<PAGE>   1


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



                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10-Q/A

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

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001

                                       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)


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



      1750 CLINT MOORE ROAD
       BOCA RATON, FLORIDA                                         33487
(Address of principal executive offices)                        (Zip Code)

       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 August 6, 2001, there were 21,872,951 shares of registrant's common stock,
$0.01 par value, outstanding.

================================================================================
<PAGE>   2


                   DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES
                                    FORM 10-Q

                           QUARTER ENDED JUNE 30, 2001

                                TABLE OF CONTENTS

                                      PART I
                              FINANCIAL INFORMATION

<TABLE>
<CAPTION>


                                                                                                                   PAGE
                                                                                                                   ----
<S>                                                                                                                <C>
Item 1.         Condensed Consolidated Financial Statements.

                Condensed Consolidated Balance Sheets as of December 31, 2000 and June 30, 2001
                     (unaudited)                                                                                    3

                Condensed Consolidated Statements of Operations for the three months and six months ended
                     June 30, 2000 and 2001 (unaudited)                                                             4

                Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2000
                     and 2001 (unaudited)                                                                           5

                Notes to Condensed Consolidated Financial Statements (unaudited)                                    6

Item 2.         Management's Discussion and Analysis of Financial Condition and                                    17
                Results of Operations.

Item 3.         Quantitative and Qualitative Disclosures about Market Risk.                                        37
</Table>


                                     PART II
                                OTHER INFORMATION
<Table>
<Caption>

<S>                                                                                                                <C>
Item 1.         Legal Proceedings                                                                                  38

Item 4.         Submission of Matters to a Vote of Security Holders                                                38

Item 5.         Other Information                                                                                  39

Item 6.         Exhibits and Reports on Form 8-K                                                                   39

                Signatures                                                                                         41

</TABLE>

                                       2
<PAGE>   3

                                     PART I

                              FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.


                   DALEEN TECHNOLOGIES, INC. and SUBSIDIARIES
                      Condensed Consolidated Balance Sheets
                        (In thousands, except share data)
                                   (unaudited)
<TABLE>
<CAPTION>

                                                                                     December 31,       June 30,
                                                                                         2000            2001
                                                                                     ------------     ----------
<S>                                                                                  <C>              <C>
ASSETS

Current assets:
   Cash and cash equivalents                                                          $    22,268          25,721
   Restricted cash                                                                            931              --
   Accounts receivable, less allowance for doubtful accounts of $4,600 at
     December 31, 2000 and $3,653 at June 30, 2001                                         13,929           8,457
   Costs in excess of billings                                                              2,213             422
   Other current assets                                                                       904             478
                                                                                      -----------     -----------
         Total current assets                                                              40,245          35,078
Notes receivable                                                                              493           1,219
Property and equipment, net                                                                10,146           5,808
Goodwill, net of accumulated amortization of $15,026 at December 31, 2000
   and $23,456 at June 30, 2001                                                            43,012          34,603
Other intangible asset, net of accumulated amortization of $786 at
   December 31, 2000                                                                        1,714              --
Other assets                                                                                3,852           2,881
                                                                                      -----------     -----------
         Total assets                                                                 $    99,462          79,589
                                                                                      ===========     ===========
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable                                                                   $     2,968           1,918
   Accrued payroll and other accrued expenses                                              12,731           8,525
   Billings in excess of costs                                                              1,466           1,176
   Deferred revenue                                                                         2,944           2,085
   Other current liabilities                                                                1,061             674
                                                                                      -----------     -----------
         Total current liabilities                                                         21,170          14,378
   Long term portion of capitalized lease                                                     607              --
                                                                                      -----------     -----------
         Total liabilities                                                                 21,777          14,378
                                                                                      -----------     -----------

Minority interest                                                                             184             184

Stockholders' equity:
   Series F Convertible Preferred Stock $.01 par value; 356,950 shares
     authorized; none issued or outstanding at December 31, 2000;
     247,882 shares issued and outstanding ($110.94 per
     share liquidation value) as of June 30, 2001                                              --          25,700
   Preferred stock $.01 par value.  Authorized 21,520,286 shares; none
     issued or outstanding                                                                     --              --
   Common stock $.01 par value.  Authorized 200,000,000 shares; issued
     and outstanding 21,781,727 shares at December 31, 2000 and
     21,863,519 shares at June 30, 2001                                                       218             218
   Stockholders' notes receivable                                                            (274)           (234)
   Deferred stock compensation                                                             (2,148)           (223)
   Additional paid-in capital                                                             161,460         187,700
   Accumulated deficit                                                                    (81,755)       (148,134)
                                                                                      -----------     -----------
         Total stockholders' equity                                                        77,501          65,027
                                                                                      -----------     -----------
         Total liabilities and stockholders' equity                                   $    99,462          79,589
                                                                                      ===========     ===========
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements.

                                       3
<PAGE>   4


                   DALEEN TECHNOLOGIES, INC. and SUBSIDIARIES
                 Condensed Consolidated Statements of Operations
                      (In thousands, except per share data)
                                   (Unaudited)
<TABLE>
<CAPTION>


                                                                    Three Months ended           Six Months ended
                                                                          June 30,                    June 30,
                                                                 -----------------------      ---------------------
                                                                     2000         2001           2000        2001
                                                                 ------------   --------      ----------   --------
<S>                                                              <C>              <C>           <C>          <C>
Revenue:
   License fees                                                  $   7,091        1,063         12,793       2,775
   Professional services and other                                   4,382        2,351          7,651       5,750
                                                                 ---------   ----------      ---------   ---------
         Total revenue                                              11,473        3,414         20,444       8,525
                                                                 ---------   ----------      ---------   ---------
Cost of revenue:
   License fees                                                        193          321            351         368
   Professional services and other                                   3,548        1,608          6,333       5,043
                                                                 ---------   ----------      ---------   ---------
         Total cost of revenue                                       3,741        1,929          6,684       5,411
                                                                 ---------   ----------      ---------   ---------

Gross margin                                                         7,732        1,485         13,760       3,114

Operating expenses:
   Sales and marketing                                               2,518        2,632          5,836       6,955
   Research and development                                          6,746        3,179         11,749       8,506
   General and administrative                                        3,527        5,639          7,372       8,936
   Amortization of goodwill and other intangibles                    3,918        3,642          7,737       8,579
   Impairment of long lived assets                                      --           --             --       3,307
   Restructuring charges                                                --        4,771             --       7,764
                                                                 ---------   ----------      ---------   ---------
         Total operating expenses                                   16,709       19,863         32,694      44,047
                                                                 ---------   ----------      ---------   ---------
Operating loss                                                      (8,977)     (18,378)       (18,934)    (40,933)
Total interest income and nonoperating income, net                     625          373          1,427         619
                                                                 ---------   ----------      ---------   ---------
Net loss                                                            (8,352)     (18,005)       (17,507)    (40,314)
Less:  preferred stock dividends arising from beneficial
       conversion feature                                               --      (26,065)            --     (26,065)
                                                                 ---------   ----------      ---------   ---------
Net loss applicable to common stockholders                       $  (8,352)     (44,070)       (17,507)    (66,379)
                                                                 =========   ==========      =========   =========
Net loss applicable to common stockholders per share - basic
  and diluted                                                    $   (0.38)       (2.02)         (0.81)      (3.05)
                                                                 =========   ==========       ========   =========

Weighted average shares outstanding - basic and diluted             21,700       21,812         21,574      21,799
                                                                 =========   ==========       ========   =========
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements

                                       4
<PAGE>   5


                   DALEEN TECHNOLOGIES, INC. and SUBSIDIARIES
                 Condensed Consolidated Statements of Cash Flows
                                 (In thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                           Six Months Ended
                                                                                   -------------------------------
                                                                                       June 30,         June 30,
                                                                                         2000             2001
                                                                                   ---------------   -------------
<S>                                                                                <C>                     <C>
Cash flows from operating activities:
    Net loss                                                                       $      (17,507)         (40,314)
    Adjustments to reconcile net loss to net cash used in operating activities:
        Depreciation and amortization                                                         984            2,135
        Amortization of goodwill and other intangibles                                      7,737            8,579
        Loss on disposal of fixed assets                                                       --            1,994
        Impairment of long-lived assets and other asset                                        --            4,307
        Stock compensation                                                                    689            1,611
        Bad debt expense                                                                      927            1,350
        Interest income on stockholder loans                                                  (15)             (81)
        Non-cash stock settlement expense                                                      --              495
        Changes in assets and liabilities:
          Restricted cash                                                                    (803)             131
          Accounts receivable                                                              (7,601)           4,653
          Costs in excess of billings                                                        (427)           1,786
          Other current assets                                                                 11              201
          Other assets                                                                        410             (156)
          Accounts payable                                                                  1,058           (1,098)
          Accrued payroll and other accrued expenses                                       (6,026)          (3,695)
          Billings in excess of costs                                                         189             (291)
          Deferred revenue                                                                  1,547             (754)
          Other current liabilities                                                           443             (895)
                                                                                   --------------     ------------
            Net cash used in operating activities                                         (18,384)         (20,042)
                                                                                   --------------     ------------
Cash flows provided by financing activities:
    Proceeds from sale of Series F preferred stock and warrants, net                           --           25,700
    Payment of capital lease                                                                   --             (300)
    Proceeds from exercise of stock options and bridge warrants                               472               11
                                                                                   --------------     ------------

            Net cash provided by financing activities                                         472           25,411
                                                                                   --------------     ------------
Cash flows provided by (used in) investing activities:
    Purchase of securities available for sale                                             (20,431)              --
    Sales and maturities of securities available for sale                                  26,440               --
    Issuance of stockholders' notes receivable                                               (192)          (1,241)
    Repayment of stockholders' notes receivable                                               138               87
    Payments related to the acquisition of Inlogic                                         (1,037)              --
    Capital expenditures                                                                   (4,373)            (696)
                                                                                   --------------     ------------
            Net cash provided by (used in) investing activities                               545           (1,850)
                                                                                   --------------     ------------
Effect of exchange rates on cash and cash equivalents                                         (51)             (66)
Net (decrease) increase in cash and cash equivalents                                      (17,418)           3,453
Cash and cash equivalents at beginning of period                                           52,852           22,268
                                                                                   --------------     ------------
Cash and cash equivalents at end of period                                         $       35,434           25,721
                                                                                   ==============    =============
</TABLE>


See accompanying notes to unaudited condensed consolidated financial statements.

                                       5
<PAGE>   6


                   DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2001
                                   (UNAUDITED)

(1) BASIS OF PRESENTATION

    The accompanying condensed 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 consolidated balance sheet
at December 31, 2000 has been derived from the Company's audited consolidated
financial statements at that date. These condensed consolidated financial
statements should be read in conjunction with the audited consolidated financial
statements and notes thereto for the year ended December 31, 2000, included in
the Company's annual report on Form 10-K as of and for the year ended December
31, 2000 filed with the Securities and Exchange Commission ("SEC").

    The results of operations for the three or six months ended June 30, 2001
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. 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 29,924,932 shares and 30,264,172 shares for the three
months and six months ended June 30, 2001, respectively. Common stock
equivalents amounted to 1,635,533 shares and 1,863,121 shares for the three
months and six months ended June 30, 2000.

