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                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D. C. 20549
                            ------------------------
                                   FORM 10-K

                            ------------------------

   FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

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

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

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

        FOR THE TRANSITION PERIOD FROM                TO

                        COMMISSION FILE NUMBER: 0-27491

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

<TABLE>
<S>                                            <C>
                  DELAWARE                                      65-0944514
       (STATE OR OTHER JURISDICTION OF                       (I.R.S. EMPLOYER
       INCORPORATION OR ORGANIZATION)                       IDENTIFICATION NO.)

            1750 CLINT MOORE ROAD                                  33487
             BOCA RATON, FLORIDA                                (ZIP CODE)
  (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>

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

        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                     COMMON STOCK, PAR VALUE $.01 PER SHARE

     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 [ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [X]

     The aggregate market value of the voting stock held by non-affiliates of
the Registrant, based upon the average of the closing bid and ask quotations for
the Common Stock on March 21, 2001 as reported by The Nasdaq Stock Market, was
approximately $14,636,343. The shares of Common Stock held by each officer and
director and by each person known to the Registrant who owns 5% or more of the
outstanding Common Stock have been excluded from this calculation in that such
persons may be deemed to be affiliates. This determination of affiliate status
is not necessarily a conclusive determination for other purposes. As of March
21, 2001, the Registrant had outstanding 21,791,296 shares of Common Stock.

                      DOCUMENTS INCORPORATED BY REFERENCE

     The Registrant's definitive Proxy Statement for the 2001 Annual Meeting of
Stockholders is incorporated by reference in Part III of this Form 10-K to the
extent stated herein.
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                           FORWARD-LOOKING STATEMENTS

     This report contains forward-looking statements within the meaning of the
Securities Exchange 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 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 Form 10-K.
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 the Form 10-K 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.

                                     PART I

ITEM 1.  BUSINESS

OVERVIEW

     We are a provider of Internet software solutions that manage the revenue
chain for next-generation service providers. Our product family, which we refer
to as RevChain(TM), 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 are able to
accelerate time-to-revenue, rapidly adapt to new market opportunities, and
leverage the power of the Internet, thereby providing a competitive advantage in
their business.

     The RevChain product family includes industry-focused software suites
composed of individual applications based on the Daleen Internet Integration
Architecture (IIA(TM)), our Internet computing architecture. The Daleen RevChain
software application products include the following:

     - RevChain Commerce -- customer care and billing;

     - RevChain Interact -- a standard browser interface for customer service
       representatives;

     - RevChain Order -- a secure storefront for Internet shopping and order
       fulfillment;

     - RevChain Care -- providing customer self-service over the Internet; and

     - RevChain Partner -- an Internet-based partner chain management(TM)
       network.

Our products may be configured to address services and feature requirements for
each industry segment on which we focus. These configured application products
are offered as packaged industry suites.

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     In addition to our RevChain product family, in July 2000 we formed a
subsidiary, PartnerCommunity, Inc. ("PartnerCommunity"). PartnerCommunity
provides an Internet-based partner chain management services network for
providers of data content and communications services that enables members to
identify, form and manage partnerships with their vendors, service providers and
customers to deliver innovative communications services offerings with higher
speed, ease and flexibility. PartnerCommunity also enable these service
providers to build their own private community to integrate business processes
with their partners and business customers and to offer partner management
services.

     In September 2000, we also formed a wholly-owned subsidiary, Daleen
Technologies Europe B.V., a corporation formed under the laws of the
Netherlands. From this subsidiary, we run our operations in Europe, the Middle
East and Africa.

RECENT DEVELOPMENTS

  Private Placement of Convertible Preferred Stock

     GENERAL.  On March 30, 2001, we entered into definitive agreements
(collectively, the "Purchase Agreements") for the sale (the "Private Placement")
of $27,500,000 of Series F convertible preferred stock (the "Preferred Stock")
and warrants to purchase Preferred Stock (the "Warrants"). The consummation of
the Private Placement is subject to the receipt of approval from our
stockholders (the "Requisite Stockholder Approval"), including approval of an
amendment to our Certificate of Incorporation to increase the number of
authorized shares of common stock and to create and designate the Preferred
Stock. The purchasers deposited the full $27,500,000 purchase price in escrow
with SunTrust Bank as escrow agent. The only condition to the release of the
escrowed funds to us is the receipt of the Requisite Stockholder Approval by
July 30, 2001. If we do not obtain the Requisite Stockholder Approval on or
before July 30, 2001, or such later date as we and the purchasers agree, our
obligation to sell, and the purchasers' obligations to purchase, the Preferred
Stock and Warrants will be deemed null and void. Pursuant to our Certificate of
Incorporation, the approval of the holders of 66 2/3% of our outstanding common
stock will be required to amend our Certificate of Incorporation to increase the
number of shares of authorized common stock and to create and designate the
terms of the Preferred Stock. Both of these amendments are required for the
consummation of the Private Placement. Certain of our stockholders, including
stockholders that have agreed to purchase Preferred Stock and Warrants in the
Private Placement as well as our directors and their affiliates, have agreed to
vote their shares our common stock in favor of the Private Placement and the
transactions contemplated thereby. These stockholders own approximately 51.3% of
our outstanding common stock. Accordingly, we must obtain the approval of the
holders of an additional 15.4% of the outstanding common stock in order to
obtain the Requisite Stockholder Approval. As a result, we believe that receipt
of the Requisite Stockholder Approval is reasonably likely but no assurances can
be given.

     The offering and sale of the Preferred Stock and Warrants will be exempt
from registration under the Securities Act of 1933, as amended, by virtue of
Rule 506 of Regulation D promulgated thereunder. The Preferred Stock will be a
new series of our preferred stock.

     TERMS OF PREFERRED STOCK.  Following is a summary of the terms of the
Preferred Stock.

        Number of Shares; Purchase Price.  Pursuant to the terms of the Purchase
Agreements, we will issue and sell (i) an aggregate of 247,882 shares Preferred
Stock and (ii) Warrants to purchase an aggregate of 99,153 shares of Preferred
Stock. Upon consummation of the Private Placement, we also will issue to
Robertson Stephens, which acted as placement agent in the transaction, warrants
for the purchase of 9,915 shares of Preferred Stock (the "Placement Agent
Warrants") and will pay a fee of $1.2 million. The purchase price per share of
the Preferred Stock (without giving effect to the allocation of any part of the
purchase price to the Warrants) is $110.94 per share, which is equal to (i)
$1.1094, the average closing price per share of our 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
Preferred Stock.

        Conversion Price.  Each share of Preferred Stock will be convertible at
any time at the option of the holder. The number of shares issuable upon
conversion of a single share of Preferred Stock is determined by

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dividing the original price per share of the Preferred Stock, or $110.94 (the
"Original Price"), by the "Conversion Price", as defined in the terms of the
Preferred Stock. The initial Conversion Price is $1.1094. As a result, each
share of Preferred Stock initially will be convertible into 100 shares of our
common stock. The Conversion Price will be subject to adjustment as described
below. Assuming conversion of all of the shares of Preferred Stock, including
the shares issuable upon exercise of the Warrants and Placement Agent Warrants,
we would issue an aggregate of 36,695,000 shares of common stock based on the
initial Conversion Price. The Conversion Price will be 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 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) 75% of the initial Conversion Price. If we issue more than one
     Earnings Release with respect to the quarter ended June 30, 2001 (such as a
     pre-announcement press release followed by the final earnings press
     release), 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, if any, will follow 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.

     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 Preferred
Stock, the Conversion Price will be reduced to be equal to the price per share
of the securities sold by us. 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 also will be subject to adjustment as a result of stock splits, stock
dividends and the like on the common stock. These provisions will apply to any
of the foregoing actions that occur after March 30, 2001.

     The Preferred Stock will automatically convert into common stock at any
time after March 30, 2002, if the common stock trades on The Nasdaq Stock Market
at a price per share of at least $3.3282 (three times the initial Conversion
Price) for ten trading days within any twenty trading day period.

        Voting Rights.  The Preferred Stock will entitle the holders thereof to
vote with the common stock on the basis of 100 votes for each share of Preferred
Stock. Additionally, so long as at least 50% of the shares of Preferred Stock
that are ever outstanding at any one time remain outstanding, we will be
prevented from the following activities unless we first obtain the approval of a
majority of the outstanding shares of Preferred Stock:

        (i) Authorize or issue any other class or series of preferred stock
            ranking senior to or parri passu with the Preferred Stock as to
            payment of amounts distributable upon our dissolution, liquidation
            or winding up or issue any additional shares of Preferred Stock;

        (ii) Reclassification of any capital stock into shares having
             preferences or priorities senior to or parri passu with the
             Preferred Stock;

        (iii) Amend, alter or repeal any rights of the Preferred Stock; and

        (iv) Pay dividends on any other class or series of capital stock.

        Dividends.  Holders of Preferred Stock will have rights to the payment
of dividends only when and if dividends are declared on our common stock. In the
event we pay dividends on our common stock, the holders of Preferred Stock would
be entitled to dividends on an as-if-converted basis.

        Liquidation Preference.  In the event of a dissolution, liquidation or
winding up of our operations, after payment or provision for payment of debts,
but before any distribution to the holders of common stock or
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any other class or series of our then outstanding capital stock ranking junior
to the Preferred Stock, the holders of the Preferred Stock then outstanding
shall be entitled to receive a preferential amount of $110.94 per share (the
"Preferential Amount"), which is equal to the Original Price per share; provided
however, that (i) if the assets to be distributed to the holders of the
Preferred Stock are insufficient to permit the payment to such holders of the
full Preferential Amount, then all of our assets to be distributed will be
distributed ratably to the holders of the Preferred Stock; and (ii) if the
amount distributable on each share of common stock upon liquidation, dissolution
or winding up of our operations (after taking into account all distributions
that would be necessary to satisfy the Preferential Amounts due to holders of
the Preferred Stock) is greater than the Preferential Amount payable on the
Preferred Stock, we, in lieu of distributing the Preferential Amount to the
holders of Preferred Stock, shall make a distribution in an amount per share to
the holders of Preferred Stock (on an as-if converted basis) equal to the amount
per share distributed to the holders of common stock.

        Redemption Rights.  Unless otherwise agreed by the holders of at least a
majority of the outstanding shares of Preferred Stock, voting or consenting as a
separate class, in the event of a "Sale of the Company" we will be required to
redeem all of the issued and outstanding shares of Preferred Stock for a
redemption price equal to the Preferential Amount. A "Sale of the Company"
means: (i) the acquisition by another entity by means of merger or consolidation
resulting in the exchange of at least 50% of the outstanding shares of our
capital stock for securities issued or other consideration paid by the acquiring
entity or any parent or subsidiary thereof (except for a merger or consolidation
after the consummation of which our stockholders immediately prior to such
merger or consolidation own in excess of 50% of the voting securities of the
surviving corporation or its parent corporation); or (ii) the sale or other
disposition by us of substantially all of our assets (other than a sale or
transfer of assets to one or more of our wholly-owned subsidiaries).

        Registration Rights.  We will be required to file with the SEC a
registration statement to register the common stock issuable upon conversion of
the Preferred Stock (including the shares of Preferred Stock issuable upon
exercise of the Warrants) on or before May 14, 2001. Such registration will
permit the resale of the common stock without restriction under the securities
laws. We also granted to the holders of Preferred Stock (i) the right to demand
that we effect up to three underwritten public offerings of the common stock
underlying the Preferred Stock and Warrants and (ii) "piggyback" registration
rights in the event we subsequently file a registration statement for the sale
of capital stock. We previously granted "piggyback" registration rights to a
number of our other stockholders, including our largest stockholders. It is
anticipated that these stockholders will exercise their right to include their
shares in the registration statement to be filed in connection with the Private
Placement.

  Terms of the Warrants.

     Purchasers of Preferred Stock will receive Warrants to purchase an
aggregate of 99,153 shares of Preferred Stock. Additionally, we will issue to
Robertson Stephens the Placement Agent Warrants for the purchase of 9,915 shares
of Preferred Stock. The Warrants and Placement Agent Warrants will have an
exercise price of $166.41 per share of Preferred Stock and will be exercisable
at any time for a period of five years following the closing of the Private
Placement. The exercise price per share is equal to 150% of the Original Price.

  Purchasers.

     The purchasers of the Preferred Stock and Warrants include SAIC Venture
Capital Corporation and St. Paul Venture Capital VI, LLC, which are current
stockholders of the Company. Other purchasers include a venture capital fund,
HarbourVest Partners VI Direct Fund, L.P., managed by HarbourVest Partners, LLC
("HarbourVest"). HarbourVest also is the managing partner of HarbourVest
Partners V -- Direct Fund L.P. which currently beneficially owns approximately
22% of our shares of common stock (including warrants to purchase 1,250,000
shares of common stock). As a result of the proposed transaction, SAIC Venture
Capital Corporation would beneficially own approximately 23.8% of our common
stock (assuming exercise of its Warrants), HarbourVest, through the funds that
it manages, would beneficially own approximately 34.4% of our common stock
(assuming exercise of its Warrants), and St. Paul Venture Capital VI, LLC would
beneficially own approximately 7.7% of the issued and outstanding common stock
(assuming exercise of its
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Warrants) in each case treating the Preferred Stock and Warrants on an
as-if-converted and exercised basis. William A. Roper is an executive officer of
SAIC Venture Capital Corporation and Ofer Nemirovsky is a managing director of
HarbourVest. Messrs. Roper and Nemirovsky are directors of the Company.

INDUSTRY BACKGROUND

     RevChain software suites may be configured to address a wide variety of
industry segments, including wireless data, broadband, digital content, mobile
voice, application service providers (ASPs), integrated communications providers
(ICPs) and utilities. A description of these markets is briefly described below:

  Wireless Data

     The past two decades have seen significant growth in wireless
communications and computer technology and the past five years have seen similar
growth in the Internet. In the middle of this convergence is the wireless data
industry. At the same time corporations are starting to use wireless services to
push their data and content to their employees as well as customers.

     The growth in wireless data subscribers and the increase in corporate use
of wireless data services has led to a tremendous growth in the number of
wireless data operators, service providers, MVNOs (Mobile Virtual Network
Operators), W-ASPs (Wireless Application Service Providers) and middleware
vendors.

  Broadband

     Broadband is capable of supporting Internet connections at very high
speeds. Ultimately, we believe that a convergence of communication services will
occur as voice, video and data are provided over one connection, from one
provider. People will then access information at high speed, communicate in
real-time and enjoy expanded sources of video entertainment.

     As demand grows and bandwidth costs continue to decrease, providers must
offer value-added services in order to reach profitability goals and to
differentiate themselves in the market. To meet these competitive demands, we
believe broadband providers need to take a more comprehensive approach and
streamline their entire enterprise's revenue chain to adapt for future growth
and dynamic, value-based service offerings.

  Digital Content

     The number of content services is growing with providers offering -- media,
videos, music, news/periodicals, reference/encyclopedias, traffic reports,
gaming, and delivery software over the Internet. Internet content providers want
to provide these services to wireless application protocol (WAP)-enabled phones,
personal digital assistants (PDAs) and personal computers (PCs). Despite the
growth, online and wireless content providers worldwide are experiencing
challenges in translating customer demand into increased revenue dollars. To
differentiate themselves from competitors, digital content providers need to
offer premium, value-based services, which require real-time customer care and
usage/value-based pricing.

  Mobile Voice

     The use of cellular and mobile phones is increasing around the world and
wireless voice penetration is expected to surpass that of wireline within the
next few years. This continued demand in wireless voice services has led to a
significant increase in the number of wireless voice providers and their
respective business models. In addition, the advent of next generation networks
has placed an enormous burden on existing legacy systems. These legacy systems
cannot adequately support the new services that will be offered over these new
networks.

  Application Service Providers (ASPs)

     ASPs are service firms that deploy, host, implement, manage and support
applications from a central data center across the Internet, VPNs (virtual
private networks), or leased lines. End users access these

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applications remotely and usually rent them on a per-user, per-month basis. This
industry enables end users to reduce both application deployment timeframes and
their total cost of ownership.

     Competition and consolidation of the ASP industry require current ASPs to
differentiate themselves by quickly becoming more effective and efficient than
their competitors. ASPs need to provide value-added application services and to
price them according to the value perceived by end users based on quality of
service, amount of resources used, and time. We believe success in the ASP
market will be dependent in part upon the ability to overcome pricing and
customer service challenges, in order to accelerate customer adoption and
time-to-revenue.

  Integrated Communications Providers (ICPs)

     Deregulation in the U.S. telecom market started in 1984 with the breakup of
AT&T into the RBOCs or regional Bell operating companies; also known as ILECs or
incumbent local exchange carriers. This was intensified by the
Telecommunications Act of 1996, which further deregulated the market resulting
in the formation of competitive local exchange carriers, or CLECs. More
recently, ICPs became the catchphrase for companies providing these types of
services.

     The deregulation in the U.S, along with similar deregulation and
privatization trends in Canada, Latin America, Europe and Asia, have increased
competition worldwide by allowing new entrants into the market. At the same
time, customers have begun to demand, and service providers are making
available, an increasing variety of communications services, including voice,
data and video services. End customers now have greater freedom of choice for
their communications needs. Service providers are experiencing the need to
constantly add additional core value and services to increase customer
acquisition efforts as well as to enhance existing customer loyalty and
satisfaction by adding additional new revenue streams. Maintaining customer
loyalty as well as driving the highest level of customer lifetime value has
become an important focus. Service providers have addressed these challenges by
providing superior customer care and expanding their service offerings with new
services and content as well as bundling together and cross-discounting various
combinations of communications services, in order to differentiate themselves.

     Customer management and billing, partner management and service activation
solutions are among the key components of a service providers' information
systems, because they enable the provider to better manage its customers and
revenues; to dynamically change and grow service offerings, to market programs
and rate plans; and to automate and streamline processes, transactions and
interactions between trading partners. In today's climate of fierce competition
and shrinking margins, ICPs need to take a more comprehensive approach to
understanding and managing the revenue chain of the entire enterprise.

  Utilities

     Deregulation in the utilities industry, which supports services including
electric, gas, water and sewer, has opened this market to competition. Today,
utility markets in many parts of the world are presenting tremendous opportunity
for utility service providers to offer new services that result in increased
revenue. In a climate of newly-emerging players, a rapidly-changing and
competitive market and evolutionary regulator mandates and shrinking margins,
today's utility provider can benefit from a more comprehensive approach to
understanding and managing the revenue chain of the entire enterprise. We
believe success as a utility service provider will depend in part on the ability
to integrate the disparate, complex processes involved in acquiring, servicing,
and most importantly, maintaining customer accounts, while accelerating
time-to-revenue. Daleen's RevChain for Utilities is designed to provide this
solution.

ISSUES COMMON TO OUR TARGETED MARKETS

     Many software systems currently in use today in our target markets were
created before the emergence of today's competitive market, and the pervasive
use of the Internet. Service providers have been forced to repeatedly modify
their legacy systems over time as they have introduced new offerings, marketing
promotions, and rate plans in response to intense competition. As a result, many
existing service providers maintain an extremely complex information systems
environment consisting of numerous proprietary systems.
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These systems have only a limited interoperability with other elements of the
information system that may be acquired by a service provider, or were created
as a result of a new product or service offering. These patchwork systems
frequently employ older technologies that are costly to maintain, were designed
to support a single communications service, and are not based on an Internet
architecture. They require significant time, resources and effort to modify,
making it difficult for service providers to respond quickly and competitively
with innovative marketing promotions and new service offerings. We believe our
targeted markets can benefit from a way to manage their entire revenue chain,
deliver new services to the market, manage customers, interact with customers
over the Internet, and incorporate partners in the extended enterprise. We
believe that service providers will move their current business processes and
software systems to an Internet architecture and an Internet-enabled eBusiness
model in order to attract and retain customers, as well as lower their labor and
other operating costs.

     Competition is becoming increasingly intense. Service providers -- faced
with fast moving and dynamic customers, competitors and capital markets -- are
partnering with other service providers and vendors to build value chains and
virtual ecosystems. In addition, most of them are new entrants into their
markets and lack significant financial resources. These companies often rely on
access to capital markets for their capital which have cut back on their
investing over the past year. Partnering allows these companies to focus on
their core competencies, delivering value to their shareholders through
increased profitability and lower capital requirements, while at the same time
delivering complete solutions to their customers, increasing revenue, market
share and customer retention. Building and managing a network of trading
partners is time consuming and expensive. Even though vendors have made
significant strides in developing message-based software, standard terminology
and processes for integrating one company's business systems with another- the
point-to-point methodology used in business-to-business integration is
increasingly costly and difficult to manage as the number of trading partners
and their interdependency increases.

     Succeeding in today's business environment is more difficult than ever
before. Providers must create new network-based services quickly, manage them
effectively, provide exceptional service to customers and issue a single invoice
for complex service bundles. A narrow focus on the back-office billing is no
longer enough. The evolving business environment requires a new, more
comprehensive solution than billing applications have previously offered.

     A linked and integrated process that drives revenue is essential. We
recently introduced a new concept we call "managing the revenue chain" that
addresses the emerging requirements of service providers. Managing the revenue
chain has four components: creation and management of services; management of
customers; orders and fulfillment; and billing and settlement. In addition, the
revenue chain spans the extended enterprise -- internally in the back office;
interfacing with customers through the Internet and with customer service
representatives (CSRs) and managing mutual service offerings and customers
across partner relationships.

     Software systems that manage the revenue chain must enable service
providers to respond quickly to competition and changing market conditions in
today's fast-growing, dynamic environment. We believe that both existing and
emerging service providers in our targeted markets are looking for
next-generation solutions that are designed to:

     - Support multiple, convergent services and the rapid deployment of new
       services and pricing programs;

     - Provide Internet-based access and process automation for both customers
       and business partners;

     - Interoperate with other components of the service provider's information
       system; and

     - Enable easy modification and maintenance to minimize use of costly
       information technology staff.

THE DALEEN SOLUTION

     Through 2000, we focused on being a leading provider of billing and
customer care software solutions. Our products, BillPlex(R), eCare,
SwitchFlow(TM), Voyager(TM), RequestFlow(TM) and PicWare, enable customers to
provide comprehensive, Internet-enabled billing, provisioning, and customer and
partner management for a

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wide array of communications services that include local, long distance and
wireless voice; Internet access and other data services; and application
hosting. Our products play a key strategic role in a service provider's business
plan by improving its ability to compete effectively while simultaneously
lowering the total cost of providing customer and partner management services.

     During 2000 we signed an agreement with a third party to have exclusive
rights to sell and support the Voyager, RequestFlow and PicWare products in the
U.S. and Canada.

