As a result, the Company's
Board of Directors formally approved a plan to further reduce operating
expenses on May 13, 2002 (the "2002 Restructuring"). On May 14, 2002 the
Company announced and immediately began to implement the 2002 Restructuring.
The Company recorded a $745,000 restructuring charge for the nine months ended
September 30, 2002 related to the 2002 Restructuring. Such charge included the
estimated costs related to workforce reductions, due to the termination of 35
employees from substantially all of the Company's employee groups. The costs
were from the following financial statement captions:

<TABLE>
<S>                                           <C>
Cost of sales - professional services         $140,000
Research and development                       168,000
Sales and marketing                            148,000
General and administrative                     289,000
                                              --------
                                              $745,000
                                              ========
</TABLE>

                                       9
<PAGE>
         At December 31, 2001, an accrual remained on the condensed unaudited
consolidated balance sheet related to the January Restructuring, April
Restructuring and October Restructuring in the amount of $653,000. During the
nine months ended September 30, 2002, the Company recorded an additional
accrual of $745,000 for the 2002 Restructuring.

         Amounts charged against the restructuring accrual for the nine months
ended September 30, 2002 were as follows (in thousands):

<TABLE>
<CAPTION>
                                           January           April           October           2002
                                        Restructuring    Restructuring    Restructuring    Restructuring    Total
                                        -------------    -------------    -------------    -------------    ------
<S>                                     <C>              <C>              <C>              <C>              <C>
Employee termination benefits           $       23       $          49    $       237       $       632     $   94
Facility costs/rent on idle facilities          33                  32             22                 -         87
Asset writedowns                                 -                   -            109                 -        109
Other costs                                      -                   -              2                 -          2
                                        ----------       -------------    -----------       -----------     ------
                                        $       56       $          81    $       370       $       632     $1,139
                                        ==========       =============    ===========       ===========     ======
</TABLE>

          As of September 30, 2002, an accrual remains on the condensed
unaudited consolidated balance sheets in accrued payroll and other accrued
expenses related to the January Restructuring, April Restructuring, October
Restructuring and 2002 Restructuring consisting of the following components (in
thousands):

<TABLE>
<CAPTION>
                                           January            April          October           2002
                                        Restructuring    Restructuring    Restructuring    Restructuring    Total
                                        -------------    -------------    -------------    -------------    -----
<S>                                     <C>              <C>              <C>              <C>              <C>
Employee termination benefits            $         -     $         19      $        43     $        105     $ 167
Facility costs/rent on idle facilities            69                -                -                -        69
Asset writedowns                                   -                -                -                -         -
Other costs                                        -               10                5                8        23
                                         -----------     ------------      -----------     ------------     -----
                                         $        69     $         29      $        48     $        113     $ 259
                                         ===========     ============      ===========     ============     =====
</TABLE>

(7)      GOODWILL

         In January 2002, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 141, "Business Combinations" ("SFAS No. 141") and
Statement No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142").
SFAS No. 141 requires that the purchase method of accounting be used for all
business combinations initiated after June 30, 2001 as well as all purchase
method business combinations completed after June 30, 2001. SFAS No. 141 also
specifies criteria for intangible assets acquired in a purchase method
combination which must be met to be recognized and reported apart from
goodwill, noting that any purchase price allocable to an assembled workforce
may not be accounted for separately. SFAS No. 142 requires goodwill to no
longer be amortized but instead tested for impairment at least annually in
accordance with the provisions of SFAS No. 142. SFAS No. 142 also requires the
Company to evaluate goodwill whenever events and changes in circumstances
suggest that the carrying amount may not be recoverable from its estimated
future cash flows.

         In March 2001, the Company reduced goodwill by approximately $1.1
million due to its decision that it will no longer promote and license certain
gateway products that it originally acquired as a result of its acquisition of
Inlogic Software Inc. in December 1999. The development of these products was
in process at the time of the acquisition and was subsequently completed. In
connection with this decision, the Company accelerated the amortization for a
proportionate amount of goodwill related to these products.

                                       10
<PAGE>
         Due to economic conditions and the Company's revenue performance in
2001, the Company assessed the recoverability of goodwill in September 2001 by
determining whether the amortization of the goodwill over the remaining life
could be recovered through undiscounted future operating cash flows over the
remaining amortization period. The Company's carrying value of goodwill at
September 30, 2001 was reduced by the estimated short fall of cash flows,
discounted at a rate commensurate with the associated risks. This amounted to a
further reduction of goodwill in the amount of approximately $23.4 million for
the three months and nine months ended September 30, 2001. The remaining
carrying value was written off at December 31, 2001 due to a continued decline
in economic conditions in 2001. As a result, as of the date of adoption of SFAS
No. 141 and SFAS No. 142, there was no impact to the Company's financial
statements.

         The following table presents the pro forma effect of SFAS No. 142 for
the three months ended September 30, 2002 and 2001:

<TABLE>
<CAPTION>
                                                                        Three months ended           Nine months ended
                                                                           September 30,               September 30,
                                                                           -------------               -------------
                                                                        2001          2002           2001         2002
                                                                        ----          ----           ----         ----
<S>                                                                  <C>           <C>           <C>           <C>
Reported net loss applicable to common shareholders                  $ (36,793)    $ (1,745)     $ (103,172)   $ (6,799)
     Goodwill amortization                                               3,642            -          10,857           -
                                                                     ---------      -------       ---------    --------
          Adjusted net loss applicable to common shareholders        $( 33,151)     $(1,745)      $ (92,315)   $ (6,799)
                                                                     =========      =======       =========    ========

Basis and diluted earnings per share:
     Reported net loss applicable to common shareholders             $   (1.68)     $ (0.07)      $   (4.73)   $  (0.29)
     Goodwill amortization                                                0.17            -            0.50           -
                                                                     ---------      -------       ---------    --------
          Adjusted net loss applicable to common shareholders        $   (1.51)     $ (0.07)      $   (4.23)   $  (0.29)
                                                                     =========      =======       =========    ========
</TABLE>

(8)      IMPAIRMENT CHARGES

         The Company recorded an impairment charge of approximately $23.4
million and $27.9 million, respectively, in the three and nine months ended
September 30, 2001 related to the following (in thousands):

<TABLE>
<CAPTION>
                                                       Three Months           Nine Months
                                                          Ended                   Ended
                                                      Sept. 30, 2001        Sept. 30, 2001
                                                      --------------        --------------
<S>                                                   <C>                   <C>
Employee workforce - other intangible asset              $     -                $ 1,545
Property and equipment                                         -                  1,888
Goodwill                                                  23,408                 24,473
                                                         -------                -------
                                                         $23,408                $27,906
                                                         =======                =======
</TABLE>

         During March 2001, due to the various restructuring activities
initiated by the Company, an evaluation of the recoverability of the employee
workforce under SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of" was performed. Management
of the Company determined that the asset was impaired and recorded an
impairment charge of approximately $1.5 million in the nine months ended
September 30, 2001.

                                       11
<PAGE>
         As of March 31, 2001, the Company determined that certain property,
leasehold improvements and equipment, which mainly represented computer
equipment and furniture from the Company's Toronto and Atlanta facilities, which
were closed, was impaired. The Company recorded an impairment charge of
approximately $1.9 million during the nine months ended September 30, 2001 for
the difference between the fair value and the carrying value of the assets.

         See note 7 for discussions of the goodwill impairment charge in the
three months and nine months ended September 30, 2001.

(9)      BUSINESS AND CREDIT CONCENTRATIONS

         During the three months ended September 30, 2002, 27.6%, of the
Company's total revenue was attributed to one customer. During the three months
ended September 30, 2001, 26.0% of the Company's total revenue was attributed
to two customers. Sales to these two customers accounted for 13.5% and 12.5% of
total revenue for the three month period.

         During each of the nine months ended September 30, 2002 and 2001,
28.9% and 29.0% of the Company's total revenue was attributed to two customers.
Sales to the two customers in 2002 accounted for 16.5% and 12.4% of total
revenue for the nine-month period. Sales to the two customers in 2001 accounted
for 17.3% and 11.7% of the Company's total revenue for the nine-month period.

         One customer accounted for 31.0% and 38.0% of total accounts
receivable at September 30, 2002 and December 31, 2001, respectively.

(10)     RELATED PARTY TRANSACTIONS

         Science Applications International Corporation ("SAIC") through its
subsidiary SAIC Venture Capital Corporation, is a significant stockholder of the
Company. Revenue related to SAIC for the three and nine months ended September
30, 2002 was $23,500 and $89,100, respectively. Revenue related to SAIC for the
three and nine months ended September 30, 2001 was $0 and $36,300, respectively.
SAIC owns 44% of the voting stock of Danet, Inc. ("Danet") and 100 percent of
the voting stock of Telcordia Technologies, Inc. ("Telcordia"). Danet is a
customer and a distributor of the Company's product. Revenue related to Danet
for the three and nine months ended September 30, 2002 was $0 and $279,
respectively. Revenue related to Danet for the three and nine months ended
September 30, 2001 was $0 and $7,400, respectively. The Company has a strategic
alliance relationship and an OEM Agreement with Telcordia. Revenue related to
Telcordia for the three and nine months ended September 30, 2002 was $36,082 and
$644,367, respectively. Revenue related to Telcordia for the three and nine
months ended September 30, 2001 was $29,700 for both periods.

         In January 2001, the Company loaned $1,237,823 to its Chairman,
President and Chief Executive Officer and his limited partnership (collectively
"the Makers"). The loan bore interest at a rate of 8.75% per annum. The
principal was payable in full January 31, 2006 with interest payable annually
on January 31 of each year. The loan was secured by 901,945 shares of the
Company's common stock, and was non-recourse to the Makers except to the extent
of 901,945 shares of the Company's common stock held as the collateral. On
January 31, 2002, an interest payment of $119,871 was due and payable. The
interest payment was not made and as a result the loan was in default. Pursuant
to the terms of the loan, the Company gave notice of default. On September 11,
2002, the makers surrendered the Company's common stock held as collateral for
the loan to the Company and the loan was deemed satisfied. The stock was
recorded as treasury stock at a value of $135,292 or $0.15 per share (the
closing price per share on The Nasdaq SmallCap Market on September 11, 2002).
As a result of the loan being non-recourse, the Company had previously recorded
a reserve for the difference between the face value of the loan plus accrued
interest and the fair market value of the underlying collateral at the end of
each period. The loan was written off against this reserve.

                                       12
<PAGE>
(11)     SERIES F PREFERRED STOCK

         In March 2002, the holders of 13,520 shares of Series F preferred stock
converted their shares into common stock resulting in the issuance of 1,655,528
shares of common stock. In September 2002, the holders of 3,000 shares of Series
F preferred stock converted their shares to common stock resulting in the
issuance of 367,350 shares of common stock. These conversions resulted in a
reduction in the number of outstanding shares of Series F preferred stock to
231,362 shares

(12)     LEGAL PROCEEDINGS

Fazari v. Daleen Technologies, Inc.

         On December 5, 2001, a class action complaint was filed in the United
States District Court for the Southern District of New York. On April 22, 2002
an amended complaint was filed by two plaintiffs purportedly on behalf of
persons purchasing the Company's common stock between September 20, 1999 and
December 6, 2000. The complaint is styled as Angelo Fazari, on behalf of
himself and all others similarly situated, vs. Daleen Technologies, Inc.,
BancBoston Robertson Stephens Inc., Hambrecht & Quist LLC, Salomon Smith Barney
Inc., James Daleen, David B. Corey and Richard A. Schell, Index Number 01 CV
10944. The individual defendants, Messrs. Corey, Schell and Daleen, have
entered into tolling agreements with the plaintiffs resulting in their
dismissal from the case without prejudice. The remaining defendants include the
Company and certain of the underwriters in the Company's initial public
offering ("IPO"). More than 300 similar class action lawsuits filed in the
Southern District of New York against numerous companies and their underwriters
have been consolidated for pretrial purposes before one judge under the caption
"In re Initial Public Offering Securities Litigation." A joint Motion to
Dismiss was filed by the defendants on July 15, 2002, but no ruling on the
motion has been made. The complaint includes allegations of violations of (i)
Section 11 of the Securities Act of 1933 by all named defendants, (ii) Section
15 of the Securities Act of 1933 by the individual defendants and (iii) Section
10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated
thereunder by the underwriter defendants.

         Specifically, the plaintiffs allege in the complaint that, in
connection with the Company's IPO, the defendants failed to disclose "excessive
commissions" purportedly solicited by and paid to the underwriter defendants in
exchange for allocating shares of the Company's common stock in the IPO to the
underwriter defendants' preferred customers. Plaintiffs further allege that the
underwriter defendants had agreements with preferred customers tying the
allocation of shares sold in the Company's IPO to the preferred customers'
agreements to make additional aftermarket purchases at pre-determined prices.
Plaintiffs further allege that the underwriters used their analysts to issue
favorable reports about the Company to further inflate the Company's share
price following the IPO. Plaintiffs claim that the defendants knew or should
have known of the underwriters actions and that the failure to disclose these
alleged arrangements rendered the Company's prospectus included in its
registration statement on Form S-1 filed with the SEC in September 1999
materially false and misleading. Plaintiffs seek unspecified damages and other
relief.

         The Company believes that it is entitled to indemnification by the
underwriters under the terms of the underwriting agreements. The Company has
notified the underwriters of the action, but the underwriters have not yet
agreed to indemnify the Company. The Company is participating in discussions
with the underwriters regarding an agreement by the underwriters to indemnify
the issuers. However, the Company's lead underwriter, BancBoston Robertson
Stephens Inc., has ceased doing business and there is no assurance it will have
the financial wherewithal to provide indemnification. The Company is also
currently reviewing and considering the terms of a proposed settlement
agreement involving the plaintiffs, the insurance companies and other issuers
that includes a waiver by the insurance companies of any retention amounts
under the policies. In that case, there would be no liability to be recorded by
the Company other than legal fees incurred in the initial defense of the
action, which are immaterial. Currently a loss cannot be determined because the
lawsuit is in its initial stages and there is no guarantee that either the
indemnification agreement or a settlement with the plaintiffs will be finalized.

                                       13
<PAGE>
In the event settlement discussions are unsuccessful, the Company intends to
defend vigorously against the plaintiffs' claims.

         General litigation

         The Company is involved in a number of other lawsuits and claims
incidental in its ordinary course of business. The Company does not believe the
outcome of any of these other activities would have a material adverse effect
on the financial position or operating results of the Company.

(13)     NEW ACCOUNTING PRONOUNCEMENTS

         In July 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 143, "Accounting for Asset Retirement Obligations". SFAS No. 143
requires entities to record the fair value of a liability for an asset
retirement obligation in the period in which it is incurred. When the liability
is initially recorded, the entity will capitalize a cost by increasing the
carrying amount of the related long-lived asset. Over-time, the liability is
accreted to its present value each period, and the capitalized cost is
depreciated over the useful life of the related asset. Upon settlement of the
liability, an entity either settles the obligation for its recorded amount or
incurs a gain or loss upon settlement. SFAS No. 143 is effective for the fiscal
years beginning after June 15, 2002, with earlier adoption permitted. The
Company believes the adoption of the SFAS No. 143 will not have a significant
impact on the Company's financial position and results of operations.