    Net loss applicable to common stockholders differs from net loss in the
three and six months ended June 30, 2001 due to the preferred stock dividends
arising from the beneficial conversion features from the sale ("Private
Placement") of the Series F convertible preferred stock ("Series F preferred
stock") and warrants to purchase additional shares of Series F preferred stock
("Warrants"). See note 11.

(4) 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 (i) 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, (ii) VSOE of fair
value does not exist for one or more of the delivered elements in the
arrangement, and (iii) all revenue recognition criteria in Statement of Position
97-2, Software Revenue

                                       6
<PAGE>   7

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:

    o    Software license
    o    Maintenance and support
    o    Professional services
    o    Third party software licenses and maintenance
    o    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: (i) 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 (ii) 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:

    o   Revenue related to customer maintenance agreements on the Company's
        software licenses and third-party software maintenance 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.

    o   Professional service fees are recognized separately from the software
        license fee since the services are not considered essential to the
        functionality of the software and the software does not require
        significant modification, production or customization. The Company
        generally enters into one of the following types of professional
        services contracts with its customers: (i) fixed fee contracts or
        (ii) time and materials contracts.

           The Company recognizes revenue from fixed fee professional services
           contracts using the percentage of completion method, based on the
           ratio of total hours incurred to date to total estimated project
           labor hours. Changes in job performance, project scope, 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

                                       7
<PAGE>   8

           billings" in the accompanying condensed consolidated balance sheets.
           All out-of-pocket expenses associated with the implementation are
           invoiced separately at the actual cost.

           The Company recognizes revenue from time and materials professional
           services contracts as the services are performed. All out-of-pocket
           expenses associated with the professional services are invoiced
           separately at their actual cost.

    o   Third party software license fees are 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 frequently sells these third party licenses separate
        of the other elements.

    o   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 to 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 generally 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 more than 12 months
after software license delivery. 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 ensure that collectibility is probable, the Company performs
extensive 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
adopted the provisions of SAB No. 101 beginning October 1, 2000. The adoption of
SAB No. 101 did not have an impact on the Company's revenue recognition
policies.

(5) RESTRUCTURING ACTIVITIES

    In December 2000, management performed a comprehensive business review to
identify areas where the Company could reduce costs. On January 4, 2001, the
Company's Board of Directors formally approved a plan to reduce operating
expenses. The process culminated with the announcement on January 5, 2001 (the
"January Restructuring") that the Company was taking certain specific cost
reduction measures. The Company recorded a $3.0 million restructuring charge for
the six months ended June 30, 2001 related to the January Restructuring. Such
charge included the estimated costs related to workforce reductions, downsizing
of facilities, asset writedowns and other costs. Management implemented these
actions associated with the January Restructuring immediately following the
January 5, 2001 announcement.

    The workforce reductions associated with the January Restructuring included
the termination of approximately 140 employees throughout the Company's Boca
Raton, Florida; Atlanta, Georgia; and Toronto, Ontario, Canada facilities and
included employees from substantially all of the Company's employee groups. The
downsizing of facilities included the downsizing of the Atlanta and Toronto
facilities to one floor at 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 resaleable. Other costs
included costs incurred that are no longer going to provide benefit to the
Company such as recruiting fees and relocation costs related to employment

                                       8
<PAGE>   9

offers that were rescinded, penalties for cancellation of a user conference and
trade show and other miscellaneous expenses.

    In late March 2001, management initiated a second comprehensive business
review to identify additional areas for cost reductions. As a result, the
Company's Board of Directors formally approved and the Company announced a plan
on April 10, 2001 (the "April Restructuring") to further reduce operating
expenses. The Company recorded a $4.8 million restructuring charge for the three
months and six months ended June 30, 2001 in connection with the April
Restructuring. Such charge included the estimated costs related to workforce
reductions, closing of facilities, asset writedowns and other costs. Management
implemented these actions immediately following the April 10, 2001 announcement.

    The workforce reductions associated with the April Restructuring included
the termination of 193 employees throughout all of the Company's facilities. The
Company consolidated its North American workforce into its Boca Raton corporate
offices and closed its Toronto and Atlanta facilities. In addition, the Company
consolidated its North American research and development and professional
services resources and further reduced its administrative support functions. The
asset writedowns were primarily related to computer equipment from terminated
employees, which was not resaleable. 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.

    The January Restructuring and April Restructuring encompassed the following
components (in thousands):

<TABLE>
<CAPTION>
                                                          January              April
                                                       Restructuring      Restructuring        Total
                                                       -------------      -------------       --------
<S>                                                     <C>                <C>                <C>
             Employee termination benefits              $  1,496           $   3,192          $  4,688
             Facility costs/rent on idle facilities          763               1,259             2,022
             Asset writedowns                                620                 240               860
             Other costs                                     114                  80               194
                                                        --------           ---------          --------
                                                        $  2,993           $   4,771          $  7,764
                                                        ========           =========          ========
</TABLE>

    The costs were from the following financial statement captions:

<TABLE>
<CAPTION>

                                                         January             April
                                                       Restructuring      Restructuring        Total
                                                       -------------      -------------       --------
<S>                                                     <C>                <C>                <C>
       Costs of sales-professional services             $     387          $  1,198           $  1,436
       Research and development                               522             1,392              1,583
       Sales and marketing                                    278               725                846
       General and administrative                           1,806             1,456              3,899
</TABLE>


                                      9
<PAGE>   10
    Amounts charged against the restructuring accrual for the six months ended
June 30, 2001 were as follows (in thousands):

<TABLE>
<CAPTION>
                                                          January            April
                                                       Restructuring      Restructuring        Total
                                                       -------------      -------------       --------

<S>                                                     <C>                <C>                <C>
             Employee termination benefits              $   1,228          $  2,476           $  3,704
             Facility costs/rent on idle facilities           763               102                865
             Asset writedowns                                 620               104                724
             Other costs                                      114                29                143
                                                        ---------          --------           --------
                                                        $   2,725          $  2,711           $  5,436
                                                        =========          ========           ========
</TABLE>

    As of June 30, 2001, an accrual remains on the condensed consolidated
balance sheets in accrued payroll and other accrued expenses related to the
January Restructuring and April Restructuring consisting of the following
components (in thousands):

<TABLE>
<CAPTION>
                                                         January             April
                                                       Restructuring      Restructuring        Total
                                                       -------------      -------------       --------

<S>                                                     <C>                <C>                <C>
      Employee termination benefits                     $     268          $    716           $    984
      Facility costs/rent on idle facilities                   --             1,157              1,157
      Asset writedowns                                         --               136                136
      Other costs                                                                51                 51
                                                        ---------          --------           --------
                                                        $     268          $  2,060           $  2,328
                                                        =========          ========           ========
</TABLE>


(6) IMPAIRMENT CHARGES

    The Company recorded an impairment charge of approximately $3.3 million in
the six months ended June 30, 2001 related to the following:

         Employee workforce - other intangible asset             $  1,565
         Property and equipment                                     1,742
                                                                 --------
                                                                 $  3,307
                                                                 ========

    Due to the various restructuring activities initiated by the Company, the
Company performed an evaluation of the recoverability of the employee workforce
under Statement of Financial Accounting Standards ("SFAS") No. 121, "ACCOUNTING
FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED
OF." Management determined that this asset was impaired at March 31, 2001.

    As of March 31, 2001, the Company determined that certain property,
leasehold improvements and equipment, which mainly represented computer
equipment and furniture from the Toronto and Atlanta facilities, was impaired.
The Company recorded an impairment charge during the six months ended June 30,
2001 for the difference between the fair value and the carrying value of the
assets.

(7) LIQUIDITY


    The Company continued to experience significant operating losses for the six
months ended June 30, 2001 and has an accumulated deficit of $148.1 million at
June 30, 2001. In order to address its liquidity issue and to strengthen its
balance sheet, the Company sold Series F preferred stock in a Private Placement,
which resulted in the receipt of net proceeds of $25.7 million to the Company on
June 7, 2001. Cash used in operations for the six months ended June 30, 2001
amounted to approximately $20.0 million.

                                       10
<PAGE>   11
    Cash and cash equivalents at June 30, 2001 was $25.7 million. Management
believes that the cash and cash equivalents at June 30, 2001, together with the
reduction of costs achieved by the January Restructuring and the April
Restructuring, will enable the Company to fund its operations for the remainder
of 2001. Although the Company intends to carefully manage the uses of cash, the
Company may need to further reduce operations and or seek additional public or
private equity financing or financing from other sources. The Company may also
need to consider other options, which include, but are not limited to, forming
strategic partnerships or alliances and/or considering other strategic
alternatives, including possible business combinations. There can be no
assurance that additional financing will be available, or that, if available,
the financing will be obtainable on terms favorable to the Company or that any
additional financing would not be dilutive. Further, there can be no assurance
that any of the additional strategic alternatives will be available, or if
available, will be on terms favorable to the Company or its stockholders.
Failure to obtain additional financing or to engage in one of the strategic
alternatives may have a material adverse effect on the Company's ability to
operate as a going concern. The accompanying unaudited condensed consolidated
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.

(8) GOODWILL

    Goodwill represents the excess of the cost to acquire Inlogic Software Inc.
("Inlogic" or renamed as "Daleen Canada") over the fair value of the assets and
liabilities purchased. Goodwill is being amortized on a straight-line basis over
four years, the expected period to be benefited.

    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 Daleen
Canada in December 1999. The development of these gateway products was in
process at the time of the Daleen Canada 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.

    The Company assesses the recoverability of goodwill by determining whether
the amortization of the goodwill over the remaining life can be recovered
through undiscounted future operating cash flows over the remaining amortization
period. The Company's carrying value of goodwill would be reduced by the
estimated shortfall of cash flows, discounted at a rate commensurate with the
associated risks. The assessment of the recoverability of goodwill will be
impacted if the estimated future operating cash flows are not achieved.

    At June 30, 2001, management believes the $34.6 million net book value of
goodwill is recoverable from future cash flows over the remaining amortization
period. However, the business environment in which the Company is operating is
changing rapidly. In addition, the Company's liquidity situation (see note 7)
and the resultant actions taken by management in 2001 to restructure the Company
(see note 5) will result in management continuing to review the recoverability
of all long-lived assets, including goodwill. In light of the Company's current
operating environment, future projected cash flows may be subject to significant
variability. As a result, it is possible that the Company will recognize
additional impairment charges related to goodwill in future periods.

(9) BUSINESS AND CREDIT CONCENTRATIONS

    During the three months ended June 30, 2001 and 2000, 19.1 percent and 23.0
percent, respectively, of the Company's total revenue was attributed to one
customer.

    For the six months ended June 30, 2001, 29.7 percent of the Company's total
revenue was attributed to two customers. Sales to these two customers accounted
for 18.2 percent and 11.5 percent of total revenue for the six-month period. For
the six months ended June 30, 2000, 13.0 percent of total revenue was attributed
to one customer.

    One customer accounted for 12.7% of total accounts receivable at June 30,
2001. One customer accounted for 10.9% of total accounts receivable at December
31, 2000.