     In February 2001, we introduced a new concept, managing the revenue
chain -- a holistic view of revenue that encompasses far more than just billing.
It addresses the need to accelerate time-to-revenue across all aspects of the
organization in the back office, on the Internet with customers, as well as with
partners. Underlying this new model for managing the revenue chain is the
fundamental requirement of doing business on the Internet.

     As a result, we developed the Daleen RevChain product family, which
represents the evolution of our former customer management and billing products
(known as BillPlex and eCare) into products with significantly enhanced
functionality and a new Internet based architecture. RevChain is a full product
line that includes a set of industry-focused software suites, composed of five
individual applications built on an Internet computing architecture. Our
RevChain applications are based on our innovative Internet architecture that may
be configured for specific industries which may be licensed together or
separately. Our product suites enable customers to accelerate time-to-revenue,
rapidly adapt to new opportunities and leverage the power of the Internet.

     Our suites of applications may be configured and integrated to address the
requirements, services and features of specific industries. This advantage may
decrease time-to-revenue, while reducing the typical costs of integration
services and upgrades. The resulting suites have maximum out-of-the-box
functionality while still providing the means to configure most aspects of the
applications to meet each enterprise's specific needs.

     The RevChain product family plays a key role in a service provider's
business by improving its ability to compete effectively, using products that
are built on an Internet architecture, while simultaneously lowering the total
cost of providing customer and partner management services. Our products are
designed to enable service providers to capture the following key business
benefits:

     Increased revenue and market share.  The RevChain product family has been
designed to address next-generation, convergent software solutions for companies
seeking to provide multiple services. Our innovative Internet architecture has
the inherent flexibility to enable providers to offer new services and marketing
programs and to respond rapidly to dynamic market conditions. The RevChain
product family enables service providers to increase revenue and market share
by:

     - Shortening the time required for a new market entrant to launch its
       business or for an existing provider to offer new promotions and
       services;

     - Promoting a provider's products and services, and attracting new
       customers through an Internet multimedia catalog, online ordering, and
       electronic bill presentment and payment functionality;

     - Allowing a provider to immediately activate services when a subscriber is
       added to the system;

     - Enabling a provider to offer targeted marketing programs and service
       bundles that are optimized for maximum revenue and market penetration;

     - Enabling a service provider to quickly and easily find, form and manage
       trading partnerships in order to extend its market reach and add
       additional services to its portfolio; and

     - Generating bills that are accurate and easy to understand.

     A pre-configured, comprehensive, integrated solution.  The RevChain product
family is designed in suites that are pre-engineered for the requirements and
standards of specific industries, allowing service providers to implement the
solutions quickly. Our modular software applications require far less
customization than competitive solutions, thereby dramatically decreasing
time-to-revenue. Furthermore, the cost of

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integration services is substantially reduced by using our pre-configured,
industry-focused solutions and pre-integrated partner solutions that leverage
the latest in Internet technologies.

     Improved customer service and customer retention.  The RevChain product
family enables service providers to offer superior customer care and
responsiveness, thus increasing customer retention. Providers can extend their
Internet presence to continually acquire new customers and significantly lower
operating costs. RevChain's customer self-care capabilities increase
satisfaction and retention rates for existing customers and reduces the strain
on the provider's call center staff. In addition, the ability to quickly, easily
and cost-effectively form trading partner relationships allows a service
provider to resell the services of its trading partners, enhancing its ability
to provide complete solutions for its target customers.

     Enterprise integration and interoperability.  The RevChain product family
is designed for seamless integration with other applications in a service
provider's enterprise operations environment, including such applications as
Enterprise Resource Planning (ERP) and Customer Relationship Management (CRM)
services. Based on the new Daleen IIA, RevChain applications integrate
seamlessly with legacy and existing systems to protect a customer's investment
in current technology and systems. IIA uses standard Internet technologies,
providing ubiquitous access and seamless integration, providing significant
benefits including rapid integration, universal application access, and lower
deployment costs. In addition, the RevChain product family suites enable service
providers to readily integrate their enterprise applications with those of their
trading partners.

     Flexibility, scalability and reliability.  The RevChain product family can
grow with a service provider's needs, scaling down to meet the needs of the
smallest new market entrant or scaling to the environment of a large, incumbent
service provider. Our new Internet architecture, IIA, provides Internet-based
scalability through the use of HTTP versus proprietary client-server protocols.
Pooled database connections reduce connection loads on the database and maximize
performance and scalability. In addition, RevChain's flexible Internet
architecture enables customers to easily support additional service offerings in
the future, delivering them with minimal customization. The RevChain product
family provides flexibility and adaptability by supporting any transaction or
data, any service offering over any network in "right time" -- meaning real time
or batch, whichever is the most effective and cost-efficient for an individual
provider's requirements. RevChain software solutions allow providers to
distribute database information and processing across multiple servers, which
minimizes the impact of a server failure and maximizes system availability and
reliability.

     Increased productivity and lower total operating costs.  We created the
RevChain product family in response to the growing imperative for service
providers to extend operations to the Internet, to provide self-service
capabilities in business-to-business and business-to-consumer markets, and to
create greater operational efficiency within the organization and with partners.
We have embraced the Internet by designing the RevChain applications and
architecture from the ground up using an Internet-centric, component-based
architecture. As a result, significant cost savings are achieved through the
ability for more rapid initial deployment, as well as ongoing management of
mission critical applications. Further cost savings are achieved through
RevChain's Internet self-care capabilities which reduces the load on a
provider's call center staff.

     Partnering with key strategic alliances.  Daleen RevChain software also
provides an Internet-based partner chain management network to automate and
manage new and existing partner relationships and automate key business support
systems between one or more partners.

THE DALEEN STRATEGY

     Our goal is to become the leading global provider of Internet software that
automates and manages the revenue chain enabling customers and partners to:

     - Accelerate time-to-revenue;

     - Rapidly adapt to new opportunities;

     - Leverage the power of the Internet; and

     - Secure their current and future success.
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     We expect to achieve this goal by:

     Aggressively targeting specific, rapidly-growing industry segments.  We
believe the RevChain product family is well suited for a variety of markets
including: wireless data, broadband, utilities, digital content, mobile voice,
ASP, and ICP. Service providers across all of these industries are increasingly
under external pressure to produce revenue at a faster rate than ever before.
The ability to accelerate time-to-revenue and provide high levels of customer
satisfaction will be crucial for service providers to succeed in today's highly
competitive market environment. Effectively managing the revenue chain is
rapidly becoming a critical element of the service provider business model to
ensure success. We develop and provide software on an Internet platform that
answers the need for both an end-to-end and a best-of-breed, tightly-integrated
solutions that manage the revenue chain. We believe that our innovative RevChain
product family will provide us with an opportunity for significant growth as
broad industry trends continue to drive the dynamic expansion of our target
markets.

     Building a scalable, software-based business model.  We provide software
solutions that may be configured to address unique and specific industry
requirements. As such, the Daleen RevChain industry suites require minimal
customization, as compared to the highly customized nature of most legacy and
first-generation systems. We believe that our pre-integrated, configurable
RevChain industry suites will provide a competitive advantage that will enable
us to pursue our market leadership goal. This approach is designed to permit us
to achieve the high margins and rapid growth typical of software companies.

     Leveraging strategic partnerships and alliances.  We have established
strategic alliances with industry-leading Business Alliance and Delivery
Partners, Technology and Solution Partners, and ASP/Service Bureau Partners.
These strategic alliances help extend our market coverage and provide us with
new business leads and access to a large pool of highly trained implementation
personnel. We are continually seeking to expand the number of partners we work
with to further penetrate the market and accelerate our growth.

     Developing and maintaining long-term customer relationships.  We seek to
develop and maintain long-term relationships with our customers. Our pricing
model is targeted to attract and retain customers through all phases of their
growth. We believe that long-term relationships with rapidly growing customers
will lead to additional product sales, customer references and ongoing support
and maintenance revenue.

     Expanding into new geographic markets and industry segments.  Our current
customers are located primarily in the United States, Canada, Latin America and
Europe. We intend to further penetrate these areas directly and through our
strategic alliance relationships, as well as continue our global expansion in
Europe, Middle East and Africa. Further, we intend to penetrate additional
market segments, such as financial services, retail and media, through the
development and release of pre-configured RevChain industry suites specifically
targeted at those market segments. We have no scheduled entry dates for
penetrating these markets at this time.

PRODUCTS

     In 2000, our product line primarily included BillPlex, eCare, SwitchFlow,
Voyager, RequestFlow and PicWare. During 2000, we signed an agreement with a
third party which grants them the exclusive rights to license the Voyager,
RequestFlow and PicWare products in the U.S. and Canada. In early 2001, we
introduced the RevChain product family of industry-focused software suites,
which may be configured to include new features, as well as enhancements and the
evolution of our former products. Our new line of Internet-ready RevChain
industry-focused software suites includes: RevChain for Wireless Data, RevChain
for Broadband, RevChain for Utilities, RevChain for Mobile Voice, RevChain for
Digital Content, RevChain for ASP, and RevChain for ICP. Some of these
industry-focused software suites are in the early stage of development.
Additional industry-focused suites for other non-telecommunications markets,
including financial services, retail and media are also in development to meet
the needs of current and future customers.

     Each of our industry-focused Daleen RevChain suites may be configured to
accommodate several modular applications that address all aspects of the revenue
chain. The modular structure makes building a

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system far simpler, allowing customers to buy a suite in its entirety or
purchase specific modules as needed. A summary of RevChain applications and
their features are outlined below:

     Daleen RevChain Commerce -- A powerful billing and customer-care solution,
RevChain Commerce provides back-office capabilities across the revenue chain
built on an Internet architecture. The application uses a "right-time/anytime"
approach that enables reading, rating and tracking any service offering over any
network in either real-time or batch mode depending upon the needs of the
service. It also provides increased throughput and support for high-capacity
operations to rate and bill high volumes of complex usage records. Electronic
bill presentment and payment (EBPP) capabilities enable customers to access
invoice and statement information and pay bills via the Internet. The
capabilities of RevChain Commerce include service planning, rating, and
configuration, customer account management, order entry validation and workflow,
real-time, event-driven rating, international language, currency, and
localization; convergent billing, credit management, accounts receivable and
collections, and EBPP capabilities.

     Daleen RevChain Interact -- An Internet user interface for customer service
and call center staff solutions that requires no additional hardware or
software, RevChain Interact leverages Web browsers to enable flexible call
center management and maximizes integration with back-office systems. RevChain
Interact reduces database connections, server load, and hardware and software
requirements, and minimizes bandwidth requirements, thus providing scalability
for larger organizations. In addition, since no client software is required,
CSRs can be deployed quickly whether they are in standard or remote
operations -- even telecommuting. The capabilities included in RevChain Interact
are: a streamlined Internet interface to product catalogs and customer
databases; account creation and management including account hierarchies, access
control, and interface for dispersed and remote call center staffing; order
status presentment; real-time balances and credits display; and on-demand
billing.

     Daleen RevChain Care -- A unified view for customer self-service on the
Internet, RevChain Care allows customers to manage their own accounts, while
fully integrating with CRM and other back-end systems. Subscribers can
self-enroll for services, manage portfolios and accounts, and view and pay
bills -- all using the Internet. RevChain Care provides a unified view of
operations and business support systems throughout the enterprise. The
capabilities of RevChain Care include: customer self-care; account creation and
management; service order and fulfillment status; EBPP display; and bill inquiry
and usage analysis.

     Daleen RevChain Order -- RevChain Order is an innovative, early stage
secure storefront that defines, publishes, distributes and manages a portfolio
of complex products and services via the Internet. A catalog designer and
customer-specific catalogs enable rapid response to market changes and a high
level of customization including quick creation of new product bundles,
definition and publishing of service offerings, and capture and fulfillment of
customer requests. In addition to acting as a secure storefront, RevChain Order
provides the tools for needs analysis and product configuration to increase
customer satisfaction. The capabilities RevChain Order provides are: support for
move, add, change, and disconnect of services; product configuration; guided
selling and personalization; shopping cart; catalog designer and management;
content aggregation and syndication; order fulfillment; and full integration
with RevChain Commerce.

     Daleen RevChain Partner -- RevChain Partner is an early stage Internet
network that automates and manages new and existing partner relationships and
automates key business support systems between one or more partners. RevChain
Partner enables companies to find new partners and services; form and maintain
partner relationships; integrate systems across companies; and manage key
functions and workflows among multiple companies using the Internet. The
capabilities of RevChain Partner, are partner contract and service level
agreement management; trouble management between partners; order validation and
distribution between partners; and settlement services.

     The services that we offer as RevChain Partner are also sold separately
under the PartnerCommunity brand identity. PartnerCommunity provides
Internet-based partner chain management services for network, application and
content service providers. PartnerCommunity enables its customers to find and
form new partner relationships, integrate systems and business processes, and
automate and manage the operation of key business functions between companies.
In addition to business process integration and partner chain management
services, which were described under RevChain Partner above, PartnerCommunity
offers the
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PartnerCommunity@ program, an innovative packaging of PartnerCommunity services
targeted at Web hosting and managed services providers who wish to offer
PartnerCommunity services to their customers in order to enhance their
competitive positions.

TECHNOLOGY

     All RevChain applications are based on Daleen's IIA. Unlike client/server
or n-tier applications, IIA is engineered on an Internet computing platform.
Standard Internet technologies, including universal Java 2 Platform, Enterprise
Edition (J2EE) support, allow ubiquitous access and seamless integration so that
users can easily access RevChain applications using only a standard
XML-compliant Internet browser or Internet-ready devices, such as PDAs and cell
phones.

     IIA is more cost effective and scales further than traditional n-tier
client/server applications. Using performance-enhancing Hypertext Transfer
Protocol (HTTP) for access and finely-tuned, lab-proven service applications,
IIA easily handles complex combinations of rating, order fulfillment, service
creation, customer management and billing.

     Leveraging open Internet technologies such as HTTP, XML, and J2EE, IIA
supports Internet-enabled customer self-care and e-commerce capabilities. IIA
integrates seamlessly with legacy and existing systems to protect a customer's
investment in current technologies and systems. Its proven scalability and
performance means unlimited flexibility as a customer adds new requirements or
updates service offerings.

     The IIA framework includes a service activation layer that integrates to
leading enterprise application integration (EAI) components. Our activation
service provides integrated and automated flow-through service activation and
network provisioning for a diversified service offering. It can be used to
activate or deactivate applications, components, and security using
best-of-breed equipment. The IIA framework means fewer manual steps, fewer hours
correcting errors, and reduced costs.

PROFESSIONAL SERVICES, MAINTENANCE AND TECHNICAL SUPPORT

     Our customer services are designed to provide customers with superior
support while giving them the tools and knowledge they need to independently run
their day-to-day operations. The following services are provided:

     Professional Consulting Services.  We provide a variety of professional
consulting services to assist customers in the implementation, modification and
customization of products and market-based packages. We work with customers to
establish business models and processes that utilize our products to increase
their market power and lower their operating costs. We are also increasing the
involvement of our third party integrators to perform implementations for our
customers with oversight from us.

     Maintenance.  We have comprehensive maintenance and support programs
(Standard or Preferred) that provide customers with timely, high-quality
maintenance and support services for our products. We generally provide these
services under maintenance agreements with our customers. The two different
levels of maintenance agreements entitle customers to multiple levels of
telephone technical support for prompt and professional response to customer
questions or problems and maintenance during and after normal business hours. We
also provide 24-hour access to our online maintenance incident tracking system.

     Operational Environment Tuning and Performance Level Service.  We provide
technical and product configuration support for operational issues and testing
environment support. The support center maintains a close working relationship
with the customer making available all maintenance releases and assisting in
planning and scheduling the implementation of each release.

     Third-party Software Fulfillment.  When customers require it, we provide a
complete solution by offering third-party software products to enable their
RevChain environments. We provide platform products, such as the Windows NT(R)
and UNIX(R) operating systems running from an Oracle(R) database. Daleen's
RevChain Commerce and RevChain Interact products are enabled through BEA's
WebLogic. RevChain Care and RevChain Order are supported by products such as
Forte Fusion and Iona's Orbixweb. We provide

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complementary products that integrate with the RevChain products, such as
Sagent's GeoStan(TM) address validation software; Group 1's Doc1 for invoice
rendering; and tools support development and reporting, such as Seagate's
Crystal Reports or Borland's C++ development toolkit software.

TRAINING

     We offer training programs using a variety of media to provide customers
with the skills needed to use our software. For RevChain Commerce and RevChain
Interact, the program offers a comprehensive train-the-trainer program via the
Internet to prepare customers' trainers who support CSRs, billing administrators
and billing operators. For RevChain Care and RevChain Order, we offer a full
suite of sessions that are geared to the end user. For each customer, we assign
a training specialist to tailor the training of a customer's staff during the
life cycle of the project.

CUSTOMERS

     The RevChain product family may be offered in many industries. Our
customers have typically been companies that are seeking to provide multiple
convergent services such as complex usage and IP-based services. We believe our
customers benefit from us, as a company whose products' integration and design
offers a complete solution for managing the revenue chain. This includes the
ability to handle multiple, convergent services, manage customer care, partner
management, ordering and fulfillment, and billing and settlement services. We
also believe that our customers value our comprehensive IIA that leverages
Internet standard protocols and a J2EE server for rapid installation,
integration and performance.

     As of December 31, 2000, we had executed 79 software contracts, which
includes contracts with local, inter-exchange carriers, Internet service
providers, other data services providers, wireless and wireless data carriers,
broadband service providers, ICPs, competitive local exchange carriers and
utilities. These customers are located in the United States, Canada, Latin
America/Caribbean and Europe and include Aether Systems, Fairpoint
Communications, Inc., Illuminet, Inc., InQuent Technologies, Inc., PacWest
Communications and Sphera Optical Networks. For the twelve months ended December
31, 2000, no customer accounted for 10% or more of our total revenue.

SALES AND MARKETING

     Sales.  Our sales strategy is focused on a wide variety of industry
segments including, wireless data, broadband, digital content, mobile voice and
data, ASPs, and ICPs. Daleen's flexible product architecture can support other
markets and is being extended to support the utility and energy services market.
Through our direct sales approach, we have developed relationships with service
providers and network operators through a problem-solving sales process. We are
working closely with them to define and determine how their needs can be
fulfilled with our products and services, as well as those of our partners. Our
sales process is enhanced by our partners, both systems integration partners for
delivery of our products and integrated solutions as well as technology partners
providing solutions, platform and development support. We have developed
relationships with leading systems integration providers that can sell,
implement and customize our products. In addition, we have developed
relationships with other leading technology providers that offer complementary
products, and who will sell RevChain jointly with their solutions. Systems
integration and technology partners play a key role in providing solutions and
delivery for our customers, thereby extending the capabilities of our sales and
marketing organization.

     Due to the sophisticated nature of our products and services, the duration
of a sales cycle can typically range anywhere from one to two months and up to
one year or longer. We intend to maintain the size of our direct sales
organization while also focusing on the ongoing development of our partners and
the indirect sales channel through our development, strategic and marketing
alliances.

     Marketing.  Our marketing organization is focused on building our brand and
value proposition in the marketplace, defining the target market focus, managing
press and analyst relationships and executing

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marketing programs that are focused on creating awareness, interest and
preference for our products and services. We engage in a variety of marketing
activities, including:

     - Aggressively building our brand recognition and value proposition in the
       marketplace;

     - Supporting our strategic marketing alliances;

     - Conducting seminars, trade shows and special events;

     - Creating and placing advertisements;

     - Creating direct mail and direct response programs;

     - Conducting ongoing public and press relations programs;

     - Creating, managing and maintaining our Web site;

     - Participating in industry consortia and partnership programs with key
       influencers;

     - Understanding and evaluating our competitive advantages; and

     - Establishing and maintaining close relationships with recognized industry
       analysts.

STRATEGIC ALLIANCES

     We have developed strategic alliances that expand the coverage of our
direct sales organization, provide implementation and customization services for
our products, and complete our solutions offerings. Our strategy is to leverage
our current relationships and develop new alliances to help achieve our sales
and implementation targets. Those alliances help expand our ability to exploit
new opportunities in our existing markets, expand our addressable market, and
drive new strategic and product initiatives.

     Our alliance program is based on three types of relationships:

     - Daleen Business Alliance and Delivery Partners;

     - Daleen Technology and Solution Partners; and

     - Daleen ASP/Service Bureau Partners.

     Daleen Business Alliance and Delivery Partners.  We established Business
Alliance and Delivery Partners with industry-leading systems integrators,
including: CAP Gemini Ernst & Young, Danet and DMR Consulting. We offer service
providers state-of-the-art complete solutions needed to manage the revenue chain
in order to stay competitive in today's markets together with our Business
Alliance and Delivery Partners. To become an affiliate in our Business Alliance
and Delivery Partner program, a company must establish an implementation team
that has been trained and certified by us.

     Daleen Technology and Solution Partners.  We work side-by-side with leading
industry application, platform and network providers to set a higher standard
for pre-integrated solutions. We are simplifying these integrations through our
move to a pure Internet architecture built on standard Internet technologies, as
well as the use of standardized, published, and well-documented application
programming interfaces (APIs) to achieve the ultimate goal of true "plug and
play" environments. Technology and Solution Partners conduct joint sales,
marketing, and development activities to create these seamless "best-of-breed"
solutions. Daleen Technology Partners include: Aether Systems, Cisco Systems,
Intec, BEA, MetaSolv and Vitria Technologies. In addition, we have developed
working relationships with the key members of the platform partners. Platform
partners create and market the hardware, operating systems, and database engines
on which our technology runs including Microsoft(R) (network operating system
and database engine), Sun Microsystems (operating systems and server hardware)
and Oracle (database engine).

     Daleen ASP and Service Bureau Partners.  Our ASP and Service Bureau
Partners are leading-edge providers of premium, outsourced services to the
broadband, ICP, and ASP industries, offering Internet billing and customer care,
service activation, and customer self-care. Our solutions share an integrated
platform

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design by using proven tools and systems and supported by market-leading
technology. Our ASP and Service Bureau Partners provide several advantages that
enable companies to compete with the major players:

     - Expert service bureau staff with a proven track record in the
       communications industry;

     - No capital investment and minimal start-up expense;

     - Rapid migration and deployment;

     - Extensive billing, provisioning, customer care, technical support, and
       management reporting;

     - Rapid introduction of new features to support growth and gain competitive
       advantage;

     - Scalability; and

     - Cost-effective solutions.

     Our ASP and Service Bureau Partners include: Danet, Network OSS, Science
Applications International Corporation (SAIC) and SynchronOSS Technologies.