         In August 2001, the FASB issued SFAS No. 144, "Accounting For The
Impairment Or Disposal Of Long Lived Assets." This statement is effective for
fiscal years beginning after December 15, 2001. SFAS No. 144 supercedes SFAS
No. 121, while retaining many of the requirements of such statement. Under
SFAS No. 144 assets held for sale will be included in discontinued operations
if the operations and cash flows will be or have been eliminated from the
ongoing operations of the entity and the entity will not have any significant
continuing involvement in the operations of the Company. The Company adopted
SFAS No. 144 as of January 1, 2002. The adoption had no impact to the Company's
financial statements.

         On April 30, 2002, the FASB issued SFAS No. 145 "Rescission of FASB
Statements No. 4, 44, and 64, Amendment to FASB Statement No. 13, and Technical
Corrections." Through this rescission, SFAS No. 145 eliminates the requirement
that gains and losses from the extinguishment of debt be aggregated and, if
material, classified as an extraordinary item, net of the related income tax
effect. In addition, SFAS No. 145 requires sale-leaseback accounting treatment
for certain lease modifications that have economic effects that are similar to
sale-leaseback transactions. SFAS No. 145 also makes several other technical
corrections to existing pronouncements that may change accounting practice. SFAS
No. 145 is effective for fiscal years beginning after May 15, 2002.

         In July 2002, the FASB issued SFAS No. 146, "Accounting for Exit or
Disposal Activities". SFAS No. 146 will be effective for disposal activities
initiated after December 31, 2002. The Company, does not anticipate any exit
or dismissal activities at this time and therefore believes the adoption of
SFAS No. 146 would not have an impact on the Company's financial position and
results of operations.

         In October 2002, the Emerging Issues Task Force issued tentative
conclusions regarding EITF Issue 00-21, "Accounting for Revenue Arrangements
with Multiple Deliverables"("EITF 00-21"). EITF 00-21 relates to accounting for
multiple-deliverable arrangements and specifies circumstances under which a
revenue arrangement should be separated into different revenue-generating
deliverables or "units of accounting" and how the revenue arrangement should be
allocated to the different deliverables or units of accounting. EITF 00-21 is
tentatively scheduled to be effective for revenue arrangements entered into in
fiscal years beginning after December 15, 2002. We are closely monitoring
developments in this issue and will complete our assessment of any potential
impact on our results of operations upon the issuance of our December 31, 2002
financial statements.

                                       14
<PAGE>
(14)     SALE OF SUBSIDIARY

         On June 24, 2002, the Company sold all if its common and preferred
stock in PartnerCommunity, in exchange for net cash proceeds of approximately
$69,000; a promissory note for $200,000 payable in 30 months with interest
payable annually at a rate of 8% per year; and five year warrants to purchase
1,200,000 shares of PartnerCommunity preferred stock at a price of $.10 per
share. The estimated fair value of the warrants of $165,700 is recorded as an
other asset in the condensed unaudited balance sheet of the Company. The fair
value of the warrants was calculated using the Black-Scholes model. The Company
recorded a gain on sale of the subsidiary of approximately $391,000 in the nine
months ended September 30, 2002.

         The Company placed a 100% reserve against the note receivable due to
the long term nature of the note and the uncertainty of collectibility. As cash
is received, the Company will record an additional gain on the transaction.

(15)     SUBSEQUENT EVENTS

ASSET PURCHASE AND PRIVATE PLACEMENT

         On October 7, 2002, Daleen, Acquisition Sub and Abiliti entered into a
definitive agreement related to the Asset Purchase and Daleen and the Behrman
Funds entered into a definitive agreement related to the 2002 Private Placement.

         Pursuant to the Asset Purchase, Acquisition Sub will purchase
substantially all of Abiliti's assets and assume certain of its liabilities. As
consideration for the Asset Purchase, Daleen will issue to Abiliti 115,681
shares of its Series F preferred stock, 11,492,136 shares of common stock and
warrants to purchase an additional 5,666,069 shares of common stock ("Asset
Purchase Warrants"), with an exercise price of $0.906 per share.

         Contemporaneously with the Asset Purchase, in the 2002 Private
Placement the Behrman Funds will invest $5.015 million in Daleen. In
consideration, Daleen will issue to the Behrman Funds an aggregate of 115,681
shares of Series F preferred stock, 10,992,136 shares of common stock, warrants
to purchase an additional 5,666,069 shares of common stock at an exercise price
of $0.906 per share (the "Investments Warrants") and warrants to purchase an
additional 500,000 shares of common stock at an exercise price of $0.17 per
share (the "Additional Warrants"). The Additional Warrants may not be exercised
until after the first anniversary of the closing of the Private Placement and
the Investment Warrants and Asset Purchase Warrants may not be exercised until
six months after the closing of the transaction.

         The terms of the Series F preferred stock are identical to the
currently outstanding Series F preferred stock. However, it is a condition to
closing the transactions that the stockholders of Daleen approve an amendment
to the Certificate of Incorporation related to the terms of the Series F
preferred stock so that there will be no adjustment to the conversion price of
the Series F preferred stock upon issuance of Daleen securities in the Asset
Purchase and the 2002 Private Placement and so that the transactions will not
give rise to redemption rights in favor of the Series F preferred stockholders.
Daleen stockholders holding sufficient voting power to approve the amendment to
the terms of the Series F preferred stock have signed agreements to vote in
favor of the amendment.

         The Asset Purchase is subject to approval by the stockholders of
Daleen and Abiliti and the 2002 Private Placement is subject to approval by the
stockholders of Daleen and each is subject to limited number of other closing
conditions that must be satisfied prior to the completion of the transactions.
Daleen stockholders holding sufficient voting power to approve the Asset
Purchase and the 2002 Private Placement have signed agreements to vote in favor
of the transactions. Abiliti stockholders holding sufficient voting power to
approve the Asset Purchase have signed agreements to vote in favor of the
transaction.

                                       15
<PAGE>
         The total preliminary consideration of approximately $6.1 million for
the Asset Purchase was based on the following:

<TABLE>
<S>                                                              <C>
-    Fair value of Daleen's common stock on October 7,           $1,723,820
     2002. 11,492,136 shares at $0.15 per share;
-    The value of the Asset Purchase Warrants using the             657,504
     Black Scholes Model with the following assumptions:

Risk free interest rate           2.07%
Volatility percentage             169.13%
Exercise price                 $  0.9060
Term                              3.66 years
-    The price per share of the Series F preferred stock
     paid in the 2002 Private Placement                           2,641,772
-    Daleen will incur Asset Purchase related costs which are
     included in the purchase consideration. These costs
     primarily consisted of investment banking fees,legal fees
     and other advisor fees.                                      1,087,228
                                                                 ----------
                                                                 $6,110,324
                                                                 ==========
</TABLE>

                                       16
<PAGE>
Unaudited Pro Forma Results of Operations

         The following statements prepared on a pro forma basis, present the
results of operations as if Abiliti had been acquired at the beginning of the
periods presented, January 1, 2001 and January 1, 2002. (In thousands except for
per share data)

<TABLE>
<CAPTION>
                                                                                    NINE MONTHS           YEAR
                                                                                       ENDED              ENDED
                                                                                  SEPT. 30, 2002      DEC. 31, 2001
                                                                                  --------------      -------------
<S>                                                                               <C>                 <C>
Revenue:
       License fees                                                               $        1,654      $       4,765
       Professional services and other                                                    12,598             22,736
                                                                                  --------------      -------------
             Total revenue                                                                14,252             27,501
                                                                                  --------------      -------------

Cost of revenue:
       License fees                                                                          221              1,646
       Professional services and other                                                     3,382             12,100
                                                                                  --------------      -------------
             Total cost of revenue                                                         3,603             13,746
                                                                                  --------------      -------------
Gross margin                                                                             10, 649             13,755
                                                                                  --------------      -------------
Operating expenses:
       Sales and marketing                                                                 3,786             12,490
       Research and development                                                            5,729             15,644
       General and administrative                                                          8,739             21,317
       Amortization of goodwill and other intangibles                                          -             12,014
       Impairment of long lived assets                                                         -             34,604
       Restructuring charges                                                                 745             12,124
                                                                                  --------------      -------------

             Total operating expenses                                                     18,999            108,193
                                                                                  --------------      -------------
Operating loss                                                                            (8,350)           (94,438)

Other Income:
       Interest income and nonoperating income, net                                          304                790
       Gain on sale of subsidiary                                                            391                  -
       Other income                                                                            -                250
                                                                                  --------------      -------------
             Total other income, net                                                         695              1,040
                                                                                  --------------      -------------

Net loss                                                                          $       (7,655)     $     (93,398)
Preferred stock dividends arising from beneficial conversion features                          -            (28,512)
                                                                                  --------------      -------------
Net loss applicable to common stockholders                                        $       (7,655)     $    (121,910)
                                                                                  ==============      =============
Net loss applicable to common stockholders per share - basic and diluted          $        (0.17)     $       (2.75)
                                                                                  ==============      =============
Weighted average shares outstanding- basic and diluted                                    45,533             44,320
                                                                                  ==============      =============
</TABLE>

                                       17
<PAGE>
Unaudited Pro Forma Balance Sheet

         The following statement is prepared on a pro forma basis, present the
unaudited condensed consolidated balance sheet as if Abiliti had been acquired
at September 30, 2002 (in thousands):

<TABLE>
<CAPTION>
                                                            NINE MONTHS
                                                               ENDED
                                                         SEPTEMBER 30, 2002
                                                         ------------------
<S>                                                      <C>
ASSETS
     Cash and cash equivalents                               $   9,912
     Restricted cash                                                30
     Accounts receivable, net                                    2,712
     Unbilled revenue                                               37
     Other current assets                                        1,575
                                                             ---------
             Total current assets                               14,266
     Notes receivable, net                                         212
     Property and equipment, net                                 2,531
     Goodwill                                                    4,202
     Other assets                                                1,355
                                                             ---------
             Total assets                                    $  22,566
                                                             =========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
     Accounts payable                                        $     624
     Accrued payroll and other accrued expenses                  4,989
     Billings in excess of costs                                   542
     Deferred revenue                                            1,012
     Other current liabilities                                     240
                                                             ---------
             Total current liabilities                           7,407
     Other long term liabilities                                    52
                                                             ---------
     Total liabilities                                           7,459
Stockholders' equity:
     Series F convertible preferred stock                       28,415
     Common stock                                                  464
     Additional paid-in capital                                195,872
     Stockholders' notes receivable                                (73)
     Accumulated deficit                                      (209,434)
     Treasury stock                                               (137)
                                                             ---------
             Total stockholders' equity                         15,107
                                                             ---------
             Total liabilities and stockholders' equity      $  22,566
                                                             =========
</TABLE>

                                       18
<PAGE>
                   DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES

               NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS

                     AS OF SEPTEMBER 30, 2002, FOR THE NINE
                      MONTH PERIOD THEN ENDED, AND FOR THE
                          YEAR ENDED DECEMBER 31, 2001
          (ALL DOLLAR AMOUNTS IN THOUSANDS UNLESS OTHERWISE INDICATED)

         In connection with the Asset Purchase, Daleen has received a commitment
for additional equity funding from the Behrman Funds, referred to as the 2002
Private Placement. The commitment total $5.015 million for the issuance of
capital stock and Warrants to purchase our common stock, and it is contingent
upon closing the Asset Purchase. The Asset Purchase is also contingent upon the
closing of the 2002 Private Placement. The 2002 Private Placement is presented
as follows in the accompanying unaudited pro forma condensed consolidated
balance sheet at September 30, 2002.

<TABLE>
<S>                                                                                 <C>
Proceeds from the private placement...........................................      $ 5,015
Less: estimated offering expenses.............................................       (1,087)
                                                                                    -------
Net Proceeds..................................................................      $ 3,928
                                                                                    =======
</TABLE>

Represents increase in stockholders' equity related to the Asset Purchase as
follows:

<TABLE>
<S>                                                                                 <C>
Paid in capital from issuance of Daleen common stock and common stock warrants...   $ 2,266
Issuance of Series F Preferred Stock.............................................     2,642
Par value adjustment (11,492 shares at $0.01 per share)..........................       115
                                                                                    -------
Total............................................................................   $ 5,023
                                                                                    =======
</TABLE>

         The value of the common stock was determined by the closing price on
         The Nasdaq SmallCap Market on October 7, 2002 which was $.15 per share.
         The value of the Asset Purchase Warrants was determined using the
         Black-Scholes model with the following assumptions:

<TABLE>
<S>                       <C>
Risk free interest rate   2.07%
Volatility percentage     169.13%
Exercise price            $.906
Term                      3.66 years
</TABLE>

         The value of the Series F preferred stock was determined using the
         same value paid in the 2002 Private Placement, which constitutes an
         arms-length transaction and a good indication of fair value of the
         consideration.

         The value of the consideration is preliminary and is not indicative of
         the final values. The final value of the consideration will be
         determined at the closing date of the transactions.

         The net assets of Abiliti assumed by us are recorded as of October 7,
2002. The final purchase price will be at the closing date of the transactions.
The net assets of Abiliti assumed by us will be recorded at the

                                       19
<PAGE>
closing date. The preliminary purchase price allocation in the Asset Purchase as
follows:

<TABLE>
<S>                                                         <C>
Fair value of consideration                                 $5,023
Estimated Daleen transaction costs                           1,087
                                                            ------
Net assets acquired                                         $6,110
                                                            ======

Net tangible assets                                         $1,804
In-process research and development                            104
Goodwill                                                     4,202
                                                            ------
Net assets acquired                                         $6,110
                                                            ======
</TABLE>

         This transaction would be accounted for as a purchase. Accordingly, the
purchase consideration of $6.1 million will be primarily allocated to the
estimated fair values of the assets acquired and liabilities assumed based on
their estimated fair values as of the signing date of the related asset purchase
agreement. In-process research and development ("IPR&D") costs will be
immediately expensed upon the consummation of the transaction. The remaining
amount of the purchase consideration represents goodwill. Goodwill will be
evaluated for impairment at least annually in accordance with the provisions of
SFAS No. 142.

         IPR&D focused on significant improvements and upgrades to Abiliti's
Simpliciti.net(TM) 2.0 product, including ancillary products such as Rate IT(TM)
are built upon Abiliti's Event Processor architecture. The upgrades maintain and
improve the capabilities of Simpliciti.net(TM) for the user. Continuous
introductions of new capabilities are necessary to maintain and improve its core
software.

         The IPR&D has not yet reached technological feasibility and has no
alternative uses. The IPR&D may not achieve technical or commercial viability.
The technological feasibility of the IPR&D efforts is established when the
enterprise has completed all planning, designing, coding and testing activities
that are necessary to establish that the technology can be utilized to meet its
design specifications, including functions, features and technical performance
requirements.

                                       20
<PAGE>
         ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                  AND RESULTS OF OPERATIONS.

         The following should be read in conjunction with the condensed
unaudited consolidated financial statements, and the related notes thereto,
included elsewhere in this Quarterly Report on Form 10-Q. In addition, reference
should be made to our audited consolidated financial statements and notes
thereto, and related Management's Discussion and Analysis of Financial Condition
and Results of Operations included with our Annual Report on Form 10-K for the
year ended December 31, 2001.