                                       11
<PAGE>   12

(10) RELATED PARTY TRANSACTIONS

    In January 2001 the Company loaned $1,237,823 to its Chairman and Chief
Executive Officer and his wholly-owned limited partnership (collectively "the
Makers"). The loan bears interest at a rate of 8.75% per annum. The principal
and any unpaid accrued interest are payable in full January 31, 2006. The loan
is secured by 901,941 shares of the Company's common stock, and is non-recourse
to the Makers except to the extent of the collateral. As a result of the note
being non-recourse, the Company has recorded an allowance for the difference
between the face value of the note plus accrued interest and the fair market
value of the underlying collateral. At June 30, 2001, the allowance was
approximately $550,000.

(11) SERIES F PREFERRED STOCK

    On March 30, 2001, the Company entered into definitive agreements
(collectively, the "Purchase Agreements") for the Private Placement of $27.5
million of Series F preferred stock and Warrants. Pursuant to the terms of the
Purchase Agreements, the Company consummated the Private Placement on June 7,
2001. The consummation of the Private Placement was subject to the receipt of
approval from the Company's stockholders, including approval of an amendment to
the Company's Certificate of Incorporation to increase the number of authorized
shares of common stock to 200 million shares and to create and designate the
Series F preferred stock. The Company's stockholders approved the Private
Placement and the related amendments to the certificate of incorporation at the
Company's annual meeting of stockholders on June 7, 2001. The net proceeds from
the Private Placement after payment of expenses, amounted to $25.7 million.

    Pursuant to the terms of the Purchase Agreements, the Company issued and
sold (i) an aggregate of 247,882 shares of Series F preferred stock and (ii)
Warrants to purchase an aggregate of 99,153 shares of Series F preferred stock
at an exercise price of $166.41. The Company also issued to the placement agent
Warrants for the purchase of 9,915 shares of Series F preferred stock at an
exercise price of $166.41.

    Pursuant to the terms of the Purchase Agreements, the purchase price per
share of the Series F preferred stock was $110.94, which is equal to (i) the
average closing price per share of the Company's common stock during the ten
trading days ending on March 30, 2001, multiplied by (ii) 100, the number of
shares of common stock initially issuable upon conversion of a share of Series F
preferred stock. Each share of Series F preferred stock will be convertible at
any time at the option of the holder into shares of the Company's common stock.
The number of shares of common stock issuable upon conversion of a share of
Series F preferred stock is determined by dividing the initial purchase price
per share of the Series F preferred stock, or $110.94, by the conversion price
in effect at the time of conversion. The initial conversion price was $1.1094.
As a result, each share of Series F preferred stock initially was convertible
into 100 shares of common stock of the Company. The conversion price was subject
to a limited one-time adjustment (the "reset") as follows:

         In the event the average market price (based on the closing price per
         share reported by The Nasdaq Stock Market) per share of the common
         stock for the ten consecutive trading days beginning with the next
         trading day immediately following the date on which the Company issues
         an Earnings Release (as defined below) for the quarter ended June 30,
         2001 (the "Reset Average Market Price") is less than the conversion
         price, the conversion price will be adjusted automatically to the
         higher of (A) the Reset Average Market Price or (B) $0.75% of the
         initial conversion price. If the Company issues more than one Earnings
         Release with respect to the quarter ended June 30, 2001, a Reset
         Average Market Price will be calculated for the ten trading days
         following each Earnings Release, and the lower Reset Average Market
         Price will be used for the purpose of determining the adjusted
         conversion price. The effective date for the reset follows the
         Company's final Earnings Release. "Earnings Release" means (y) a press
         release issued by the Company after March 30, 2001, providing any
         material financial metrics regarding revenue or estimated revenue or
         earnings or estimated earnings for the quarter ended June 30, 2001, or
         (z) a press release issued by the Company announcing its actual total
         revenue for the quarter ended June 30, 2001.

                                       12
<PAGE>   13
    On April 10, 2001, the Company issued an Earnings Release, which would have
resulted in a reset of $0.923 as of June 30, 2001. On July 26, 2001, the Company
issued its final Earnings Release. The Reset Average Market Price following the
final Earnings Release was $0.9060, which was the lowest Reset Average Market
Price following the Company's Earnings Releases. As a result, effective August
9, 2001, the conversion price of the Series F preferred stock was reset to
$0.9060. Based on the reset conversion price established by the July 26, 2001
final Earnings Release and pursuant to the terms of the Purchase Agreements,
each share of Series F preferred stock is convertible into 122.4503 shares of
common stock.

    In addition to the reset, in the event the Company issues common stock or
securities convertible into common stock at a price per share less than the
conversion price of the Series F preferred stock, the conversion price will be
reduced to be equal to the price per share of the securities sold by the
Company. This adjustment provision is subject to a number of exceptions,
including the issuance of stock or options to employees and the issuance of
stock or options in connection with acquisitions. The conversion price will also
be subject to adjustment as a result of stock splits and stock dividends on the
common stock.

    The Series F preferred stock will automatically convert into common stock at
any time after March 30, 2002 if the common stock trades on The Nasdaq National
Market or a national securities exchange at a price per share of at least
$3.3282 for ten trading days within any twenty-day trading period.

    In the event the Company pays dividends on its common stock, the holders of
the Series F preferred stock would be entitled to dividends on an
as-if-converted basis.

    In the event of an acquisition of the Company by another entity, the Company
will be required to redeem all of the issued and outstanding shares of Series F
preferred stock unless the holders of the Series F preferred stock otherwise
consent.

    The Company granted to the purchasers certain demand and piggyback
registration rights.

    The Warrants issued are exercisable at any time for a period of five years.
The fair value of all warrants issued to the holders of the Series F preferred
stock is approximately $7.7 million using the Black-Scholes model. This was
recorded as a preferred stock dividend on June 7, 2001. The Company used the
following assumptions in the Black-Scholes model.

                  Expected life                    5 years
                  Dividends                        None
                  Risk-free interest rate          4.96%
                  Expected volatility              68.6%

    The Company also recorded a beneficial conversion feature in the amount of
approximately $18.4 million on June 7, 2001 based on the proceeds from the
Series F preferred stock reduced by the amount allocated to the warrants. This
was recorded as a preferred stock dividend. The beneficial conversion feature
was recorded using a conversion price of $0.923 which was the most probable
reset price at June 30, 2001. Due to the reset conversion price established by
the July 26, 2001 final Earnings Release which resulted in a lower conversion
price ($0.906) the Company will record an additional beneficial conversion
feature during the third quarter 2001 in the amount of $715,585.

(12) STOCK OPTION PLANS

    The Company accounts for its stock option plans in accordance with the
provisions of Accounting Principles Board ("APB") Opinion No. 25, "ACCOUNTING
FOR STOCK ISSUED TO EMPLOYEES", and related interpretations. As such,

                                       13
<PAGE>   14

compensation expense would be recorded on the date of grant only if the current
market price of the underlying stock exceeded the exercise price. Compensation
expense is recognized on a straight-line method over the vesting period. SFAS
No. 123, "ACCOUNTING FOR STOCK-BASED COMPENSATION" ("SFAS No. 123"), permits
entities to recognize as expense over the vesting period the fair value of all
stock-based awards on the date of grant. Alternatively, SFAS No. 123 also allows
entities to continue to apply the provisions of APB Opinion No. 25 and provide
pro forma net loss and pro forma net loss per share disclosures for employee
stock option grants made in 1995 and future years as if the fair-value-based
method defined in SFAS No. 123 had been applied. The Company has elected to
continue to apply the provisions of APB Opinion No. 25 and provide the pro forma
disclosures provisions of SFAS No. 123.

    In March 2000, the FASB issued Financial Interpretation No. 44 ("FIN 44"),
"ACCOUNTING FOR CERTAIN TRANSACTIONS INVOLVING STOCK COMPENSATION - AN
INTERPRETATION OF APB NO. 25." FIN 44 clarifies the application of APB Opinion
No. 25 for certain issues including: (i) the definition of employee for purposes
of applying APB Opinion No. 25, (ii) the criteria for determining whether a plan
qualifies as a noncompensatory plan, (iii) the accounting consequence of various
modifications to the terms of a previously fixed stock option or award, and (iv)
the accounting for exchange of stock compensation awards in a business
combination. FIN 44 was effective July 1, 2000, except for the provisions that
relate to modifications that directly or indirectly reduce the exercise price of
an award and the definition of an employee, which were effective after December
15, 1998. The adoption of FIN 44 did not have a material adverse effect on the
Company's financial position or results of operations.

    PARTNERCOMMUNITY, INC.

    In 2001, the Company approved the 2000 Stock Incentive Plan (the "PC Plan")
for its subsidiary, PartnerCommunity, Inc. The PC Plan authorized
PartnerCommunity, Inc. to issue stock incentives not to exceed 2,500,000 shares
of PartnerCommunity, Inc.'s common stock and includes incentive stock options
("ISOs") and non-qualified stock option transactions. Employees and key persons
of PartnerCommunity, Inc. selected by the Board of Directors of
PartnerCommunity, Inc are eligible for the grant of stock incentives under the
PC Plan. Only employees of PartnerCommunity, Inc. shall be eligible to receive a
grant of ISOs. The concentrated life of options granted is ten years from grant
date for ISOs and non-qualified stock options granted to other than 10%
stockholders and five years for ISOs granted to 10% stockholders. In January
2001, PartnerCommunity, Inc granted options to purchase 787,000 shares of
PartnerCommunity, Inc. common stock under the PC Plan to employees at $.70 per
share. Upon exercise of these options, the Company will account for the stock
issued as minority interest in PartnerCommunity, Inc.

    DALEEN TECHNOLOGIES, INC.

    The Amended and Restated 1999 Stock Option Plan ("the 1999 Plan") authorized
Daleen Technologies, Inc. to automatically adjust the number of shares of common
stock available for issuance on the first day of each fiscal year beginning in
2000, up to an annual increase of 5,000,000 shares subject to a maximum of 20%
of the fully-diluted shares outstanding at the time. The number of shares
authorized under the 1999 Plan increased to 5,790,145 in 2001. The annual
increase in 2002 will be reduced to a maximum of 3,000,000 shares pursuant to an
amendment to the 1999 Plan approved by the Board of the Directors on July 18,
2001. (See note 14)

(13) LEGAL PROCEEDINGS

    On May 11, 2001, the Company commenced a lawsuit against Mohammad Aamir,
1303949 Ontario Inc. and The Vengrowth Investment Fund, Inc. (collectively, the
"Defendants"). The case was filed in the Ontario Superior Court of Justice
(Court File No. 010CV-210809) and was styled DALEEN TECHNOLOGIES, INC. AND
DALEEN CANADA CORPORATION V. MOHAMMAD AAMIR, 1303949 ONTARIO INC., AND THE
VENGROWTH INVESTMENT FUND INC. All Defendants were former stockholders of
Inlogic. Mr. Aamir was the president and chief executive officer of Inlogic.

                                       14
<PAGE>   15

    On June 6, 2001, the Company settled the lawsuit against the Defendants. In
connection with the settlement, on June 8, 2001, the Company granted to the
Defendants warrants to purchase an aggregate of 750,000 shares of the Company's
common stock with an exercise price of $1.134 per share. The warrants are
immediately exercisable for a period of two years. The Company also agreed to
negotiate in good faith to license its ecare product as part of the settlement.
The term of the license are not yet finalized. The Defendants also agreed to
release the Company from any claims they may have had against the Company. The
issuance of the warrants resulted in the recognition of non-cash expense of
approximately $495,000 in the three months ended June 30, 2001, and represents
the fair value of such warrants.