RESEARCH AND DEVELOPMENT

     Our product development capabilities are essential to our strategy of
enhancing our core technology, developing additional applications incorporating
that technology and maintaining the competitiveness of the Daleen RevChain
product family. We have invested heavily in software development to ensure that
we have the product design skills and tools for achieving our market leadership
objective. We recognize that our ability to create and extend our products with
each release comes from investing in exceptionally talented software engineers,
quality assurance testers and billing and telecommunications specialists. In
addition, we engage third parties to perform contract labor on research and
development. We anticipate we will use these third parties more in the future.
We have also created a structured process for both platform and market package
releases that serves as a framework for minimizing our product development cycle
times and ensuring quality software releases that meet or exceed our customers'
requirements.

     Our research and development expenses totaled approximately $6.7 million
for 1998, $9.3 million for 1999, and $27.2 million in 2000. We had three
research and development organizations in 2000 located in Toronto, Canada, Boca
Raton, Florida and Atlanta, Georgia which we have currently consolidated into
two locations. As of February 28, 2001, approximately 156 employees were engaged
in research and development activities.

COMPETITION

     The markets in which we compete are intensely competitive, highly
fragmented and rapidly changing. We expect this competition to increase in the
future. Our products compete on the basis of product functionality, performance,
scalability, extensibility, ease of integration and cost of ownership. The
principal competitive factors in our markets include responsiveness to the needs
of our customers, product features, timeliness of implementation, quality and
reliability of products, price, project management capability, financial
condition and technical expertise. We believe that our total value proposition
of managing the revenue chain, our Internet architecture, the robustness of our
application offerings, the specific product features, and our pricing strategy
offer competitive advantages.

     We believe that our ability to compete depends in part on the performance
of the competition, including the development by others of software that is
competitive with our products and services, the price at which others offer
competitive software and services, the extent of competitors' responsiveness to
customer needs and the ability of our competitors to hire, retain and motivate
key personnel.

     Our main competitors include:

     - Portal Software, Inc.;

     - Saville Systems, PLC, a business unit of ADC Telecommunications, Inc.;

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     - Geneva Technology (which recently announced an agreement to be acquired
       by Convergys Corporation); and

     - Kenan Systems Corporation, a wholly-owned subsidiary of Lucent
       Technologies Inc.

     We also compete with the internal information technology departments of
large communications companies, who may elect to develop functionality such as
those provided by our products in-house rather than buying from outside
suppliers.

     We anticipate continued growth and competition in our target markets and
the entrance of new competitors into the customer management and billing,
partner management, and service activation software markets, as well as emerging
players in the overall revenue chain management area. We expect that the market
for our products will remain intensely competitive. We compete with a number of
companies that have longer operating histories, larger customer bases,
substantially greater financial, technical, sales and marketing resources, and
greater name recognition than we do.

     In addition, as we expand, we will market our products and services to
service providers in geographic and industry markets that we do not currently
serve. Upon our entrance into these markets, we may encounter new competitors,
many of which may have greater "local" knowledge than we do and some of which
could have significantly greater financial and other resources than we have.

INTELLECTUAL PROPERTY

     We regard significant portions of our software products and related
processes as proprietary and rely on a combination of patent, copyright,
trademark and trade secret law, contractual provisions and nondisclosure
agreements to protect our intellectual property rights. We were issued a patent
for our dynamically configurable and extensible rating engine used in our
RevChain Commerce product and currently have six other patent applications
pending in the United States. In addition, we have filed a number of trademark
applications to protect our trademarks and tradenames. There is no guarantee
that our pending patent or trademark applications will result in issued patents
or trademarks, or will provide us with any competitive advantages. In addition,
our patent and trademark applications may be challenged by third parties.

     We generally enter into confidentiality or license agreements with our
employees and consultants. When we license our products, we use signed license
agreements that limit access to and distribution of our intellectual property
and contain confidentiality terms customary in the industry. Generally, we
license our products in object code only, a format that does not allow the user
to change the software source code. However, some of our license agreements do
require us to place the source code for our products into escrow. These
agreements generally provide that these licensees' would have a limited,
non-exclusive right to use the software source code if there is a bankruptcy
proceeding by or against us, if we cease to do business without a successor or
if we discontinue providing maintenance and support on our products.

EMPLOYEES

     As of February 28, 2001, we had 391 full-time employees, of whom 95 were in
product implementation and support, 77 in sales and marketing, 156 in research
and product development and 63 in administration. We have never had a work
stoppage and none of our employees are represented under collective bargaining
agreements. We consider our relations with our employees to be good.

ITEM 2.  PROPERTIES.

     Our headquarters are located in a three-story professional office building
in Boca Raton, Florida where we lease approximately 46,000 square feet. We
occupy this space under a sublease, which expires on May 31, 2008. Also, our
technical facilities are located in approximately 31,000 square feet in an
office complex located in Boca Raton, Florida. We occupy these premises under a
lease that expires on January 31, 2004.

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     We also lease approximately 32,000 square feet of office space in Atlanta,
Georgia. The Atlanta lease expires on August 31, 2004. In addition, we lease
approximately 43,000 square feet of office space in Toronto, Canada. The lease
for this office expires in August 2007.

     We currently lease office space under 1000 square feet for our European
operations in Amsterdam, The Netherlands. This space is leased on a
month-by-month basis.

     We also have United States sales presence in the metropolitan areas of
Boston, Massachusetts; Chicago, Illinois; Portland, Oregon; Denver, Colorado;
Pittsburgh, Pennsylvania; San Diego, California; Atlanta, Georgia; San
Francisco, California; Dallas, Texas; Orlando, Florida and Washington, D.C. We
also have a European sales office located in London, England.

ITEM 3.  LEGAL PROCEEDINGS.

     We are the defendant in a number of 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.

     None

ITEM 4A.  EXECUTIVE OFFICERS OF THE REGISTRANT

     The names, ages at December 31, 2000, and current positions of our
executive officers are listed below in accordance with General Instruction G(3)
of Form 10-K and Instruction 3 of Item 401(b) of Regulation S-K. Unless
otherwise stated, each executive officer has held their position for at least
the last five years. All officers are elected for one year terms or until their
respective successors are chosen. There are no family relationships among the
executive officers nor is there any agreement or understanding between any
officer and any other person pursuant to which the officer was elected.

     JAMES DALEEN, 41, our founder, has served as chairman of the board and
chief executive officer of Daleen since our inception in 1989. Mr. Daleen has
owned and operated several technology companies over the last 15 years. Mr.
Daleen served as president and chief executive officer of Sound Impulse Company,
an electrical construction company, from 1983 until 1995.

     DAVID B. COREY, 41, has served as president and chief operating officer of
Daleen since February 1998 and as a director since June 1998. Mr. Corey has more
than 15 years of international experience in the telecommunications industry,
having held a wide range of executive level positions. Before joining Daleen,
Mr. Corey served as senior vice president of Global Marketing for Westell
Technologies, a telecommunications equipment company and as vice president and
managing director/Asia Pacific for Westell International, a telecommunications
company.

     STEPHEN M. WAGMAN, 40, has served as chief financial officer of Daleen
since June 2000 and has served as an executive vice president of corporate
development and secretary since June 1999. Mr. Wagman has over 12 years of
finance, business and legal experience with high-growth software companies.
Before joining Daleen, Mr. Wagman served in various capacities with PowerCerv
Corporation, an enterprise resource planning software company, including chief
financial officer, treasurer, senior vice president of administration, general
counsel and secretary.

     STEVE KIM, 38, has served as executive vice president of products and
technology since joining Daleen in April 2000. Mr. Kim has over 15 years of
experience in the information technology and telecommunications industries.
Prior to joining Daleen, Mr. Kim was vice president of engineering at Clear
Communications. He has also held senior management positions at Alcatel, Fujitsu
and Walt Disney Corporation in product development and product planning.

                                        17
<PAGE>   19

                                    PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.

     Our Common Stock has been traded on The Nasdaq Stock Market under the
symbol "DALN" since October 1, 1999. Prior to that time there was no established
market for the shares. The price per share reflected in the table below
represents the range of low and high closing sale prices for our Common Stock as
reported by The Nasdaq Stock Market for the periods indicated:

<TABLE>
<CAPTION>
QUARTER ENDED                                                 HIGH PRICE    LOW PRICE
-------------                                                 ----------    ---------
<S>                                                           <C>           <C>
March 31, 2000..............................................    $31.75       $16.62
June 30, 2000...............................................    $20.31       $ 9.62
September 30, 2000..........................................    $17.81       $13.87
December 31, 2000...........................................    $13.25       $ 2.62
</TABLE>

     The closing sale price of our Common Stock as reported by The Nasdaq Stock
Market on March 21, 2001 was $1.25 per share.

     The number of stockholders of record of Daleen's Common Stock as of March
21, 2001, was approximately 239.

     We have never paid cash dividends on our capital stock. We currently intend
to retain any earnings for use in the business and do not anticipate paying any
cash dividends in the foreseeable future.

ISSUANCE OF COMMON STOCK IN ACQUISITION OF INLOGIC

     Effective December 16, 1999, we acquired all of the issued and outstanding
capital shares of Inlogic Software Inc., a Nova Scotia corporation ("Inlogic"
renamed "Daleen Canada Inc."). We acquired the capital shares of Inlogic in
exchange for an aggregate of 2,160,239 exchangeable shares (the "Exchangeable
Shares") and 57,435 shares of our Common Stock. The Exchangeable Shares were
issued by our wholly-owned subsidiary, Daleen Canada Corporation, but are
exchangeable at any time into shares of our Common Stock on a one-for-one basis.
As of March 21, 2000, an aggregate of 2,145,471 Exchangeable Shares had been
converted into shares of our Common Stock. We also issued options to acquire an
aggregate of 167,361 shares of our Common Stock in exchange for all of the
outstanding options to acquire capital shares of Inlogic. The terms of the
transaction are set forth in a Share Purchase Agreement as well as certain other
transaction documents, which are filed as Exhibits to our Current Report on Form
8-K filed on December 30, 1999.

ITEM 6.  SELECTED FINANCIAL DATA.

     The selected financial data set forth below should be read in conjunction
with the consolidated financial statements, including the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in Item 7 of this Form 10-K. The following selected
financial data concerning Daleen for and as of the end of each of the years in
the five year period ended December 31, 2000 are derived from the audited
consolidated financial statements of Daleen. The selected financial data is
qualified in its entirety by the more detailed information and consolidated
financial statements, including the notes thereto, included elsewhere in this
report. The audited consolidated financial statements of Daleen as of December
31, 2000 and 1999 and for each of the years in the three year period ended
December 31, 2000, and the report of KPMG LLP thereon, are included elsewhere in
this report.

                                        18
<PAGE>   20

                      SELECTED CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                             YEARS ENDED DECEMBER 31,
                                                --------------------------------------------------
                                                 1996      1997       1998       1999       2000
                                                -------   -------   --------   --------   --------
                                                       (IN THOUSANDS EXCEPT PER SHARE DATA)
<S>                                             <C>       <C>       <C>        <C>        <C>
Revenue:
  License fees................................  $     0   $     0   $  1,879   $ 12,404   $ 26,886
  Professional services and other.............    2,550       156      3,352      8,321     16,743
                                                -------   -------   --------   --------   --------
          Total revenue.......................    2,550       156      5,231     20,725     43,629
                                                -------   -------   --------   --------   --------
Cost of revenue:
  License fees................................        0         0          3         64        682
  Professional services and other.............    1,396       293      4,239      7,721     13,878
                                                -------   -------   --------   --------   --------
          Total cost of revenue...............    1,396       293      4,242      7,785     14,560
                                                -------   -------   --------   --------   --------
Gross margin..................................    1,154      (137)       989     12,940     29,069
Operating expenses:
  Sales and marketing.........................      450       962      2,435      4,342     14,680
  Research and development....................    1,067     1,669      6,653      9,348     27,215
  Purchased in process research and
     development..............................        0         0          0      6,347          0
  General and administrative..................    2,446     3,704      4,824      8,965     18,210
  Amortization of goodwill and other
     intangibles..............................        0         0          0        607     15,205
                                                -------   -------   --------   --------   --------
          Total operating expenses............    3,963     6,335     13,912     29,609     75,310
                                                -------   -------   --------   --------   --------
Operating loss................................   (2,809)    6,472)   (12,923)   (16,669)   (46,241)
Nonoperating income (expense):................    1,283    (1,512)       754      1,329      2,456
                                                -------   -------   --------   --------   --------
Net loss......................................   (1,526)   (7,984)   (12,169)   (15,340)   (43,785)
                                                -------   -------   --------   --------   --------
Accretion of preferred stock..................        0         0        (65)      (122)         0
                                                -------   -------   --------   --------   --------
Net loss applicable to common stockholders....  $(1,526)   (7,984)  $(12,234)  $(15,462)  $(43,785)
                                                =======   =======   ========   ========   ========
Net loss applicable to common stockholders per
  share -- basic and diluted..................  $ (0.81)    (3.48)  $  (3.78)  $  (1.06)  $  (2.02)
                                                =======   =======   ========   ========   ========
Weighted average shares -- basic and
  diluted.....................................    1,879     2,295      3,240     14,548     21,671
</TABLE>

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                --------------------------------------------------
                                                 1996      1997       1998       1999       2000
                                                -------   -------   --------   --------   --------
<S>                                             <C>       <C>       <C>        <C>        <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents.....................  $   813   $ 5,030   $    723   $ 52,852   $ 22,268
Total Assets..................................    2,065     8,516     11,025    133,881     99,462
Notes payable.................................    3,200     1,618          0          0          0
Current portion of long-term debt and
  obligations under capital leases............      146         0          0          0        129
Long-term debt and obligations under capital
  leases, less current portion................       77         0          0          0        607
Stockholders' (deficit) equity................   (1,914)   (1,946)   (13,897)   119,457     77,501
</TABLE>

                                        19
<PAGE>   21

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.

THE FOLLOWING SHOULD BE READ IN CONJUNCTION WITH THE ACCOMPANYING CONSOLIDATED
FINANCIAL STATEMENTS AND THE RELATED NOTES THERETO INCLUDED ELSEWHERE THEREIN.

OVERVIEW

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

     In December 1999, we acquired all of the issued and outstanding capital
shares of Daleen Canada, a Nova Scotia corporation (formerly known as Inlogic
Software, Inc.). Daleen Canada provides eBusiness software solutions for
customer and partner relationship management, including Web-enabled customer
self-care and EBPP, as well as business-to-business gateway solutions that
support streamlined workflows and automated processes between trading partners.

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

     Revenue from license fees is recognized when persuasive evidence of an
arrangement exists, the software is shipped, the fee is fixed and determinable
and collectibility is probable. An arrangement fee is generally not presumed to
be fixed or determinable if payment of a significant portion of the licensing
fees is not due until after expiration of the license or more than 12 months
after shipment. Revenue related to arrangements containing extended payment
terms where the fees are not considered fixed and determinable is deferred until
payments are due. If collectibility is not probable, revenue is recognized when
the fee is collected.

     If the contract requires us to perform services not considered essential to
the functionality of the software, the revenue related to the software services
are recognized using the percentage of completion method, based on the ratio of
total labor hours incurred to date to total estimated labor hours.

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

     Revenue related to customer maintenance agreements is deferred and
recognized ratably on a straight-line basis over the maintenance period of the
agreement.

     Since late 1998, we have been investing heavily in our professional
services organization, including opening our Atlanta office, the acquisition of
Inlogic, expansion of the Boca Raton and Toronto facilities and the hiring of
consulting professionals, training and customer support professionals. We
believe these investments were necessary to help insure the satisfaction of our
customers as we focus on increasing the number of sales of product licenses. We
anticipate the profit margin from our professional services organization to
continue to improve in the future as the number of our product sales and
implementations increase and more customers subscribe to our maintenance and
support and more third party integrators perform implementations.

                                        20
<PAGE>   22

     We have a limited operating history as a software company. In recent years
we have invested heavily in sales and marketing, research and development and
general operating expenses in order to increase our market position, develop our
products and build our infrastructure. With our recent implementation of our
"profitability acceleration plan" in first quarter 2001, we expect operating
costs to decrease after first quarter 2001 in areas such as compensation and
benefits, travel costs, capitalized expenditures, facilities and other operating
costs. In addition, we are also considering other expense reductions and
consolidations and leveraging our growth and implementations with third party
integrators trained in implementing our software. We anticipate that if these
actions are taken it will further reduce our operating expense levels and
improve cash flow.

     We currently have a net operating loss carryforward for U.S. federal and
state income tax purposes in excess of $64.0 million, and are continuing to
experience operating losses for tax purposes. Therefore, we currently do not pay
any federal income taxes. However, the amount of the net operating loss and
credit carryforwards that we may utilize each year may be limited due to changes
in stock ownership that have occurred over the past several years. In addition,
we have net operating loss carryforwards for Canada in the amount of
approximately $15 million.

RESULTS OF OPERATIONS

     The following table set forth the results of operations expressed as a
percentage of total revenue for the periods indicated. These historical results
are not necessarily indicative of results to be expected for any future period.

                           DALEEN TECHNOLOGIES, INC.
                             RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                              YEARS ENDED DECEMBER 31,
                                                              -------------------------
                                                               1998     1999      2000
                                                              ------    -----    ------
<S>                                                           <C>       <C>      <C>
AS A PERCENTAGE OF TOTAL REVENUES
Revenues:
  License fees..............................................    35.9%    59.9%     61.6%
  Professional services and other...........................    64.1     40.1      38.4
                                                              ------    -----    ------
          Total revenue.....................................   100.0    100.0     100.0

Cost of revenue:
  License fees..............................................     0.1      0.3       1.6
  Professional services and other...........................    81.0     37.3      31.8
                                                              ------    -----    ------
          Total cost of revenue.............................    81.1     37.6      33.4
                                                              ------    -----    ------
Gross profit................................................    18.9     62.4      66.6

Operating expenses:
  Sales and marketing.......................................    46.6     21.0      33.6
  Research and development..................................   127.2     45.1      62.4
  Purchased in process research and development.............      --     30.6        --
  General and administrative................................    92.2     43.3      41.7
  Amortization of goodwill and other intangibles............      --      2.9      34.9
                                                              ------    -----    ------
          Total operating expenses..........................   266.0    142.9     172.6
                                                              ------    -----    ------
Operating loss..............................................  (247.1)   (80.5)   (106.1)
Nonoperating income.........................................    14.4      6.4       5.6
                                                              ------    -----    ------
Net loss....................................................  (232.7)%  (74.1)%  (100.5)%
                                                              ======    =====    ======
</TABLE>

                                        21
<PAGE>   23

YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999

     Total Revenue.  Total revenue, which includes license fees and professional
services and other revenue, increased $22.9 million, or 110.5%, to $43.6 million
in 2000 from $20.7 million in 1999. Revenue increased from both license fees and
professional services and other due to increased sales and customer contracts
for our products and services, increased market acceptance of our products,
additional ongoing product implementations and increased revenue due to
maintenance and support agreements.

     License Fees.  Our license fees are derived from licensing our software
products and ongoing royalties received from third party users of our products.
License fees increased $14.5 million, or 116.8%, to $26.9 million in 2000 from
$12.4 million in 1999. These increases were due to an increase in the number and
size of license contracts in 2000 and increased market acceptance of our
products. License fees constituted 61.6% of total revenue in 2000 compared to
59.9% in 1999.

     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 related to our products.
Consulting services are offered on a fixed fee basis and on a time and material
basis. Third party software fulfillment is offered on a "cost plus" basis.
Professional services and other revenue increased $8.4 million, or 101.2%, to
$16.7 million in 2000 from $8.3 million in 1999. This increase was due to
increased sales and customer contracts, implementations and product sales
associated with our acquisition of Daleen Canada, and increased revenue related
to maintenance and support as our customer base grows.

     Professional services and other revenue decreased to 38.4% of total revenue
in 2000 compared to 40.1% in 1999.

     Cost of Revenue.  Total cost of revenue increased $6.8 million, or 87.0%,
to $14.6 million in 2000 from $7.8 million in 1999. 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, third party fees
paid for product referrals, overhead and materials associated with the
fulfillment and delivery of the license products, and related corporate overhead
costs to provide professional services to customers. These costs increased as we
hired additional personnel to support the new and existing implementations that
we performed for our products. Total cost of revenue as a percentage of total
revenue decreased to 33.4% in 2000 from 37.6% in 1999 primarily related to
improved efficiencies during implementations.

     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, third-party software license payments and related documentation and
third-party referral fees associated with customer contracts. Cost of license
fees increased to $682,000, or 965.6%, in 2000 from $64,000 in 1999 due to the
increased number of software contracts, hiring of personnel focused primarily on
product fulfillment, third party software royalty payments and third party
referral fees.

     Cost of Professional Services and Other.  Cost of professional services and
other includes direct cost of labor, benefits, third party software and related
overhead costs to provide professional services to customers. Cost of
professional services and other increased $6.2 million, or 79.7%, to $13.9
million in 2000 from $7.7 million in 1999. These costs increased as we hired
additional personnel to support new and existing implementations in 2000 and
costs related to our acquisition of Daleen Canada, Inc. Cost of professional
services and other decreased to 82.8% of professional services and other revenue
in 2000 compared to 92.8% in 1999. The percentage decrease is primarily the
result of increased professional services implementations, increased services
revenue together with improved efficiencies during product implementation.

     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, tradeshow and marketing program
costs, promotional and related corporate overhead costs. These expenses
increased $10.4 million, or 238.1%, to $14.7 million in 2000 from $4.3 million
in 1999. The overall increase was due to the increase in the number of personnel
in the sales, marketing, and partner management organizations from 1999 to 2000,
commissions associated with increased revenue and increased involvement in
marketing

                                        22
<PAGE>   24

programs and trade shows. As a percentage of total revenue, these expenses
increased to 33.6% in 2000 from 21.0% in 1999 due to support needed to continue
to drive the increase in revenue.

     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
increased $17.9 million, or 191.1%, to $27.2 million in 2000 from $9.3 million
for 1999. The overall increase was primarily the result of development efforts
associated with the acquisition of Daleen Canada, additional products and
upgrades, additional software developers, increased product testing and
benchmarking, additional managers and quality assurance personnel. We also
incurred costs associated with our use of subcontractors to accelerate
development of new releases of our RevChain products that provide additional
functionality. The third party development firms were subcontracted out to
supplement our internal development resources. As a percentage of total revenue,
these expenses increased to 62.4% in 2000 from 45.1% in 1999. We expect this
percentage to decrease in the future due to the recent launch of RevChain and
the new versions of our products, which have recently been completed.