FORWARD-LOOKING STATEMENTS

         This report contains forward-looking statements within the meaning of
the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended
by the Private Securities Litigation Reform Act of 1995. These forward-looking
statements are not historical facts but rather are based on current
expectations, estimates and projections about our business and industry, our
beliefs and assumptions. Words such as "anticipates", "expects", "intends",
"plans", "believes", "seeks", "estimates" and variations of these words and
similar expressions are intended to identify forward-looking statements. These
statements are not guarantees of future performance and are subject to known and
unknown risks, uncertainties, and other factors, some of which are beyond our
control, are difficult to predict, and could cause actual results to differ
materially from those expressed or forecasted in the forward-looking statements.
These risks and uncertainties include those described in "Risks Associated with
Daleen's Business and Future Operating Results", "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and elsewhere in this
report and in the Company's Annual Report on Form 10-K for the year ended
December 31, 2001 filed with the Securities and Exchange Commission on April 1,
2002. Forward-looking statements that were true at the time made may ultimately
prove to be incorrect or false. Readers are cautioned to not place undue
reliance on forward-looking statements, which reflect our management's view only
as of the date of this report. We undertake no obligation to update or revise
forward-looking statements to reflect changed assumptions, the occurrence of
unanticipated events or changes to future operating results.

         You should be aware that some of these statements are subject to known
and unknown risks, uncertainties and other factors, including those discussed in
the section of this report entitled "Risks Associated with Daleen's Business and
Future Operating Results," that could cause the actual results to differ
materially from those suggested by the forward-looking statements.

OVERVIEW

         From our founding in 1989 and through 1996, we operated as a software
consulting company, performing contract consulting and software development
services in a contract placement and staffing business. We sold the contract
placement and staffing business to a third-party in 1996. Since 1996, we have
been a provider of software solutions and have evolved to be a global provider
of Internet software solutions that manage the revenue chain for traditional and
next generation communications service providers. Our RevChain(R) applications
enable service providers to automate and manage their entire revenue chain. In
addition to our RevChain(R) product family, we offer professional consulting
services, training, maintenance, support and third-party software fulfillment,
in each case related to the products we develop. We recognized the first
material revenue from software license fees in 1998.

         Historically, we operated our business with primarily a direct sales
model and our products and services were sold through our direct sales force.
Beginning in 2001, our focus shifted to the use of strategic alliance partners,
including operational support system providers, software application companies,
consulting firms, systems integration firms and OEM partners. The use of
strategic partners provided sales and marketing support to deliver a complete
solution and successful implementation to our customers and provided greater
visability for our products. We continue to maintain a mix of strategic alliance
partners as well as direct sales force for direct sales opportunities and to
support our strategic alliance partners.

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<PAGE>
RECENT DEVELOPMENTS

         On October 7, 2002, Daleen Solutions, Inc., one of our indirect
wholly-owned subsidiaries ("Acquisition Sub"), Abiliti Solutions, Inc.
("Abiliti") and us entered into definitive agreements whereby Acquisition Sub
will purchase substantially all of the assets and assume certain liabilities of
Abiliti (the "Asset Purchase"). We will issue to Abiliti capital stock and
warrants as consideration for the purchased assets. In addition to the Asset
Purchase, Behrman Capital II, L.P., Abiliti's largest shareholder, and an
affiliated fund (collectively, the "Behrman Funds"), have agreed to purchase
from us capital stock and warrants, for an aggregate consideration of $5.015
million (the "2002 Private Placement").

         As consideration for the Asset Purchase, we will issue to Abiliti
115,681 shares of our Series F convertible preferred stock ("Series F preferred
stock"), 11,492,136 shares of our common stock and warrants to purchase an
additional 5,666,069 shares of common stock, with an exercise price of $0.906
per share.

         As consideration for the 2002 Private Placement, we will issue to the
Behrman Funds an aggregate of 115,681 shares of Series F preferred stock,
10,992,136 shares of common stock, warrants to purchase an additional 5,666,069
shares of common stock at an exercise price of $0.906 per share and warrants to
purchase an additional 500,000 shares of common stock at an exercise price of
$0.17 per share.

         The Asset Purchase is subject to approval by our stockholders and
stockholders of Abiliti and the 2002 Private Placement is subject to approval by
our stockholders and each is subject to a limited number of other closing
conditions that must be satisfied prior to the completion of the transactions.
Our stockholders holding sufficient voting power to approve the Asset Purchase
and the 2002 Private Placement and/or the actions required to consummate the
transactions, have signed agreements to vote in favor of the transactions.
Abiliti stockholders holding sufficient voting power to approve the Asset
Purchase have signed agreements to vote in favor of the transaction.

         The terms of the Series F preferred stock are identical to the
currently outstanding Series F preferred stock. However, it is a condition to
closing the transactions that our stockholders approve an amendment to our
Certificate of Incorporation related to the terms of the Series F preferred
stock so that there will be no adjustment to the conversion price of the Series
F preferred stock upon issuance of our securities in the Asset Purchase and the
2002 Private Placement so that the transactions will not give rise to redemption
rights in favor of the Series F preferred stockholders. Our stockholders holding
sufficient voting power to approve the amendment to the terms of the Series F
preferred stock have signed agreements to vote in favor of the amendment.

         Abiliti is a provider of billing, rating and event management and
customer care solutions to network service providers. Abiliti provides solutions
through its outsourcing model. Abiliti operates as a billing application service
provider providing a tailored billing solution for each customer. Upon closing
of the transactions, it is anticipated that we will be able to develop, market
and deliver a broader suite of licensed and outsourced billing, customer care
and event management solutions to customers worldwide. To begin taking advantage
of our synergies, we have executed an alliance agreement with Abiliti that
allows us to develop, market and deliver joint solutions to our customers and
prospects.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

         The discussion and analysis of our financial condition and results of
operations included herein are based upon our condensed unaudited consolidated
financial statements included elsewhere in this Quarterly Report on Form 10-Q,
which have been prepared in accordance with accounting principles generally
accepted in the United States of America. The preparation of these financial
statements requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. On an on-going basis, we evaluate our
estimates, including those related to our bad debts, investments, income taxes,
restructuring, long-term service contracts, contingencies and litigation. We
base our estimates on

                                       22
<PAGE>
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

         We believe that the following critical accounting policies affect our
more significant judgments and estimates used in the preparation of our
condensed unaudited consolidated financial statements.

Revenue Recognition

         Revenue from license fees is based on the size of the customers'
authorized system, such as number of authorized users and computer processors,
revenue billed through the system, or other factors. We generally receive
license fees from our customers upon signing of the license agreement. In some
cases we expect to receive additional license fees as our customers grow and add
additional subscribers, or increase their revenue billed through the system. We
also derive license fee revenue from existing customers who purchase additional
products from us to increase the functionality of their current system. We have
also entered into arrangements with service bureau providers and application
service providers that utilize our products to service their customers. We
expect to continue to receive recurring license fees from these activities in
the future.

         Revenue from license fees is recognized when persuasive evidence of an
arrangement exists, the software is shipped, the fee is fixed and determinable
and collectibility is probable. An arrangement fee is generally not presumed to
be fixed or determinable if payment of a significant portion of the licensing
fees is not due until after expiration of the license or due after the normal
and customary terms usually given to our customers. At times, we enter into
extended payment terms with certain customers if we believe it is a good
business opportunity. Revenue related to arrangements containing extended
payment terms where the fees are not considered fixed and determinable is
deferred until payments are due. Granting extended payment terms results in a
longer collection period for accounts receivable and slower cash inflows from
operations. If collectibility is not considered probable, revenue is recognized
when the fee is collected.

         If the contract requires us to perform services not considered
essential to the functionality of the software, the revenue related to the
software services is recognized using the percentage of completion method, based
on the ratio of total labor hours incurred to date to total estimated labor
hours. The percentage of completion method relies on estimates of total expected
contract revenue and costs. We follow this method since reasonably dependable
estimates of the revenue and costs can be made. Recognized revenues and profits
are subject to revisions as the contract progresses to completion. Revisions in
profit estimates are charged to income in the period in which the facts that
give rise to the revision become known.

         Revenue related to professional services under a time and material
arrangement is recognized as services are performed.

         Revenue related to customer maintenance agreements is deferred and
recognized ratably on a straight-line basis over the maintenance period of the
agreement. Maintenance is renewable annually and we expect to receive annual
maintenance fees from these activities in the future.

Accounts Receivable

         We maintain an allowance for doubtful accounts for estimated losses
resulting from the inability of our customers to make required payments. We
continuously monitor collections and payments from our customers and the
allowance for doubtful accounts is based on historical experience and any
specific customer collection issues that we have identified. If the financial
condition of our customers were to deteriorate, resulting in an impairment of
their ability to make payments, additional allowances may be required.

                                       23
<PAGE>
Notes Receivable

         We maintain an allowance for notes receivable for one note that is
non-recourse except against the collateral, for the difference between the face
value of the note plus accrued interest and the fair market value of the
underlying collateral which consists of our common stock. If the common stock
price were to decrease, additional allowances may be needed. Likewise, if the
common stock price were to increase, a decrease in the allowance may be needed.
An increase in the allowance would decrease income in the period the common
stock price decreased while a decrease in the allowance would increase income in
the period the common stock price increased.

         We also maintain an allowance for notes receivable that are full
recourse for estimated losses resulting from the inability of prior employees to
make payments. We continually monitor the notes receivable and the allowance is
based on specific issues that we have identified. If the financial condition of
the holder of the notes were to deteriorate, resulting in such holders inability
to make required payments, additional allowances may be required.

Investment in Third Parties

         We have an investment in a technology company having operations in
areas within our strategic focus. We also have warrants to purchase preferred
stock of a former subsidiary. We would record an investment impairment charge
when we believe these investments have experienced a decline in value that is
other than temporary. Future adverse changes in market conditions, or poor
operating results of these investments, could result in losses or an inability
to recover the carrying value of investments that may not be reflected in our
investment's current carrying value, thereby possibly requiring an impairment
charge in the future.

Accounting for Income Taxes

         We record a valuation allowance to reduce our deferred tax assets to
the amount that is more likely than not to be realized. While we have considered
future taxable income and ongoing prudent and feasible tax planning strategies
in assessing the need for the valuation allowance, in the event we were to
determine that we would be able to realize our deferred tax assets in the future
in excess of its net recorded amount, an adjustment to the deferred tax asset
would increase income in the period such determination was made.

RESULTS OF OPERATIONS

         On January 4, 2001, our Board of Directors approved, and on January 5,
2001, we announced a plan to implement specific cost reduction measures (the
"January Restructuring") that included workforce reductions, downsizing of
facilities and asset writedowns. We recorded a $3.0 million restructuring charge
in the three months ended March 31, 2001 related to the January Restructuring.
We implemented the actions associated with the January Restructuring immediately
following the January 5, 2001 announcement. The workforce reductions in the
January Restructuring included the termination of approximately 140 employees
throughout our Boca Raton, Florida; Atlanta, Georgia; and Toronto, Ontario,
Canada facilities, and included employees from substantially all of our employee
groups. The downsizing of facilities included the downsizing of the Atlanta and
Toronto facilities to one floor per each location. The asset writedowns were
primarily related to the disposition of duplicative furniture and equipment and
computer equipment from terminated employees, which was not resalable.

         In late March 2001, we initiated a second comprehensive business review
to identify additional areas for cost reductions. As a result, our Board of
Directors approved, and we announced, another restructuring on April 10, 2001
(the "April Restructuring"). The April Restructuring included the consolidation
of our North American workforce into our Boca Raton, Florida corporate offices
and the closure of our Toronto, Canada and Atlanta, Georgia facilities. The
April Restructuring included the consolidation of our North American research
and development and professional services resources and further reduced our
administrative support functions. The

                                       24
<PAGE>
workforce reductions resulted in the termination of 193 employees from
substantially all of our employee groups, closing of facilities, asset
writedowns and other costs. Other costs included accounting and legal fees,
penalties for cancellation of software maintenance contracts in Atlanta and
Toronto and penalties for cancellation of a trade show. We implemented the
actions associated with the April Restructuring immediately following the April
10, 2001 announcement.

         On October 17, 2001, our Board of Directors approved and on October 19,
2001 we announced a plan to further reduce expenses (the "October
Restructuring"). The October Restructuring included the estimated costs related
to workforce reductions of 75 employees from substantially all of our employee
groups, further downsizing of facilities including rental property lease
termination charges of $1.4 million, asset writedowns, and other costs. We
started to implement these actions immediately following the October 19, 2001
announcement.

         On May 13, 2002, our Board of Directors approved and on May 14, 2002 we
announced, a plan to further reduce expenses (the "2002 Restructuring"). The
2002 Restructuring included the estimated costs related to workforce reductions
of 35 employees from substantially all of our employee groups. We implemented
the actions associated with the 2002 Restructuring immediately following the May
14, 2002 announcement.

         Due to the termination of employees in the January Restructuring, the
April Restructuring, the October Restructuring and the 2002 Restructuring and
assuming we do not hire any additional employees, we expect to achieve an
annualized savings related to the cost of salaries and benefits for these
terminated employees of approximately $33.2 million. The anticipated savings are
from the following: approximately $9.8 million in cost of professional services
and other; approximately $12.2 million in research and development;
approximately $7.0 million in sales and marketing; and approximately $4.2
million in general and administrative.

THREE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 2001

         Total Revenue. Total revenue, which includes license revenue and
professional services and other revenue, decreased $958,000, or 43.5%, to $1.2
million in the three months ended September 30, 2002, from $2.2 million for the
same period in 2001. The primary reason for lower revenue during the recent
quarter is related to the decrease in the number of contracts being signed in
recent quarters, which has resulted in a decrease in our professional services
and other revenue due to less ongoing product implementations related to
licensing our software products and the need for third-party software
fulfillment. In addition, PartnerCommunity, Inc. is no longer a wholly owned
subsidiary. This entity was sold on June 24, 2002. Total revenue related to
PartnerCommunity in third quarter 2001 was $182,000.

         License Fees. Our license fees are derived from licensing our software
products. License fees decreased $21,100, or 5.1%, in the three months ended
September 30, 2002 to $397,000, compared to $418,000 for the same period in
2001. The slight reduction was due to the sale of PartnerCommunity, Inc. License
revenue related to PartnerCommunity, Inc. in the three months ended September
30, 2001 was $25,000. License fees constituted 31.9% of total revenue in the
three months ended September 30, 2002, compared to 19% in the same period in
2001. The increase as a percentage of total revenue is due to a reduction in
professional services and other revenue in the quarter.

         Professional Services and Other. Our professional services and other
revenue consists of revenue from professional consulting services, training,
maintenance and support, and third-party software fulfillment, all related to
the software products we license. We offer consulting services both on a fixed
fee basis and on a time and materials basis. We also offer third-party software
fulfillment based on our acquisition cost plus a reasonable margin. Professional
services and other revenue decreased $937,000 or 52.5%, in the three months
ended September 30, 2002 to $849,000, compared to $1.8 million in the same
period in 2001. The decrease was due to fewer ongoing product implementations,
fewer maintenance contracts primarily due to customer insolvency, loss

                                       25
<PAGE>
of revenue contribution from PartnerCommunity, Inc. due to the sale of the
subsidiary, and less revenue associated with third-party software fulfillment.
Professional services and other revenue constituted 68.1% of total revenue in
the three months ended September 30, 2002, compared to 81.0% for the same period
in 2001.

         Total Cost of Revenue. Total cost of revenue decreased $2.1 million, or
82.7%, to $438,000 in the three months ended September 30, 2002 from $2.5
million in the same period in 2001. Total cost of revenue includes both cost of
license fees and cost of professional services and other. These components
include the cost of direct labor, benefits, overhead and materials associated
with the fulfillment and delivery of license products, amortization expense
related to prepaid third-party licenses and related corporate overhead costs to
provide professional services to our customers. These costs decreased due to a
decrease in total revenue, and the result of our cost reduction measures taken
in the October Restructuring and the 2002 Restructuring. In addition, in the
three months ended September 30, 2001 we wrote off $1.2 million of prepaid third
party software license costs since certain third party products are no longer
integrated with our product. No such write offs took place in the three months
ended September 30, 2002. Overall, total cost of revenue as a percentage of
total revenue decreased to 35.1% in the three months ended September 30, 2002,
compared to 114.5% in the same period in 2001.