(14) SUBSEQUENT EVENTS

    On July 18, 2001, the Board of Directors approved the Daleen Technologies,
Inc. 2001 Broad-Based Stock Incentive Plan ("the 2001 Plan"). The Plan provides
that the exercise price of the options granted will be issued at no less than
the fair market value of the underlying common stock at the date of grant.
2,000,000 shares were authorized for issuance under the 2001 Plan. On July 18,
2001, the Compensation Committee and the Board of Directors authorized the
issuance of 1,403,250 options to purchase common stock to its employees under
the 2001 Plan at the fair market value at date of grant. The vesting period for
these options is 50% each year for two years from date of grant.

(15) NEW ACCOUNTING PRONOUNCEMENTS

    In September 2000, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 140, "ACCOUNTING FOR TRANSFER AND SERVICING OF FINANCIAL ASSETS AND
EXTINGUISHMENTS OF LIABILITIES" ("SFAS No. 140"). SFAS No. 140 provides guidance
on accounting for (1) securitization transactions involving financial assets;
(2) sales of financial assets (including loan participations); (3) factoring
transactions; (4) wash sales; (5) servicing assets and liabilities; (6)
collateralized borrowing arrangements; (7) securities lending transactions; (8)
repurchase agreements; and (9) extinguishment of liabilities. The provisions of
SFAS No. 140 became effective for transactions entered into after March 31,
2001. The adoption of SFAS No. 140 did not have a significant impact of the
Company's financial position or operating results.

    In July 2001, the FASB issued Statement 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 business 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 will require that
goodwill and intangible assets with indefinite useful lives no longer be
amortized, but instead tested for impairment at least annually in accordance
with the provisions of SFAS No. 142. SFAS No. 142 will also require that
intangible assets with definite useful lives be amortized over their respective
estimated useful lives to their estimated residual values, and reviewed for
impairment in accordance with SFAS No. 121.

    The Company is required to adopt the provisions of SFAS No. 141 immediately
and SFAS No. 142 effective January 1, 2002. Goodwill and intangible assets
acquired in business combinations completed before July 1, 2001 will continue to
be amortized prior to the adoption of SFAS No. 142.

    SFAS No. 141 will require, upon adoption of SFAS No. 142, that the Company
evaluate its existing intangible assets and goodwill that were acquired in a
prior purchase business combination, and to make any necessary reclassifications
in order to conform with the new criteria in SFAS No. 141 for recognition apart
from goodwill. Upon adoption of SFAS No. 142, the Company will be required to
reassess the useful lives and residual values of

                                       15
<PAGE>   16

all intangible assets acquired in purchase business combinations, and make any
necessary amortization period adjustments by the end of the first interim period
after adoption. In addition, to the extent an intangible asset is identified as
having an indefinite useful life, the Company will be required to test the
intangible asset for impairment in accordance with the provisions of SFAS No.
142 within the first interim period. Any impairment loss will be measured as of
the date of adoption and recognized as the cumulative effect of a change in
accounting principle in the first interim period.

    In connection with the transitional goodwill impairment evaluation, SFAS No.
142 will require the Company to perform an assessment of whether there is an
indication that goodwill is impaired as of the date of adoption. To accomplish
this, the Company must identify its reporting units and determine the carrying
value of each reporting unit by assigning the assets and liabilities, including
the existing goodwill and intangible assets, to those reporting units as of the
date of adoption. The Company will then have up to six months from the date of
adoption to determine the fair value of each reporting unit and compare it to
the reporting unit's carrying amount. To the extent a reporting unit's carrying
amount exceeds its fair value, an indication exists that the reporting unit's
goodwill may be impaired and the Company must perform the second step of the
transitional impairment test. In the second step, the Company must compare the
implied fair value to all of its assets (recognized and unrecognized) and
liabilities in a manner similar to a purchase price allocation in accordance
with SFAS No. 141, to its carrying amount, both of which would be measured as of
the date of adoption. This second step is required to be completed as soon as
possible, but no later than the end of the year of adoption. Any transitional
impairment loss will be recognized as the cumulative effect of a change in
accounting principle in the Company's statement of operations.

    As of the date of adoption, the Company expects to have unamortized goodwill
in the amount of approximately $27.5 million, which will be subject to the
transition provisions of SFAS No. 141 and SFAS No. 142. Amortization expense
related to goodwill was approximately $14.4 million and $8.4 million for the
year ended December 31, 2000 and six months ended June 30, 2001, respectively.

    Because of the extensive effort needed to comply with adopting SFAS No. 141
and SFAS No. 142, it is not practicable to reasonably estimate the impact of
adopting SFAS No. 141 and SFAS No. 142 on the Company's financial statements at
the date of this report, including whether any transitional impairment losses
will be required to be recognized as the cumulative effect of a change in
accounting principle.

    In July 2001 FASB issued Statement No. 143, "ACCOUNTING FOR ASSET RETIREMENT
OBLIGATIONS" ("SFAS No. 143"). That standard 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. The standard
is effective for fiscal years beginning after June 15, 2002, with earlier
adoption permitted. The Company has not determined the impact of adopting this
standard.

                                       16
<PAGE>   17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.

    The following should be read in conjunction with the unaudited condensed
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, 2000.

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, 2000 filed with the Securities and Exchange Commission on April 5,
2001. 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

    We are a provider of Internet software solutions that manage the revenue
chain for next-generation service providers, enterprise business and technology
solutions providers. Our RevChain(TM) product family enables service providers
to automate and manage their entire revenue chain including services, customers,
orders and fulfillment and billing and settlement across the span of the
enterprise. Our RevChain solutions extend from the back office to interfacing
with customers, whether through the Internet or with customer service
representatives, and manage mutual service offerings across partner
relationships. These modular solutions integrate with third-party solutions and
deliver proven scalability, making the software highly adaptable and ready for
the future. As a result, service providers, and enterprise business and
technology solutions providers are able to accelerate time-to-revenue, rapidly
adapt to new opportunities, and leverage the power of the Internet, thereby
providing a competitive advantage in their business. In addition to our
products, we offer professional consulting services, training, maintenance,
support and third-party software fulfillment related to the products we develop.

    Historically, we have operated our business with primarily a direct sales
model. Our products and services were sold through our direct sales force. Our
strategic alliance partners, including operational support system providers,
other software application companies, consulting firms and systems integration
firms, provided some level of sales and marketing support to deliver a complete
solution and successful implementation to our customers. In order to address a
broader market and to satisfy customers' requirements associated with the use of
independent consulting and systems integration firms, we have increased our
focus on indirect sales through our strategic alliance partners. We believe that
an increased focus on these strategic alliances will enable us to more easily
enter into new markets and reach potential new customers for our products. In
addition, we will continue to maintain a reduced direct sales force for those
sales opportunities that do not include or require third party strategic
alliance partners. We believe that the launch of our RevChain product family in
the first quarter enhanced our ability to increase our focus on this
distribution strategy. Our new RevChain product line, associated positioning,
packaging and underlying pure Internet architecture provide the added-value and
competitive differentiation we believe are critical to attract and maintain
relationships with partners essential to our overall success. We are currently
working with several of these partners under various agreements to generate new
business opportunities through joint sales and marketing efforts. Our success
will depend to a large extent on the willingness and ability of our alliance
partners to devote sufficient resources and efforts to marketing our products
versus the products of others. There are no guarantees that this strategy will
be successful.

    In recent years, we have invested heavily in research and development, sales
and marketing, and general operating expenses in order to increase our market
position, develop our products and build our infrastructure. As a result of
reduction in market growth in the second half of 2000, combined with reduced
information technology spending, we implemented two extensive restructuring
actions in 2001 which have resulted in a reduction of operating costs in areas
such as compensation and benefits, facilities, capitalized expenditures,

                                       17
<PAGE>   18
travel costs and other operating costs. On January 4, 2001 our Board of
Directors approved and on January 5, 2001 we announced we executed specific cost
reduction measures ("the January Restructuring"). We recorded a $3.0 million
restructuring charge in the six months ended June 30, 2001 related to the
January Restructuring. This charge included the estimated costs related to
workforce reductions, downsizing of facilities, asset writedowns and other
costs. 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 the Company's Boca Raton,
Florida; Atlanta, Georgia; and Toronto, Ontario, Canada facilities, and included
employees from substantially all of the Company's 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 resaleable. Other costs
included costs incurred that are no longer going to provide benefit to us such
as recruiting fees and relocation costs related to employment offers that were
rescinded, penalties for cancellation of a user conference and trade show, and
other miscellaneous expenses.

    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 closed our Toronto and Atlanta facilities. In addition, we consolidated our
North American research and development and professional services resources and
further reduced our administrative support functions. We recorded a $4.8 million
restructuring charge in the three and six months ended June 30, 2001 related to
the April Restructuring. This charge included the estimated costs related to
workforce reductions of 193 employees, 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.

    Due to the termination of employees in the January Restructuring and April
Restructuring, and assuming we do not hire any additional employees, we expect
to achieve an annualized savings relating to the cost of salaries and benefits
for these terminated employees of approximately $22.4 million. The anticipated
savings are from the following departments: $8.2 million in cost of professional
services and other; $8.1 million in research and development; $3.7 million in
sales and marketing; and $2.4 million in general and administrative.

RECENT DEVELOPMENTS

    PRIVATE PLACEMENT OF SERIES F CONVERTIBLE PREFERRED STOCK. On March 30,
2001, we entered into definitive agreements (collectively, the "Purchase
Agreements") for the sale ("private placement") of $27.5 million of Series F
convertible preferred stock (the "Series F preferred stock") and warrants to
purchase additional shares of Series

                                       18
<PAGE>   19

F preferred stock (the "Warrants"). Pursuant to the terms of the Purchase
Agreements, we consummated the private placement on June 7, 2001. We received
net proceeds of approximately $25.7 million from the private placement. The
consummation of the private placement was subject to the receipt of approval
from our stockholders, including approval of an amendment to our certificate of
incorporation to increase the number of authorized shares of common stock to 200
million shares and to create and designate the Series F preferred stock. Our
stockholders approved the private placement and the related amendments to our
certificate of incorporation at our 2001 Annual Meeting of Stockholders held on
June 7, 2001.

           Pursuant to the Purchase Agreements, we issued and sold (i) an
           aggregate of 247,882 shares Series F preferred stock and (ii)
           Warrants to purchase an aggregate of 109,068 shares of Series F
           preferred stock, including a Warrant that we issued to Robertson
           Stephens, Inc., which acted as our placement agent in the private
           placement. The purchase price per share of the Series F preferred
           stock (without giving effect to the allocation of any part of the
           purchase price to the Warrants) was $110.94 per share, which is equal
           to (A) $1.1094, the average closing price per share of our common
           stock during the ten trading days ending on March 30, 2001, the date
           of the Purchase Agreements, multiplied by (B) 100, the number of
           shares of common stock initially issuable upon conversion of a share
           of Series F preferred stock.