     General and Administrative.  General and administrative expenses consist
primarily of salaries, benefits and related costs for our executive, finance,
administrative, human resources and information systems personnel. It also
consists of non-cash stock compensation expense, provision for bad debts and
related corporate overhead costs. Our general and administrative expenses
increased $9.2 million, or 249.1%, to $18.2 million in 2000 from $9.0 million
for 1999. This increase was primarily the result of operating as a public
company and hiring and retaining additional executive, finance, information
services and human resources personnel to support the growth of our business. In
addition, our provision for bad debts increased $3.9 million for the year ended
December 31, 2000. We increased the allowance for doubtful accounts due to
market conditions in the telecommunications industry, constraint of capital
resources, certain customers declaring bankruptcy, and having funding issues.

     We also increased stock compensation expense due to recording expense over
the vesting period related to options issued primarily in connection with our
acquisition of Daleen Canada along with certain other stock options granted by
us. In each case, the exercise prices of the options were below the fair market
value of our common stock on the date of grant. As a percentage of total
revenue, these expenses decreased to 41.7% in 2000 from 43.3% in 1999.

     Amortization of Goodwill and Other Intangibles.  Goodwill and other
intangibles are the result of the acquisition of Daleen Canada and are being
amortized over a four-year period. Our amortization increased $14.6 million, or
2045%, to $15.2 million in 2000 from $607,000 in 1999.

     Nonoperating Income.  Nonoperating income is comprised primarily of
interest income, net of interest expense. Nonoperating income increased $1.2
million, or 84.8%, to $2.5 million in 2000 from $1.3 million in 1999. The
increase of nonoperating income for 2000 over 1999 was primarily attributable to
the investment earnings of the proceeds of our initial public offering, received
in the fourth quarter of 1999.

YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998

     Total Revenue.  Total revenue increased $15.5 million, or 296.20%, to $20.7
million in 1999 from $5.2 million in 1998. Revenue increased from both license
fees and professional services and other due to a significant increase in the
number of customer contracts for our products and related product
implementations compared to 1998.

     License Fees.  License fees increased $10.5 million, or 560.14%, to $12.4
million in 1999 from $1.9 million in 1998. These increases were due to an
increase in the number of contracts in 1999 compared to 1998, as well as the
result of our software based business model strategy, in which license fees
account for an increasing percentage of our total revenue, and increased market
acceptance of our products. License fees constituted 59.9% of total revenue in
1999 compared to 35.9% in 1998.

                                        23
<PAGE>   25

     Professional Services and Other.  Professional services and other revenue
increased $5.0 million, or 148.24%, to $8.3 million in 1999 from $3.4 million in
1998. This increase was due to increased implementation services directly
related to increased license fees.

     Professional services and other revenue decreased to 40.1% of total revenue
in 1999 compared to 64.1% in 1998.

     Cost of Revenue.  Total cost of revenue increased $3.5 million, or 83.52%,
to $7.8 million in 1999 from $4.2 million in 1998. 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, third party fees
paid for product referrals, overhead and materials associated with the
fulfillment and delivery of the license products, and related corporate overhead
costs to provide professional services to customers. These costs increased as we
hired additional personnel to support the new and existing implementations that
we performed for our products. Total cost of revenue as a percentage of total
revenue decreased to 37.6% in 1999 from 81.1% in 1998 primarily related to
improved efficiencies during implementations.

     Cost of License Fees.  Cost of license fees increased to $64,000, or
2,033.33%, in 1999 from $3,000 in 1998 due to the increased number of software
contracts signed in 1999 compared to 1998.

     Cost of Professional Services and Other.  Cost of professional services and
other increased $3.5 million, or 82.14%, to $7.7 million in 1999 from $4.2
million in 1998. These costs increased as we hired additional personnel to
support new and existing implementations in 1999. Cost of professional services
and other decreased to 92.8% of professional services and other revenue in 1999
compared to 126.5% in 1998. The percentage decrease is primarily the result of
improved efficiencies during implementation.

     Sales and Marketing.  These expenses increased $1.9 million, or 78.32%, to
$4.3 million in 1999 from $2.4 million in 1998. The overall increase was due to
the increase in the number of personnel in the sales and marketing organizations
from 1998 to 1999. As a percentage of total revenue, these expenses decreased to
21.0% in 1999 from 46.6% in 1998.

     Research and Development.  Our research and development expenses increased
$2.6 million, or 40.51%, to $9.3 million in 1999 from $6.7 million in 1998. The
increase was primarily the result of additional software developers, quality
assurance personnel and outside contractors to support the continued development
of our products. As a percentage of total revenue, these expenses decreased to
45.1% in 1999 from 127.2% in 1998.

     General and Administrative.  Our general and administrative expenses
increased $4.2 million, or 85.84%, to $9.0 million in 1999 from $4.8 million for
1998. This increase was primarily the result of hiring and retaining additional
finance, executive, information services and human resources personnel to
support the growth of our business. In addition, the increase is a result of
recording stock compensation expense over the vesting period related to options
issued in connection with our acquisition of Daleen Canada in December 1999
along with certain other stock options grants issued by us. In each case, the
exercise prices of the options were below the fair market value of our common
stock on the date of grant. As a percentage of total revenue, these expenses
decreased to 43.3% in 1999 from 92.2% in 1998.

     Amortization of Goodwill and Other Intangibles.  Goodwill and other
intangibles are the result of the acquisition of Daleen Canada and are being
amortized over a four-year period.

     Nonoperating Income.  Nonoperating income increased approximately $575,000,
or 76.26%, to $1.3 million in 1999 from $754,000 in 1998. The increase of
nonoperating income for 1999 over 1998 was primarily attributable to the
investment earnings of the proceeds of our initial public offering, received in
the fourth quarter of 1999 as well as the investment of the proceeds of our
preferred stock offerings received in 1999 and 1998.

SEASONALITY

     Our operating results have varied significantly from quarter to quarter in
the past and may continue to vary significantly from quarter to quarter in the
future due to a variety of factors. Factors that can contribute to variations
include delays in completing contract negotiations with large contracts without
an offset by a
                                        24
<PAGE>   26

corresponding reduction in fixed costs. Also, quarterly fluctuations can occur
as a result of delays in completing contracts with customers where we derive a
large part of our revenue each quarter from a small number of customers. We have
not experienced seasonal fluctuations. However, as we grow, we may experience
similar quarterly fluctuations due to seasonality. For all these reasons, we
believe that results of operations for interim periods should not be relied upon
as any indication of the results to be expected in any future period.

LIQUIDITY AND CAPITAL RESOURCES

     At December 31, 2000, our total cash and cash equivalents was $22.3
million. We generated these funds primarily through our initial public offering
of common stock in October 1999. Beyond our capital expenditures, the funds
raised have been applied to support our various needs. Our needs have increased
significantly due to our new office space in Boca Raton, Florida, Atlanta,
Georgia, Toronto, Ontario and Amsterdam, The Netherlands. In addition, during
2000 we made significant investments in research and development and sales and
marketing resulting in headcount increases, entrance into international markets,
the acquisition of Daleen Canada and the formation of our subsidiaries
PartnerCommunity, Inc. and Daleen Europe B.V.

     Net cash used in operating activities was $30.0 million for the year ended
December 31, 2000, $9.0 million in 1999, and $11.2 million in 1998. The
principal use of cash for all periods was to fund our losses from operations.

     Net cash used in investing activities was $2.0 million in 2000, $7.1
million in 1999, and $6.0 million in 1998 mostly attributable to capital
expenditures and purchases and sales of securities available for sale.

     Net cash provided by financing activities was $1.5 million for the year
ended December 31, 2000, $68.0 million in 1999, and $12.9 million in 1998. Cash
provided by financing activities was attributable to sales of our common and
preferred stock and the issuance of notes payable.

     We experienced significant operating losses in 2000. At December 31, 2000,
we believe the net book values of our long-lived assets, including the $43.0
million net book value of goodwill, are recoverable from future cash flows over
the remaining estimated lives of the respective assets. However, the business
environment in which we are operating is changing rapidly. In addition, our
liquidity situation and the resultant actions taken by us in 2001 to restructure
ourselves, coupled with further actions being contemplated, will result in
management continuing to review during 2001 the recoverability of all long-lived
assets, including goodwill. In light of our current operating environment,
future projected cash flows may be subject to significant variability. As a
result, it is possible that we will recognize impairment charges related to
goodwill in 2001. With respect to long-lived assets other than goodwill, given
the restructuring actions which were implemented in the first quarter of 2001
and the additional restructuring actions being contemplated by management, it is
possible that in 2001 there will be impairment charges and accelerated
amortization expense related to such assets.

     Further, as a result of the restructuring actions implemented by management
in 2001, and the additional actions being contemplated, we will recognize (in
addition to the asset impairment charges) restructuring charges in 2001,
including certain charges in the first quarter related to, among other things,
employee severance and lease termination costs. At this time, we cannot estimate
the dollar amount of all such restructuring charges that are probable of
recognition in 2001, however, management estimates that restructuring charges to
be recognized in the first quarter of 2001 will be at least $2.0 million.

     In March 2001, we entered into the Purchase Agreement for the Private
Placement of $27.5 million of the Preferred Stock and Warrants. The consummation
of the Private Placement is subject to the receipt of approval from our
stockholders. The proceeds from the Private Placement were placed in escrow
pending stockholder approval. The stockholders will vote on such matters at the
annual stockholders' meeting, currently scheduled for June 2001. Pursuant to our
Certificate of Incorporation, the approval of the holders of 66 2/3% of our
outstanding common stock will be required to amend our Certificate of
Incorporation to increase the number of shares of authorized common stock and to
create and designate the terms of the Preferred

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<PAGE>   27

Stock. Both of these amendments are required for the consummation of the Private
Placement. Certain of our stockholders who own approximately 51.3% of our
outstanding common stock, have agreed to vote in favor of the Private Placement
and related matters. In the event more than 66 2/3% of our stockholders do not
approve the Private Placement by July 31, 2001, the funds held in escrow will be
returned to the purchasers. In such case, our cash on hand (currently
approximately $9.5 million) will not be sufficient to allow us to sustain our
operations and meet our financial obligations in 2001. We believe that receipt
of Requisite Stockholder Approval is reasonably likely but no assurances can be
given.

     We believe that the cash on hand, the net proceeds of the Private Placement
together with the reduction of costs achieved by the successful execution of the
aforementioned restructuring activities will be sufficient to meet our
anticipated cash needs in 2001. Failure to obtain stockholder approval on the
Private Placement and implement cost reduction actions will have a materially
adverse effect on our ability to meet our financial obligations and continue to
operate as a going concern.

     We may require additional funds to support our working capital
requirements, strengthen our financial position, support our international and
business development expansion efforts or for other purposes. Additionally, we
may seek to raise additional funds through public or private equity financing or
from other sources. 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.

NEW ACCOUNTING PRONOUNCEMENTS

     In December 1999, the Securities Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB
No. 101"). SAB No. 101 summarized certain of the SEC's views in applying
accounting principles generally accepted in the United States to revenue
recognition in financial statements. In March 2000, the SEC issued SAB No. 101A
which delayed the implementation date of SAB No. 101. In June 2000, the SEC
issued SAB No. 101B, which further delayed the implementation date of SAB No.
101. The Company adopted the provisions of SAB No. 101 beginning October 1,
2000. The adoption of SAB No. 101 did not have a significant impact on our
revenue recognition.

     In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133 Accounting for Derivative Instruments and Hedging Activities. SFAS No.
133 established accounting and reporting standards for derivative instruments
embedded in other contracts and for hedging activities. We adopted SFAS No. 133,
as amended, in the third quarter 2000. SFAS No. 133 did not have a material
effect on our consolidated financial position or our results of operations since
we had no derivative instruments or hedging activities in the year 2000.

     In September 2000, the FASB issued Statement of Financial Accounting
Standards No. 140 ("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. While most of the provisions of SFAS No. 140 will
become effective for transactions entered into after March 31, 2001, companies
with calendar fiscal year ends that hold beneficial interests from previous
securitizations will be required to make additional disclosures in their
December 31, 2000 financial statements. The adoption of SFAS No. 140 will not
have a significant impact on our consolidated financial statements.

     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 25 for
certain issues including: (a) the definition of employee for purposes of
applying APB 25, (b) the criteria for determining whether a plan qualifies as a
noncompensatory plan, (c) the accounting consequence of various modifications to
the terms of a previously fixed stock option or award, and (d) 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,
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<PAGE>   28

1998. The adoption of FIN 44 did not have an impact on the Company's financial
position or results of operations.

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.

ADDITIONAL CAPITAL FROM PRIVATE PLACEMENT REQUIRED TO FUND OPERATIONS FOR THE
REMAINDER OF 2001.

     Cash and cash equivalents at December 31, 2000 were $22.3 million. Cash
used in operations in 2000 was $30 million. During this period, we incurred
significant costs related to the acquisition of Daleen Canada, development of
our products, entrance into international markets, formation of our subsidiaries
and increases in headcount. Current cash and cash equivalents (approximately
$9.5 million at March 31, 2001) will be insufficient to fund operations for the
remainder of 2001.

     In order to address our liquidity issue and to strengthen our balance sheet
on March 30, 2001 we entered into Purchase Agreements for the Private Placement
of $27.5 million of Preferred Stock. The proceeds from the Private Placement
were placed in escrow pending stockholder approval. Pursuant to our Certificate
of Incorporation, the approval of the holders of 66 2/3% of our outstanding
common stock will be required to amend our Certificate of Incorporation to
increase the number of shares of authorized common stock and to create and
designate the terms of the preferred stock. Both of these amendments are
required for the consummation of the Private Placement. In the event the holders
of at least 66 2/3% of our common stock do not approve the Private Placement by
July 30, 2001, the funds held in escrow will be returned to the purchasers. The
stockholders will vote on such matters at the annual stockholders' meeting,
currently scheduled for June 2001. Certain of our stockholders, including
stockholders that have agreed to purchase Preferred Stock and Warrants in the
Private Placement as well as our directors and their affiliates, have agreed to
vote their shares of our common stock in favor of the Private Placement. These
stockholders own approximately 51.3% of our outstanding common stock.
Accordingly, we must obtain the approvals of the holders of an additional 15.4%
of our outstanding Common Stock in order to obtain Requisite Shareholder
Approval. We believe that receipt of Requisite Stockholder Approval is
reasonably likely but no assurances can be given.

     In January 2001, the Company announced a restructuring plan in an attempt
to reduce certain operating costs, and is considering further actions in the
second quarter of 2001.

     The proceeds from the Private Placement, the cost reductions contemplated
by the January 2001 restructuring, and the further actions being considered in
the second quarter of 2001 are necessary for us to sustain operations and meet
our financial obligations for the remainder of 2001.

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 $43.8 million for the year ended
December 31, 2000. Additionally, we incurred net losses of $15.3 million in 1999
and $12.2 million in 1998. As of December 31, 2000, we had an accumulated
deficit of approximately $81.7 million. We have not realized any profit to date
and do not expect to achieve profitability until the second half of 2001. 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 implementation of our
"profitability acceleration plan" in the first quarter, which includes workforce
reductions, downsizing of facilities and other miscellaneous cost reductions. We
are also considering additional expense reductions and consolidations to further
reduce our fixed operating expenses. In addition, we need to continue to improve
our financial and managerial controls and reporting systems and procedures and
train and manage our workforce. There is no
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<PAGE>   29

assurance we will achieve these objectives and thus achieve profitability. 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 QUARTERLY OPERATING RESULTS MAY FLUCTUATE IN FUTURE PERIODS, AND WE MAY FAIL
TO MEET EXPECTATIONS.

     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:

     - Variations in demand for our products and services;

     - Competitive pressures;

     - Decrease in corporate information technology spending and decline in
       economic conditions and market;

     - Our quarterly revenue and expense levels;

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

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

     - Industry consolidation reducing the number of potential customers;

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

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

     The timing of revenue 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.

WE FACE SIGNIFICANT COMPETITION FROM COMPANIES THAT MAY HAVE GREATER RESOURCES
THAN WE DO.

     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:

     - Longer operating histories;

     - Larger customer bases;

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

     - A lead in expanding their business internationally;

     - Greater name recognition; and

     - Ability to more easily provide a comprehensive hardware and software
       solution.
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<PAGE>   30

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.

IF OUR CUSTOMERS CANNOT SECURE ADEQUATE FINANCING, WE MAY NOT OBTAIN THEIR
BUSINESS OR WE MAY NOT BE ABLE TO RECOGNIZE REVENUE AS QUICKLY, IF AT ALL.

     Many of our 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 which 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, such as 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 has caused our accounts receivable to
increase. There is no assurance we will be able to collect all of these
outstanding receivables. As a result, we increased our provision for bad debts
in the year ended December 31, 2000. If the economic downturn continues or
customers continue to have difficulty obtaining funding, further increases may
be needed and we may need to write-off certain of the receivables that are
provided for at December 31, 2000 as uncollectible.

OUR LENGTHY SALES CYCLE MAKES IT DIFFICULT TO ANTICIPATE THE TIMING OF SALES,
AND REVENUE MAY VARY FROM PERIOD TO PERIOD.

     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.

THE ANTI-TAKEOVER PROVISIONS WE HAVE ADOPTED MAY DELAY, DEFER OR PREVENT A
CHANGE OF CONTROL

     Certain provisions of Delaware Law, our Certificate of Incorporation and
our Bylaws contain provisions that could delay, deter or prevent a change in
control of Daleen. Our Certificate of Incorporation and Bylaws, among other
things, provide for a classified board of directors, restrict the ability of
stockholders to call stockholders meetings by allowing only stockholders
holding, in the aggregate, not less than 10% of the capital stock entitled to
cast votes at these meetings to call a meeting, preclude stockholders from
raising new business for consideration at stockholder meetings unless the
proponent has provided us with timely advance notice of the new business, and
limit business that may be conducted at stockholder meetings to those matters
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<PAGE>   31

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 PRICE OF OUR COMMON STOCK HAS BEEN, AND WILL CONTINUE TO BE VOLATILE.

     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:

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

     - Failure to meet the expectations of industry analysts;

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

     - Increased price competition; and

     - 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.

THE LOW PRICE OF OUR COMMON STOCK COULD RESULT IN THE DELISTING OF OUR COMMON
STOCK FROM THE NASDAQ NATIONAL MARKET.

     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 market makers and shareholders, market capitalization, and
maintaining a minimum bid price of $1.00 for shares of our common stock. The
minimum bid price of our common stock has recently dropped to under $1.00 per
share. If the minimum bid price of our common stock were to remain below $1.00
for 30 consecutive trading days, or if we are unable to continue to meet
Nasdaq's standards for any other reason, our common stock could be delisted from
The Nasdaq National Market. 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 Over-the-Counter 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.

OUR STRATEGY TO EXPAND INTO INTERNATIONAL MARKETS 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 strategic relationships and internal business expansion. In
addition to risks generally associated with international operations, our future
international operations might not succeed for a number of reasons, including:

     - Dependence on sales efforts of third party distributors;

     - Difficulties in staffing and managing foreign operations;

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

     - Reduced protection for intellectual property rights in some countries;

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<PAGE>   32

     - Greater difficulty in collecting accounts receivable; and

     - Legal 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 DEPEND IN SOME CASES ON STRATEGIC BUSINESS ALLIANCES TO SELL AND IMPLEMENT
OUR PRODUCTS, AND ANY FAILURE TO DEVELOP OR MAINTAIN THESE ALLIANCES COULD HURT
OUR FUTURE GROWTH.

     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. We plan to increase our reliance on
systems integration firms to implement our products. 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.

WE RECENTLY INTRODUCED OUR REVCHAIN FAMILY OF INDUSTRY-FOCUSED SOFTWARE SUITES.

     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 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.

IF WE DO NOT CONTINUALLY ENHANCE OUR PRODUCT OFFERING TO MEET THE CHANGING NEEDS
OF SERVICE PROVIDERS, 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.

     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
                                        31
<PAGE>   33

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.

     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 DIVERT OUR
RESOURCES, RESULT IN UNEXPECTED LICENSE FEES AND HARM OUR BUSINESS.

     Third parties could claim that our current or future products or technology
infringe their proprietary rights. An infringement claim against us could be
costly even if the claim is invalid, and could distract our management from the
operation of our business. Furthermore, a judgment against us could require us
to pay substantial damages and could also include an injunction or other court
order that could prevent us from selling our product offering. If we faced a
claim relating to proprietary technology or information, we might seek to
license technology or information, or 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 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 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. We have a customer support organization that is
responsible for providing maintenance and support to our customers. Maintenance
and support includes identifying and correcting any reported product defects or
software errors and our margins may be affected if the amounts of resources
needed to address these issues are substantial. 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.

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POTENTIAL ACQUISITIONS OF COMPANIES OR TECHNOLOGIES COULD RESULT IN DISRUPTIONS
TO OUR BUSINESS, 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 goodwill and other
intangible assets.

THE SKILLED EMPLOYEES THAT WE NEED MAY BE DIFFICULT AND EXPENSIVE TO HIRE AND
RETAIN 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 attract or 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. In
addition, an increase in expenses required to attract and retain qualified
personnel may reduce our operating margins.

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 that are
subject to fluctuations in commodities prices or foreign currency exchange
rates.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     Our financial statements are submitted as a separate section of this
Report, beginning on page F-1.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.

     None.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     In accordance with General Instruction G(3) of the Form 10-K, the
information relating to the directors of Daleen, including directors who are
executive officers of Daleen, is set forth in Daleen's Proxy Statement for the
2000 Annual Meeting of Stockholders (the "Proxy Statement") and is incorporated
herein by reference. Pursuant to Instruction 3 of Item 401(b) of Regulation S-K
and General Instruction G(3) of Form 10-K, information relating to the executive
officers of Daleen is set forth under the caption "Executive Officers of the
Registrant" in Part I, Item 4A of this report.

                                        33
<PAGE>   35

     Compliance with Section 16(a) of the Securities Exchange Act of 1934:
Section 16(a) of the Securities Exchange of 1934, as amended, and regulations of
the Securities and Exchange Commission thereunder require our directors and
executive officers and any persons who own more than 10% of Daleen's Common
Stock, as well as certain affiliates of such persons, to file reports with the
Securities and Exchange Commission and the National Association of Securities
Dealers, Inc. with respect to their ownership of Daleen's Common Stock.
Directors, executive officers and persons owning more than 10% of Daleen's
Common Stock are required by Securities and Exchange Commission regulations to
furnish Daleen with copies of all Section 16(a) reports they file. Based solely
on its review of the copies of such reports received by it and written
representations that no other reports were required of those persons, we believe
that during fiscal 2000, all filing requirements applicable to its directors and
executive officers were complied with in a timely manner. We are not aware of
any other persons other than directors and executive officers and their
affiliates who own more than 10% of Daleen's Common Stock.