         Cost of License Fees. Cost of license fees includes direct cost of
labor, benefits and packaging material for fulfillment and shipment of our
software products and amortization expense related to prepaid third-party
licenses. Cost of license fees decreased $1.2 million or 97.3% to $34,000, in
the three months ended September 30, 2002, from $1.2 million in the same period
in 2001, due to a decrease in amortization expense related to prepaid
third-party licenses which were being amortized over the term of their
respective agreements. In the three months ended September 30, 2001, we wrote
down $1.2 million of prepaid third party software licenses since certain
licenses are no longer integrated with our product. Cost of license fees as a
percentage of license revenue decreased to 8.5% in the three months ended
September 30, 2002, compared to 295.6% for the same period in 2001.

         Cost of Professional Services and Other. Cost of professional services
and other includes direct cost of labor, benefits, third-party software and
related corporate overhead costs to provide professional services and training
to our customers. Cost of professional services and other decreased $883,000, or
68.6% to $404,000, in the three months ended September 30, 2002, from $1.3
million in the same period in 2001. These costs decreased due to a decrease in
professional services and other revenue, and the result of our cost reduction
measures taken in the October Restructuring and the 2002 Restructuring. The cost
reductions included a decrease in professional services personnel. Cost of
professional services and other decreased to 47.6% of professional services and
other revenue in the three months ended September 30, 2002, compared to 72.1%
for the same period 2001.

         Sales and Marketing. Sales and marketing expenses consist primarily of
salaries, commissions and bonuses earned by sales, marketing and partner
management personnel, travel and entertainment, trade show and marketing program
costs, promotional and related corporate overhead costs. These expenses
decreased $1.0 million or 56.8%, to $789,000 in the three months ended September
30, 2002, from $1.8 million for the same period in 2001. These costs decreased
as a result of a decrease in our trade show presence, a decrease in sales
commissions and bonuses, as well as the cost reduction measures taken with the
October Restructuring and 2002 Restructuring. The cost reductions included a
decrease in sales and marketing personnel with a corresponding decrease in
travel and other costs. As a percentage of revenue, sales and marketing expenses
decreased to 63.4% in the three months ended September 30, 2002, from 82.8% in
the same period in 2001.

         Research and Development. Research and development expenses consist
primarily of salaries and benefits for software developers, product testing and
benchmarking, management and quality assurance personnel, subcontractor costs
and related corporate overhead costs. Our research and development expenses
decreased $1.7 million, or 70.7%, to $713,000 in the three months ended
September 30, 2002, from $2.4 million for the same period in 2001. The overall
decrease was primarily due to the cost reductions associated with the October
Restructuring and 2002 Restructuring. The cost reductions included a decrease in
research and development

                                       26
<PAGE>
personnel and other costs. As a percentage of revenue, research and development
expenses decreased to 57.2% in the three months ended September 30, 2002
compared to 110.2% in the same period in 2001.

         General and Administrative. General and administrative expenses consist
primarily of salaries, benefits and related costs for our executive, finance and
accounting, facilities, human resources and information systems personnel, and
related corporate overhead costs. It also consists of non-cash stock
compensation expense and provision for bad debt. Our general and administrative
expenses decreased $2.1 million, or 65.3%, to $1.1 million in the three months
ended September 30, 2002, from $3.2 million in the same period in 2001. In the
three months ended September 30, 2001, we increased the allowance for
non-recourse loans in the amount of approximately $390,000 due to the decline in
our stock price at September 30, 2001 and the impact such decline had on the
stock pledged as collateral on the loans. The charge in the three months ended
September 30, 2002 was $2,100. In addition, in the three months ended September
30, 2001 there was an $800,000 charge to our provision for bad debt due to
market conditions in the telecommunications industry and certain customers
significantly reducing or liquidating their operations in 2001. The charge to
bad debt in the three months ended September 30, 2002 was approximately $60,000.
The decrease in general and administrative expenses is also attributed to the
decease in administrative personnel and administrative charges associated with
the October Restructuring and the 2002 Restructuring. As a percentage of
revenue, general and administrative expenses decreased to 87.8% in the three
months ended September 30, 2002 from 142.8% in the same period in 2001.

         Amortization of Goodwill and Other Intangibles. Amortization expense
decreased $3.7 million, or 100%, to $0 in the three months ended September 30,
2002, from $3.7 million for the same period in 2001. Goodwill and other
intangibles was considered impaired and written off during 2001. Therefore, no
amortization of goodwill and other intangibles was recorded in the three months
ended September 30, 2002.

         Impairment of Long Lived Assets. Impairment expenses decreased $23.4
million, or 100%, to $0 in the three months ended September 30, 2002 from $23.4
million in the same period in 2001. Impairment charges consisted of an
impairment charge related to goodwill. Due to economic conditions and the
Company's past revenue performance, we performed an evaluation of the
recoverability of the goodwill under Statement of Financial Accounting Standards
(SFAS) No. 121 over the remaining useful life and determined that the
undiscounted future operating cash flows projected was less than the goodwill
balance at September 30, 2001. This resulted in a write down in the amount of
approximately $23.4 million in the three months ended September 30, 2001.

         Other Income. Other income decreased $405,000, or 90.6%, to $42,000 in
the three months ended September 30, 2002, from $447,000 for the same period in
2001. This was primarily attributable to a one-time refund received in 2001
related to our self-funded health insurance policy and a decrease in investment
earnings in the three months ended September 30, 2002 due to the decrease in our
cash balance and a decrease in interest rates in 2002.

NINE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
2001

         Total Revenue. Total revenue, which includes license revenue and
professional services and other revenue, decreased $5.6 million, or 51.9%, to
$5.2 million in the nine months ended September 30, 2002 from $10.8 million for
the same period in 2001. The primary reason for lower revenue is related to
fewer license contracts being signed in the nine months ended September 30, 2002
than in the same period in 2001. In addition, the number of contracts being
signed in recent quarters has decreased our professional services and other
revenue due to fewer ongoing product implementations related to licensing our
software products and the corresponding decrease in the need for third-party
software fulfillment.

         License Fees. Our license fees are derived from licensing our software
products. License fees decreased $1.8 million, or 57.4%, in the nine months
ended September 30, 2002 to $1.4 million compared to $3.2 million for the same
period in 2001. This decrease was due to fewer license contracts being signed in
the nine months ended

                                       27
<PAGE>
September 30, 2002 compared to the same period in 2001. The primary reasons for
this reduction include an overall reduction in technology spending, market
conditions in the industries in which our customers operate, competition,
lengthening of the sales cycle and postponement of customer licensing decisions.
License fees constituted 26.2% of total revenue in the nine months ended
September 30, 2002, compared to 29.6% in the same period in 2001.

         Professional Services and Other. Our professional services and other
consists of revenue from professional consulting services, training, maintenance
and support, and third-party software fulfillment, all related to the software
products we license. We offer consulting services on a fixed fee basis and on a
time and materials basis. We offer third-party software fulfillment based on our
acquisition cost plus a reasonable margin. Professional services and other
revenue decreased $3.8 million, or 49.6%, in the nine months ended September 30,
2002 to $3.8 million, compared to $7.6 million in the same period in 2001. The
decrease was due to less ongoing product implementations, fewer maintenance
contracts primarily due to customer insolvency, and less revenue associated with
third-party software fulfillment. Professional services and other revenue
constituted 73.8% of total revenue in the nine months ended September 30, 2002,
compared to 70.4% for the same period in 2001. The increase as a percentage of
total revenue is due to a reduction in license revenue in the nine months ended
September 30, 2002.

         Total Cost of Revenue. Total cost of revenue decreased $5.8 million, or
72.9%, to $2.2 million in the nine months ended September 30, 2002, from $7.9
million in the same period in 2001. Total cost of revenue includes both cost of
license fees and cost of professional services and other. These components
include the cost of direct labor, benefits, overhead and materials associated
with the fulfillment and delivery of licensed products, amortization expense
related to prepaid third-party licenses and related corporate overhead costs to
provide professional services to our customers. These costs decreased due to the
decrease in total revenue and a decrease in amortization of prepaid third-party
license fees. In the nine months ended September 30, 2001 we wrote off $1.2
million of prepaid third party software license costs because certain third
party products were no longer integrated with our product. The decrease in costs
were also a result of our cost reduction measures taken in the April
Restructuring, October Restructuring, and 2002 Restructuring. The cost
reductions included a decrease in professional services personnel and other
overhead costs. Overall, total cost of revenue as a percentage of total revenue
decreased to 41.4% in the nine months ended September 30, 2002, compared to
73.5% in the same period in 2001.

         Cost of License Fees. Cost of license fees includes direct cost of
labor, benefits and packaging material for fulfillment and shipment of our
software products and amortization expense related to prepaid third-party
software licenses. Cost of license fees decreased $1.4 million or 89.3% to
$171,000, in the nine months ended September 30, 2002, from $1.6 million in the
same period in 2001 due to a decrease in amortization expense related to prepaid
third-party licenses. In the nine months ended September 30, 2001 we wrote down
$1.2 million of certain prepaid third party software licenses costs because
certain third party products were no longer integrated with our product. Cost of
license fees decreased to 12.6% of license revenue in 2002, compared to 50.2% in
2001.

         Cost of Professional Services and Other. Cost of professional services
and other includes direct cost of labor, benefits, third-party software and
related corporate overhead costs to provide professional services and training
to our customers. Cost of professional services and other decreased $4.4
million, or 68.7%, to $2.0 million in the nine months ended September 30, 2002,
from $6.3 million in the same period in 2001. These costs decreased as a result
of our cost reduction measures taken with the April Restructuring, October
Restructuring and the 2002 Restructuring. In addition, the revenue related to
professional services and other has decreased. Cost of professional services and
other decreased to 51.7% of professional services and other revenue in the nine
months ended September 30, 2002, compared to 83.3% for the same period in 2001.

         Sales and Marketing. Sales and marketing expenses consist primarily of
salaries, commissions and bonuses earned by sales, marketing and partner
management personnel, travel and entertainment, trade show and

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<PAGE>
marketing program costs, promotional and related corporate overhead costs. These
expenses decreased $5.8 million, or 65.5%, to $3.0 million in the nine months
ended September 30, 2002, from $8.8 million for the same period in 2001. The
decrease was a result of a decrease in our trade show presence, decrease in
sales commissions and bonuses as well as the cost reduction measures taken with
the April Restructuring, October Restructuring and the 2002 Restructuring. As a
percentage of revenue, sales and marketing expenses decreased to 58.3% in the
nine months ended September 30, 2002, from 81.3% for the same period in 2001.

         Research and Development. Research and development expenses consist
primarily of salaries and benefits for software developers, product testing and
benchmarking, management and quality assurance personnel, subcontractor costs
and related corporate overhead costs. Our research and development expenses
decreased $7.8 million, or 71.7%, to $3.1 million in the nine months ended
September 30, 2002, from $10.9 million for the same period in 2001. The decrease
was a result of the cost reduction measures associated with the April
Restructuring, October Restructuring and the 2002 Restructuring. As a percentage
of revenue, research and development expenses decreased to 59.7% in 2002 to
101.3% in 2001.

         General and Administrative. General and administrative expenses consist
primarily of salaries, benefits and related costs for our executive, finance and
accounting, facilities, human resources and information systems personnel, and
related corporate overhead costs. It also consists of non-cash stock
compensation expense and provision for bad debt. Our general and administrative
expenses decreased $8.3 million, or 69.3%, to $3.7 million in the nine months
ended September 30, 2002, from $12.0 million in the same period in 2001. The
decrease was attributed to the aggregate amount of approximately $4.7 million
non-cash charges recorded in the nine months ended September 30, 2001,
encompassing: (i) an asset write-down of $1.0 million related to an investment;
(ii) the issuance of warrants to purchase common stock in connection with a
legal settlement resulting in a charge of approximately $495,000; (iii) a charge
of $1.2 million related to amortization of stock compensation expense due to
options issued in 1999 and 2000 with exercise prices below fair market value
compared to $22,400 in amortization of stock compensation in the same period in
2002; (iv) an increase in the allowance for non-recourse loans in the amount of
approximately $939,000 due to a decline in our stock price at September 30, 2001
and the impact of such declines on the stock pledge as collateral (the charge in
the nine months ended September 30, 2002 was a significant decrease to
$227,000); and (v) a $1.6 million charge to our provision for bad debt for the
nine months ended September 30, 2001 compared to a $64,000 charge for the nine
months ended September 30, 2002. The provision in the nine month period in 2001
was due to the market conditions in the telecommunications industry and certain
customers significantly reducing or liquidating their operations in 2001. The
decrease in general and administrative expenses also was a direct result of the
cost reduction measures associated with the April Restructuring, October
Restructuring and 2002 Restructuring. As a percentage of revenue, general and
administrative expenses decreased to 70.9% in the nine ended September 30, 2002
from 111.0% in the same period in 2001.

         Amortization of Goodwill and Other Intangibles. Amortization expense
decreased $11.2 million, or 100%, to $0 in the nine months ended September 30,
2002, from $11.2 million for the same period in 2001. Goodwill and other
intangibles were considered impaired and written off during 2001. Therefore no
amortization of goodwill and other intangibles was recorded in the nine months
ended September 30, 2002.

         Impairment of Long Lived Assets. Impairment charges decreased $27.9
million, or 100%, to $0 in the nine months ended September 30, 2002, from $27.9
million for the same period in 2001. Impairment charges in the nine months ended
September 30, 2001 consisted of (i) write-off of employee workforce of $1.5
million; (ii) impairment of property and equipment in the amount of $1.9
million; and (iii) an impairment of goodwill in the amount of $24.5 million. Due
to various restructuring activities initiated by us, we performed an evaluation
of the recoverability of the employee workforce acquired in the acquisition of
Inlogic Software, Inc. under SFAS No. 121. We determined that this asset was
impaired and in connection with this determination, we recorded an impairment
charge in the nine months ended September 30, 2001 in the amount of
approximately $1.5 million. In addition, we determined that certain property,
leasehold improvements and equipment, which mainly represented

                                       29
<PAGE>
computer equipment and furniture from the Toronto and Atlanta facilities, was
impaired. We recorded an impairment charge of approximately $1.9 million during
the nine months ended September 30, 2001 representing the difference between the
fair value and the carrying value of the assets. We recorded an impairment
charge to goodwill in the amount of approximately $1.1 million in March 2001
related to certain gateway products acquired from Inlogic Software, Inc. on
December 16, 1999 which we do not plan to promote and license in the future. In
addition, due to economic conditions and our past revenue performance, we
performed an evaluation of the recoverability of the goodwill under SFAS No. 121
over the remaining useful life and determined that the undiscounted future
operating cash flows projected was less than the goodwill balance at September
30, 2001. This resulted in an additional writedown of goodwill in the amount of
approximately $23.4 million in the nine months ended September 30, 2001. There
was no asset impairment in the nine months ended September 30, 2002.