           Each share of Series F preferred stock is convertible at any time at
           the option of the holder into shares of our common stock. The number
           of shares of common stock issuable upon conversion of a single share
           of Series F preferred stock is determined by dividing the original
           price per share of the Series F preferred stock, which is $110.94, by
           the conversion price in effect on the date of conversion. The initial
           conversion price was $1.1094. The conversion price was subject to a
           limited one-time adjustment (the "reset") as follows:

    In the event the average market price (based on the closing price per share
reported by The Nasdaq Stock Market) per share of our common stock for the ten
consecutive trading days beginning with the next trading day immediately
following the date on which we issue an Earnings Release (as defined below) for
the quarter ended June 30, 2001 (the "Reset Average Market Price") is less than
the conversion price, the conversion price will be adjusted automatically to the
higher of (A) the Reset Average Market Price or (B) $0.75% of the initial
conversion price. If we issue more than one Earnings Release with respect to the
quarter ended June 30, 2001, a Reset Average Market Price will be calculated for
the ten trading days following each Earnings Release, and the lower Reset
Average Market Price will be used for the purpose of determining the adjusted
conversion price. The effective date for the reset follows our final Earnings
Release. "Earnings Release" means (y) a press release issued by us after March
30, 2001, providing any material financial metrics regarding revenue or
estimated revenue or earnings or estimated earnings for the quarter ended June
30, 2001, or (z) a press release issued by us announcing our actual total
revenue for the quarter ended June 30, 2001.

    On April 10, 2001, we issued an Earnings Release, which would have resulted
in a reset of $0.9230 as of June 30, 2001. On July 26, 2001, we issued our final
Earnings Release. The Reset Average Market Price following the final Earnings
Release was $0.9060, which was the lowest Reset Average Market Price following
our Earnings Releases. As a result, effective August 9, 2001, the conversion
price of the Series F preferred stock was reset to $0.9060. Based on the reset
conversion price established by the July 26, 2001 final Earnings Release and
pursuant to the terms of the Purchase Agreements, each share of Series F
preferred stock is convertible into 122.4503 shares of common stock, or an
aggregate of approximately 43,708,634 shares of common stock.

    In addition to the reset, in the event we issue common stock or securities
convertible into common stock at a price per share less than the conversion
price of the Series F preferred stock, the conversion price will be reduced to
be equal to the price per share of the securities sold. This adjustment
provision is subject to a number of exceptions, including the issuance of stock
or options to employees and the issuance of stock or options in connection with
acquisitions. The conversion price will also be subject to adjustment as a
result of stock splits and stock dividends on the common stock.

                                       19
<PAGE>   20

RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2001 COMPARED TO THREE MONTHS ENDED JUNE 30, 2000

    TOTAL REVENUE. Total revenue, which includes license revenue and
professional services and other revenue, decreased $8.1 million, or 70.2%, to
$3.4 million in the three months ended June 30, 2001 from $11.5 million for the
same period in 2000. The primary reason for lower revenue during the recent
quarter related to a decrease in license revenue due to fewer license contracts
being signed in the second quarter 2001 than in the second quarter 2000. In
addition, the number of contracts being signed in recent quarters has decreased
our services revenue due to less ongoing product implementations related to
licensing our software products and the need for third-party software
fulfillment.

    LICENSE FEES. Our license fees are derived from licensing our software
products. License fees decreased $6.0 million, or 85.0%, in the three months
ended June 30, 2001 to $1.1 million compared to $7.1 million for the same period
in 2000. This decrease was due to fewer license contracts being signed in the
second quarter 2001 compared to the same period in 2000. The primary reasons for
this reduction include an overall reduction in technology spending, market
conditions in our industry, competition, lengthening of the sales cycle and
postponement of customer licensing decisions. License fees constituted 31.2% of
total revenue in the three months ended June 30, 2001, compared to 61.8% in the
same period in 2000.

    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 develop and license. We offer consulting services 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 $2.0 million, or 46.4%, in the three months
ended June 30, 2001 to $2.4 million, compared to $4.4 million in the same period
in 2000. The decrease was due to less ongoing product implementations, fewer
maintenance contracts due to customer insolvency, and less revenue associated
with third-party software fulfillment. Professional services and other revenue
constituted 68.9% of total revenue in the three months ended June 30, 2001,
compared to 38.2% for the same period in 2000. The increase as a percentage of
total revenue is due to a reduction in license revenue in the quarter.

    TOTAL COST OF REVENUE. Total cost of revenue decreased $1.8 million, or
48.4%, to $1.9 million in the three months ended June 30, 2001 from $3.7 million
in the same period in 2000. 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 as well as the result of our cost reduction measures
taken in the January Restructuring and April Restructuring. The cost reductions
included a decrease in professional services personnel and other overhead costs
which were reduced when we closed the Atlanta office. The Atlanta office
primarily operated as a professional services facility. Overall, total cost of
revenue as a percentage of total revenue increased to 56.5% in the three months
ended June 30, 2001, compared to 32.6% in the same period in 2000. This increase
resulted from the decrease in total revenue.

    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 increased to $320,654, or 65.8%, in the three months ended June
30, 2001, from $193,375 in the same period in 2000 due to the amortization
expense related to prepaid third-party licenses which are being amortized over
the term of their respective agreements. These prepaid third-party license
agreements did not exist in the same period in 2000. Cost of license fees
increased to 30.2% of license revenue in the three months ended June 30, 2001,
compared to 2.7% for the same period 2000 due to the decrease in license
revenue.

                                       20
<PAGE>   21

    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 $1.9 million, or
54.7%, to $1.6 million in the three months ended June 30, 2001, from $3.5
million in the same period in 2000. These costs decreased as a result of our
cost reduction measures taken with the January Restructuring and the April
Restructuring. In addition, the revenue related to professional services and
other has decreased. Cost of professional services and other decreased to 68.4%
of professional services and other revenue in the three months ended June 30,
2001, compared to 81.0% for the same period in 2000 due to the cost reduction
measures related to the January Restructuring and the April Restructuring.

    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 costs and related corporate overhead costs. These expenses
increased $114,257, or 4.5%, to $2.6 million in the three months ended June 30,
2001, from $2.5 million for the same period in 2000. The overall increase in
2001 was due to the increase in our trade show presence and our increased sales
presence in the Netherlands. These increases were offset by the cost reduction
measures associated with the January Restructuring and the April Restructuring.
As a percentage of revenue, these expenses increased from 21.9% in the three
months ended June 30, 2000 to 77.1% for the same period in 2001 mainly due to
the decrease in total revenue in the three months ended June 30, 2001 compared
to the same period in 2000.

    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 $3.6 million, or 52.9%, to $3.2 million in the three months ended June
30, 2001, from $6.7 million for the same period in 2000. The overall decrease
was primarily due to the cost reduction measures associated with the January
Restructuring and the April Restructuring. The cost reductions included a
decrease in research and development personnel and other costs, which were
reduced when we closed the Toronto facility. The Toronto facility primarily
operated as a research and development facility. As a percentage of revenue,
these expenses increased from 58.8% in 2000 to 93.1% in 2001. This was a direct
result of the lower revenue recognized in the three months ended June 30, 2001
compared to the same period in 2000.

    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 increased $2.1 million, or 59.8%, to $5.6 million in the three months
ended June 30, 2001, from $3.5 million in the same period in 2000. This increase
was attributed to the aggregate amount of approximately $3.6 million of non-cash
charges recorded in the three months ended June 30, 2001 encompassing: (i) an
asset write-down of $1.0 million related to an investment; (ii) the issuance of
warrants 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 at below fair market value; (iv) an increase in the allowance
for a non-recourse loan to an executive officer in the amount of approximately
$275,000 due to the decline in our stock price at June 30, 2001 and (v) a
$650,000 charge to our provision for bad debt for the three months ended June
30, 2001. We increased the allowance for doubtful accounts due to market
conditions in the telecommunication industry and certain customers significantly
reducing or liquidating their operations. These charges were offset by the
decrease in administrative personnel and administrative charges associated with
the January Restructuring and April Restructuring. As a percentage of revenue,
general and administrative expenses increased to 165.1% in the three months
ended June 30, 2001 from 30.8% in the same period in 2000. This was a direct
result of the lower revenue recognized in the three months ended June 30, 2001
compared to the same period in 2000, as well as the non-cash charges incurred in
three months ended June 30, 2001.

                                       21
<PAGE>   22

    AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES. Goodwill is being amortized
over a four-year period. Amortization expense decreased $275,557, or 7.0%, to
$3.6 million in the three months ended June 30, 2001 from $3.9 million for the
same period in 2000. This was primarily due to the amortization expense recorded
in a prior period related to the employee workforce which was considered
impaired and written off at March 31, 2001 due to the January Restructuring and
April Restructuring. Therefore, no amortization of the employee workforce was
recorded in the three months ended June 30, 2001.

    RESTRUCTURING CHARGES. Restructuring charges incurred in the three months
ended June 30, 2001 related to the April Restructuring. These charges included
$3.2 million of employee termination benefits, $1.3 million of facility costs
related to the closing of the Toronto and Atlanta facilities, $240,053 of asset
writedowns, and $80,215 of other restructuring costs such as penalties incurred
for cancellations of trade shows, penalties incurred for cancellation of
software maintenance agreements and legal fees. The costs were from the
following financial statement captions:

     Cost of sales - professional services        $1.2 million
     Research and development                     $1.4 million
     Sales and marketing                          $725,000
     General and administrative                   $1.5 million

    Total restructuring charges for the three months ended June 30, 2001 was
$4.8 million compared to $0 in the three months ended June 30, 2000. There were
no restructuring actions taken in 2000.

    NONOPERATING INCOME. Nonoperating income is comprised primarily of interest
income, net of interest expense. Nonoperating income decreased $251,843, or
40.3%, to $372,604 in the three months ended June 30, 2001 from $624,447 for the
same period in 2000. This was primarily attributable to the decrease in
investment earnings due to the decrease in our cash balance during 2001 compared
to 2000.

SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO SIX MONTHS ENDED JUNE 30, 2000

    TOTAL REVENUE. Total revenue, which includes license revenue and
professional services and other revenue, decreased $11.9 million, or 58.3%, to
$8.5 million in the six months ended June 30, 2001 from $20.4 million for the
same period in 2000. The primary reason for lower revenue is related to fewer
license contracts being signed in the six months ended June 30, 2001 than in the
same period in 2000. In addition, the number of contracts being signed in recent
quarters has decreased our services revenue due to less ongoing product
implementations related to licensing our software products and the need for
third-party software fulfillment.

    LICENSE FEES. Our license fees are derived from licensing our software
products. License fees decreased $10.0 million, or 78.3%, in the six months
ended June 30, 2001 to $2.8 million compared to $12.8 million for the same
period in 2000. This decrease was due to fewer license contracts being signed in
the six months ended June 30, 2001 compared to the same period in 2000. The
primary reasons for this reduction include an overall reduction in technology
spending, market conditions in our industry, competition, lengthening of the
sales cycle and postponement of customer licensing decisions. License fees
constituted 32.6% of total revenue in the six months ended June 30, 2001,
compared to 62.6% in the same period in 2000.