ITEM 11.  EXECUTIVE COMPENSATION.

     In accordance with General Instruction G(3) of Form 10-K, the information
relating to executive compensation is set forth in the Proxy Statement and is
incorporated herein by reference; provided, such incorporation by reference
shall not be deemed to include or incorporate by reference the information
referred to in Item 402 (a)(8) of Regulation S-K.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     In accordance with General Instruction G(3) of Form 10-K, the information
relating to security ownership by certain persons is set forth in the Proxy
Statement and is incorporated herein by reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     In accordance with General Instruction G(3) of Form 10-K, the information
relating to certain relationships and related transactions is set forth under
the caption "Related Party Transactions" in the Proxy Statement and is
incorporated herein by reference.

                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

     (a) The following documents are filed as part of this report:

          1. Financial Statements

          The financial statements are submitted as a separate section of this
     report, beginning on page F-1.

          2. Financial Statement Schedule

          Schedule II Valuation and Qualifying Accounts. Submitted as a separate
     section of the financial statements on page F-27.

     (b) Exhibits. The following exhibits are filed as part of, or are
incorporated by reference into, this report on Form 10-K:

EXHIBIT LIST

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                            DESCRIPTION
-------                           -----------
<S>       <C>
2.1+      Share Purchase Agreement dated December 16, 1999, between
          the Company, Daleen Canada Corporation, Inlogic Software
          Inc., the shareholders of Inlogic Software Inc., and
          Atevent.com Inc. (Incorporated by reference to Exhibit 10.1
          to the Company's Form 8-K (File No. 333-82487) filed on
          December 30, 1999).
</TABLE>

                                        34
<PAGE>   36

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                            DESCRIPTION
-------                           -----------
<S>       <C>
3.1+      Certificate of Incorporation of Daleen Technologies, Inc.
          (Incorporated by reference to Exhibit 3.1 to the Company's
          Registration Statement on Form S-1 (File No. 333-82487)
          filed on September 30, 1999).
3.2+      Bylaws of Daleen Technologies, Inc. (Incorporated by
          reference to Exhibit 3.2 to the Company's Registration
          Statement on Form S-1 (File No. 333-82487) filed on
          September 30, 1999). (Incorporated by reference to Exhibit
          3.2 to the Company's Registration Statement on Form S-1
          (File No. 333-82487) filed on September 30, 1999).
4.1+      See Exhibits 3.1 and 3.2 for provisions of the certificate
          of incorporation and bylaws of Daleen Technologies, Inc.
          defining rights of the holders of common stock of Daleen
          Technologies, Inc. (Incorporated by reference to Exhibit 4.1
          to the Company's Registration Statement on Form S-1 (File
          No. 333-82487) filed on September 30, 1999).
4.2+      Specimen stock certificate (Incorporated by reference to
          Exhibit 4.2 to the Company's Registration Statement on Form
          S-1 (File No. 333-82487) filed on September 30, 1999).
10.1+     Employment Agreement, dated December 1, 1994, between James
          Daleen and Daleen Technologies, Inc. (Incorporated by
          reference to Exhibit 10.1 to the Company's Registration
          Statement on Form S-1 (File No. 333-82487) filed on
          September 30, 1999).
10.2+     Amendment to Employment Agreement dated September 5, 1997,
          between James Daleen and Daleen Technologies, Inc.
          (Incorporated by reference to Exhibit 10.2 to the Company's
          Registration Statement on Form S-1 (File No. 333-82487)
          filed on September 30, 1999).
10.3+     Third Amendment to the Employment Agreement, effective March
          1, 1999, between James Daleen and Daleen Technologies, Inc.
          (Incorporated by reference to Exhibit 10.3 to the Company's
          Registration Statement on Form S-1 (File No. 333-82487)
          filed on September 30, 1999).
10.4+     Employment Agreement, dated, January 31, 1998, between David
          B. Corey and Daleen Technologies, Inc. (Incorporated by
          reference to Exhibit 10.4 to the Company's Registration
          Statement on Form S-1 (File No. 333-82487) filed on
          September 30, 1999).
10.5+     Employment Agreement, dated November 15, 1994, between
          Richard A. Schell and Daleen Technologies, Inc.
          (Incorporated by reference to Exhibit 10.5 to the Company's
          Registration Statement on Form S-1 (File No. 333-82487)
          filed on September 30, 1999).
10.6+     Amendment to Employment Agreement, dated January 31, 1997,
          between Richard A. Schell and Daleen Technologies, Inc.
          (Incorporated by reference to Exhibit 10.6 to the Company's
          Registration Statement on Form S-1 (File No. 333-82487)
          filed on September 30, 1999).
10.7+     Second Amendment to Employment Agreement, dated September 5,
          1997, between Richard A. Schell and Daleen Technologies,
          Inc. (Incorporated by reference to Exhibit 10.7 to the
          Company's Registration Statement on Form S-1 (File No.
          333-82487) filed on September 30, 1999).
10.8+     Third Amendment to Employment Agreement, effective March 1,
          1999, between Richard A. Schell and Daleen Technologies,
          Inc. (Incorporated by reference to Exhibit 10.8 to the
          Company's Registration Statement on Form S-1 (File No.
          333-82487) filed on September 30, 1999).
10.9+     Employment Agreement, dated April 28, 1999, between Stephen
          M. Wagman and Daleen Technologies, Inc. (Incorporated by
          reference to Exhibit 10.9 to the Company's Registration
          Statement on Form S-1 (File No. 333-82487) filed on
          September 30, 1999).
10.10+    Form of Indemnification Agreement (Incorporated by reference
          to Exhibit 10.10 to the Company's Registration Statement on
          Form S-1 (File No. 333-82487) filed on September 30, 1999).
10.11+    Daleen Technologies, Inc. Amended and Restated Stock
          Incentive Plan (Incorporated by reference to Exhibit 10.11
          to the Company's Registration Statement on Form S-1 (File
          No. 333-82487) filed on September 30, 1999).
</TABLE>

                                        35
<PAGE>   37

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                            DESCRIPTION
-------                           -----------
<S>       <C>
10.12+    Daleen Technologies, Inc. 1998 Incentive Stock Option Plan
          (Incorporated by reference to Exhibit 10.12 to the Company's
          Registration Statement on Form S-1 (File No. 333-82487)
          filed on September 30, 1999).
10.13+    Daleen Technologies, Inc. 1997 Incentive Stock Option Plan
          (Incorporated by reference to Exhibit 10.13 to the Company's
          Registration Statement on Form S-1 (File No. 333-82487)
          filed on September 30, 1999).
10.14+    Daleen Technologies, Inc. 1995 Incentive Stock Option Plan
          (Incorporated by reference to Exhibit 10.14 to the Company's
          Registration Statement on Form S-1 (File No. 333-82487)
          filed on September 30, 1999).
10.15+    Daleen Technologies, Inc. 1998 Employee Non-Qualified Stock
          Option Plan (Incorporated by reference to Exhibit 10.15 to
          the Company's Registration Statement on Form S-1 (File No.
          333-82487) filed on September 30, 1999).
10.16+    Daleen Technologies, Inc. 1996 Employee Non-Qualified Stock
          Option Plan (Incorporated by reference to Exhibit 10.16 to
          the Company's Registration Statement on Form S-1 (File No.
          333-82487) filed on September 30, 1999).
10.17+    Daleen Technologies, Inc. 1994 Employee Non-Qualified Stock
          Option Plan (Incorporated by reference to Exhibit 10.17 to
          the Company's Registration Statement on Form S-1 (File No.
          333-82487) filed on September 30, 1999).
10.18+    Lease Agreement, dated August 4, 1992, by Innovative
          Selective Software, Inc., and Crow-Childress-Donner, Limited
          (Incorporated by reference to Exhibit 10.18 to the Company's
          Registration Statement on Form S-1 (File No. 333-82487)
          filed on September 30, 1999).
10.19+    First Amendment to Lease Agreement, dated December 29, 1994,
          by Daleen Technologies Inc, successor to Innovative
          Selective Software, Inc., and Regent Holding Corporation,
          successor to Crow-Childress-Donner (Incorporated by
          reference to Exhibit 10.19 to the Company's Registration
          Statement on Form S-1 (File No. 333-82487) filed on
          September 30, 1999).
10.20+    Lease Agreement, dated August 27, 1998, by Daleen
          Technologies, Inc. and Regent Holding Corporation
          (Incorporated by reference to Exhibit 10.20 to the Company's
          Registration Statement on Form S-1 (File No. 333-82487)
          filed on September 30, 1999).
10.21+    First Amendment to Lease, dated December 2, 1998, between
          Daleen Technologies, Inc. and Regent Holding Corporation
          (Incorporated by reference to Exhibit 10.21 to the Company's
          Registration Statement on Form S-1 (File No. 333-82487)
          filed on September 30, 1999).
10.22+    Second Amendment to Lease, dated January 16, 1996, between
          Daleen Technologies, Inc. and Regent Holding Corporation
          (Incorporated by reference to Exhibit 10.22 to the Company's
          Registration Statement on Form S-1 (File No. 333-82487)
          filed on September 30, 1999).
10.24+    Sublease Agreement, dated August 2, 1999, between W.R. Grace
          & Co. and Daleen Technologies, Inc. (Incorporated by
          reference to Exhibit 10.24 to the Company's Registration
          Statement on Form S-1 (File No. 333-82487) filed on
          September 30, 1999).
10.25+    Employment Agreement, dated April 7, 1997, between John Z.
          Yin and Daleen Technologies, Inc. (Incorporated by reference
          to Exhibit 10.25 to the Company's Registration Statement on
          Form S-1 (File No. 333-82487) filed on September 30, 1999).
10.26+    Employment Agreement, dated April 7, 1997, between Frank
          Dickinson and Daleen Technologies, Inc. (Incorporated by
          reference to Exhibit 10.26 to the Company's Registration
          Statement on Form S-1 (File No. 333-82487) filed on
          September 30, 1999).
10.27+    Employment Agreement, dated July 22, 1998, between David
          McTarnaghan and Daleen Technologies, Inc. (Incorporated by
          reference to Exhibit 10.27 to the Company's Registration
          Statement on Form S-1 (File No. 333-82487) filed on
          September 30, 1999).
</TABLE>

                                        36
<PAGE>   38

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                            DESCRIPTION
-------                           -----------
<S>       <C>
10.28+    Employment Agreement, dated December 15, 1998, between
          Timothy C. Moss and Daleen Technologies, Inc. (Incorporated
          by reference to Exhibit 10.28 to the Company's Registration
          Statement on Form S-1 (File No. 333-82487) filed on
          September 30, 1999).
10.29+    Employment Agreement, dated September 7, 1999, between
          Manuel J.M. Andrade and Daleen Technologies, Inc.
          (Incorporated by reference to Exhibit 10.30 to the Company's
          Registration Statement on Form S-1 (File No. 333-82487)
          filed on September 30, 1999).
10.30+    Employment Agreement, effective as of December 16, 1999
          between Mohammad Aamir and Inlogic Software, Inc.
          (Incorporated by reference to Exhibit 10.30 to the Company's
          Annual Report on Form 10-K (File No. 0-27491) filed on March
          30, 2000).
10.31+    Employment Agreement, effective as of December 16, 1999
          between George Timmes and Inlogic Software, Inc.
          (Incorporated by reference to Exhibit 10.31 to the Company's
          Annual Report on Form 10-K (File No. 0-27491) filed on March
          30, 2000).
10.32+    Indemnity Escrow Agreement dated December 16, 1999, between
          the Company, Daleen Canada Corporation, Inlogic Software
          Inc., the shareholders of Inlogic Software Inc., and
          Montreal Trust Company of Canada, as escrow agent
          (Incorporated by reference to Exhibit 10.1 to the Company's
          Form 8-K (File No. 333-82487) filed on December 30, 1999).
10.33+    Employee/Shareholder Escrow Agreement dated December 16,
          1999, between the Company, Daleen Canada Corporation,
          Inlogic Software Inc., the employee shareholders of Inlogic
          Software Inc., and Montreal Trust Company of Canada, as
          escrow agent (Incorporated by reference to Exhibit 10.2 to
          the Company's Form 8-K (File No. 333-82487) filed on
          December 30, 1999).
10.34+    Support Agreement dated December 16, 1999, between the
          Company, Daleen Canada Corporation, Daleen Callco
          Corporation, and the shareholders of Inlogic Software Inc.
          (Incorporated by reference to Exhibit 10.3 to the Company's
          Form 8-K (File No. 333-82487) filed on December 30, 1999).
10.35+    Exchange Trust Agreement dated December 16, 1999, between
          the Company, Daleen Canada Corporation, Daleen Callco
          Corporation, the shareholders of Inlogic Software Inc., and
          Montreal Trust Company of Canada, as trustee (Incorporated
          by reference to Exhibit 10.4 to the Company's Form 8-K (File
          No. 333-82487) filed on December 30, 1999).
10.36+    Registration Rights Agreement dated December 16, 1999,
          between the Company and the shareholders of Inlogic Software
          Inc. (Incorporated by reference to Exhibit 10.5 to the
          Company's Form 8-K (File No. 333-82487) filed on December
          30, 1999).
10.37     Daleen Technologies, Inc. Amended & Restated 1999 Stock
          Incentive Plan
10.38     Promissory Note and Stock Pledge Agreement dated January 11,
          2001 by and between James Daleen and J.D. Investment Company
          Limited Partnership and Daleen Technologies, Inc.
10.39     PartnerCommunity Inc. 2000 Stock Incentive Plan.
10.40+    Loan Agreement dated August 18, 2000 by and between Bank of
          America, N.A., a national banking association and Daleen
          Technologies, Inc. (Incorporated by reference to Exhibit
          10.1 to the Company's Quarterly Report on Form 10-Q (File
          No. 0-27491) filed on November 14, 2000).
10.41+    Promissory Note dated August 18, 2000 by and between Bank of
          America, N.A., a national banking association and Daleen
          Technologies, Inc. (Incorporated by reference to Exhibit
          10.2 to the Company's Quarterly Report on Form 10-Q (File
          No. 0-27491) filed on November 14, 2000).
10.42+    Office Lease Agreement dated May 5, 2000, between Daleen
          Technologies, Inc., Daleen Canada Corporation and The Atrium
          on Bay Inc. (Incorporated by reference to Exhibit 10.1 to
          the Company's Quarterly Report on Form 10-Q (File No.
          0-27491) filed on August 14, 2000).
10.43+    Second Amendment to Lease, dated May 31, 2000, between
          Daleen Technologies, Inc. and Regent Holding Corporation.
          (Incorporated by reference to Exhibit 10.2 to the Company's
          Quarterly Report on Form 10-Q (File No. 0-27491) filed on
          August 14, 2000).
</TABLE>

                                        37
<PAGE>   39

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                            DESCRIPTION
-------                           -----------
<S>       <C>
10.44+    Third Amendment to Lease, dated May 31, 2000, between Daleen
          Technologies, Inc. and Regent Holding Corporation.
          (Incorporated by reference to Exhibit 10.3 to the Company's
          Quarterly Report on Form 10-Q (File No. 0-27491) filed on
          August 14, 2000).
10.45     Securities Purchase Agreement dated March 30, 2001 by and
          between Daleen Technologies, Inc. and the Escrow Purchasers
          named therein.
10.46     Form of Certificate of Amendment for the Series F
          Convertible Preferred Stock.
10.47     Form of Warrant Agreement by and between Daleen
          Technologies, Inc. and the Escrow Purchasers name therein.
10.48     Registration Rights Agreement dated March 30, 2001 by and
          between Daleen Technologies, Inc. and the Escrow Purchasers
          named therein.
10.49     Escrow Agreement dated March 30, 2001 by and between Daleen
          Technologies, Inc. and the Escrow Purchasers named therein.
21.1      Subsidiaries.
23.1      Independent Auditors' Consent.
</TABLE>

---------------

+ Previously filed.

                                        38
<PAGE>   40

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) 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 on the 4th day of
April, 2001.

                                          Daleen Technologies, Inc.

                                          By: /s/     JAMES DALEEN
                                            ------------------------------------
                                                        James Daleen
                                              Chairman of the Board and Chief
                                                 Executive Officer (Principal
                                                      Executive Officer)

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
                     SIGNATURE                                      TITLE                      DATE
                     ---------                                      -----                      ----
<C>                                                  <S>                                   <C>
                 /s/ JAMES DALEEN                    Chairman of the Board and Chief       April 4, 2001
  ----------------------------------------------       Executive Officer (Principal
                   James Daleen                        Executive Officer)

                /s/ DAVID B. COREY                   President, Chief Operating Officer    April 4, 2001
  ----------------------------------------------       and Director
                  David B. Corey

               /s/ STEPHEN M. WAGMAN                 Chief Financial Officer (Principal    April 4, 2001
---------------------------------------------------    Financial and Accounting Officer)
                 Stephen M. Wagman

               /s/ PAUL G. CATAFORD                  Director                              April 4, 2001
---------------------------------------------------
                 Paul G. Cataford

                  /s/ NEIL E. COX                    Director                              April 4, 2001
---------------------------------------------------
                    Neil E. Cox

               /s/ DANIEL J. FOREMAN                 Director                              April 4, 2001
---------------------------------------------------
                 Daniel J. Foreman

               /s/ STEPHEN J. GETSY                  Director                              April 4, 2001
---------------------------------------------------
                 Stephen J. Getsy

               /s/ PAULA J. HILBERT                  Director                              April 4, 2001
---------------------------------------------------
                 Paula J. Hilbert

                /s/ OFER NEMIROVSKY                  Director                              April 4, 2001
---------------------------------------------------
                  Ofer Nemirovsky

             /s/ WILIAM A. ROPER, JR.                Director                              April 4, 2001
---------------------------------------------------
               William A. Roper, Jr.
</TABLE>

                                        39
<PAGE>   41

                           DALEEN TECHNOLOGIES, INC.
                                AND SUBSIDIARIES

                       CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 1999 AND 2000

                  (WITH INDEPENDENT AUDITORS' REPORT THEREON)

                                       F-1
<PAGE>   42

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
  Daleen Technologies, Inc.:

     We have audited the accompanying consolidated balance sheets of Daleen
Technologies, Inc. and Subsidiaries as of December 31, 1999 and 2000, and the
related consolidated statements of operations, redeemable preferred stock and
stockholders' (deficit) equity and cash flows for each of the years in the
three-year period ended December 31, 2000. In connection with our audits of the
consolidated financial statements, we have also audited the financial statement
schedule for each of the years in the three-year period ended December 31, 2000,
as listed in item 14(a)2 of the Company's 2000 Annual Report on Form 10-K. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule based on our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Daleen
Technologies, Inc. and Subsidiaries as of December 31, 1999 and 2000, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States of America. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.

     The accompanying consolidated financial statements and financial statement
schedule have been prepared assuming that the Company will continue as a going
concern. As discussed in Note 2 to the consolidated financial statements, the
Company has suffered recurring losses from operations and has an accumulated
deficit of $81.7 million at December 31, 2000. These matters raise substantial
doubt about the Company's ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 2. The consolidated
financial statements and financial statement schedule do not include any
adjustments that might result from the outcome of this uncertainty.