         Restructuring Charges. Restructuring charges decreased $7.0 million, or
90.4%, to approximately $745,000 in the nine months ended September 30, 2002,
from $7.8 million for the same period in 2001. Restructuring charges incurred by
us in the nine months ended September 30, 2002 related to the 2002
Restructuring. These charges were related to employee termination benefits. The
costs were from the following financial statement captions:

<TABLE>
<S>                                                  <C>
Cost of sales - professional services                $140,000
Research and development                              168,000
Sales and marketing                                   148,000
General and administrative                            289,000
                                                     --------
                                                     $745,000
                                                     ========
</TABLE>

         Restructuring charges incurred by us in the nine months ended September
30, 2001 related to the January Restructuring and April Restructuring and were
higher than the same period in 2002. In the January Restructuring and April
Restructuring more employees were terminated, costs were incurred related to the
closing of the Toronto and Atlanta facilities, and there were asset writedowns.
In the 2002 Restructuring the costs incurred were related only to employee
terminations.

         Other Income. Other income decreased $277,000 or 28.0%, to $712,000 in
the nine months ended September 30, 2002 from $989,000 for the same period in
2001. This was primarily attributable to the decrease in investment earnings
due to the decrease in interest rates in 2002 compared to 2001, and a decrease
in the cash balance at September 30, 2002. In addition, in the nine months ended
September 30, 2001 we received a refund related to our self-funded health
insurance policy which we did not receive in the same period in 2002. This
decrease was offset by the gain on sale of subsidiary of $391,000.

LIQUIDITY AND CAPITAL RESOURCES

         Net cash used in operating activities was $7.0 million for the nine
months ended September 30, 2002, compared to $24.0 million for the nine months
ended September 30, 2001. The principal use of cash for both periods was to fund
our losses from operations.

         Net cash used in financing activities was $135,000 for the nine months
ended September 30, 2002 compared to net cash provided by financing activities
of $25.1 million for the nine months ended September 30, 2001. In 2002, cash was
used in financing activities mainly for transaction costs related to the Asset
Purchase and 2002 Private Placement. In 2001, the cash provided by financing
activities was primarily related to the net proceeds received from the sale of
the Series F preferred stock and warrants to purchase additional shares of
Series F preferred stock in June 2001.

         Net cash used in investing activities was $64,000 for the nine months
ended September 30, 2002, compared to the $1.9 million for the nine months ended
September 30, 2001. The cash used in investing activities for the nine

                                       30
<PAGE>
months ended September 30, 2002 was primarily related to capital expenditures of
approximately $172,000 offset by net proceeds of $68,000 from the sale of the
PartnerCommunity, Inc. and $39,000 in repayments of notes receivable. The cash
used in investing activities for the nine months ended September 30, 2001 was
primarily related to a non-recourse note receivable issued to our Chairman,
President and Chief Executive Officer for approximately $1.2 million and capital
expenditures of approximately $768,000.

     We continued to experience operating losses during the nine months ended
September 30, 2002 and had an accumulated deficit of $208.1 million at September
30, 2002. Cash and cash equivalents at September 30, 2002 was $6.0 million. The
cash used during the nine months ended September 30, 2002 was a significant
improvement from prior periods. The January Restructuring, April Restructuring,
October Restructuring and 2002 Restructuring resulted in a reduction in
operating expense levels, and cash usage requirements in the nine months ended
September 30, 2002.

         We intend to continue to manage our use of cash. We believe the cash
and cash equivalents at September 30, 2002, together with the assets and
additional funding to be provided upon the completion of the Asset Purchase and
the 2002 Private Placement as well as anticipated revenue, may be sufficient to
fund our operations for the foreseeable future. Although unlikely, there is a
possibility that the Asset Purchase and the 2002 Private Placement will not be
consummated. If the transactions are not consummated, we believe the cash and
cash equivalents at September 30, 2002 may be sufficient to fund our operations
through June 30, 2003 and we will be required to further reduce our operations
and/or seek additional public or private equity financing or financing from
other sources. Although we are precluded from considering other strategic
alternatives pending completion or termination of the Asset Purchase, if the
transactions are not completed we will need to consider other strategic
alternatives. There can be no assurance that additional financing will be
available, or that, if available, the financing will be obtainable on terms
acceptable to us or that any additional financing would not be substantially
dilutive to our existing stockholders. Further, there can be no assurance that
any other strategic alternatives will be available, or if available will be on
terms acceptable to us or all of our stockholders. Failure to consummate the
Asset Purchase and 2002 Private Placement will have a material adverse effect on
our ability to meet our financial obligations and to continue to operate as a
going concern which may result in filing for bankruptcy protection, winding down
of operations and/or liquidation of our assets. Our condensed unaudited
consolidated financial statements included elsewhere in this Form 10-Q have been
prepared assuming that we will continue as a going concern, and do not include
any adjustments that might result from the outcome of this uncertainty. See
"Risks Associated with Daleen's Business and Operating Results."

NEW ACCOUNTING PRONOUNCEMENTS

         In July 2001, the Financial Accounting Standards Board ("FASB"), issued
Statement of Financial Accounting Standards No. 143, "Accounting for Asset
Retirement Obligations" ("SFAS No. 143"). That statement requires entities to
record the fair value of a liability for an asset retirement obligation in the
period in which it is incurred. When the liability is initially recorded, the
entity will capitalize a cost by increasing the carrying amount of the related
long lived asset. Over-time, the liability is accreted to its present value each
period, and the capitalized cost is depreciated over the useful life of the
related asset. Upon settlement of the liability, an entity either settles the
obligation for its recorded amount or incurs a gain or loss upon settlement.
SFAS No. 143 is effective for the fiscal years beginning after June 15, 2002,
with earlier adoption permitted. We believe the adoption of the SFAS No. 143
will not have a significant impact on our financial position and results of
operations.

         In August 2001, the FASB issued Statement of Financial Accounting
Standards No. 144, "Accounting For The Impairment Or Disposal Of Long Lived
Assets" ("SFAS No. 144"). This statement is effective for fiscal years beginning
after December 15, 2001. This statement supercedes SFAS No. 121, while retaining
many of the requirements of such statement. Under SFAS No. 144 assets held for
sale will be included in discontinued operations if the operations and cash
flows will be or have been eliminated from the ongoing operations of the

                                       31
<PAGE>
entity and the entity will not have any significant continuing involvement in
the operations of the Company. We adopted SFAS No. 144 as of January 1, 2002.
The adoption had no impact to our financial statements.

         On April 30, 2002, the FASB issued Statement of Financials Accounting
Standards No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment
of FASB Statement No. 13, and Technical Corrections"("SFAS No. 145"). Through
this rescission, SFAS No. 145 eliminates the requirement that gains and losses
from the extinguishment of debt be aggregated and, if material, classified as an
extraordinary item, net of the related income tax effect. In addition, SFAS No.
145 requires sale-leaseback accounting treatment for certain lease modifications
that have economic effects that are similar to sales-leaseback transactions.
SFAS No. 145 also makes several other technical corrections to existing
pronouncements that may change accounting practice. SFAS No. 145 is effective
for fiscal years beginning after May 15, 2002.

         In July 2002, the FASB issued a Statement of Financial Accounting
Standards No. 146, "Accounting for Exit or Dismissal Activities" ("SFAS No.
146"). SFAS No. 146 will be effective for disposal activities initiated by us
after December 31, 2002. We do not anticipate any exit or dismissal activities
at this time and therefore we believe that adoption will not have an impact on
our financial statements.

         In October 2002, the Emerging Issues Task Force issued tentative
conclusions regarding EITF Issue 00-21, "Accounting for Revenue Arrangements
with Multiple Deliverables"("EITF 00-21"). EITF 00-21 relates to accounting for
multiple-deliverable arrangements and specifies circumstances under which a
revenue arrangement should be separated into different revenue-generating
deliverables or "units of accounting" and how the revenue arrangement should be
allocated to the different deliverables or units of accounting. EITF 00-21 is
tentatively scheduled to be effective for revenue arrangements entered into in
fiscal years beginning after December 15, 2002. We are closely monitoring
developments in this issue and will complete our assessment of any potential
impact on our results of operations upon the issuance of our December 31, 2002
financial statements.

RISKS ASSOCIATED WITH DALEEN'S BUSINESS AND FUTURE OPERATING RESULTS

         Our future operating results may vary substantially from period to
period. The price of our common stock will fluctuate in the future, and an
investment in our common stock is subject to a variety of risks, including but
not limited to the specific risks identified below. In addition to general risk
factors, risk factors resulting from our Series F preferred stock are set forth
below under the caption "Risks Associated with our Series F preferred stock"
beginning on page 38 and risk factors associated with the Asset Purchase and the
2002 Private Placement are set out in detail in the Proxy Statement filed in
connection with the proposed transactions. Inevitably, some investors in our
securities will experience gains while others will experience losses depending
on the prices at which they purchase and sell securities. Prospective and
existing investors are strongly urged to carefully consider the various
cautionary statements and risks in this report.

RISKS ASSOCIATED WITH OUR BUSINESS AND OPERATIONS

OUR INDEPENDENT PUBLIC ACCOUNTANTS HAVE EXPRESSED DOUBTS OVER OUR ABILITY TO
CONTINUE AS A GOING CONCERN.

         We incurred net losses of approximately $6.8 million for the nine
months ended September 30, 2002. Our cash and cash equivalents at September 30,
2002 was $6.0 million. Cash used in operations for the nine months ended
September 30, 2002 was $7.0 million. As a result of our financial condition, the
independent auditors' report covering our December 31, 2001 consolidated
financial statements and financial statement schedule contains an explanatory
paragraph that states that our recurring losses from operations and accumulated
deficit raised substantial doubt about our ability to continue as a going
concern. We initiated cost reduction measures in the January Restructuring,
April Restructuring, October Restructuring and 2002 Restructuring in order to
reduce our operating expenses, including workforce reductions, reduction of
office space, asset writedowns and consolidation of our North American research
and development and professional services resources.

                                       32
<PAGE>
         We believe that our cash and cash equivalents as of September 30, 2002
together with the assets and additional funding resulting from the completion of
the Asset Purchase and 2002 Private Placement as well as anticipated revenue may
be sufficient to fund our operations for the foreseeable future. The completion
of the Asset Purchase and 2002 Private Placement is subject to a number of
closing conditions and we cannot be assured that they will be completed and we
cannot predict the date on which they will be completed. Although we intend to
carefully manage our use of cash and attempt to increase revenues, if we do not
complete the Asset Purchase and 2002 Private Placement, we likely will be
required to further reduce our operations and/or seek additional public or
private equity financing or financing from other sources. We will need to
consider other strategic alternatives. There can be no assurance that any other
strategic alternatives will be available, or if available, will be on terms
acceptable to us or that any additional financing would be substantially
dilutive to our existing stockholders. There can be no assurance that any other
strategic alternatives will be available, or if available, will be on terms
acceptable to us, or all of our stockholders. Failure to consummate the Asset
Purchase and 2002 Private Placement will have a material adverse effect on our
ability to meet our financial obligations and to continue to operate as a going
concern, which may result in filing for bankruptcy protection, winding down of
our operations and/or liquidation of our assets. See "Risks Associated with our
Series F preferred stock - The holders of our Series F preferred stock have
rights that are senior to those of the holders of our common stock in the event
of the sale of our Company or in the event of our liquidation, dissolution or
winding up" below for a discussion of the terms of the Series F preferred stock
applicable in the event of a business combination, liquidation event or issuance
of equity securities.

IF WE ARE UNABLE TO CONSUMMATE THE ASSET PURCHASE AND 2002 PRIVATE PLACEMENT,
OUR BUSINESS WILL BE ADVERSELY AFFECTED.

         If the Asset Purchase and the 2002 Private Placement are not
consummated, our business and, likely, our stock price, will be adversely
affected. We currently anticipate that our cash and cash equivalents may be
sufficient to fund our operations through June 30, 2003. If we are unable to
complete the transactions, we may be unable to continue to operate our business.
Costs related to the transactions, such as legal and accounting, must be paid
even if the transactions are not completed. In addition, even if we have
sufficient funds to continue to operate our business if the transactions are not
completed, the current market price of our common stock may decline.

THE TERMS OF THE ASSET PURCHASE AGREEMENT PROHIBIT US FROM CONSIDERING
ALTERNATIVE TRANSACTIONS.

         Under the terms of the asset purchase agreement with Abiliti, we, our
board of directors, and our representatives are prohibited from (1) soliciting,
initiating or encouraging any alternative business combination proposal or (2)
participating in, encouraging any discussions or negotiating with, or furnishing
information with respect to, any inquiries or the making of any alternative
business combination proposals. This prohibition may prevent us from considering
or entering into an alternative arrangement that may provide more value to our
stockholders than the Asset Purchase and 2002 Private Placement. In the event
the transactions are not completed, this prohibition may also delay or prevent
us from seeking an alternative arrangement prior to the termination of the asset
purchase agreement.

THE NUMBER OF SHARES ISSUED AS CONSIDERATION IN THE ASSET PURCHASE AND IN THE
2002 PRIVATE PLACEMENT WILL NOT BE ADJUSTED, EVEN IF THERE IS AN INCREASE OR
DECREASE IN THE PRICE OF THE COMMON STOCK.

         The price of our common stock at the time the Asset Purchase and 2002
Private Placement of the close may vary from its price at the signing date of
the transaction agreements and at the date of the special meeting. Therefore, in
the transactions, the shares of capital stock that we issue may have a greater
or lesser value than the value of the same number of shares on the signing date
or the date of the special meeting and could materially increase or decrease the
value that we will transfer to the Behrman Funds in the 2002 Private Placement
and to Abiliti in the Asset Purchase. Variations in the price of our common
stock before the completion of the

                                       33
<PAGE>
transactions may result from a number of factors that are beyond our control,
including actual or anticipated changes in our business, operations or
prospects, market assessments of the likelihood that the transactions will be
consummated and the timing thereof, regulatory considerations, general market
and economic conditions and other factors.

WE HAVE NOT ACHIEVED PROFITABILITY AND MAY CONTINUE TO INCUR NET LOSSES FOR AT
LEAST THE NEXT SEVERAL QUARTERS.

         We incurred net losses of approximately $6.8 million for the nine
months ended September 30, 2002. As of September 30, 2002, we had an accumulated
deficit of approximately $208.1 million. We have not realized any profit to date
and may not achieve profitability in the near future. To achieve profitability,
we need to generate significant additional revenue from licensing of our
products and related services and support revenues. We have reduced our fixed
operating expenses through the cost reduction measures implemented in the
January Restructuring, April Restructuring, October Restructuring and 2002
Restructuring, which included workforce reductions, reduction of office space,
asset writedowns, and other miscellaneous cost reductions. We consolidated our
North American workforce into our Boca Raton, Florida facility and we closed our
Toronto, Ontario, Canada and Atlanta, Georgia offices.

         In order to achieve profitability, we may need to further reduce our
operations. In addition, even if we do achieve profitability, we may not be able
to sustain or increase profitability on a quarterly or annual basis in the
future.

OUR REVENUE IS DIFFICULT TO PREDICT AND QUARTERLY OPERATING RESULTS MAY
FLUCTUATE IN FUTURE PERIODS, AS A RESULT OF WHICH WE MAY FAIL TO MEET
EXPECTATIONS, WHICH MAY CAUSE OUR COMMON STOCK PRICE TO DECLINE.