    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 develop and 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 $1.9 million, or 24.8%, in the six months
ended June 30, 2001 to $5.7 million, compared to $7.7 million in the same period
in 2000. The decrease was due to less ongoing product implementations, fewer
maintenance contracts due to customer insolvency, and less revenue associated
with third-party software fulfillment. Professional services and other revenue
constituted 67.5% of total revenue in the six months ended June 30, 2001,
compared to 37.4% for the same period in 2000. The increase as a percentage of
total revenue is due to a reduction in license revenue in the six months ended
June 30, 2001.

    TOTAL COST OF REVENUE. Total cost of revenue decreased $1.3 million, or
19.0%, to $5.4 million in the six months ended June 30, 2001 from $6.7 million
in the same period in 2000. 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, and related corporate overhead
costs to provide professional services to our customers. These costs decreased
due to the

                                       22
<PAGE>   23

decrease in total revenue as well as the result of our cost reduction measures
taken in the January Restructuring and April Restructuring. The cost reductions
included a decrease in professional services personnel and other overhead costs
which were reduced when we closed the Atlanta office. The Atlanta office
primarily operated as a professional services facility. Overall, total cost of
revenue as a percentage of total revenue increased to 63.5% in the six months
ended June 30, 2001, compared to 32.7% in the same period in 2000. This increase
resulted from the decrease in total revenue.

    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 slightly increased to $367,703, or 4.6%, in the six months ended
June 31, 2001, from $351,375 in the same period in 2000 due to an increase in
amortization of prepaid third-party licenses offset by a decrease in third party
referral fees incurred in the prior period. Cost of license fees increased to
13.2% of license revenue in 2001 compared to 2.7% in 2000 due to the decrease in
license revenue. We expect cost of license fees as a percentage of license fees
to be reduced in future periods as license revenue increases.

    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 $1.3 million, or
20.4%, to $5.0 million in the six months ended June 30, 2001, from $6.3 million
in the same period in 2000. These costs decreased as a result of our cost
reduction measures taken with the January Restructuring and the April
Restructuring. In addition, the revenue related to professional services and
other has decreased. Cost of professional services and other increased to 87.7%
of professional services and other revenue in the six months ended June 30,
2001, compared to 82.8% for the same period in 2000 due to less professional
services and other revenue in the six months ended June 30, 2001 in the six
months ended June 30, 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
increased $1.1 million, or 19.2%, to $7.0 million in the six months ended June
30, 2001, from $5.8 million for the same period in 2000. The overall increase in
2001 was due to the increase in our trade show presence and our increased sales
presence in the Netherlands. In addition, the increase was due to the costs
associated with launching our RevChain product family in the first quarter.
These increases were offset by the cost reduction measures associated with the
January Restructuring and the April Restructuring. As a percentage of revenue,
these expenses increased from 28.5% in the six months ended June 30, 2000 to
81.6% for the same period in 2001 mainly due to the decrease in total revenue in
the six months ended June 30, 2001 compared to the same period in 2000.

    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 $3.2 million, or 27.6%, to $8.5 million in the six months ended June
30, 2001, from $11.7 million for the same period in 2000. The overall decrease
was primarily due to the cost reduction measures associated with the January
Restructuring and the April Restructuring. The cost reductions included a
decrease in research and development personnel and other costs which were
reduced when we closed the Toronto facility. The Toronto facility primarily
operated as a research and development facility. As a percentage of revenue,
these expenses increased from 57.5% in 2000 to 99.8% in 2001. This was a direct
result of the lower revenue recognized in the six months ended June 30, 2001
compared to the same period in 2000.

    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,
facility 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 increased $1.6 million, or 21.2%, to

                                       23
<PAGE>   24

$8.9 million in the six months ended June 30, 2001, from $7.4 million in the
same period in 2000. The increase was attributed to the aggregate amount of
approximately $4.4 million non-cash charges recorded in the six months ended
June 30, 2001 encompassing: (i) an asset write-down of $1.0 million related to
an investment; (ii) the issuance of warrants in connection with a legal
settlement resulting in a charge of approximately $495,000; (iii) a charge of
$1.5 million related to amortization of stock compensation expense due to
options issued in 1999 and 2000 with exercise prices below fair market value;
(iv) an increase in the allowance for a non-recourse loan to an executive
officer in the amount of approximately $550,000 due to the decline in our stock
price at June 30, 2001 and (v) a $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. These
increases were offset by the decrease in administrative personnel and
administrative charges associated with the January Restructuring and April
Restructuring. As a percentage of revenue, general and administrative expenses
increased to 104.8% in the six months ended June 30, 2001 from 36.1% in the same
period in 2000. This was a direct result of the lower revenue recognized in the
six months ended June 30, 2001 compared to the same period in 2000 as well as
the non-cash charges incurred in the six months ended June 30, 2001.

    AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES. Goodwill is being amortized
over a four-year period. Amortization expense increased $842,161, or 10.9%, to
$8.6 million in the six months ended June 30, 2001 from $7.7 million for the
same period in 2000. This was primarily due to the accelerated amortization we
recorded in the six months ended June 30, 2001 related to certain gateway
products acquired from Inlogic on December 16, 1999 which we do not plan to
promote and license in the future.

    IMPAIRMENT OF LONG-LIVED ASSETS. Due to various restructuring activities
initiated by the Company, we performed an evaluation of the recoverability of
the employee workforce acquire in the Inlogic acquisition under Statement of
Financial Accounting Standards ("SFAS") No. 121. We determined that this asset
was impaired and in connection with this determination, we recorded the
impairment charges in the six months ended June 30, 2001 in the amount of
approximately $1.6 million. In addition, we determined that certain property,
leasehold improvements and equipment, which mainly represented computer
equipment and furniture from the Toronto and Atlanta facilities, was impaired.
We recorded an impairment charge of approximately $1.7 million during the six
months ended June 30, 2001 representing the difference between the fair value
and the carrying value of the assets. Fair value was based on standards in the
industry.

    RESTRUCTURING CHARGES. Restructuring charges incurred by us in the six month
ended June 30, 2001, related to the January Restructuring and April
Restructuring. These charges included $4.7 million of employee termination
benefits, $2.0 million of facility costs, $860,053 of asset writedowns, and
$194,215 of other restructuring costs such as penalties incurred for
cancellations of trade shows and marketing programs, recruiting fees and
relocation costs related to employment offers that were rescinded, penalties
incurred for cancellation of software maintenance contracts, legal fees and
other costs. The costs were from the following financial statement captions:

<TABLE>
<CAPTION>
                                                  January           April
                                                  --------       ------------
<S>                                               <C>            <C>
     Cost of sales - professional services        $387,000       $1.2 million
     Research and development                     $522,000       $1.4 million
     Sales and marketing                          $278,000       $725,000
     General and administrative                   $1.8 million   $1.5 million
</TABLE>

Total restructuring charges for the six months ended June 30, 2001 was
$7.8 million compared to $0 in the six months ended June 30, 2000. There were no
restructuring actions taken in 2000.

    NONOPERATING INCOME. Nonoperating income is comprised primarily of interest
income, net of interest expense. Nonoperating income decreased $808,614, or
56.6%, to $619,089 in the six months ended June 30, 2001 from $1.4 million for
the same period in 2000. This was primarily attributable to the decrease in
investment earnings due to the decrease in our cash balance during 2001 compared
to 2000.

LIQUIDITY AND CAPITAL RESOURCES

    On March 30, 2001, we entered into Purchase Agreements in a private
placement of $27.5 million of Series F preferred stock and Warrants of Series F
preferred stock. Pursuant to the terms of the Purchase Agreement, we consummated
the private placement on June 7, 2001. We received net proceeds of approximately
$25.7 million from the private placement. At June 30, 2001, our total cash and
cash equivalents totaled $25.7 million.

                                       24
<PAGE>   25

    Net cash used in operating activities was $20.0 million for the six months
ended June 30, 2001, compared to $18.4 million for the six months ended June 30,
2000. The principal use of cash for both periods was to fund our losses from
operations.

    Net cash provided by financing activities was $25.4 million for the six
months ended June 30, 2001, compared to $472,000 for the six months ended June
30, 2000. In 2001, the cash provided was primarily related to the net proceeds
received from the private placement. In 2000, cash was provided by proceeds from
the exercise of stock options and bridge warrants.

    Net cash used in investing activities was $1.9 million for the six months
ended June 30, 2001 compared to net cash provided by investing activities of
$545,000 for the six months ended June 30, 2000. The cash used in 2001 was
primarily related to a non-recourse note receivable issued to our chairman and
chief executive officer for approximately $1.2 million and capital expenditures
of approximately $696,000. The cash provided in the six months ended June 30,
2000 was primarily related to the sales of securities available for sale offset
by approximately $4.4 million of capital expenditures.

    We continued to experience significant operating losses during the six
months ended June 30, 2001. The business environment in which we are operating
is changing rapidly and there is continued weakness in the market conditions.
The January Restructuring and April Restructuring actions resulted in a
reduction in operating expense levels and, based on expected revenue and cash
collections, and it is reasonably likely that there will be reduction in cash
requirements on a quarterly basis going forward.

    We believe that the cash on hand, together with the reduction of costs
achieved by the January Restructuring and the April Restructuring will enable us
to fund our operations for the remainder of 2001. Although we intend to
carefully manage the use of cash, we may need to further reduce our operations
and seek additional financing. We may seek to raise additional funds through
public or private equity financing or from other sources. We may also consider
additional options, which include, but are not limited to, forming strategic
partnerships or alliances and/or considering other strategic alternatives,
including possible business combinations. There can be no assurance that
additional financing will be available at all, or that, if available, the
financing will be obtainable on terms favorable to us or that any additional
financing would not be dilutive. Further, there can be no assurance that any of
the additional strategic alternatives will be available, or if available, will
be on terms favorable to us or our stockholders. Failure to obtain additional
financing or to engage in one of the other strategic alternatives may have a
material adverse effect on our ability to operate as a going concern. Our
unaudited condensed 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.

NEW ACCOUNTING PRONOUNCEMENTS

    In September 2000, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 140, "ACCOUNTING FOR TRANSFER AND SERVICING OF FINANCIAL ASSETS AND
EXTINGUISHMENTS OF LIABILITIES (A REPLACEMENT OF SFAS NO. 125)". SFAS No. 140
provides guidance on accounting for (1) securitization transactions involving
financial assets; (2) sales of financial assets (including loan participations);
(3) factoring transactions; (4) wash sales; (5) servicing assets and
liabilities; (6) collateralized borrowing arrangements; (7) securities lending
transactions; (8) repurchase agreements; and (9) extinguishment of liabilities.
The provisions of SFAS No. 140 became effective for transactions entered into
after March 31, 2001. The adoption of SFAS No. 140 did not have a significant
impact on our consolidated financial statements.

    In July 2001, the FASB issued Statement 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 intangible assets acquired in a purchase method
business combination that 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

                                       25
<PAGE>   26

separately. SFAS No. 142 will require that goodwill and intangible assets with
indefinite useful lives no longer be amortized, but instead tested for
impairment at least annually in accordance with the provisions of SFAS No. 142.
SFAS No. 142 will also require that intangible assets with definite useful lives
be amortized over their respective estimated useful lives to their estimated
residual values, and reviewed for impairment in accordance with SFAS No. 121,
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO
BE DISPOSED OF.