/s/ KPMG LLP
------------------------------------------------------

Miami, Florida
January 24, 2001 except as to notes 2, 11 and 14 which are as of March 30, 2001

                                       F-2
<PAGE>   43

                   DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1999 AND 2000
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                1999        2000
                                                              --------    --------
<S>                                                           <C>         <C>
ASSETS
Current assets:
  Cash and cash equivalents.................................  $ 52,852    $ 22,268
  Restricted cash...........................................       124         931
  Securities available for sale.............................     9,385          --
  Accounts receivable, less allowance for doubtful accounts
     of $707 at December 31, 1999 and $4,600 at December 31,
     2000...................................................     3,673      13,091
  Costs in excess of billings...............................     3,514       2,213
  Unbilled revenue..........................................       136         838
  Other current assets......................................       941         904
                                                              --------    --------
          Total current assets..............................    70,625      40,245
Notes receivable............................................       159         493
Property and equipment, net.................................     4,845      10,146
Goodwill, net of accumulated amortization of $581 at
  December 31, 1999 and $15,026 at December 31, 2000........    55,211      43,012
Other intangible asset, net of accumulated amortization of
  $26 at December 31, 1999 and $786 at December 31, 2000....     2,474       1,714
Other assets................................................       567       3,852
                                                              --------    --------
          Total assets......................................  $133,881    $ 99,462
                                                              ========    ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................  $  1,099    $  2,968
  Accrued payroll and other accrued expenses................    12,240      12,731
  Billings in excess of costs...............................       769       1,466
  Other current liabilities.................................       316       4,005
                                                              --------    --------
          Total current liabilities.........................    14,424      21,170
  Long term portion of capitalized lease....................        --         607
                                                              --------    --------
          Total liabilities.................................    14,424      21,777
Commitments and contingencies
Minority interest...........................................        --         184
Stockholders' equity:
  Common stock -- $.01 par value. Authorized 70,000,000
     shares; issued and outstanding 21,408,246 shares at
     December 31, 1999 and 21,781,727 at December 31,
     2000...................................................       214         218
  Stockholders notes receivable.............................      (202)       (274)
  Deferred stock compensation...............................    (3,031)     (2,148)
  Additional paid-in capital................................   160,446     161,460
  Accumulated deficit.......................................   (37,970)    (81,755)
                                                              --------    --------
          Total stockholders' equity........................   119,457      77,501
                                                              --------    --------
          Total liabilities and stockholders' equity........  $133,881    $ 99,462
                                                              ========    ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       F-3
<PAGE>   44

                   DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                  YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                               1998        1999        2000
                                                             --------    --------    --------
<S>                                                          <C>         <C>         <C>
Revenue:
  License fees.............................................  $  1,879    $ 12,404    $ 26,886
  Professional services and other..........................     3,352       8,321      16,743
                                                             --------    --------    --------
          Total revenue....................................     5,231      20,725      43,629
                                                             --------    --------    --------
Cost of revenue:
  License fees.............................................         3          64         682
  Professional services and other..........................     4,239       7,721      13,878
                                                             --------    --------    --------
          Total cost of revenue............................     4,242       7,785      14,560
                                                             --------    --------    --------
Gross margin...............................................       989      12,940      29,069
Operating expenses:
  Sales and marketing......................................     2,435       4,342      14,680
  Research and development.................................     6,653       9,348      27,215
  Purchased in-process research and development............        --       6,347          --
  General and administrative...............................     4,824       8,965      18,210
  Amortization of goodwill and other intangibles...........        --         607      15,205
                                                             --------    --------    --------
          Total operating expenses.........................    13,912      29,609      75,310
                                                             --------    --------    --------
Operating loss.............................................   (12,923)    (16,669)    (46,241)
                                                             --------    --------    --------
Nonoperating income:
  Interest income, net.....................................       249         961       2,335
  Other income.............................................       505         368         121
                                                             --------    --------    --------
          Total nonoperating income........................       754       1,329       2,456
                                                             --------    --------    --------
Net loss...................................................   (12,169)    (15,340)    (43,785)
Accretion of preferred stock...............................       (65)       (122)         --
                                                             --------    --------    --------
Net loss applicable to common stockholders.................  $(12,234)   $(15,462)   $(43,785)
                                                             ========    ========    ========
Net loss per share -- basic and diluted....................  $  (3.78)   $  (1.06)   $  (2.02)
                                                             ========    ========    ========
Weighted average shares -- basic and diluted...............     3,240      14,548      21,671
                                                             ========    ========    ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       F-4
<PAGE>   45

                   DALEEN TECHNOLOGIES INC. AND SUBSIDIARIES

    CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS'
                                (DEFICIT) EQUITY
                 YEARS ENDED DECEMBER 31, 1998, 1999, AND 2000
                       (IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
                                                               REDEEMABLE PREFERRED STOCK
                                     ------------------------------------------------------------------------------
                                          SERIES A           SERIES D AND D-1            SERIES E
                                     -------------------   ---------------------   ---------------------
                                     NUMBER OF             NUMBER OF               NUMBER OF
                                       SHARES     AMOUNT     SHARES      AMOUNT      SHARES      AMOUNT     TOTAL
                                     ----------   ------   ----------   --------   ----------   --------   --------
<S>                                  <C>          <C>      <C>          <C>        <C>          <C>        <C>
Balance, December 31, 1997.........   3,000,000   $7,500           --   $     --           --   $     --   $  7,500
 Issuance of preferred stock --
   Series D and D-1................          --       --    4,908,379     14,232           --         --     14,232
 Accretion of preferred stock --
   Series D and D-1................          --       --           --         65           --         --         65
 Issuance of preferred stock --
   Series C........................          --       --           --         --           --         --         --
 Stock issued for consulting
   services related to Series C
   issuance........................          --       --           --         --           --         --         --
 Redemption of bridge warrents.....          --       --           --         --           --         --         --
 Stock issued for options and
   bridge warrants exercised.......          --       --           --         --           --         --         --
 Net loss..........................          --       --           --         --           --         --         --
                                     ----------   ------   ----------   --------   ----------   --------   --------
Balance, December 31, 1998.........   3,000,000    7,500    4,908,379     14,297           --         --     21,797
 Deferred stock compensation.......          --       --           --         --           --         --         --
 Non-cash stock compensation
   expense.........................          --       --           --         --           --         --         --
 Issuance of preferred stock --
   Series E, net...................          --       --           --         --    1,496,615     13,404     13,404
 Accretion of preferred stock......          --       --           --        119           --          3        122
 Exercise of stock options and
   warrents........................          --       --           --         --           --         --         --
 Payment of Stockholder note
   receivable......................          --       --           --         --           --         --         --
 Issuance of common stock for
   initial public offering, net of
   expenses........................          --       --           --         --           --         --         --
 Conversion of mandatorily
   redeemable preferred stock
   issuance of IPO.................  (3,000,000)  (7,500)  (4,908,379)   (14,416)  (1,496,615)   (13,407)   (35,323)
 Acquisition on Inlogic Software,
   Inc. plus expenses..............          --       --           --         --           --         --         --
 Net loss..........................          --       --           --         --           --         --         --
                                     ----------   ------   ----------   --------   ----------   --------   --------
Balance, December 31, 1999.........          --       --           --         --           --         --         --
 Additional expenses associated
   with IPO........................          --       --           --         --           --         --         --
 Forfeitures of unvested stock
   options.........................          --       --           --         --           --         --         --
 Non-cash stock compensation
   expense.........................          --       --           --         --           --         --         --
 Exercise of stock options and
   warrants........................          --       --           --         --           --         --         --
 Payment of stockholder note
   receivable......................          --       --           --         --           --         --         --
 Non-cash interest on stockholder
   loan............................          --       --           --         --           --         --         --
 Issuance of stockholder note......          --       --           --         --           --         --         --
 Net loss..........................          --       --           --         --           --         --         --
                                     ----------   ------   ----------   --------   ----------   --------   --------
Balance, December 31, 2000.........          --   $   --           --   $     --           --   $     --   $     --
                                     ==========   ======   ==========   ========   ==========   ========   ========

<CAPTION>

                                     SERIES C PREFERRED
                                            STOCK             COMMON STOCK
                                     -------------------   ------------------   STOCKHOLDER     DEFERRED     ADDITIONAL
                                     NUMBER OF             NUMBER OF     PAR       NOTES         STOCK        PAID-IN
                                       SHARES     AMOUNT     SHARES     VALUE   RECEIVABLE    COMPENSATION    CAPITAL
                                     ----------   ------   ----------   -----   -----------   ------------   ----------
<S>                                  <C>          <C>      <C>          <C>     <C>           <C>            <C>
Balance, December 31, 1997.........   1,150,493   $5,092    3,209,987   $ 32       $  --        $    --       $  3,204
 Issuance of preferred stock --
   Series D and D-1................          --       --           --     --          --             --             --
 Accretion of preferred stock --
   Series D and D-1................          --       --           --     --          --             --             --
 Issuance of preferred stock --
   Series C........................      63,091      279           --     --          --             --             --
 Stock issued for consulting
   services related to Series C
   issuance........................          --      (70)      21,600     --          --             --             70
 Redemption of bridge warrents.....          --       --           --     --          --             --             (4)
 Stock issued for options and
   bridge warrants exercised.......          --       --        8,433     --          --             --              8
 Net loss..........................          --       --           --     --          --             --             --
                                     ----------   ------   ----------   ----       -----        -------       --------
Balance, December 31, 1998.........   1,213,584    5,301    3,240,020     32          --             --          3,278
 Deferred stock compensation.......          --       --           --     --          --         (3,110)         3,110
 Non-cash stock compensation
   expense.........................          --       --           --     --          --             79             --
 Issuance of preferred stock --
   Series E, net...................          --       --           --     --          --             --             --
 Accretion of preferred stock......          --       --           --     --          --             --             --
 Exercise of stock options and
   warrents........................          --       --      800,574      8        (574)            --          1,817
 Payment of Stockholder note
   receivable......................          --       --           --     --         372             --             --
 Issuance of common stock for
   initial public offering, net of
   expenses........................          --       --    4,531,400     46          --             --         48,940
 Conversion of mandatorily
   redeemable preferred stock
   issuance of IPO.................  (1,213,584)  (5,301)  10,618,578    106          --             --         40,517
 Acquisition on Inlogic Software,
   Inc. plus expenses..............          --       --    2,217,674     22          --             --         62,784
 Net loss..........................          --       --           --     --          --             --             --
                                     ----------   ------   ----------   ----       -----        -------       --------
Balance, December 31, 1999.........          --       --   21,408,246    214        (202)        (3,031)       160,446
 Additional expenses associated
   with IPO........................          --       --           --     --          --             --           (135)
 Forfeitures of unvested stock
   options.........................          --       --           --     --          --            444           (444)
 Non-cash stock compensation
   expense.........................          --       --           --     --          --            439             --
 Exercise of stock options and
   warrants........................          --       --      373,481      4          --             --          1,593
 Payment of stockholder note
   receivable......................          --       --           --     --         122             --             --
 Non-cash interest on stockholder
   loan............................          --       --           --     --         (10)            --             --
 Issuance of stockholder note......          --       --           --     --        (184)            --             --
 Net loss..........................          --       --           --     --          --             --             --
                                     ----------   ------   ----------   ----       -----        -------       --------
Balance, December 31, 2000.........          --   $   --   21,781,727   $218       $(274)       $(2,148)      $161,460
                                     ==========   ======   ==========   ====       =====        =======       ========

<CAPTION>

                                     ACCUMULATED
                                       DEFICIT      TOTAL
                                     -----------   -------
<S>                                  <C>           <C>
Balance, December 31, 1997.........    (10,274)    $(1,946)
 Issuance of preferred stock --
   Series D and D-1................         --          --
 Accretion of preferred stock --
   Series D and D-1................        (65)        (65)
 Issuance of preferred stock --
   Series C........................         --         279
 Stock issued for consulting
   services related to Series C
   issuance........................         --          --
 Redemption of bridge warrents.....         --          (4)
 Stock issued for options and
   bridge warrants exercised.......         --           8
 Net loss..........................    (12,169)    (12,169)
                                       -------     -------
Balance, December 31, 1998.........    (22,508)    (13,897)
 Deferred stock compensation.......         --          --
 Non-cash stock compensation
   expense.........................         --          79
 Issuance of preferred stock --
   Series E, net...................         --          --
 Accretion of preferred stock......       (122)       (122)
 Exercise of stock options and
   warrents........................         --       1,251
 Payment of Stockholder note
   receivable......................         --         372
 Issuance of common stock for
   initial public offering, net of
   expenses........................         --      48,986
 Conversion of mandatorily
   redeemable preferred stock
   issuance of IPO.................         --      35,322
 Acquisition on Inlogic Software,
   Inc. plus expenses..............         --      62,806
 Net loss..........................    (15,340)    (15,340)
                                       -------     -------
Balance, December 31, 1999.........    (37,970)    119,457
 Additional expenses associated
   with IPO........................         --        (135)
 Forfeitures of unvested stock
   options.........................         --          --
 Non-cash stock compensation
   expense.........................         --         439
 Exercise of stock options and
   warrants........................         --       1,597
 Payment of stockholder note
   receivable......................         --         122
 Non-cash interest on stockholder
   loan............................         --         (10)
 Issuance of stockholder note......         --        (184)
 Net loss..........................    (43,785)    (43,785)
                                       -------     -------
Balance, December 31, 2000.........    (81,755)    $77,501
                                       =======     =======
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       F-5
<PAGE>   46

                   DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                  YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                1998        1999        2000
                                                              --------    --------    --------
<S>                                                           <C>         <C>         <C>
Cash flows from operating activities:
  Net loss..................................................  $(12,169)   $(15,340)   $(43,785)
  Adjustments to reconcile net loss to net cash used in
    operating activities:
    Depreciation and amortization...........................       918       1,591       3,092
    Amortization of deferred stock compensation.............        --          79         439
    Amortization of goodwill and other intangibles..........        --         607      15,205
    Bad debt expense........................................       247         762       4,439
    Interest income on stockholder loans....................        --        (139)        (38)
    Purchased in-process research and development...........        --       6,347          --
    Changes in assets and liabilities:
      Restricted cash.......................................        --        (124)       (807)
      Accounts receivable...................................    (1,431)     (2,506)    (13,850)
      Costs in excess of billings...........................      (503)     (3,147)      1,301
      Unbilled revenue......................................        --        (136)       (702)
      Other current assets..................................        53         (25)         15
      Other assets..........................................       (63)       (204)     (1,784)
      Notes receivable......................................        --        (159)       (304)
      Accounts payable......................................       166        (194)      1,890
      Accrued payroll and other accrued expenses............     1,332       2,934         638
      Billings in excess of costs...........................       429         390         697
      Other current liabilities.............................      (147)        256       3,591
                                                              --------    --------    --------
        Net cash used in operating activities...............   (11,168)     (9,008)    (29,963)
                                                              --------    --------    --------
Cash flows provided by financing activities:
  Proceeds from sale of preferred stock-Series C, net.......       279          --          --
  Proceeds from sale of mandatorily redeemable convertible
    preferred stock --
    Series D and D-1, net...................................    14,232          --          --
  Proceeds from sale of preferred stock -- Series E, net....        --      13,404          --
  Proceeds from exercise of stock options and bridge
    warrants:common stock/APIC..............................         8       1,825       1,597
  Net proceeds(payments) from initial public offering.......        --      48,986        (136)
  Principal payments on notes payable and capital lease
    obligations.............................................    (1,618)         --          (9)
  Issuance of notes receivable -- shareholders..............        --        (435)         --
  Repayment of notes receivable.............................                   372          --
  Acquisition of cash from Daleen Canada, Inc...............                 3,874          --
  Redemption of bridge warrants.............................        (4)         --          --
                                                              --------    --------    --------
        Net cash provided by financing activities...........    12,897      68,026       1,452
                                                              --------    --------    --------
Cash flows provided by investing activities:
  Purchase of securities available for sale.................   (48,697)    (53,750)         --
  Issuance of stockholders notes receivable.................        --          --          (3)
  Repayment of stockholders notes receivable................        --          --         122
  Sales and maturities of securities available for sale.....    44,715      50,117       9,385
  Payments related to the acquisition of Daleen Canada......        --          --      (2,246)
  Capital expenditures......................................    (2,054)     (3,507)     (7,738)
  Investment in BizProLink..................................        --          --      (1,500)
                                                              --------    --------    --------
        Net cash provided by investing activities...........    (6,036)     (7,140)     (1,980)
                                                              --------    --------    --------
Effect of exchange rates on cash and cash equivalents.......        --         251         (93)
                                                              --------    --------    --------
Net increase (decrease) in cash and cash equivalents........    (4,307)     52,129     (30,584)
Cash and cash equivalents at beginning of period............     5,030         723      52,852
                                                              --------    --------    --------
Cash and cash equivalents at end of period..................  $    723    $ 52,852    $ 22,268
                                                              ========    ========    ========
Supplemental disclosures of cash flow information:
  Cash paid during the year for:
    Interest................................................  $    142    $      1    $     --
                                                              ========    ========    ========
Non-cash investing and financing activities (in thousands):
  Issuance of common stock and stock options for acquisition
    of Daleen Canada, Inc...................................        --      65,319          --
                                                              ========    ========    ========
  Accrued acquisition costs.................................        --       2,067          --
                                                              ========    ========    ========
  Deferred Compensation.....................................        --       3,110          --
                                                              ========    ========    ========
  Preferred stock converted to common stock upon initial
    public offering.........................................        --      35,201          --
                                                              ========    ========    ========
  Capital lease additions...................................        --          --         721
                                                              ========    ========    ========
  Forfeitures of unvested stock options.....................        --          --         444
                                                              ========    ========    ========
  Sale of equipment at book value...........................        --          --          50
                                                              ========    ========    ========
  Issuance of notes receivable..............................        --          --         184
                                                              ========    ========    ========
</TABLE>

          See accompanying notes to consolidated financial statements.
                                       F-6
<PAGE>   47

                   DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 2000

(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  (a) Business

     Daleen Technologies, Inc. (the "Company" or "Daleen") is a provider of
Internet software solutions that manage the revenue chain for next-generation
service providers. In 2000, our product line primarily included BillPlex and
eCare. The Company's products were designed to enable providers of multiple
communication services to perform billing and customer care management.

     The Company has a professional services department to provide a variety of
professional consulting services to assist customers with implementation, custom
integration and configuration services, as well as training and support for
customers and business partners. The Company maintains a customer service
department to provide technical assistance to customers, in addition to
providing customer care for upgrades and new releases of its products.

     In February 1996, the Company formed a foreign sales corporation, Daleen
International, Inc., which is wholly-owned. Daleen International, Inc. had no
operations for each of the years in the three year period ended December 31,
2000.

     In December 1999, the Company completed its acquisition of a wholly owned
subsidiary, Inlogic Software, Inc. (renamed "Daleen Canada"). See note 3 for
description of acquisition.

     In July 2000, we formed a subsidiary, PartnerCommunity, Inc.
PartnerCommunity, Inc. provides an Internet-based partner chain management
services for providers of data content and communication services that enables
members to identify, form and manage partnerships with their vendors, service
providers and customers to deliver innovative communications services offerings
with higher speed, ease and flexibility. PartnerCommunity, Inc. also enable
these service providers to build their own private community to integrate
business processes with their partners and business customers and to offer
partner management services.

     In September 2000, the Company formed a wholly-owned subsidiary, Daleen
Technologies Europe B.V., a corporation formed under the laws of the Netherlands
with its registered office in Amsterdam, to carry out the European operations.

  (b) Principles of Consolidation

     The consolidated financial statements include the accounts and operations
of the Company and its subsidiaries. All intercompany accounts and transactions
have been eliminated.

  (c) Revenue Recognition

     The Company recognizes revenue under Statement of Position 97-2, Software
Revenue Recognition ("SOP 97-2") for all software transactions entered into that
do not require significant production, modification or customization. SOP 97-2
generally requires revenue earned on software arrangements involving multiple
elements to be allocated to each element based on vendor specific objective
evidence ("VSOE") of the relative fair values of the elements. VSOE is
determined by the price charged when the element is sold separately. The revenue
allocated is recognized when persuasive evidence of an arrangement exists, the
software has been delivered, the fee is fixed and determinable and
collectibility is probable. An arrangement fee is generally not presumed to be
fixed or determinable if payment of a significant portion of the licensing fee
is not due until after expiration of the license or more than 12 months after
delivery. Revenue related to arrangements containing extended payment terms
where the fees are not considered fixed and determinable is deferred until
payments are due. If collectibility is determined to not be probable, revenue is
recognized when cash is received.

                                       F-7
<PAGE>   48
                   DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     In March 1999, the Company adopted Statement of Position 98-9, Modification
of SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions
("SOP 98-9"). Statement of Position 98-9 amends SOP 97-2 to require recognition
of revenue using the "residual method" when (1) there is VSOE of the fair values
of all undelivered elements in a multiple-element arrangement that is not
accounted for using long-term contract accounting, (2) VSOE of fair value does
not exist for one or more of the delivered elements in the arrangement, and (3)
all revenue recognition criteria in SOP 97-2 other than the requirement for VSOE
of the fair value of each delivered element of the arrangement are satisfied.
Under the residual method, the arrangement fee is recognized as follows: (1) the
total fair value of the undelivered elements, as indicated by VSOE, is deferred
and subsequently recognized in accordance with the relevant sections of SOP 97-2
and (2) the difference between the total arrangement fee and the amount deferred
for the undelivered elements is recognized as revenue related to the delivered
elements.

     The Company recognizes revenue from fixed fee service contracts using the
percentage of completion method, based on the ratio of total labor hours
incurred to date to total estimated labor hours. Changes in job performance, job
conditions, estimated profitability and final contract settlement may result in
revisions to costs and income and are recognized in the period in which the
revisions are determined. Contract costs include all direct material and labor
costs and those indirect costs related to contract performance, such as indirect
labor and supplies. Provisions for estimated losses on uncompleted contracts are
made in the period in which such losses are determined. Amounts billed in excess
of revenue recognized to date are classified as "Billings in excess of costs,"
whereas revenue recognized in excess of amounts billed are classified as "Costs
in excess of billings" in the accompanying consolidated balance sheets.

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

     Revenue related to customer maintenance agreements is deferred and
recognized ratably on a straight-line basis over the maintenance period of the
agreement.

     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 U.S. to revenue recognition in financial statements.
In March 2000, the SEC issued SAB 101A, which delayed the implementation date of
SAB No. 101. In June 2000, the SEC issued SAB 101B, which further delayed the
implementation date of SAB 101. 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.

  (d) Cash and Cash Equivalents

     The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.

  (e) Notes Receivable

     Notes receivable are recorded at cost, less any related allowance for
impaired notes receivable. Management, considering current information and
events regarding the borrowers' ability to repay their obligations, considers a
note to be impaired when it is probable that the Company will be unable to
collect all amounts due according to the contractual terms of the note
agreement. When a loan is considered to be impaired, the amount of the
impairment is measured based on the present value of expected future cash flows
discounted at the note's effective interest rate. Notes receivable at December
31, 2000 are not considered to be impaired.

                                       F-8
<PAGE>   49
                   DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  (f) Securities Available for Sale

     Securities available for sale are recorded at fair value. The fair value of
securities available for sale approximated the historical cost for all periods
presented and thus, no significant unrealized gains or losses existed.

  (g) Property and Equipment, Net

     Property and equipment is stated at cost. Depreciation on property and
equipment is calculated using the straight-line method over the estimated useful
lives of the assets, ranging from three to seven years. Leasehold improvements
are amortized over their useful lives or the term of the related lease,
whichever is shorter.

  (h) Software Development Costs

     The Company accounts for software development costs under Statement of
Financial Accounting Standards (SFAS) No. 86, Accounting for Costs of Computer
Software to Be Sold, Leased or Otherwise Marketed ("SFAS No. 86"). Under SFAS
No. 86, the costs associated with software development are required to be
capitalized after technological feasibility has been established. Based on the
Company's product development process, technological feasibility is generally
established upon completion of the working model. Costs incurred by the Company
between completion of the working model and the point at which the product is
ready for general release are insignificant and, as a result, the Company has
not capitalized any software development costs.

  (i) Impairment of Long-Lived Assets and Long-Lived Assets To Be Disposed Of

     Pursuant to Statement of Financial Accounting Standards No. 121 ("SFAS No.
121") Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of, the Company reviews long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Impairment of assets to be held and used is
determined by a comparison of the carrying amount of an asset to future net cash
flows expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less
costs to sell.

  (j) Income Taxes

     The Company uses the asset and liability method of accounting for income
taxes. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized as a change in
expense in the period that includes the enactment date.

  (k) 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, compensation
expense would be recorded on the date of grant only if the current market price
of the underlying stock exceeded the exercise price. Statement of Financial
Accounting Standards 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.

                                       F-9
<PAGE>   50
                   DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 25 for
certain issues including: (a) the definition of employee for purposes of
applying APB 25, (b) the criteria for determining whether a plan qualifies as a
noncompensatory plan, (c) the accounting consequence of various modifications to
the terms of a previously fixed stock option or award, and (d) 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 impact on the Company's financial
position or results of operations.

  (l) Fair Value of Financial Instruments

     Statement of Financial Accounting Standards No. 107, Disclosures About Fair
Value of Financial Instruments (SFAS No. 107), requires disclosure of fair value
of certain financial instruments. Cash and cash equivalents, restricted cash,
accounts receivable, securities available for sale, costs in excess of billings
and other current assets, as well as accounts payable, accrued expenses and
other current liabilities, as reflected in the consolidated financial
statements, approximate fair value because of the short-term maturity of these
instruments. In addition, the Company utilized letters of credit to back certain
leases. (See note 8). The letters of credit reflect fair value as a condition of
their underlying purpose and are subject to fees competitively determined in the
market place.

     Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates are subjective in nature and involve uncertainties and matters
of significant judgment and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.