         Our revenue and operating results have varied and may continue to vary
significantly from quarter to quarter due to a number of factors. This
fluctuation may cause our operating results to be below the expectations of
public market analysts and investors, and the price of our common stock may
fall. Factors that could cause quarterly fluctuations include:

         -        variations in demand for our products and services;

         -        competitive pressures;

         -        continued low levels of corporate information technology
                  spending;

         -        prospective customers delaying their decision to acquire
                  licenses for our products;

         -        prospective customers' concerns over their own financial
                  viability and use of cash;

         -        general market and economic conditions;

         -        our ability to develop and attain market acceptance of
                  enhancements to the RevChain product applications and any new
                  products and services;

         -        the pace of product implementation and the timing of customer
                  acceptance;

         -        industry consolidation reducing the number of potential
                  customers;

                                       34
<PAGE>
         -        the willingness of potential customers to conduct business
                  with us due to concerns over operating losses and our long
                  term financial viability;

         -        changes in our pricing policies or the pricing policies of our
                  competitors; and

         -        the mix of sales channels through which our products and
                  services are sold.

The timing of revenue and revenue recognition is difficult to predict.
Historically, in any given quarter, most of our revenue has been attributable to
a limited number of relatively large contracts and we expect this to continue.
Further, the sales cycle associated with the purchase of our products is
lengthy, and the time between the initial proposal to a perspective customer and
the signing of a license agreement can be as long as one year. As a result, our
quarterly results of operations are difficult to predict and the deferral of
even a small number of contract bookings or delays associated with delivery of
products in a particular quarter could significantly reduce our revenue and
increase our net loss which would hurt our quarterly financial performance. As a
result of a reduced number of new contracts, our revenue for the three months
ended September 30, 2002 and previous quarters was derived primarily from our
existing customers that signed contracts in prior periods. In addition, a
substantial portion of our costs are relatively fixed and based upon anticipated
revenue. A failure to book an expected order in a given quarter would not be
offset by a corresponding reduction in costs and could adversely affect our
operating results.

THE LOW PRICE OF OUR COMMON STOCK COULD RESULT IN THE DELISTING OF OUR COMMON
STOCK FROM THE NASDAQ SMALLCAP MARKET, WHICH COULD CAUSE OUR COMMON STOCK PRICE
TO DECLINE AND MAKE TRADING IN OUR COMMON STOCK MORE DIFFICULT TO INVESTORS.

         Our common stock was transferred to The Nasdaq SmallCap Market
effective July 12, 2002, as a result of its delisting from The Nasdaq National
Market for failure to maintain a minimum bid price of $1.00 as required by the
applicable Nasdaq Marketplace Rule, as well as our failure to maintain the
required minimum value of publicly held shares. The Nasdaq SmallCap Market is
viewed by most investors as a less desirable and less liquid marketplace than
The Nasdaq National Market.

         We must satisfy The Nasdaq SmallCap Market's minimum listing
maintenance requirements to maintain our listing on The Nasdaq SmallCap Market.
The listing maintenance requirements set forth in Nasdaq's Marketplace Rules
include a series of financial tests relating to stockholders' equity, market
capitalization, net income, public float, market value of public float, number
of market makers and stockholders, and maintaining a minimum closing bid price
of $1.00 per share for shares of our common stock. Although we failed to regain
compliance by demonstrating a closing bid price of at least $1.00 per share
prior to the expiration of the grace period on August 13, 2002, the Nasdaq
granted us an additional 180-day extension of the bid price exception, or until
February 10, 2003, to regain compliance. If we do not regain compliance by
February 10, 2003, our stock may be delisted from The Nasdaq SmallCap Market.

         If our common stock is delisted from The Nasdaq SmallCap Market, the
common stock would trade on either the OTC Bulletin Board or the "pink sheets",
both of which are viewed by most investors as less desirable and less liquid
marketplaces. Thus, delisting from The Nasdaq SmallCap Market could make trading
our shares more difficult for investors, leading to further declines in share
price. It would also make it more difficult for us to raise additional capital.
In addition, we would incur additional costs under state blue sky laws to sell
equity if our common stock is delisted from The Nasdaq SmallCap Market.


                                       35
<PAGE>
IF NASDAQ DETERMINES THAT THE ASSET PURCHASE AND 2002 PRIVATE PLACEMENT
CONSTITUTE A "REVERSE MERGER" UNDER THE NASDAQ RULES, THEN WE MAY NOT BE ABLE TO
MAINTAIN THE LISTING OF OUR COMMON STOCK ON THE NASDAQ SMALLCAP MARKET.

         Our common stock is currently listed on The Nasdaq SmallCap Market
under an exception to the listing requirements that allow us a grace period
until February 10, 2003, during which time we may be able to remain listed and
within which period we must regain compliance with the $1.00 bid price
requirement. On November 5, 2002, the staff of The Nasdaq Stock Market notified
us that it believes the Asset Purchase and 2002 Private Placement together
constitute a "reverse merger" as set forth in Nasdaq Marketplace Rule 4330(f)
and that the Nasdaq Listing Qualifications Panel will consider the reverse
merger issue in considering whether to modify or terminate the terms of the
exception and it offered us an opportunity to respond to its analysis of the
transactions. We intend to submit a written response addressing the issues
raised by the Nasdaq staff. If the Nasdaq qualification personnel makes a
determination that the consummation of the transactions will constitute a
reverse merger, to remain listed we will be required to file an application for
listing and will be required to meet the initial listing requirements for
inclusion on The Nasdaq SmallCap Market rather than the continued listing
requirements. The initial listing requirements are more stringent than the
continued listing requirements and it is likely that we will not satisfy these
requirements. There can be no assurances that we will be successful in
maintaining our listing on The Nasdaq SmallCap Market. If we are not successful,
our common stock will be quoted on the OTC Bulletin Board Service, which is
generally considered a less liquid market.

WE FACE SIGNIFICANT COMPETITION FROM COMPANIES THAT HAVE GREATER RESOURCES THAN
WE DO AND THE MARKETS IN WHICH WE COMPETE ARE RELATIVELY NEW, INTENSELY
COMPETITIVE, HIGHLY FRAGMENTED AND RAPIDLY CHANGING.

         The markets in which we compete are relatively new, intensely
competitive, highly fragmented and rapidly changing. Our principal competitors
include other internet enabled billing and customer care system providers,
operation support system providers, systems integrators and service bureaus, and
the internal information technology departments of larger communications
companies which may elect to develop functionalities similar to those provided
by our product in-house rather than buying them from us. Several of our
competitors have recently gone through business combinations with other
competitors that may result in an advantage for them due to combinations in
technology, experience, financial resources and other economic synergies. Many
of our current and future competitors may have advantages over us, including:

                  -        longer operating histories;

                  -        larger customer bases;

                  -        substantially greater financial, technical, research
                           and development and sales and marketing resources;

                  -        a lead in expanding their business internationally;

                  -        greater name recognition; and

                  -        ability to more easily provide a comprehensive
                           hardware and software solution.

         Our current and potential competitors have established, and may
continue to establish in the future, cooperative relationships among themselves
or with third parties, including telecom hardware vendors, and system
implementers, that would increase their ability to compete with us. In addition,
competitors may be able to adapt more quickly than we can to new or emerging
technologies and changes in customer needs, or to devote more resources to
promoting and selling their products. If we fail to adapt to market demands and
to compete successfully with existing and new competitors, our business and
financial performance would suffer.


                                       36
<PAGE>
WE DEPEND IN PART ON STRATEGIC BUSINESS ALLIANCES WITH THIRD PARTIES, INCLUDING
SOFTWARE FIRMS, CONSULTING FIRMS, SYSTEMS INTEGRATION FIRMS, AND OEM PARTNERS,
TO SELL AND IMPLEMENT OUR PRODUCTS, AND ANY FAILURE TO DEVELOP OR MAINTAIN
THESE ALLIANCES COULD HURT OUR FUTURE GROWTH IN REVENUE AND OUR GOALS FOR
ACHIEVING PROFITABILITY.

         Third parties such as operation support system providers, software
application companies, consulting firms, systems integration firms, and OEM
Partners help us with marketing, sales, implementation and support of our
products. Our success depends in part, on our ability to maintain our
relationships with these firms, develop additional similar relationships and
generate new business opportunities through joint marketing and sales efforts.
We may encounter difficulties in forging and maintaining long-term relationships
with these firms for a variety of reasons. These firms may discontinue their
relationships with us, they may fail to devote sufficient resources to
adequately market our products, they may refocus their efforts to other markets,
they may fail to implement and support our products, they may develop
relationships with our competitors, or they may fail to honor the terms of our
agreements or make payments when due. Many of these firms also work with
competing software companies, and our success will depend on their willingness
and ability to devote sufficient resources and efforts to marketing our products
versus the products of others. In addition, these firms may delay the product
implementation or negatively affect our customer relationships. Our agreements
with these firms typically are in the form of a non-exclusive referral fee or
license and package discount arrangement that may be terminated by either party
without cause or penalty and with limited notice.

MANY OF OUR CUSTOMERS AND POTENTIAL CUSTOMERS LACK FINANCIAL RESOURCES, AND IF
THEY CANNOT SECURE ADEQUATE FINANCING, WE MAY NOT MAINTAIN THEIR BUSINESS, WHICH
WOULD NEGATIVELY IMPACT OUR REVENUE AND RESULTS OF OPERATIONS.

         Many of our customers and potential customers lack significant
financial resources. These companies rely to a large degree, on access to the
capital markets for growth that have cut back over the past year. Their failure
to raise capital has hurt their financial viability and their ability to
purchase our products. The lack of funding has caused potential customers to
reduce information technology spending. Also, because we do at times provide
financing arrangements to customers, their ability to make payments to us may
impact when we can recognize revenue.

         The revenue growth and profitability of our business depends
significantly on the overall demand for software products and services that
manage the revenue chain as it has been defined, particularly in the product and
service segments in which we compete. Softening demand for these products and
services caused by worsening economic conditions may result in decreased
revenues or earning levels or growth rates. Recently, economies have weakened
worldwide. This has resulted in companies delaying or reducing expenditures,
including expenditures for information technology. Highly publicized
bankruptcies such as those at Global Crossing, Kmart, Enron and WorldCom have
caused further tightening of the credit and equity markets overall.
Telecommunication providers are among the most affected by these changes. The
credit and equity situation has caused many of the telecommunication providers
to significantly cut back capital spending on information technology. This
reduction in capital spending has had and may continue to have an adverse impact
on us.

         In addition, our current customers' ability to generate revenues or
otherwise obtain capital could adversely impact on their ability to purchase
additional products or renew maintenance and support agreements with us. If they
go out of business there will be no future licenses or services to support
revenue. The lack of funding available in our customers' markets, the recent
economic downturn in the technology market and customers shutting down
operations, combining or declaring bankruptcy may cause our accounts receivable
to continue to increase. There is no assurance we will be able to collect all of
our outstanding receivables and that our costs associated with collection will
not increase.


                                       37
<PAGE>
THE PRICE OF OUR COMMON STOCK HAS BEEN, AND WILL CONTINUE TO BE VOLATILE, WHICH
INCREASES THE RISK OF AN INVESTMENT IN OUR COMMON STOCK.

         The trading price of our common stock has fluctuated in the past and
will fluctuate in the future. This future fluctuation could be a result of a
number of factors, many of which are outside our control. Some of these factors
include:

                  -        the response of the market to the announcement of the
                           pending asset purchase and private placement;

                  -        quarter-to-quarter variations in our operating
                           results;

                  -        announcements and technological innovations or new
                           products by us or our competitors;

                  -        increased price competition; and

                  -        general conditions in the Internet, technology and
                           the telecommunications industries.

         The stock market has experienced extreme price and volume fluctuations
which have particularly affected the market prices of many Internet and computer
software companies, including ours.

WE ARE THE TARGET OF SECURITIES CLASS ACTION LITIGATION AND THE VOLATILITY OF
OUR STOCK PRICE MAY LEAD TO ADDITIONAL LEGAL PROCEEDINGS BEING BROUGHT AGAINST
US WHICH COULD RESULT IN SUBSTANTIAL COSTS AND DIVERT MANAGEMENT ATTENTION AND
RESOURCES.

         In December 2001, a class action complaint was filed and is pending in
the United States District Court for the Southern District of New York against
us and certain of the underwriters of our initial public offering. The complaint
alleges that the defendants failed to disclose "excessive commissions" paid to
the underwriters in exchange for allocating shares to preferred customers, that
the underwriters had agreements with preferred customers tying the allocation of
shares to the preferred customers' agreements to make additional aftermarket
purchases at pre-determined prices. The complaint alleges that the failure to
disclose these alleged arrangements made our prospectus materially false and
misleading. Plaintiffs seek unspecified damages and other relief. We believe we
are entitled to indemnification by the underwriters under the terms of the
underwriting agreements. We have notified the underwriters of the action and
discussions related to a possible global indemnification agreement are on-going,
but the underwriters have not yet agreed to indemnify us. Further, the Company's
lead underwriter, BancBoston Robertson Stephens Inc., has ceased doing business.
No assurances can be given that indemnification will be available. A motion to
dismiss was filed but no ruling has yet been made on the Motion. We are also
currently reviewing and considering the terms of a proposed settlement agreement
involving the plaintiffs, the insurance companies and the issuers. These
discussions are in the initial stages and there is no guarantee that a
settlement with the plaintiffs will be finalized. In the event settlement
discussions are unsuccessful, we intend to defend vigorously against the
plaintiffs' claims. Such defense may result in substantial costs and divert
management attention and resources, which may seriously harm our business.

         In addition, in the past, other types of securities class action
litigation has often been brought against a company following periods of
volatility in the market price of its securities. We may in the future be the
target of similar litigation. While we are not aware of any other complaints
being filed against us, and we do not know of any facts and circumstances that
could give rise to a valid course of action, any other securities litigation may
also result in substantial costs and divert management's attention and
resources, which may seriously harm our business.


                                       38
<PAGE>
OUR STRATEGY TO EXPAND INTO INTERNATIONAL MARKETS THROUGH DIRECT SALES EFFORTS
AND THROUGH STRATEGIC RELATIONSHIPS MAY NOT SUCCEED AS A RESULT OF LEGAL,
BUSINESS AND ECONOMIC RISKS SPECIFIC TO INTERNATIONAL OPERATIONS.

         Our strategy includes expansion into international markets through a
combination of direct sales efforts and strategic relationships. In addition to
risks generally associated with international operations, our future
international operations might not succeed for a number of reasons, including:

                  -        dependence on sales efforts of third-party
                           distributors and systems integrators;

                  -        difficulties in staffing and managing foreign
                           operations;

                  -        difficulties in localizing products and supporting
                           customers in foreign countries;

                  -        reduced protection for intellectual property rights
                           in some countries;

                  -        greater difficulty in collecting accounts receivable;
                           and

                  -        uncertainties inherent in transnational operations
                           such as export and import regulations, taxation
                           issues, tariffs, trade barriers and fluctuations in
                           currency conversion rates.

         To the extent that we are unable to successfully manage expansion of
our business into international markets due to any of the foregoing factors, our
business could be adversely affected.

OUR FUTURE SUCCESS WILL DEPEND IN PART UPON OUR ABILITY TO CONTINUALLY ENHANCE
OUR PRODUCT OFFERING TO MEET THE CHANGING NEEDS OF SERVICE PROVIDERS, AND IF WE
ARE NOT ABLE TO DO SO WE WILL LOSE FUTURE BUSINESS TO OUR COMPETITORS.

         We believe that our future success will depend to a significant extent
upon our ability to enhance our product offering and packaged industry suites
and to introduce new products and features to meet the requirements of our
customers in a rapidly developing and evolving market. We devote significant
resources to refining and expanding our software products, developing our
pre-configured industry suites and investigating complimentary products and
technologies. The requirements of our customers may change and our present or
future products or packaged industry suites may not satisfy the evolving needs
of our targeted markets. Due to our cost reduction measures, we have
significantly reduced the amount of cash we will utilize for research and
development. This reduction may make it more difficult to enhance future product
offerings. If we are unable to anticipate or respond adequately to customer
needs, we will lose business and our financial performance will suffer.