    We are required to adopt the provisions of SFAS No. 141 immediately and SFAS
No. 142 effective January 1, 2002. Goodwill and intangible assets acquired in
business combinations completed before July 1, 2001 will continue to be
amortized prior to the adoption of SFAS No. 142.

    SFAS No. 141 will require upon adoption of SFAS No. 142 that we evaluate our
existing intangible assets and goodwill that were acquired in a prior purchase
business combination, and to make any necessary reclassifications in order to
conform with the new criteria in SFAS No. 141 for recognition apart from
goodwill. Upon adoption of SFAS No. 142, we will be required to reassess the
useful lives and residual values of all intangible assets acquired in purchase
business combinations, and make any necessary amortization period adjustments by
the end of the first interim period after adoption. In addition, to the extent
an intangible asset is identified as having an indefinite useful life, we will
be required to test the intangible asset for impairment in accordance with the
provisions of SFAS No. 142 within the first interim period. Any impairment loss
will be measured as of the date of adoption and recognized as the cumulative
effect of a change in accounting principle in the first interim period.

    In connection with the transitional goodwill impairment evaluation, SFAS No.
142 we will be required to perform an assessment of whether there is an
indication that goodwill is impaired as of the date of adoption. To accomplish
this, we must identify our reporting units and determine the carrying value of
each reporting unit by assigning the assets and liabilities, including the
existing goodwill and intangible assets, to those reporting units as of the date
of adoption. We will then have up to six months from the date of adoption to
determine the fair value of each reporting unit and compare it to the reporting
unit's carrying amount. To the extent a reporting unit's carrying amount exceeds
its fair value, an indication exists that the reporting unit's goodwill may be
impaired and we must perform the second step of the transitional impairment
test. In the second step, we must compare the implied fair value to all of its
assets (recognized and unrecognized) and liabilities in a manner similar to a
purchase price allocation in accordance with SFAS No. 141, to our carrying
amount, both of which would be measured as of the date of adoption. This second
step is required to be completed as soon as possible, but no later than the end
of the year of adoption. Any transitional impairment loss will be recognized as
the cumulative effect of a change in accounting principle in our statement of
operations.

    As of the date of adoption, we expect to have unamortized goodwill in the
amount of approximately $27.5 million, which will be subject to the transition
provisions of SFAS No. 141 and SFAS No. 142. Amortization expense related to
goodwill was approximately $14.4 million and $8.4 million for the year ended
December 31, 2000 and six months ended June 30, 2001, respectively.

    Because of the extensive effort needed to comply with adopting SFAS No. 141
and SFAS No. 142, it is not practicable to reasonably estimate the impact of
adopting SFAS No. 141 and SFAS No. 142 on our financial statements at the date
of this report, including whether any transitional impairment losses will be
required to be recognized as the cumulative effect of a change in accounting
principle.

    In July 2001, FASB issued Statement No. 143, "ACCOUNTING FOR ASSET
RETIREMENT OBLIGATIONS" ("SFAS No. 143"). 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 accredited 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. The

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<PAGE>   27

standard is effective for fiscal years beginning after June 15, 2002, with
earlier adoption permitted. We have not determined the impact of adopting this
standard.

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. 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.

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

    We incurred net losses of approximately $40.3 million for the six months
ended June 30, 2001 and net losses of $43.8 million for the year ended December
31, 2000. Our cash and cash equivalents at June 30, 2001 was $25.7 million. Cash
used in operations for the six months ended June 30, 2001 was $20.0 million. As
of June 30, 2001, we had an accumulated deficit of approximately $148.1 million.
As a result of our financial condition the independent auditors' report covering
our December 31, 2000 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 and April Restructuring in order to reduce our
operating expenses, including workforce reductions, reduction of office space,
consolidation of facilities and departments, asset writedowns and consolidation
of our North American research and development and professional services
resources.

    In order to address our liquidity issue and to strengthen our balance sheet,
we sold the Series F preferred stock in the private placement, which resulted in
net proceeds of $25.7 million. We believe that our current cash and cash
equivalents, including the net proceeds received from the private placement,
together with the January Restructuring and April Restructuring, will be
sufficient to fund our operations for the remainder of 2001. However, there is
no assurance that we will be able to continue as a going concern beyond 2001.
Although we intend to carefully manage our use of cash and improve
profitability, we may be required to further reduce our operations and seek
additional financing. We may seek to raise additional funds through public or
private equity financing or from other sources. We may also consider additional
options, which include, but are not limited to, forming strategic partnerships
or alliances and/or considering other strategic alternatives, including possible
business combination. We have not yet identified the source of any additional
financing, nor can we predict whether additional financing can be obtained, or
if obtained, the terms of such financing. Further, there can be no assurance
that any of the additional strategic alternatives will be available, or if
available, will be on terms favorable to us or our stockholders.

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 $40.3 million for the six months
ended June 30, 2001, and net losses of approximately $43.8 million for the year
ended December 31, 2000. As of June 30, 2001, we had an accumulated deficit of
approximately $148.1 million. We have not realized any profit to date and do not
expect to achieve profitability until early in 2002, which may not occur. To
achieve this objective, we need to generate significant additional revenue from
licensing of our products and related services and support revenues. We expect
to reduce our fixed operating expenses through the cost reduction measures
implemented in the January Restructuring and the April Restructuring, which
included workforce reductions, consolidation of facilities and departments,
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. We also consolidated our
North American research and development and professional services resources.

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<PAGE>   28

There is no assurance we will achieve these objectives and thus achieve
profitability. We may be required to further reduce our operations and seek
additional financing. 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 may 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:

    o  variations in demand for our products and services;

    o  competitive pressures;

    o  further decrease in corporate information technology spending and decline
       in economic conditions and market;

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

    o  our quarterly revenue and expense levels;

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

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

    o  industry consolidation reducing the number of potential customers;

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

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

    The timing of revenue and revenue recognition is difficult to predict. 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, our
customer contract bookings and revenue recognized tends to occur predominantly
in the last two weeks of the quarter. 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. 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 NATIONAL MARKET, WHICH COULD CAUSE OUR COMMON STOCK PRICE
TO DECLINE AND MAKE TRADING IN OUR COMMON STOCK MORE DIFFICULT TO INVESTORS.

    Our common stock is currently quoted on The Nasdaq National Market. We must
satisfy Nasdaq's minimum listing maintenance requirements to maintain our
listing on The Nasdaq National Market. Nasdaq listing maintenance requirements
include a series of financial tests relating to net tangible assets, public
float, number of

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<PAGE>   29

market makers and shareholders, market capitalization, and maintaining a minimum
bid price of $1.00 for shares of our common stock. If the minimum closing bid
price of our common stock were to trade below $1.00 for 30 consecutive trading
days, or if we are unable to meet Nasdaq's standards for any other reason, our
common stock could be delisted from The Nasdaq National Market. Recently, the
closing minimum bid price had been at levels below $1.00. Although the closing
minimum bid has not yet been below $1.00 for 30 consecutive trading days, there
is no guarantee that it will return to a minimum bid price of $1.00 of higher.
If our common stock is delisted from The Nasdaq National Market, the common
stock would trade on either The Nasdaq SmallCap Market or on the OTC Bulletin
Board, both of which are viewed by most investors as less desirable and less
liquid marketplaces. Thus, delisting from The Nasdaq National 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 National 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. In some markets, limited capital
resources are causing reduced spending in information technology. We expect
competition to increase in the future, both from existing competitors as well as
new entrants in our current markets. 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. Many of our current and future
competitors may have advantages over us, including:

    o  longer operating histories;

    o  larger customer bases;

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

    o  a lead in expanding their business internationally;

    o  greater name recognition; and

    o  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, 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.

WE DEPEND ON STRATEGIC BUSINESS ALLIANCES WITH THIRD PARTIES, INCLUDING SOFTWARE
FIRMS, CONSULTING FIRMS AND SYSTEMS INTEGRATION FIRMS, 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, other software
firms, consulting firms and systems integration firms help us with marketing,
and sales and implementation of our products. In order to address a broader

                                       29
<PAGE>   30

market and to satisfy customers' requirements associated with the use of
independent consulting and systems integration firms, we have increased our
focus on indirect sales through our strategic alliance partners, including
operational support system providers, other software application companies,
consulting firms and systems integration firms. To be successful, we must
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, fail to devote sufficient resources
to market our products or develop relationships with our competitors. 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 ARE NEW ENTRANTS INTO THEIR
MARKETS AND LACK FINANCIAL RESOURCES, AS A RESULT OF WHICH 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 are new entrants into their
markets and 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 several months. 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. If our potential customers cannot obtain the resources to purchase our
products, they may turn to other options such as service bureaus, which would
hurt our business. 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, the U.S. economy has weakened. This has resulted in
companies delaying or reducing expenditures, including expenditures for
information technology.

    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 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 or
declaring bankruptcy may cause our accounts receivable to continue to increase.
There is no assurance we will be able to collect all of these outstanding
receivables.

OUR LENGTHY SALES CYCLE MAKES IT DIFFICULT TO PREDICT THE TIMING OF SALES AND
THE RESULTING REVENUE, AND REVENUE MAY VARY FROM PERIOD TO PERIOD, WHICH MAY
ADVERSELY AFFECT OUR COMMON STOCK PRICE.

    The sales cycle associated with the purchase of our products is lengthy, and
the time between the initial proposal to a prospective customer and the signing
of a license agreement can be as long as one year. Our products involve a
commitment of capital which may be significant to the customer, with attendant
delays frequently associated with large capital expenditures and implementation
procedures within an organization. These delays may reduce our revenue in a
particular period without a corresponding reduction in our costs, which could
hurt our results of operations for that period.

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<PAGE>   31

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:

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

    o  failure to meet the expectations of industry analysts;

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

    o  increased price competition; and

    o  general conditions in the Internet and telecommunications industry.

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, and which we believe have often been
unrelated to the operating performance of these companies or our company.

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:

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

    o  difficulties in staffing and managing foreign operations;

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

    o  reduced protection for intellectual property rights in some countries;

    o  greater difficulty in collecting accounts receivable; and

    o  uncertainties inherent in transnational operations such as export and
       import regulations, taxation issues, tariffs and trade barriers.

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.

WE RECENTLY INTRODUCED OUR REVCHAIN FAMILY OF INDUSTRY-FOCUSED SOFTWARE SUITES,
THE SUCCESS OF WHICH WILL BE DEPENDENT UPON MARKET ACCEPTANCE.

    We introduced the RevChain product family in early 2001. This new product
family is an evolution of our former customer management and billing products
that were significantly enhanced and re-positioned to address

                                       31
<PAGE>   32

the customer need for managing the entire revenue chain. The RevChain product
family consists of several industry-focused suites, some of which are in the
early stages of their release, and are undergoing further development. As a
result, the market's acceptance of our new RevChain product family, and the
maturity of some of the industry-focused product suites, may have an affect on
our business and financial performance, including our revenues.

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. 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.

WE MAY BE UNABLE TO PROTECT OUR PROPRIETARY TECHNOLOGY, AND OUR COMPETITORS MAY
INFRINGE ON OUR TECHNOLOGY, EITHER 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

                                       32
<PAGE>   33

information, we might seek to license technology or information, or develop 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, PARTICULARLY JAMES DALEEN, 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, particularly James Daleen, our
founder and chief executive officer. If we lost the services of Mr. Daleen or
other key employees it would likely hurt our business. We have employment and
non-compete agreements with some of our executive officers, including Mr.
Daleen. However, these agreements do not obligate them to continue working for
us.