  (m) Use of Estimates

     Management has made a number of estimates and assumptions relating to the
reporting of assets and liabilities and the disclosure of contingent assets and
liabilities to prepare these accompanying financial statements in conformity
with generally accepted accounting principles. Actual results could differ from
those estimates.

     The Company experienced significant operating losses in 2000. At December
31, 2000, management believes the net book values of its long-lived assets,
including the $43.0 million net book value of goodwill, are recoverable from
future cash flows over the remaining estimated lives of the respective assets.
However, the business environment in which the Company is operating is changing
rapidly. In addition, the Company's liquidity situation and the resultant
actions taken by management in 2001 to restructure the Company (see note 14),
coupled with further actions being contemplated, will result in management
continuing to review during 2001 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 recognized impairment charges
related to goodwill in 2001. With respect to long-lived assets other than
goodwill, given the restructuring actions which were implemented in the first
quarter of 2001 and the additional restructuring actions being contemplated by
management, it is possible that in 2001 there will be impairment charges and
accelerated amortization expense related to such assets.
                                       F-10
<PAGE>   51
                   DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  (n) Goodwill and Other Intangible Assets

     Goodwill represents the excess of the cost to acquire Daleen Canada over
the fair value of the assets and liabilities purchased (see note 3). Goodwill is
being amortized on a straight-line basis over four years -- the expected period
to be benefited.

     Other intangibles represent the fair value of the employee work force
acquired from Daleen Canada and are also being amortized over four years.

     The Company assesses the recoverability of these intangible assets by
determining whether the amortization of the goodwill and other intangible asset
balances over their remaining lives can be recovered through undiscounted future
operating cash flows over the remaining amortization period. The Company's
carrying value of goodwill and other intangible assets 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.

     In December 2000, the Company reduced other intangible assets by $135,167.
Due to the implementation of the restructuring in January 2001 described in
footnote 14, the Company wrote off the remaining book value for those employees
who were part of the workforce reduction that were included in the other
intangible at the date of acquisition.

  (o) Basic and Diluted Net Loss per Share

     Basic and diluted net loss applicable to common stockholders 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 for each of the years in
the three-year period ended December 31, 2000 since their effect would be
antidilutive. Common stock equivalents amounted to 3,374,557 shares as of
December 31, 2000. Net loss applicable to common stockholders differs from net
loss in the years ended December 31, 1998 and 1999 due to the accretion on the
Company's preferred stock outstanding during the respective periods.

  (p) Comprehensive Income

     Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS No. 130").
SFAS No. 130 establishes standards for reporting and displaying comprehensive
income and its components in a full set of general-purpose financial statements.
SFAS No. 130 requires that an enterprise (a) classify items of other
comprehensive income by their nature in financial statements and (b) display the
accumulated balance of other comprehensive income separately from accumulated
deficit and additional paid in capital in the equity section of the balance
sheets. Comprehensive income is defined as a change in equity during the
financial reporting period of a business enterprise resulting from non-owner
sources. There were no differences between net loss and comprehensive loss for
each of the years in the three-year period ended December 31, 2000.

  (q) Foreign Currency Translation

     The functional currency of the Company's foreign subsidiaries is the
respective local currencies. The translation of the foreign currency into U.S.
dollars is performed for balance sheet accounts using the current exchange rates
in effect at the balance sheet date and for revenue and expense accounts using
average rates prevailing during the year. The adjustments resulting from the
translation of foreign currency financial statements for the years ended
December 31, 1999 and 2000 were immaterial and were recorded in the consolidated
statements of operations for the respective periods. The Company had no foreign
operations for the year ended December 31, 1998.

                                       F-11
<PAGE>   52
                   DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The Company enters into transactions based on the Company's local currency,
which results in limited foreign currency risk. The Company did not engage in
foreign currency hedging in the three-year period ended December 31, 2000.

  (r) Segment Information

     Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, Disclosure about Segments of an Enterprise and
Related Information ("SFAS No. 131"). SFAS No. 131 establishes standards for the
way that public business enterprises report information about operating segments
in annual financial statements and requires those enterprises to report selected
information about operating segments in interim financial reports issued to
stockholders. The Company operates in one segment for management reporting
purposes, the development and marketing of revenue chain software. Although the
Company has foreign subsidiaries the Company does not assess the performance of
its subsidiaries on a stand-alone basis. The revenue generated by the foreign
operations of the Company was not material in the periods presented.

  (s) Derivatives

     In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities ("SFAS No. 133). SFAS No. 133 established
accounting and reporting standards for derivative instruments embedded in other
contracts and for hedging activities. SFAS No. 133, as amended, is effective for
all quarters beginning after June 15, 2000. The Company adopted SFAS No. 133 in
July 2000. The adoption of SFAS No. 133 did not have a material affect on the
Company's consolidated financial position or results of operations since the
Company had no derivative instruments or hedging activities during the year
ended December 31, 2000.

  (t) Investment in Nonpublic Affiliate

     The Company accounts for its minority equity investment in a nonpublic
affiliate using the cost method.

(2) LIQUIDITY

     The Company has incurred losses for each of the years in the three-year
period ended December 31, 2000 and has an accumulated deficit of $81.7 million
at December 31, 2000. Cash and cash equivalents at December 31, 2000 are $22.3
million. Cash used in operations in 2000 was $30 million. During this period,
the Company incurred significant costs related to the acquisition of Daleen
Canada, development of its primary products, entrance into international
markets, formation of the Company's subsidiaries and efforts to increase the
employee workforce throughout all areas of the organization. Current cash and
cash equivalents will be insufficient to fund operations in 2001.

     The Company has developed a plan to address these liquidity issues. Such
plan includes raising additional capital and restructuring operations in the
attempt to reduce certain costs. The actions taken by the Company thus far are
as follows:

     Series F Convertible Preferred Stock

     On March 30, 2001, the Company entered into definitive agreements
(collectively, the "Purchase Agreements") for the sale (the "Private Placement")
of $27.5 million of Series F convertible preferred stock ("Series F Preferred
Stock") and warrants to purchase preferred stock (the "Warrants"), see note
14(a). The consummation of the Private Placement is subject to receipt of formal
approval from the Company's stockholders by July 30, 2001. The purchasers
deposited the $27.5 million purchase price in escrow pending stockholder
approval. In the event the stockholders do not approve the Private Placement by
July 30, 2001, the

                                       F-12
<PAGE>   53
                   DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

funds held in escrow will be returned to the purchasers. The stockholders will
vote on such matters at the annual stockholders' meeting, currently scheduled
for June 2001. Pursuant to the Company's Certificate of Incorporation, the
approval of the holders of 66 2/3% of the Company's common stock will be
required to amend the Company's Certificate of Incorporation to increase the
number of shares of authorized common stock and to create and designate the
terms of the Preferred Stock. Both of these amendments are required for the
consummation of the Private Placement. Certain stockholders of the Company,
including stockholders that have agreed to purchase Series F Preferred Stock and
Warrants in the Private Placement, as well as the directors of the Company and
their affiliates, have agreed to vote their shares of the Company's common stock
in favor of the Private Placement. These stockholders own approximately 51.3% of
the outstanding common stock of the Company. Accordingly, the Company must
obtain the approval of the holders of an additional 15.4% of the outstanding
common stock in order to obtain stockholder approval. The proceeds from the
Private Placement are necessary for the Company to sustain operations and meet
its financial obligations into 2001.

     Restructuring Activities

     In January 2001, the Company announced a restructuring plan in an attempt
to reduce certain operating costs, and is considering further actions in the
second quarter of 2001. See note 14(b).

     Management believes that the proceeds from the Private Placement and the
Company's restructuring activities will enable the Company to meet its financial
obligations through 2001. Failure to obtain stockholder approval of the Private
Placement by July 30, 2001 and receive the proceeds of the Private Placement
from escrow, and to sufficiently reduce certain operating costs as a result of
planned and contemplated restructuring activities would have a material adverse
effect on the Company's ability to continue as a going concern.

(3) ACQUISITION

     On December 16, 1999 ("the acquisition date"), the Company acquired the
stock of Daleen Canada in a purchase business combination. This transaction
expanded our customer management and billing product through the addition of
Internet-enabled customer care and electronic bill presentment and payment,
together with business-to-business gateway solutions. All of Daleen Canada's
shares and options were exchanged for the following:

     - 2,217,674 shares of common stock valued at $60.7 million. The valuation
       of the common stock was determined by the stock price two days after
       December 16, 1999, which was the date of the acquisition, was announced
       and terms were agreed.

     - Issuance of 167,361 stock options to Daleen Canada's employees valued at
       $4.6 million. Valuation was determined using the Black-Scholes option
       pricing model on the date of the acquisition.

     In addition, the Company incurred direct acquisition costs of approximately
$2.2 million.

     The transaction resulted in a one-time charge of $6.3 million related to
the write-off of purchased in-process research and development. The Company
hired an outside professional valuation consultant to value the purchased
in-process research and development. In process research and development relates
to the development of numerous products that provide web interfaces and other
operational support system products at the time of the acquisition, the products
were in the early stages of their development and were undergoing further
development and integration with our products. The value assigned to in-process
research and development was determined based on management's estimates of the
percentage of completion of the underlying development effort, resulting net
cash flows from Daleen Canada's products and the discounting of such cash flows
back to their present value.

                                       F-13
<PAGE>   54
                   DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The acquisition was accounted for as a purchase transaction and,
accordingly, the acquisition price was allocated to the acquired assets and
assumed liabilities based on their estimated fair values as of the acquisition
date. Other intangibles represent the purchased employee work force of Daleen
Canada. The excess of the consideration paid over the estimated fair value of
net assets, other intangible and purchased in-process research and development
acquired was recorded as goodwill, which is being amortized over four years.

     The consolidated statement of operations for the years ended December 31,
1999 included the operating results of Daleen Canada from the date of
acquisition. The purchase price was allocated as follows:

<TABLE>
<CAPTION>
                                                              (IN THOUSANDS)
<S>                                                           <C>
Purchased in process research and development...............     $ 6,347
Working capital.............................................         360
Deferred compensation.......................................       2,530
Employee work force.........................................       2,500
Goodwill....................................................      55,792
                                                                 -------
                                                                 $67,529
                                                                 =======
</TABLE>

     The following unaudited pro forma results of operations of the Company for
the years ended December 31, 1998 and 1999 assume the acquisition occurred as of
the beginning of 1998 and 1999. The pro forma results give effect to certain
adjustments, which include depreciation and amortization of intangible assets.
The costs associated with the in-process research and development were not
included in the pro forma results since they are considered to be a one-time
non-recurring charge. The pro forma results have been prepared for comparative
purposes only and do not purport to indicate the results of operations that
would actually have occurred had the combinations been in effect on the dates
indicated, or which may occur in the future.

<TABLE>
<CAPTION>
                                                                 1998           1999
                                                              -----------    ----------
                                                              (IN THOUSANDS EXCEPT PER
                                                                     SHARE DATA)
<S>                                                           <C>            <C>
Total revenue...............................................   $  6,899        22,577
                                                               ========       =======
Net loss applicable to common stockholders..................   $(27,695)      (27,517)
                                                               ========       =======
Net loss applicable to common stockholders per share --basic
  and diluted...............................................   $  (5.07)        (1.64)
                                                               ========       =======
</TABLE>

(4) INITIAL PUBLIC OFFERING

     On October 6, 1999, the Company and certain selling stockholders sold 4.1
million shares of its common stock in an initial public offering ("IPO") from
which the Company received proceeds of approximately $44.2 million after payment
of underwriter discounts and commissions and payment of IPO expenses.
Concurrently, the outstanding preferred stock as described in note 10 was
automatically converted to common stock.

     On October 28, 1999, the underwriters of the Company's IPO exercised their
option to purchase 431,000 additional shares of the Company's common stock from
which the Company received proceeds of $4.8 million.

                                       F-14
<PAGE>   55
                   DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(5) PROPERTY AND EQUIPMENT, NET

     Property and equipment, net consist of the following at December 31:

<TABLE>
<CAPTION>
                                             1999       2000      ESTIMATED USEFUL LIFE
                                            -------    ------    -----------------------
                                             (IN THOUSANDS)
<S>                                         <C>        <C>       <C>
Computer hardware.........................  $ 3,943     6,208           3-5 years
Purchased computer software...............    1,055     2,851           3-5 years
Office furniture and equipment............    1,657     4,237    5-7 years or lease term
Leasehold improvements....................      932     2,799          lease term
Patents & trademarks......................       --        11           20 years
Construction in progress..................      682       474              --
                                            -------    ------
                                              8,269    16,580
Less accumulated depreciation and
  amortization............................   (3,424)   (6,434)
                                            -------    ------
Property and equipment, net...............  $ 4,845    10,146
                                            =======    ======
</TABLE>

(6) INCOME TAXES

     Pretax losses are derived from the following sources:

<TABLE>
<CAPTION>
                                                           1998       1999      2000
                                                          -------    ------    ------
                                                                (IN THOUSANDS)
<S>                                                       <C>        <C>       <C>
Domestic................................................  $12,169     8,284    33,626
Foreign.................................................        0     7,056    10,159
                                                          -------    ------    ------
                                                          $12,169    15,340    43,785
                                                          =======    ======    ======
</TABLE>

     The Company did not have income tax expense for each of the years in the
three year period ended December 31, 2000. This differed from an income tax
benefit computed by applying the Federal income tax rate of 34 percent to pretax
losses as a result of the following:

<TABLE>
<CAPTION>
                                                          1998       1999      2000
                                                         -------    ------    -------
                                                                (IN THOUSANDS)
<S>                                                      <C>        <C>       <C>
Computed "expected" tax benefit........................  $ 4,137     5,216     14,887
Increase (reduction) in income taxes resulting from:
  State income taxes (net of federal benefit)..........      439       515      1,562
  Increase in the valuation allowance for deferred tax
     assets............................................   (4,360)   (6,146)   (16,876)
  Other items..........................................     (216)      415        427
                                                         -------    ------    -------
                                                         $    --        --         --
                                                         =======    ======    =======
</TABLE>

                                       F-15
<PAGE>   56
                   DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets at December 31, 1999 and 2000, are presented
below:

<TABLE>
<CAPTION>
                                                                1999       2000
                                                              --------    -------
                                                                (IN THOUSANDS)
<S>                                                           <C>         <C>
Deferred tax assets:
  Net operating loss carryforwards..........................  $ 15,139     26,380
  Depreciation and amortization.............................       200        362
  Daleen Canada goodwill....................................     2,487      4,821
  Allowance for doubtful accounts...........................       267      1,740
  Research and experimentation credit carryforwards.........       749      1,325
  Accrued expenses..........................................       242        343
  Other.....................................................       107        (23)
                                                              --------    -------
  Gross deferred tax assets.................................    19,191     34,948
  Less valuation allowance..................................   (18,124)   (34,438)
                                                              --------    -------
          Total deferred tax asset..........................  $  1,067        510
Deferred tax liabilities:
  Costs in excess of billings...............................     1,067        510
                                                              --------    -------
          Net deferred tax asset............................  $     --         --
                                                              ========    =======
</TABLE>

     Realization of deferred tax assets associated with net operating loss and
research and experimentation credit carryforwards is dependent upon generating
sufficient taxable income prior to their expiration. Management believes that it
is more likely than not that these net operating losses and research and
experimentation credit carryforwards will expire unused and, therefore, has
established a valuation allowance for the entire deferred tax assets, net of the
deferred tax liabilities. Of the total increase in the valuation allowance for
the year ended December 31, 2000 approximately $326,000 was attributed to net
operating losses generated from the exercise of non-statutory employee stock
options [the benefit of which will be credited to additional paid-in capital
when realized] and approximately $888,000 was attributed to the redetermination
of the deferred tax asset from the 1999 acquisition of Daleen Canada.

     Net operating loss carryforwards for U.S. and State income tax purposes
amount to approximately $64,400,000 and expire through year 2020. Of the total
net operating loss carry forward, the future utilization of approximately
$14,824,000 will be subject to an annual limitation prescribed by the tax law as
a result of changes in the ownership of the Company which has occurred over the
past several years, including the most recent closing of the Series F Preferred
Stock. Total net operating loss carryforwards includes approximately $1,712,000
of tax benefits from the exercise of employee stock options that expire through
year 2020 and will be credited to additional paid-in capital when they are
realized. In addition, the Company has net operating loss carryforwards for
Canada of approximately $14,971,000, which expire through year 2007.

                                       F-16
<PAGE>   57
                   DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(7) ACCRUED PAYROLL AND OTHER ACCRUED EXPENSES

     Accrued payroll and other accrued expenses consist of the following at
December 31:

<TABLE>
<CAPTION>
                                                               1999        2000
                                                              -------     ------
                                                                (IN THOUSANDS)
<S>                                                           <C>         <C>
Accrued payroll and related expenses........................  $   788      1,788
Due to subcontractors.......................................      800      1,251
Accrued bonuses.............................................    2,856      2,865
Acquisition costs...........................................    2,067         --
Dividend payable to former Inlogic shareholders.............    4,800        800
Accounts payable............................................      166      2,037
Accrued software licenses...................................       --      1,262
Sales tax payable...........................................       12        698
Accrued professional fees...................................      187        713
Deferred rent...............................................       94        525
Other accrued expenses......................................      470        792
                                                              -------     ------
                                                              $12,240     12,731
                                                              =======     ======
</TABLE>

(8) COMMITMENTS

  (a) Leases

     The Company entered into agreements to lease office facilities and certain
equipment in Boca Raton, Atlanta and Toronto under operating leases which expire
on various dates through May 2008. Generally accepted accounting principles
require that the full costs of a lease be recognized ratably over the term of
the lease. Accordingly, the Company has recorded deferred credits as of December
31, 1999 and 2000 of $93,692 and $524,973 respectively to reflect the excess of
rent expense over cash payments related to these leases. These credits are
included as part of accrued payroll and other accrued expenses in the
consolidated balance sheets in each period.

     The Company has a letter of credit in the amount of $643,750 to
collateralize the lease payments on the Toronto facility.

     The Company leases certain furniture and equipment under a capital lease
that expires December 2006. The gross amount of the furniture and equipment and
related accumulation amortization recorded under capital leases are as follows:

<TABLE>
<CAPTION>
                                                              1999      2000
                                                              ----      ----
                                                              (IN THOUSANDS)
<S>                                                           <C>       <C>
Furniture and Equipment.....................................   $--      721
Less Accumulated Amortization...............................   --       (10)
                                                               --       ---
TOTAL.......................................................   $--      711
                                                               ==       ===
</TABLE>

     The Company utilizes a letter of credit to collateralize this capital lease
in the amount of approximately $725,000.

                                       F-17
<PAGE>   58
                   DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) and future minimum
capital lease payments as of December 31, 2000 are as follows:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,                                  CAPITAL LEASES    OPERATING LEASES
------------------------                                  --------------    ----------------
                                                                    (IN THOUSANDS)
<S>                                                       <C>               <C>
2001....................................................      $ 157               2,449
2002....................................................        158               2,583
2003....................................................        157               2,601
2004....................................................        158               2,324
2005....................................................        157               1,468
2006 and thereafter.....................................        145               2,420
                                                              -----              ------
Total minimum lease payments............................      $ 932              13,845
                                                              =====              ======
Less amount representing interest.......................       (196)
                                                              -----
Present value of minimum capital lease payments.........        736
Less current maturities of capital lease payments.......       (129)
                                                              -----
                                                              $ 607
                                                              =====
</TABLE>

     As a result of the restructuring announced in the first quarter 2001 the
Company is reviewing alternatives for the above obligations related to the
unused office space that was created as a result of the reductions in workforce.
In January 2001, the Company reached a buyout agreement for some of the Toronto
unused office space in the amount of $38,000, which will reduce the commitments
above by $4,000 in 2001 and $43,000 in 2002. The Company is pursuing other
possibilities of lease buyouts or attempting to sublease the unused portion of
premises in Boca Raton, Toronto and Atlanta in order to reduce the above
commitment.

     The Company also subleases some office space in Toronto. The amounts of
minimum lease payments are offset by future minimum rental receipts from sub
lessee of $53,415 in each of the years 2001 through 2003 and $8,902 in 2004.

     Total rent expense for operating leases was $370,919, $648,324 and
$2,648,113 for the years ended December 31, 1998, 1999 and 2000, respectively.

  (b) Contribution Plans

     Daleen Technologies, Inc. 401(k) Profit Sharing Plan ("the Plan") covers
substantially all of its U.S. employees. The Company matched 35% of the
employees' contribution in 2000 and 25% in both 1998 and 1999, up to a maximum
of 8 percent deferral made by the employees. In addition, the Plan allows
discretionary contributions from the Company. The total expense associated with
the Plan for 1998, 1999 and 2000 was $71,923, $237,995 and $571,587,
respectively.

     In 2000, Daleen Canada established a Group Retirement Plan (the "Daleen
Canada Plan"). The Daleen Canada Plan consists of a Deferred Profit Sharing Plan
(DPSP) and a Group Registered Retirement Savings Plan (RRSP). The Daleen Canada
Plan covers substantially all of its Canadian employees. The Plan contributes to
the DPSP $0.35 for each $1.00 of employee contribution to the RRSP, to a maximum
of 2.8% of total earnings subject to maximum limits set by the Income Tax Act.
The total expense for this plan was $25,489 in the year 2000.

                                       F-18
<PAGE>   59
                   DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  (c) Employment Agreements

     The Company has employment agreements with specified employment terms with
two executives that provide for annual base salaries, annual salary increases,
an annual bonus and periodic stock option grants subject to the approval by the
compensation committee of the Company's board of directors. The terms of their
agreements vary in length up to three years and provide for aggregate annual
base salaries of $537,625. These agreements, and other employment agreements
with other executives that do not have specified employment terms, provide for
severance payments of up to two years base salary.

  (d) Litigation

     The Company is the defendant in a number of lawsuits and claims incidental
in its ordinary course of business. The Company does not believe the outcome of
any of this litigation would have a material adverse impact on the financial
position or the results of operations of the Company.