IF WE CANNOT CONTINUE TO OBTAIN OR IMPLEMENT THE THIRD-PARTY SOFTWARE THAT WE
INCORPORATE INTO OUR PRODUCT OFFERING, WE MAY HAVE TO DELAY OUR PRODUCT
DEVELOPMENT OR REDESIGN EFFORTS, WHICH COULD HAVE AN ADVERSE EFFECT ON OUR
REVENUE AND RESULTS OF OPERATIONS.

         Our product offering involves integration with products and systems
developed by third parties. If any of these third-party products should become
unavailable for any reason, fail under operation with our product offering, or
fail to be supported by their vendors, it would be necessary for us to redesign
our product offering. We might encounter difficulties in accomplishing any
necessary redesign in a cost-effective or timely manner. We also could
experience difficulties integrating our product offering with other hardware and
software. Furthermore, if new releases of third-party products and systems occur
before we develop products compatible with these new releases, we could
experience a decline in demand for our product offering which could cause our
business and financial performance to suffer.

                                       39
<PAGE>
WE MAY BE UNABLE TO PROTECT OUR PROPRIETARY TECHNOLOGY, AND OUR COMPETITORS MAY
INFRINGE ON OUR TECHNOLOGY, OR DEVELOP COMPETITIVE TECHNOLOGY, ANY ONE OF WHICH
COULD HARM THE VALUE OF OUR PROPRIETARY TECHNOLOGY.

         Any misappropriation of our technology or the development of
competitive technology could seriously harm our business. We regard a
substantial portion of our software product as proprietary and rely on a
combination of patent, copyright, trademark and trade secret laws, customer
license agreements and employee and third-party agreements to protect our
proprietary rights. These steps may not be adequate, and we do not know if they
will prevent misappropriation of our intellectual property, particularly in
foreign countries where the laws may not protect proprietary rights as fully as
do the laws of the United States. Other companies could independently develop
similar or superior technology without violating our proprietary rights. If we
have to resort to legal proceedings to enforce our intellectual property rights,
the proceedings could be burdensome and expensive and could involve a high
degree of risk.

CLAIMS BY OTHERS THAT WE INFRINGE THEIR PROPRIETARY TECHNOLOGY COULD BE COSTLY
AND HARM OUR BUSINESS.

         Third parties could claim that our current or future products or
technology infringe their proprietary rights. An infringement claim against us
could be costly even if the claim is invalid, and could distract our management
from the operation of our business. Furthermore, a judgment against us could
require us to pay substantial damages and could also include an injunction or
other court order, that could prevent us from selling our product offering. If
we faced a claim relating to proprietary technology or information, we might
seek to license technology or information, or modify our own, but we might not
be able to do so. Our failure to obtain the necessary licenses or other rights
or to develop non-infringing technology could prevent us from selling our
products and could seriously harm our business.

LOSS OF OUR SENIOR MANAGEMENT PERSONNEL OR OUR HIGHLY SKILLED EMPLOYEES OR THE
FAILURE TO MOTIVATE THEM WOULD LIKELY HURT OUR BUSINESS.

         Our future success depends to a significant extent on the continued
services of our senior management and other key personnel. If we lost the
services of our key employees and we were unable to hire suitable replacements,
it would likely hurt our business. We have employment and non-compete agreements
with our executive officers. However, these agreements do not obligate them to
continue working for us. Our success also depends in large part on our ability
to motivate and retain highly skilled information technology professionals,
software programmers, and sales and marketing professionals. Our restructurings
and cost reductions may create uncertainties that could effect motivation and
our ability to retain our employees. While qualified personnel in these fields
may be readily employable, turnover of such personnel could create a lack of
continuity that could prevent us from managing and competing for existing and
future projects or to compete for new customer contracts.

PRODUCT DEFECTS OR SOFTWARE ERRORS IN OUR PRODUCTS COULD ADVERSELY AFFECT OUR
BUSINESS DUE TO COSTLY REDESIGNS, PRODUCTION DELAYS AND CUSTOMER
DISSATISFACTION.

         Design defects or software errors in our products may cause delays in
product introductions or damage customer satisfaction, either of which could
seriously harm our business. Our software products are highly complex and may,
from time to time, contain design defects or software errors that may be
difficult to detect and correct. Although we have license agreements with our
customers that contain provisions designed to limit our exposure to potential
claims and liabilities arising from customer problems, these provisions may not
effectively protect us against all claims. In addition, claims and liabilities
arising from customer problems could significantly damage our reputation and
hurt our business.

                                       40
<PAGE>
IN THE EVENT WE ACQUIRE THIRD PARTIES OR THIRDPARTY TECHNOLOGIES, SUCH
ACQUISITIONS COULD RESULT IN DISRUPTIONS TO OUR BUSINESS AND DIVERSION OF
MANAGEMENT, AND COULD REQUIRE THAT WE ENGAGE IN FINANCING TRANSACTIONS THAT
COULD HURT OUR FINANCIAL PERFORMANCE.

         In addition to the Asset Purchase and 2002 Placement, we may in the
future make acquisitions of companies, products or technologies, or enter into
strategic relationship agreements that require substantial up-front investments.
We will be required to assimilate the acquired businesses and may be unable to
maintain uniform standards, controls, procedures and policies if we fail to do
so effectively. We may have to incur debt or issue equity securities to pay for
any future acquisitions. The issuance of equity securities for any acquisition
could be substantially dilutive to our stockholders. In addition, our
profitability may suffer because of acquisition-related costs and the time and
focus required of management to complete such an acquisition.

DELAWARE LAW, OUR CERTIFICATE OF INCORPORATION AND OUR BYLAWS CONTAIN
ANTI-TAKEOVER PROVISIONS THAT MAY DELAY, DEFER OR PREVENT A CHANGE OF CONTROL.

        Certain provisions of Delaware Law, our certificate of incorporation and
our bylaws contain provisions that could delay, deter or prevent a change in
control of Daleen. Our certificate of incorporation and bylaws, among other
things, provide for a classified board of directors, restrict the ability of
stockholders to call stockholders meetings by allowing only stockholders
holding, in the aggregate, not less than 10% of the capital stock entitled to
cast votes at these meetings to call a meeting, preclude stockholders from
raising new business for consideration at stockholder meetings unless the
proponent has provided us with timely advance notice of the new business, and
limit business that may be conducted at stockholder meetings to those matters
properly specified in notices delivered to us. Moreover, we have not opted out
of Section 203 of the Delaware General Corporation Law, which prohibits mergers,
sales of material assets and some types of self-dealing transactions between a
corporation and a holder of 15% or more of the corporation's outstanding voting
stock for a period of three years following the date the stockholder became a
15% holder, unless an applicable exemption from the rule is available. These
provisions do not apply to the purchasers of our Series F preferred stock.

RISKS ASSOCIATED WITH OUR SERIES F PREFERRED STOCK

THE HOLDERS OF OUR SERIES F PREFERRED STOCK HAVE RIGHTS THAT ARE SENIOR TO THOSE
OF THE HOLDERS OF OUR COMMON STOCK IN THE EVENT OF THE SALE OF OUR COMPANY OR IN
THE EVENT OF OUR LIQUIDATION, DISSOLUTION OR WINDING UP.

         The holders of the Series F preferred stock will have a claim against
our assets senior to the claim of the holders of our common stock in the event
of our liquidation, dissolution or winding up. The aggregate amount of that
senior claim will be at least $110.94 per share of Series F preferred stock (the
"Preferential Amount"), or approximately $25.7 million based on the number of
shares of Series F preferred stock outstanding at November 1, 2002.

Additionally, unless otherwise agreed by the holders of at least a majority of
the outstanding shares of Series F preferred stock, in the event of a "Sale of
the Company", we are required to redeem all of the issued and outstanding shares
of Series F preferred stock for the Preferential Amount per share. A "Sale of
the Company" means: (i) the acquisition by another entity by means of merger or
consolidation resulting in the exchange of at least 50% of the outstanding
shares of our capital stock for securities issued or other consideration paid by
the acquiring entity or any parent subsidiary thereof (except for a merger or
consolidation after the consummation of which our stockholders immediately prior
to such merger or consolidation own in excess of 50% of the voting securities of
the surviving corporation or its parent corporation); or (ii) the sale or other
disposition by us of substantially all of our assets (other than a sale or
transfer of assets to one or more of our wholly owned subsidiaries). As a
result, in the event of a Sale of the Company, the holders of the Series F
preferred stock would be entitled to the first approximately $25.7 million of
the transaction value based on the number of shares of

                                       41
<PAGE>
Series F preferred stock outstanding on November 1, 2002. Further, upon the
completion of the transactions contemplated by the Asset Purchase and 2002
Private Placement, the holders the Series F preferred stock would be entitled to
the first approximately $51.3 million of the transaction value.

THE HOLDERS OF OUR SERIES F PREFERRED STOCK HAVE SIGNIFICANT VOTING RIGHTS THAT
ARE SENIOR TO THOSE OF THE HOLDERS OF OUR COMMON STOCK.

         The holders of the Series F preferred stock have voting rights
entitling them to vote together with the holders of our common stock as a single
class and on the basis of 100 votes per share of Series F preferred stock,
subject to adjustment for any stock split, stock dividend, reverse stock split,
reclassification or consolidation of or on our common stock. As of November 1,
2002, the voting rights of the holders of Series F preferred stock, excluding
shares of common stock currently owned by the holders of the Series F preferred
stock, would constitute a majority of the entire voting class of common stock,
or more than 60%, if the warrant holders exercise their warrants to purchase
Series F preferred Stock ("Warrants") and warrants to purchase common stock.

         As discussed below, the holders of the Series F preferred stock have
the right to vote together with the holders of our common stock as a single
class and on the basis of 100 votes per share of Series F preferred stock. As a
result, the holders of the outstanding shares of Series F preferred stock
control a majority of the outstanding vote. Additionally, certain of the holders
of Series F preferred stock beneficially own a significant number of shares of
our outstanding common stock. When combined with the shares of common stock that
they beneficially own, the holders of our Series F preferred stock control more
than 58% of the vote on any proposal submitted to the holders of our outstanding
common stock, or more than 67% of the vote if the holders of the Series F
preferred stock exercise their Warrants and warrants to purchase common stock.
In the event that we seek stockholder approval of a transaction or action
involving the Sale of the Company and/or the liquidation, dissolution or winding
down of the Company, or other transaction, including the Asset Purchase and the
2002 Private Placement, the holders of the Series F preferred stock will control
a majority of the vote and, as a result, would control or significantly
influence the outcome of a proposal with respect to such a transaction or
action, whether or not the holders of our common stock support or oppose the
proposal.

         On November 1, 2002, we had 22,984,272 shares of common stock
outstanding and 231,362 shares of Series F preferred stock issued and
outstanding. Additionally, we had outstanding Warrants for the purchase of an
aggregate of 109,068 shares of Series F preferred stock.

         Following the conversion of the Series F preferred stock, the holders
will be entitled to vote the number of shares of common stock issued upon
conversion. As a result, the holders of Series F preferred stock have a
significant ability to determine the outcome of matters submitted to our
stockholders for a vote, including a vote with respect to the Asset Purchase and
2002 Private Placement or a Sale of the Company and/or liquidation, dissolution
or winding down of the Company. Additionally, the holders of the Series F
preferred stock are entitled to vote as a separate class on certain matters,
including:

                  -        the authorization or issuance of any other class or
                           series of preferred stock ranking senior to or equal
                           with the Series F preferred stock as to payment of
                           amounts distributable upon dissolution, liquidation
                           or winding down of Daleen;

                  -        the issuance of any additional shares of Series F
                           preferred stock;

                  -        the reclassification of any capital stock into shares
                           having preferences or priorities senior to or equal
                           with the Series F preferred stock;

                  -        the amendment, alteration, or repeal of any rights of
                           the Series F preferred stock; and

                                       42
<PAGE>
                  -        the payment of dividends on any other class or series
                           of capital stock of Daleen, including the payment of
                           dividends on our common stock.

         As a result of these preferences and senior rights, the holders of the
Series F preferred stock have rights that are senior to the common stock in
numerous respects.

         The holders of the Series F preferred stock have other rights and
preferences, including the right to convert the Series F preferred stock into an
increased number of shares of common stock as a result anti-dilution
adjustments.

THE JUNE 2001 SALE OF THE SERIES F PREFERRED STOCK PROVIDED THE INVESTORS WITH
SUBSTANTIAL EQUITY OWNERSHIP IN DALEEN AND HAD A SIGNIFICANT DILUTIVE EFFECT ON
EXISTING STOCKHOLDERS.

         The Series F preferred stock is convertible at any time into a
substantial percentage of the outstanding shares of our common stock. The
issuance of the Series F preferred stock has resulted in substantial dilution to
the interests of the holders of our common stock. The exercise of the Warrants
will result in further dilution. The number of shares of our common stock
issuable upon conversion of the Series F preferred stock, and the extent of
dilution to existing stockholders, depends on a number of factors, including
events that cause an adjustment to the conversion price.

         Due to the reset provision of the Series F preferred stock, the
conversion price of the Series F preferred stock is $0.9060. Based on the number
of shares of Series F preferred stock that were outstanding as of November 1,
2002, if all of the holders of the Series F preferred stock and Warrants
exercise the Warrants in full and convert all of the remaining shares of Series
F preferred stock and Warrants into shares of common stock, we would issue an
aggregate of approximately 41,685,754 additional shares of common stock.

OUR SERIES F PREFERRED STOCK PROVIDES FOR ANTIDILUTION ADJUSTMENTS TO THE
SERIES F PREFERRED STOCK CONVERSION PRICE, WHICH COULD RESULT IN A REDUCTION OF
THE CONVERSION PRICE.

         Subject to certain exceptions, the conversion price of the Series F
preferred stock will be reduced each time, if any, that we issue common stock,
convertible preferred stock, options, warrants or other rights to acquire common
stock at a price per share of common stock that is less than the conversion
price of the Series F preferred stock then in effect. A reduction in the
conversion price of the Series F preferred stock will increase the number of
shares of common stock issuable upon conversion of the Series F preferred stock.

THE SERIES F PREFERRED STOCK IS AUTOMATICALLY CONVERTIBLE ONLY IN LIMITED
CIRCUMSTANCES AND, AS A RESULT COULD BE OUTSTANDING INDEFINITELY.

         The Series F preferred stock will convert automatically into common
stock only if the closing price of our common stock on The Nasdaq National
Market or a national securities exchange is at least $3.3282 per share for ten
out of any 20 trading day period. Otherwise, the shares of Series F preferred
stock are convertible only at the option of the holder. Further, the Series F
preferred stock is not subject to automatic conversion if our common stock is
not then listed for trading on The Nasdaq National Market or a national
securities exchange. Each Warrant is exercisable for Series F preferred stock in
whole or in part at any time during a five-year exercise period at the sole
discretion of the Warrant holder and will not be convertible or callable at the
election of us. As a result of these provisions and our delisting from The
Nasdaq National Market, the Series F preferred stock may remain outstanding
indefinitely.

THE SERIES F PREFERRED STOCK HOLDERS ACQUIRED VOTING POWER OF OUR CAPITAL STOCK
SUFFICIENT TO ENABLE THE INVESTORS TO CONTROL OR SIGNIFICANTLY INFLUENCE ALL
MAJOR CORPORATE DECISIONS.