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.

IN THE EVENT WE ACQUIRE THIRD PARTIES OR THIRD PARTY 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.

    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 or amortization costs for acquired intangible assets.

OUR SUCCESS DEPENDS IN PART ON OUR ABILITY TO ATTRACT AND RETAIN SKILLED
EMPLOYEES, WHICH IS DIFFICULT AND EXPENSIVE IN TODAY'S TECHNOLOGY LABOR MARKET.

    Our success depends in large part on our ability to attract, train, motivate
and retain highly skilled information technology professionals, software
programmers and sales and marketing professionals. Qualified personnel in these
fields are in great demand and are likely to remain a limited resource. We may
be unable to continue to retain the skilled employees we require. Any inability
to do so could prevent us from managing and competing for existing and future
projects or to compete for new customer contracts.

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

                                       33
<PAGE>   34

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.

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

    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 $27.5 million. The holders of the Series F preferred
stock also 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 August 6, 2001, 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 53.1% of the entire voting
class of common stock, or 62.0%, if the Warrant holders exercise the Warrants.
On August 6, 2001, we had 21,872,951 shares of common stock issued and
outstanding and 247,882 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.
Additionally, the holders of the Series F preferred stock are entitled to vote
as a separate class on certain matters, including:

    o  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
       up of Daleen;

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

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

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

    o  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.

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<PAGE>   35

THE PRIVATE PLACEMENT PROVIDED THE INVESTORS IN THE SERIES F PREFERRED STOCK
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 Series F 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 provisions of the Series F preferred stock, the conversion
price is $0.9060. Assuming that the holders of the Series F preferred stock and
Warrants exercise the Warrants in full and convert all of their shares of Series
F preferred stock into shares of common stock, we would issue an aggregate of
approximately 43,708,634 shares of common stock. Based on the number of shares
of our common stock outstanding on August 6, 2001, this would represent 66.6% of
our outstanding common stock.

OUR SERIES F PREFERRED STOCK PROVIDES FOR ANTI-DILUTION 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,
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, after March 30, 2002, 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 Daleen. As a result of these provisions, the Series F preferred
stock may remain outstanding indefinitely.

THE PRIVATE PLACEMENT INVESTORS ACQUIRED VOTING POWER OF OUR CAPITAL STOCK
SUFFICIENT TO ENABLE THE INVESTORS TO CONTROL OR SIGNIFICANTLY INFLUENCE ALL
MAJOR CORPORATE DECISIONS.

    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 purchasers in the private placement:

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

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    o  As of August 6, 2001, HarbourVest Partners V-Direct Fund L.P.
       beneficially owned approximately 21.9% of our common stock (including a
       warrant to purchase 1,250,000 shares of our common stock).

    o  HarbourVest Partners, LLC, through funds it manages, beneficially owns
       approximately 35.5% 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 of the
       HarbourVest funds' Warrants and outstanding warrants to purchase our
       common stock.

    o  Prior to the conversion of the Series F preferred stock, but assuming
       exercise of the HarbourVest funds' Warrants and their other warrants,
       HarbourVest Partners, LLC would control approximately 34.3% of the voting
       power of Daleen, or 27.5% 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
purchasers in the private placement, as of August 6, 2001:

    o  SAIC Venture Capital Corporation holds 2,246,615 shares of our common
       stock, 67,604 shares of Series F preferred stock and Warrants to purchase
       an additional 27,042 shares of Series F preferred stock.

    o  As a result, SAIC Venture Capital Corporation beneficially owns
       approximately 24.9% 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.

    o  Prior to the conversion of the Series F preferred stock, but assuming
       exercise of its Warrants, SAIC Venture Capital Corporation would control
       approximately 23.7% of the voting power of Daleen, or 19.3% 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. 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 55,822,944 shares
of common stock. Although the Registration Statement has not been declared
effective by the Securities and Exchange Commission, we expect that it will be
effective prior to September 30, 2001. 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, once the Registration Statement becomes
effective it will permit the holders 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.

    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

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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.

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.

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                                     PART II

                                OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

    On May 11, 2001, we commenced a lawsuit against Mohammad Aamir, 1303949
Ontario Inc. and The Vengrowth Investment Fund Inc. (collectively, the
"Defendants"). The case was filed in the Ontario Superior Court of Justice
(Court File No. 01-CV-210809) and was styled DALEEN TECHNOLOGIES, INC. AND
DALEEN CANADA CORPORATION V. MOHAMMAD AAMIR, 1303949 ONTARIO INC., AND THE
VENGROWTH INVESTMENT FUND INC. All Defendants are former stockholders of Inlogic
Software Inc. ("Inlogic"), a Nova Scotia unlimited liability company that we
acquired in December 1999. Additionally, Mr. Aamir was the president and chief
executive officer of Inlogic and is a former director and executive officer of
the Company. On June 6, 2001, we settled this lawsuit against the Defendants. In
connection with the settlement, on June 8, 2001, we granted to the Defendants
warrants to purchase an aggregate of 750,000 shares of our common stock with an
exercise price of $1.134 per share. The warrants are for two years and are
immediately exercisable. The Company also agreed to negotiate in good faith to
license its ecare product as part of the settlement. The terms of the license
are not yet finalized. The Defendants also agreed to release us from any claims
they may have had against us.

    We are the defendant in a number of other lawsuits and claims incidental in
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.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    The Company held its 2001 Annual Meeting of Stockholders on June 7, 2001
(the "Annual Meeting"). At the Annual Meeting, the stockholders voted on and
approved each of the following proposals:

    Proposal One: To approve the Securities Purchase Agreement dated as of March
    30, 2001 between the Company and the investors to approve an amendment to
    Daleen's Certificate of Incorporation to authorize and designate the rights,
    preferences and designations of the Series F preferred stock to be sold to
    the investors pursuant to the Securities Purchase Agreement and to approve
    the performance by Daleen of all of the transactions contemplated by the
    Securities Purchase Agreement.

    Proposal Two: To approve an amendment to Daleen's certificate of
    incorporation to increase the number of authorized shares of common stock
    from 70 million to 200 million.

    Proposal Three: To approve an amendment to Daleen's certificate of
    incorporation to clarify the provision relating to the Daleen's "blank
    check" preferred stock to specifically permit the Board of Directors to
    designate voting rights on new series of preferred stock.

    Proposal Four: To approve the election of David B. Corey, Neil E. Cox and
    Daniel J. Foreman as Class I directors to serve for a term expiring at the
    2004 annual meeting of stockholders.

    The total number of shares of our common stock issued, outstanding and
entitled to vote at the Annual Meeting was 21,792,425 shares, of which
20,548,965 shares of common stock were present at the meeting in person or by
proxy.

    Proposal One was approved by the holders of over 76.7% of the outstanding
shares of common stock entitled to vote at the Annual Meeting. Specifically, a
total of 16,721,349 shares were voted in favor of this proposal, 117,251 shares
were voted against the proposal and 55,020 shares abstained from voting on the
proposal.

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<PAGE>   39

    Proposal Two was approved by the holders of over 74.1% of the outstanding
shares of common stock entitled to vote at the Annual Meeting. Specifically, a
total of 16,650,891 shares were voted in favor of this proposal, 187,842 shares
were voted against the proposal and 45,072 shares abstained from voting on the
proposal.

    Proposal Three was approved by the holders of 74.1% of the outstanding
shares of common stock entitled to vote at the Annual Meeting. Specifically, a
total of 16,138,637 shares were voted in favor of this proposal, 615,178 shares
were voted against the proposal and 168,292 shares abstained from voting on the
proposal.

    The following list indicates the number of votes received by each of the
nominees for election to the Company's Board of Directors in Proposal Four:

                                    For             Withheld         Result
                                    ---             --------         ------

     David B. Corey              20,441,192         157,773          Approved
     Neil E. Cox                 20,467,802         131,163          Approved
     Daniel J. Foreman           20,469,802         129,163          Approved

ITEM 5. OTHER INFORMATION.

    On June 4, 2001, Neil E. Cox, a director of Daleen, became Executive Vice
President, Telecommunications Integration Sector of Science Applications
International Corporation ("SAIC"). SAIC is the sole stockholder of SAIC Venture
Capital Corporation, a principal stockholder of Daleen. In connection with his
election as an officer of SAIC, Mr. Cox resigned as a director of Daleen on July
18, 2001.

    Stephen M. Wagman, Daleen's chief financial officer, has announced his
intent to resign as an officer of Daleen effective on August 30, 2001. Mr.
Wagman's resignation is for personal reasons. Jeanne Prayther, the current Vice
President - Finance and Accounting of Daleen, will serve as acting chief
financial officer.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

   (a)  Exhibit List

                   EXHIBIT
                   NUMBER                  DESCRIPTION

                    10.1+  Securities Purchase Agreement dated March 30,
                           2001 by and between Daleen Technologies, Inc.
                           and the Escrow Purchasers named therein
                           [incorporated by reference to Exhibit 10.45
                           to the Company's Annual Report on Form 10-K
                           filed on April 5, 2001 (File No. 0-27491)].

                    10.2+  Form of Certificate of Amendment for the
                           Series F Convertible Preferred Stock
                           [incorporated by reference to Exhibit 10.2 to
                           the Company's Current Report on Form 8-K
                           filed on June 15, 2001 (File No. 0-27491)].

                    10.3+  From of Warrant Agreement by and between Daleen
                           Technologies, Inc. and the Escrow Purchasers named
                           therein [incorporated by reference to Exhibit 10.47
                           to the Company's Annual Report on Form 10-K filed on
                           April 5, 2001 (File No. 0-27491)].

                    10.4+  Registration Rights Agreement dated March 30,
                           2001 by and between Daleen Technologies, Inc.
                           and the Escrow Purchasers named therein
                           [incorporated by reference to Exhibit 10.48
                           to the Company's Annual Report On Form 10-K
                           filed on April 5, 2001 (File No. 0-27491)].

                    10.5+  Escrow Agreement dated March 30, 2001 by and
                           between Daleen Technologies, Inc. and the
                           Escrow Purchasers named therein [incorporated
                           by reference to Exhibit 10.49 to the
                           Company's Annual Report on Form 10-K filed on
                           April 5, 2001 (File No. 0-27491)].

----------------------
   + Previously filed.

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<PAGE>   40

   (b) Reports on Form 8-K

    Report on Form 8-K filed June 15, 2001 with respect to the stockholder
approval of the Company's issuance and sale of $27.5 million of Series F
preferred stock and Warrants to purchase Series F preferred stock.

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<PAGE>   41




                                   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: September 25, 2001                      /s/   JAMES DALEEN
                                              ----------------------------------
                                              JAMES DALEEN
                                              Chairman of the Board of Directors
                                                and Chief Executive Officer
                                                (Principal Executive Officer)

Date: September 25, 2001                      /s/   Jeanne Prayther
                                              ----------------------------------
                                              Jeanne Prayther
                                              Acting Chief Financial Officer
                                                (Principal Financial Officer and
                                                Principal Accounting Officer)


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