(9) STOCKHOLDERS' EQUITY

  (a) Stock Options

     The Company has seven fixed stock option plans: the 1994 Employee
Non-Qualified Stock Option Plan ("the 1994 Plan"), the 1995 Qualified Employee
Incentive Stock Option Plan ("the 1995 Plan"), the 1996 Employee Non-Qualified
Stock Option Plan ("the 1996 Plan"), the 1997 Employee Incentive Stock Option
Plan ("the 1997 Plan"), the 1998 Non-Qualified Employee Stock Option Plan ("the
1998 Plan"), the 1998 Qualified Employee Incentive Stock Option Plan ("the 1998
ISO Plan"), and the Amended and Restated 1999 Stock Incentive Plan ("the 1999
Plan"). Each 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. A summary of the Company's stock option plans is presented
below:

<TABLE>
<CAPTION>
                                SHARES
                              AUTHORIZED
                             FOR ISSUANCE                                 CONTRACTUAL LIFE
                              UNDER PLAN          VESTING PERIOD             OF OPTIONS
                             ------------   ---------------------------  -------------------
<S>                          <C>            <C>                          <C>
1994 Plan..................     125,000     100% upon grant              5 years from grant
1995 Plan..................     200,000     100% upon grant              5 years from grant
1996 Plan..................     400,000     100% upon grant              5 years from grant
1997 Plan..................     200,000     1/3 each year for first      5 years from grant
                                            three years from grant
1998 Plan..................     500,000     23% to 50% per year          5 years from grant
                                            beginning one year from
                                            grant
1998 ISO Plan..............   1,600,000     25% each year for first      5 years from grant
                                            four years from grant
1999 Plan..................   1,349,000     25% each year for first      10 years from grant
                                            four years from grant
</TABLE>

     The 1999 Plan authorizes the Company 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 has increased to 5,648,881 shares in
2000.

                                       F-19
<PAGE>   60
                   DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     A summary of the status of the Company's stock option plans, as of December
31, 1998, 1999 and 2000, and changes during the years then ended, is presented
below:

<TABLE>
<CAPTION>
                                            1998                    1999                    2000
                                    ---------------------   ---------------------   ---------------------
                                                WEIGHTED-               WEIGHTED-               WEIGHTED-
                                                 AVERAGE                 AVERAGE                 AVERAGE
                                                EXERCISE                EXERCISE                EXERCISE
                                     SHARES       PRICE      SHARES       PRICE      SHARES       PRICE
                                    ---------   ---------   ---------   ---------   ---------   ---------
<S>                                 <C>         <C>         <C>         <C>         <C>         <C>
Outstanding at beginning of
  year............................  1,476,498     $2.67     2,363,697    $ 2.89     3,794,256     10.58
Granted...........................  1,012,600      3.25     2,250,613     15.98     2,702,076     13.35
Exercised.........................     (8,433)     3.13      (800,574)     2.04      (391,006)     2.88
Forfeited.........................   (116,968)     3.13       (19,480)     4.74      (684,363)    17.04
                                    ---------               ---------               ---------
Outstanding at end of year........  2,363,697     $2.89     3,794,256    $10.58     5,420,963     11.75
                                    =========               =========               =========
Options exercisable at end of
  year............................    957,814                 742,930               1,252,384
Weighted average fair value of
  options granted during the
  year............................                $0.61                  $ 2.87                  $ 7.58
</TABLE>

     The following table summarizes information about stock options outstanding
and exercisable at December 31, 2000:

<TABLE>
<CAPTION>
                           OPTIONS OUTSTANDING               OPTION EXERCISABLE
                  --------------------------------------   -----------------------
                                 WEIGHTED-
                                  AVERAGE      WEIGHTED-                 WEIGHTED-
                                 REMAINING      AVERAGE                   AVERAGE
RANGE OF            NUMBER      CONTRACTUAL    EXERCISE      NUMBER      EXERCISE
EXERCISE PRICES   OUTSTANDING   LIFE (YEARS)     PRICE     EXERCISABLE     PRICE
---------------   -----------   ------------   ---------   -----------   ---------
<S>               <C>           <C>            <C>         <C>           <C>
$ 0.01 to $ 3.00     258,528        3.54        $ 2.08        224,560     $ 2.39
$ 3.25             1,168,771        2.57          3.25        631,704       3.25
$ 3.44 to $ 9.00     832,050        9.00          7.05        141,439       7.61
$ 9.44               542,529        9.80          9.44              0         --
$ 9.91 to $13.63     642,307        9.44         12.54          7,928      12.88
$13.88 to $16.75     627,500        9.52         15.96          2,000      13.88
$16.81 to $20.31     275,745        9.17         18.11         10,375      17.84
$21.38               648,125        9.00         21.38        161,976      21.38
$21.88 to $46.94     423,408        9.02         26.75         71,902      28.08
$52.69                 2,000        8.90         52.69            500      52.69
                   ---------                                ---------
                   5,420,963        7.55        $11.75      1,252,384     $ 7.58
                   =========                                =========
</TABLE>

     The Company applies APB Opinion No. 25 and related interpretations in
accounting for its stock option plans. The fair value of each option granted to
employees is estimated on the date of grant using the Black-Scholes Option
Pricing model with the following assumptions:

<TABLE>
<CAPTION>
                                                          1998        1999       2000
                                                        ---------    -------    -------
<S>                                                     <C>          <C>        <C>
Expected life.........................................  4-5 years    5 years    5 years
Dividends.............................................    None        None       None
Risk-free interest rate...............................    5.39%       5.65%      4.99%
Expected volatility...................................     0%        116.8%     125.0%
</TABLE>

                                       F-20
<PAGE>   61
                   DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Had compensation expense for the Company's plans been determined consistent
with FAS No. 123, the Company's net loss and net loss per share would have been
increased to pro forma amounts indicated below:

<TABLE>
<CAPTION>
PRO FORMA DISCLOSURES                                    1998       1999       2000
---------------------                                  --------    -------    -------
                                                               (IN THOUSANDS)
<S>                                                    <C>         <C>        <C>
Net loss:
  As reported........................................  $(12,169)   (15,340)   (43,785)
  Pro forma..........................................   (12,444)   (16,569)   (55,127)
Net loss per share:
  As reported........................................     (3.78)     (1.06)     (2.02)
  Pro forma..........................................     (3.84)     (1.15)     (2.54)
</TABLE>

     In June 2000, the Company granted stock options to a marketing executive
under the 1999 Plan at an exercise price less than the fair market value of the
underlying common stock of the Company at the date of grant. These grants will
result in the recognition of compensation expense of $586,000 over their
one-year vesting period, which began in July 2000. Approximately $293,000 of the
expense was recorded as sales and marketing expense for the year ended December
31, 2000.

  (b) Common and Preferred Stock

     In November 1997, the Company began an offering of Series C convertible
preferred stock ("Series C Preferred Stock"). The Series C Preferred Stock was
offered for $4.50 per share and was convertible at the option of the holder to
common stock on a one-to-one basis. The Company raised a total of approximately
$5,301,000 for 1,213,584 shares of Series C Preferred Stock, of which
approximately $5,092,000 and $279,000 was received in 1997 and 1998,
respectively. In connection with this offering the Company issued warrants to
purchase an additional 285,000 shares of the Company's common stock at $4.50 per
share. The Series C Preferred Stock automatically converted to common stock upon
the completion of an IPO. The Company completed its initial public offering in
October 1999. At that time, all Series C Preferred Stock was converted to common
stock on a one-to-one basis.

     In January 1998, the Company issued 21,600 shares of common stock to
certain individuals for consulting services at a fair value of $70,200.

     In 2000, the Company designated 10,000,000 shares, par value $0.0001 per
share, of authorized Preferred Stock as Series A Convertible Preferred
Stock -- PartnerCommunity, Inc. (the "Series A Preferred-PartnerCommunity"). The
Company's subsidiary issued 9.5 million shares to the Company. The Company
contributed $3 million and certain assets for those shares. This transaction was
eliminated upon consolidation. The remaining 500,000 shares were issued to an
executive of PartnerCommunity, Inc. for consideration of $184,000 payable in the
form of a promissory note.

  (c) Warrants

     The Company has outstanding warrants of 1,729,147 shares at December 31,
2000. 1,250,000 warrants are related to Series B Preferred Stock and expire in
2002 and 285,000 warrants are related to Series C Preferred Stock and expire in
2003. The remaining warrants were issued in connection with issuance of debt in
1997 and 1998 with exercise prices between $3 to $4 per share. These warrants
expire throughout 2002 and 2003.

(10) REDEEMABLE PREFERRED STOCK

     On September 12, 1997, the Company completed a sale of mandatorily
redeemable convertible Series A preferred stock ("Series A Preferred Stock") to
a venture capital fund. The Company issued 3,000,000 shares

                                       F-21
<PAGE>   62
                   DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

of Series A Preferred Stock to the fund at $2.50 per share for total proceeds of
$7,500,000. The Series A Preferred Stock was convertible on a one-to-one basis
into the Company's common stock at the option of the holder, until an IPO
occurs, at which time the Series A Preferred Stock would be automatically
converted. In addition, the Company issued to the venture capital fund 1,250,000
warrants to purchase Series B Preferred Stock at $4.00 per share. As a result of
the offering of the Series D Preferred Stock, the warrants were repriced to
$3.056. The Series B Preferred Stock was also convertible to common stock on a
one-to-one basis and had the same automatic conversion features as the Series A
Preferred Stock.

     In June 1998, the Company completed a private placement with a group of
venture capital funds for an investment of $15,000,006 in the Company. Under the
terms of the private placement, the Company issued 4,221,846 shares and 686,533
shares, respectively, of newly authorized Series D and D-1 redeemable
convertible preferred stock ("Series D and D-1 Preferred Stock"). The Series D
and D-1 Preferred Stock was convertible on a one-to-one basis into the Company's
common stock at the option of the holder and was automatically convertible to
common stock in the event of an IPO of at least $20,000,000 at a price per share
of at least three times the Series D and D-1 Preferred Stock conversion price
($9.00). The fair market value was equal to the conversion price per share at
the date of issuance. The Company was required to redeem one-third of the Series
D and D-1 Preferred Stock on each of June 18, 2002, 2003 and 2004. Costs of the
offering were $768,275 and were recorded as a discount to the fair value of the
Series D and D-1 Preferred Stock at its date of issuance. This discount was
accreted into the carrying value of the Series D and D-1 Preferred Stock, using
the effective interest method, so that one-third of the carrying value of the
Series D and D-1 Preferred Stock will equal its redemption value on each of June
18, 2002, 2003 and 2004. The net proceeds of the private placement after payment
of expenses were used for working capital and to repay notes payable and accrued
interest of approximately $1,800,000.

     In June, 1999 the Company completed a sale of mandatorily redeemable
convertible Series E Preferred Stock ("Series E Preferred Stock") to a private
company. The Company issued 1,496,615 shares of Series E Preferred Stock at
$9.00 per share for total proceeds of $13.5 million. The Series E Preferred
Stock was convertible on a one to one basis into the Company's common stock at
the option of the holder, until an IPO occurs, at which time the Series E
Preferred Stock is automatically converted.

     The Company completed its IPO in October 1999. At that time, all Redeemable
Preferred Stock was converted to common stock based on the above features.

(11) LINE OF CREDIT

     The Company had a $10 million unsecured revolving line of credit with a
financial institution available through February 28, 2002. In order to have
access to this unsecured revolving line of credit, the Company is required to
maintain a $10 million compensating balance with this financial institution. As
of March 30, 2001, the Company was not in compliance with this compensating
balance arrangement. There are no amounts outstanding on this line of credit at
December 31, 2000.

(12) BUSINESS AND CREDIT CONCENTRATIONS

     A greater percentage of business is now being performed with customers
located in different areas of the United States and in Latin America and Europe.

     During the year ended December 31, 1998, 98 percent of the Company's total
revenue were attributed to five customers. Sales to five customers in 1998
accounted for 19 percent, 22 percent, 27 percent, 15 percent and 15 percent.
There were no sales in 1999 and 2000 to any customers, which represented greater
than 10% of total revenue. In addition, there were accounts receivable from one
customer, three customers and one customer at December 31, 1998, 1999 and 2000
respectively, each of which exceeded 10 percent of total accounts receivable and
aggregated approximately $1,130,000, $1,597,640 and $2,017,500, respectively.

                                       F-22
<PAGE>   63
                   DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The Company estimates an allowance for doubtful accounts based on an
analysis of collections in prior years, the credit worthiness of its customers,
general economic conditions and other factors. The current financial
difficulties in the target markets the customers operate in and the recent
economic downturn caused the Company to increase its allowance for doubtful
accounts for the year ended December 31, 2000. Consequently, the continuation of
these factors could affect the Company's estimate of its doubtful accounts.

(13) RELATED PARTY TRANSACTIONS

     A member of the board of directors is the Senior Vice President and Chief
Financial Officer of Science Applications International Corporation ("SAIC").
SAIC is a significant stockholder of the Company. Revenue related to SAIC for
the year ended December 31, 2000 was $391,464. SAIC owns 43 percent of all
voting stock of Danet, Inc. and 100 percent of the voting stock of Telcordia.
Danet is a customer and a distributor of the Company. Sales to Danet for the
years ended December 31, 1998, 1999 and 2000 amounted to $334,794, $1,031,350,
and $0 respectively. The Company paid Danet, in its capacity as distributor of
its products, $2.2 million, $99,468 and $144,862 for the years ended December
31, 1998, 1999 and 2000. The Company has a strategic alliance relationship with
Telcordia. No revenue was received and no payments were made in connection with
this relationship for each of the years in the three-year period ended December
31, 2000.

     In September 2000, the Company entered into a service agreement with Danet
to perform work on behalf of the Company. The agreement calls for payments
totaling $240,000 during 2001.

     The Company offers loans to several executive officers and other employees
for purposes of providing funds for the exercise of vested, non qualified stock
options and payment of tax obligations resulting from the exercise of those
options. The loans bear interest at a rate of 8.75% per annum. All principal and
accrued interest payable under the notes is due not later than five years from
their issue date. The loans are full recourse and each officer has pledged the
stock issued upon exercise as security for the loan. As of December 31, 1999 and
2000, the balance on these loans was approximately $159,000 and $493,000,
respectively.

     The Company loaned executive officers and other employees an amount to pay
the income tax related to the exercise of stock options. The total amounts of
loans were approximately $498,000 of which $389,000 was repaid as of December
31, 2000.

     In November 2000, the Company purchased 296,699 shares of Series B
Convertible Preferred Stock, $.001 par value, from BizProLink.Com, Inc. for
$1,500,000. BizProLink.Com, Inc. ("BizProLink"), a nonpublic entity, is a
customer of the Company. The purchase agreement contains a call provision, which
states that any time after the fifth anniversary of the Closing Date, and before
consumption of an initial public offering, BizProLink, Inc. has the right but
not the obligation, to repurchase all the Series B Preferred Stock at a price
per share equal to the greater of (i) the fair value thereof as determined in
writing by an Independent Investment Bank mutually acceptable to the Company and
BizProLink and (ii) the price per share at which the Series B Preferred Stock
was issued as adjusted for stock splits or similar transactions. The investment
in BizProLink is included in other assets in the accompanying balance sheet at
December 31, 2000 and is accounted for using the cost method.

     In January 2001, the Company loaned the Chairman and CEO of the Company and
his wholly-owned limited partnership ("Makers") $1,237,823. 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.

                                       F-23
<PAGE>   64
                   DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(14) SUBSEQUENT EVENTS

  (a) Series F Preferred Stock

     On March 30, 2001, the Company entered into the Purchase Agreements for the
Private Placement of $27.5 million of Series F Preferred Stock and Warrants. The
consummation of the Private Placement is subject to the receipt of approval from
the stockholders of the Company, including approval of an amendment to increase
the number of authorized shares of common stock and to create and designate the
Series F Preferred Stock. The purchasers deposited the $27.5 million in escrow.
These escrowed funds will be released to the Company upon receipt of stockholder
approval by July 30, 2001. If the Company does not obtain approval on or before
July 30, 2001, the Private Placement will be deemed null and void. Pursuant to
the Company's Certificate of Incorporation, the approval of the holders of
66 2/3% of the Company's outstanding common stock will be required to amend the
Company's Certificate of Incorporation to increase the number of shares of
authorized common stock and to create and designate the terms of the Preferred
Stock. Both of these amendments are required for the consummation of the Private
Placement. Certain stockholders of the Company, including stockholders that have
agreed to purchase Series F Preferred Stock and Warrants in the Private
Placement, as well as the directors of the Company and their affiliates, have
agreed to vote their shares of the Company's common stock in favor of the
Private Placement. These stockholders own approximately 51.3% of the outstanding
common stock of the Company. Accordingly, the Company must obtain the approval
of the holders of an additional 15.4% of the outstanding common stock in order
to obtain stockholder approval.

     Pursuant to the terms of the Purchase Agreements the Company will issue and
sell (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.
Upon consummation of the Private Placement, the Company will also issue to the
placement agent warrants for the purchase of 9,915 shares of Series F Preferred
Stock and will pay the placement agent $1.2 million. The purchase price per
share of the Series F Preferred Stock is $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. Each share of Series F Preferred Stock
initially will be convertible into 100 shares of common stock of the Company.
The conversion price will be subject to a limited one time adjustment (the
"reset") in the event the average market price 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 for the
quarter ended June 30, 2001 is less than the conversion price. The conversion
price will be adjusted automatically to the higher of (A) average market price
or (B) 75% of the initial conversion price.

     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
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. These provisions will apply after March 30, 2001.

     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 Stock
Market at a price per share of at least $3.3282 for ten trading days within any
twenty day period.

     In the event the Company pays dividends on its Common Stock, the holders of
the Preferred Stock would be entitled to dividends on an as-if-converted basis.

                                       F-24
<PAGE>   65
                   DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     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 in the Private Placement have an exercise price of
$166.41 per share of Series F Preferred Stock. They 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 $7.1 million using the Black
Scholes model and will be included in additional paid-in capital and amortized
over five years.

  (b) Restructuring Activities

     In December 2000 management performed a comprehensive review to identify
areas where the Company could reduce costs. This process culminated with the
announcement in January 2001 that the Company was taking certain specific cost
reduction measures including the termination of employees and consolidation of
certain business activities. This action is expected to result in a charge to
operations in the first quarter of 2001 of approximately $2.0 million.

     In March 2001 management, to address worsening market conditions in the
first quarter of 2001, began a comprehensive review to identify additional areas
for cost reductions. Management is considering other expense reductions and
consolidations. If these actions are taken it will result in charges to
operations in 2001.

  (c) Stock Option Plan -- 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. common stock and includes Incentive Stock Options and
Non Incentive Stock Option transactions. Employees and Key Persons of
PartnerCommunity, Inc. selected by the Board shall be eligible for the grant of
Stock Incentives under the PC Plan. Only Employees shall be eligible to receive
a grant of ISO's. The Concentrated Life of options granted is ten (10) years
from grant date for ISO's and Non-ISO's granted to other than 10% Shareholders
and five (5) years for ISO's granted to 10% Shareholders. No options were
granted in year 2000 under the PC Plan. In January 2001, the PC Plan granted
787,000 options to employees at $.70 per share.

(15) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

<TABLE>
<CAPTION>
                               THREE MONTHS ENDED     THREE MONTHS ENDED     THREE MONTHS ENDED         THREE MONTHS ENDED
                              ---------------------   -------------------   ---------------------   ---------------------------
                              MARCH 31,   MARCH 31,   JUNE 30,   JUNE 30,   SEPTEMBER   SEPTEMBER   DECEMBER 31,   DECEMBER 31,
                                2000        1999        2000       1999       2000        1999          2000           1999
                              ---------   ---------   --------   --------   ---------   ---------   ------------   ------------
                                   (UNAUDITED)            (UNAUDITED)            (UNAUDITED)                (UNAUDITED)
<S>                           <C>         <C>         <C>        <C>        <C>         <C>         <C>            <C>
Net sales...................   $ 8,970      1,779      11,473      5,336     14,025       6,083         9,161          7,527
                               -------     ------      ------     ------     ------      ------       -------        -------
Gross profit................     5,880        511       7,732      2,946      9,914       4,319         5,543          5,164
                               -------     ------      ------     ------     ------      ------       -------        -------
Operating loss..............    (9,951)    (3,016)     (8,977)    (1,591)    (9,542)     (1,820)      (17,771)       (10,242)
                               -------     ------      ------     ------     ------      ------       -------        -------
Net loss applicable to
  common stockholders.......   $(9,153)    (2,958)     (8,352)    (1,589)    (9,054)     (1,684)      (17,226)        (9,231)
                               =======     ======      ======     ======     ======      ======       =======        =======
Net loss per share --
  basic and diluted.........   $  (.43)      (.91)       (.38)      (.49)      (.42)       (.46)         (.79)          (.48)
                               =======     ======      ======     ======     ======      ======       =======        =======
</TABLE>

(16) NEW ACCOUNTING PRONOUNCEMENTS

     In September 2000, the FASB issued Statement of Financial Accounting
Standards No. 140 ("SFAS No. 140"), "Accounting for Transfer and Servicing of
Financial Assets and Extinguishments of Liabilities".
                                       F-25
<PAGE>   66
                   DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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. While most of the provisions of SFAS No. 140 will
become effective for transactions entered into after March 31, 2001, companies
with calendar fiscal year ends that hold beneficial interests from previous
securitizations are required to make additional disclosures. The Company
believes the adoption of SFAS No. 140 will not have a significant impact of the
Company's consolidated financial statements.

                                       F-26
<PAGE>   67

SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS

                   DALEEN TECHNOLOGIES, INC. AND SUBSIDIARIES

                       VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
                                             FOR EACH OF THE YEARS IN THE THREE YEAR PERIOD
                                                         ENDED DECEMBER 31, 2000
                                 -----------------------------------------------------------------------
                                  BALANCE AT                                                  BALANCE AT
                                 BEGINNING OF                   INLOGIC                         END OF
                                     YEAR       CHARGES(A)   ACQUISITION(B)   DEDUCTIONS(C)      YEAR
                                 ------------   ----------   --------------   -------------   ----------
<S>                              <C>            <C>          <C>              <C>             <C>
Description:
  Reserves and allowances
     deducted from asset
     accounts
     1998
       Allowance for doubtful
          accounts.............    $ 16,581     $  247,052      $    --         $(254,588)    $    9,045
                                   ========     ==========      =======         =========     ==========
Description:
  Reserves and allowances
     deducted from asset
     accounts
     1999
       Allowance for doubtful
          accounts.............    $  9,045     $  761,936      $30,000         $ (94,046)    $  706,935
                                   ========     ==========      =======         =========     ==========
Description:
  Reserves and allowances
     deducted from asset
     accounts
     2000
       Allowance for doubtful
          accounts.............    $706,935     $4,439,405      $    --         $(546,340)    $4,600,000
                                   ========     ==========      =======         =========     ==========
</TABLE>

---------------
(a) Charges to the reserve account represent increase in reserve levels and
    establishment of specific reserves charged to expense.

(b) Amount acquired in Inlogic acquisition.

(c) Deductions to the reserve account represent write-offs net of recoveries
    which occurred during the year.

                                       F-27