                                       43
<PAGE>
         The holders of the Series F preferred stock and Warrants hold a
percentage of the voting power of our capital stock that will enable such
holders to elect directors and to control to a significant extent major
corporate decisions involving Daleen and our assets that are subject to a vote
of our stockholders. The voting rights of the holders of the Series F preferred
stock, when combined with the common stock owned by their affiliates, currently
represents more than a majority of the voting power of Daleen.

         Following is information on HarbourVest Partners VI-Direct Fund L.P.,
one of the holders of Series F preferred stock as of November 1, 2002:

                  -        HarbourVest Partners VI-Direct Fund L.P. is managed
                           by HarbourVest, which also manages HarbourVest
                           Partners V-Direct Fund L.P.

                  -        HarbourVest, through funds it manages, beneficially
                           owns approximately 36.01% of our common stock,
                           based on a Series F preferred stock conversion
                           price of $0.9060 and assuming conversion of all of
                           the outstanding shares of Series F preferred stock
                           and exercise of all HarbourVest funds' Warrants and
                           outstanding warrants to purchase our common stock.

                  -        Prior to the conversion of the Series F preferred
                           stock, but assuming exercise of the HarbourVest
                           funds' Warrants and their other warrants,
                           HarbourVest would control approximately 34.70% of
                           the voting power of Daleen, or 27.82% prior to
                           exercising the HarbourVest funds' Warrants and
                           other warrants, based on the voting rights of the
                           Series F preferred stock.

         Following is information on SAIC Venture Capital Corporation, one of
the holders of Series F preferred stock as of November 1, 2002:

                  -        SAIC Venture Capital Corporation beneficially owns
                           approximately 25.33% of our outstanding common
                           stock, based on a Series F preferred stock
                           conversion price of $0.9060 and assuming conversion
                           of all of the outstanding shares of Series F
                           preferred stock and exercise of SAIC Venture
                           Capital Corporation's Warrants.

                  -        Prior to the conversion of the Series F preferred
                           stock, but assuming exercise of its Warrants, SAIC
                           Venture Capital Corporation would control
                           approximately 23.99% of the voting power of Daleen,
                           or 19.53% prior to the exercise of its Warrants,
                           based on the voting rights of the Series F
                           preferred stock.

SALES OF A SUBSTANTIAL NUMBER OF SHARES OF COMMON STOCK IN THE PUBLIC MARKET,
COULD LOWER OUR STOCK PRICE AND IMPAIR OUR ABILITY TO RAISE FUNDS IN NEW STOCK
OFFERINGS.

         Pursuant to the terms of the Purchase Agreements, the Company has filed
with the Securities and Exchange Commission a Registration Statement on Form S-3
for the purpose of registering the shares of common stock issuable upon
conversion of the Series F preferred stock. The Securities and Exchange
Commission declared the Registration Statement effective on September 25, 2001.
Pursuant to other agreements with third parties, the Company has included in the
Registration Statement shares of common stock held or that may be acquired by
certain other stockholders of the Company. As a result, the Registration
Statement covers an aggregate of 56,192,841 shares of common stock. The holders
of the shares of common stock included in the Registration Statement are not
obligated to sell any or all of the shares to be registered. However, it permits
the holders of the registered shares, including the shares of common stock
issuable upon conversion of the Series F preferred stock, to sell their shares
of our common stock in the public market or in private transactions from time to
time until all of the shares are sold or the shares otherwise may be transferred
without restriction under the securities laws.

                                       44
<PAGE>
         Future sales of a substantial number of shares of our common stock in
the public market, or the perception that such sales could occur, including any
perceptions that may be created upon the actual conversion of Series F preferred
stock, could adversely affect the prevailing market price of our common stock.
Additionally, a decrease in the market price of our common stock could make it
more difficult for us to raise additional capital through the sale of equity
securities.

                                       45
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         Our financial instruments consist of cash that is invested in
institutional money market accounts and less than 90-day securities invested in
corporate fixed income bonds. We do not use derivative financial instruments in
our operations or investments and do not have significant operations subject to
fluctuations in commodities prices or foreign currency exchange rates.

ITEM 4. CONTROLS AND PROCEDURES.

         Within the 90 day period prior to the date of this report, we, under
the supervision and with the participation of our management, including our
Chief Executive Officer and Chief Financial Officer, carried out an evaluation
of the effectiveness of the design and operation of our disclosure controls and
procedures. Based upon this evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures are
effective in ensuring that material information relating to us, including our
consolidated subsidiaries, is made known to them by others within those
entities, particularly during the period in which this quarterly report was
being prepared. There were no significant changes in our controls or in other
factors that could significantly affect these controls subsequent to the date of
the evaluation.

                                       46
<PAGE>
         PART II

                                OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

         On December 5, 2001, a class action complaint was filed in the United
States District Court for the Southern District of New York. On April 22, 2002
an amended complaint was filed by two plaintiffs purportedly on behalf of
persons purchasing the Company's common stock between September 20, 1999 and
December 6, 2000. The complaint is styled as Angelo Fazari, on behalf of himself
and all others similarly situated, vs. Daleen Technologies, Inc., BancBoston
Robertson Stephens Inc., Hambrecht & Quist LLC, Salomon Smith Barney Inc., James
Daleen, David B. Corey and Richard A. Schell, Index Number 01 CV 10944. The
individual defendants, Messrs. Corey, Schell and Daleen, have entered into
tolling agreements with the plaintiffs resulting in their dismissal from the
case without prejudice. The remaining defendants include us and certain of the
underwriters in the Company's initial public offering ("IPO"). More than 300
similar class action lawsuits filed in the Southern District of New York against
numerous companies and their underwriters have been consolidated for pretrial
purposes before one judge under the caption "In re Initial Public Offering
Securities Litigation." A joint Motion to Dismiss was filed by the defendants on
July 15, 2002, but no ruling on the motion has been made. The complaint includes
allegations of violations of (i) Section 11 of the Securities Act of 1933 by all
named defendants, (ii) Section 15 of the Securities Act of 1933 by the
individual defendants and (iii) Section 10(b) of the Securities Exchange Act of
1934 and Rule 10b-5 promulgated thereunder by the underwriter defendants.

         Specifically, the plaintiffs allege in the complaint that, in
connection with our IPO, the defendants failed to disclose "excessive
commissions" purportedly solicited by and paid to the underwriter defendants in
exchange for allocating shares of our common stock in the IPO to the underwriter
defendants' preferred customers. Plaintiffs further allege that the underwriter
defendants had agreements with preferred customers tying the allocation of
shares sold in our IPO to the preferred customers' agreements to make additional
aftermarket purchases at pre-determined prices. Plaintiffs further allege that
the underwriters used their analysts to issue favorable reports about us to
further inflate our share price following the IPO. Plaintiffs claim that the
defendants knew or should have known of the underwriters actions and that the
failure to disclose these alleged arrangements rendered our prospectus included
in our registration statement on Form S-1 filed with the SEC in September 1999
materially false and misleading. Plaintiffs seek unspecified damages and other
relief.

         We believe we are entitled to indemnification by the underwriters under
the terms of the underwriting agreements. We have notified the underwriters of
the action, but the underwriters have not yet agreed to indemnify us. We are
participating in discussions with the underwriters regarding an agreement by the
underwriters to indemnify the issuers. However, our lead underwriter, BancBoston
Robertson Stephens Inc., has ceased doing business and there is no assurance it
will have the financial wherewithal to provide indemnification. We are also
currently reviewing and considering the terms of a proposed settlement agreement
involving the plaintiffs, the insurance companies and other issuers that
includes a waiver by the insurance companies of any retention amounts under the
policies. In that case, there would be no liability to be recorded by us other
than legal fees incurred in the initial defense of the action, which are
immaterial. Currently, a loss cannot be determined because the lawsuit is in its
initial stages and there is no guarantee that either the indemnification
agreement or a settlement with the plaintiffs will be finalized. In the event
settlement discussions are unsuccessful, we intend to defend vigorously against
the plaintiffs' claims.

         General Litigation

         We are involved in a number of other lawsuits and claims incidental on
our ordinary course of business. We do not believe the outcome of any of this
litigation would have a material adverse impact on our financial position or our
results of operations.

                                       47
<PAGE>
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

         (a)      Exhibit List

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                          DESCRIPTION
<S>            <C>
10.1           Amended and Restated Employment Agreement Between Daleen Technologies, Inc. and James R. Daleen dated
               September 20, 2002

10.2           Independent Consultant Agreement with James Daleen, effective upon termination of Employment Agreement
               dated October 11, 2002

10.3           Amendment to Employment Agreement for Jeanne Prayther dated October 7, 2002

10.4           Amendment to Employment Agreement for David McTarnaghan dated October 7, 2002

10.5+          Asset Purchase Agreement, dated October 7, 2002, by and between Daleen Technologies, Inc., Daleen
               Solutions, Inc. and Abiliti Solutions, Inc. (Incorporated by reference to Exhibit 99.1 to the
               Company's Current Report on Form 8-K (File No. 0-27491) filed on October 11, 2002).

10.6+          Investment Agreement, dated October 7, 2002, by and between Daleen Technologies, Inc. and the
               investors named therein  (Incorporated by reference to Exhibit 99.2 to the Company's Current Report on
               Form 8-K (File No. 0-27491) filed on October 11, 2002).

10.7+          Registration Rights Agreement, dated October 7, 2002, by and between Daleen Technologies, Inc. and
               the holders named therein  (Incorporated by reference to Exhibit 99.3 to the Company's Current Report
               on Form 8-K (File No. 0-27491) filed on October 11, 2002).

10.8+          Form of Escrow Agreement to be entered into between Daleen Technologies, Inc., Abiliti Solutions,
               Inc. and SunTrust Bank  (Incorporated by reference to Exhibit 99.4 to the Company's Current Report on
               Form 8-K (File No. 0-27491) filed on October 11, 2002).

10.9+          Form of Voting Agreement between Daleen Technologies, Inc. and certain shareholders of Abiliti
               Solutions, Inc. (Incorporated by reference to Exhibit 99.5 to the Company's Current Report on Form
               8-K (File No. 0-27491) filed on October 11, 2002).
</TABLE>

          +  Previously filed

         (b) Reports on Form 8-K

         Report on Form 8-K filed July 12, 2002, with respect to Daleen's
receipt of The Nasdaq National Market delisting notice and Daleen's common stock
being transferred to The Nasdaq SmallCap Market.

         Report on Form 8-K filed July 19, 2002, with respect to Daleen's second
quarter financial results.

         Report on Form 8-K filed August 16, 2002, with respect to the granting
by The Nasdaq Stock Market of an additional 180 day grace period within which to
regain compliance with the minimum $1.00 listing price.

         Report on Form 8-K filed September 11, 2002 with respect to the
surrender by James Daleen's partnership of certain shares of common stock held
as collateral for a non-recourse promissory note to Daleen on which Mr. Daleen
and the partnership had defaulted.

                                       48
<PAGE>
                                   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.

                               DALEEN TECHNOLOGIES, INC.


Date: November 14, 2002        /s/      JAMES DALEEN
                                  ------------------------
                               JAMES DALEEN
                               Chairman of the Board of Directors,
                               President and Chief Executive Officer
                               (Principal Executive Officer)


Date: November 14, 2002        /s/      JEANNE PRAYTHER
                                  ------------------------
                               JEANNE T. PRAYTHER
                               Chief Financial Officer (Principal Financial
                               Officer and Principal Accounting Officer)

                                       49
<PAGE>
                                 CERTIFICATIONS

I, James Daleen, Chairman of the Board, President and Chief Executive Officer
of Daleen Technologies, Inc., certify that:

1.       I have reviewed this quarterly report on Form 10-Q of Daleen
         Technologies, Inc.;

2.       Based on my knowledge, this quarterly report does not contain any
         untrue statement of a material fact or omit to state a material fact
         necessary to make the statements made, in light of the circumstances
         under which such statements were made, not misleading with respect to
         the period covered by this quarterly report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this quarterly report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this quarterly report;

4.       The registrant's other certifying officers and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
         and we have:

         a)       designed such disclosure controls and procedures to ensure
                  that material information relating to the registrant,
                  including its consolidated subsidiaries, is made known to
                  us by others within those entities, particularly during the
                  period in which this quarterly report is being prepared;

         b)       evaluated the effectiveness of the registrant's disclosure
                  controls and procedures as of a date within 90 days prior
                  to the filing date of this quarterly report (the
                  "Evaluation Date"); and

         c)       presented in this quarterly report our conclusions about the
                  effectiveness of the disclosure controls and procedures
                  based on our evaluation as of the Evaluation Date;

5.       The registrant's other certifying officers and I have disclosed, based
         on our most recent evaluation, to the registrant's auditors and the
         audit committee of registrant's board of directors (or persons
         performing the equivalent function):

         a)       all significant deficiencies in the design or operation of
                  internal controls which could adversely affect the
                  registrant's ability to record, process, summarize and
                  report financial data and have identified for the
                  registrant's auditors any material weaknesses in internal
                  controls; and

         b)       any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal controls; and

6.       The registrant's other certifying officers and I have indicated in this
         quarterly report whether or not there were significant changes in
         internal controls or in other factors that could significantly affect
         internal controls subsequent to the date of our most recent
         evaluation, including any corrective actions with regard to
         significant deficiencies and material weaknesses.

Date:  November 14, 2002

/s/  JAMES DALEEN
-----------------
James Daleen
Chairman of the Board, President and Chief Executive Officer

                                       50
<PAGE>
                       CERTIFICATIONS

I, Jeanne Prayther, Chief Financial Officer, and Secretary of Daleen
Technologies, Inc., certify that:

1.       I have reviewed this quarterly report on Form 10-Q of Daleen
         Technologies, Inc.;

2.       Based on my knowledge, this quarterly report does not contain any
         untrue statement of a material fact or omit to state a material fact
         necessary to make the statements made, in light of the circumstances
         under which such statements were made, not misleading with respect to
         the period covered by this quarterly report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this quarterly report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this quarterly report;

4.       The registrant's other certifying officers and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
         and we have:

         a)       designed such disclosure controls and procedures to ensure
                  that material information relating to the registrant,
                  including its consolidated subsidiaries, is made known to
                  us by others within those entities, particularly during the
                  period in which this quarterly report is being prepared;

         b)       evaluated the effectiveness of the registrant's disclosure
                  controls and procedures as of a date within 90 days prior
                  to the filing date of this quarterly report (the
                  "Evaluation Date"); and

         c)       presented in this quarterly report our conclusions about the
                  effectiveness of the disclosure controls and procedures
                  based on our evaluation as of the Evaluation Date;

5.       The registrant's other certifying officers and I have disclosed, based
         on our most recent evaluation, to the registrant's auditors and the
         audit committee of registrant's board of directors (or persons
         performing the equivalent function):

         a)       all significant deficiencies in the design or operation of
                  internal controls which could adversely affect the
                  registrant's ability to record, process, summarize and
                  report financial data and have identified for the
                  registrant's auditors any material weaknesses in internal
                  controls; and

         b)       any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  registrant's internal controls; and

6.       The registrant's other certifying officers and I have indicated in this
         quarterly report whether or not there were significant changes in
         internal controls or in other factors that could significantly affect
         internal controls subsequent to the date of our most recent
         evaluation, including any corrective actions with regard to
         significant deficiencies and material weaknesses.

Date:  November 14, 2002

/s/  JEANNE PRAYTHER
--------------------
Jeanne Prayther
Chief Financial Officer and Secretary

                                       51